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Angela Crawley (Lanark and Hamilton East) (SNP)
Chris Elmore (Ogmore) (Lab)
Hywel Williams (Arfon) (PC)
The Secretary of State for Wales (Alun Cairns)
With your permission, Mr Speaker, before I answer the questions, may I say that I am sure the House will want to join me in paying tribute and respect to Assembly Member Steffan Lewis, who sadly died just over a week ago? He was a bright and dedicated politician who had an exceptional future in front of him, with so much to offer Wales. My prayers and thoughts are with his wife, Shona, and son, Celyn, at this most difficult time.
I can update the House that the UK air accidents investigation branch is working with the relevant rescue and transportation authorities in relation to Emiliano Sala and the pilot who went missing on Monday evening. I am sure that the whole House wishes to join me in hoping for a positive outcome.
The Government are working to identify the broadest possible consensus on a way forward so that we leave the European Union in a smooth and orderly manner. We are engaging with Members on both sides of the House and with representatives of business groups, civil society, trade unions and others.
Angela Crawley
A recent report by The UK in a Changing Europe has found that almost half of all respondents oppose the Prime Minister’s deal, with only 23% in support. How can the Secretary of State reconcile his position of being Wales’s champion in Westminster when this place is working contrary to Welsh public opinion?
Alun Cairns
In the first instance, I remind the hon. Lady that Wales voted to leave the European Union in even stronger numbers than the rest of the United Kingdom. The withdrawal agreement sets out the basis on which, and how, we will leave the European Union. In the light of last week’s votes, we are determined to make amendments and to develop a document in consultation with colleagues across the House in order to win the House of Commons’ support.
Chris Elmore
May I associate myself with the Secretary of State’s comments about Steffan Lewis? He and I worked together as young researchers in the National Assembly for Wales. We must remember the words of our colleague Jo Cox that we do have a lot more in common across this House and across the devolved institutions.
Will the Secretary of State simply rule out now, and make representations to the Prime Minister to rule out, no deal, so that the automotive industry in Bridgend—Ford in Bridgend employs many of my constituents—can have certainty beyond March? This continuing planning for no deal is providing no certainty to anybody.
Alun Cairns
I would say to the hon. Gentleman that the best way of avoiding no deal is obviously to get a deal. It was interesting that the hon. Gentleman voted against the deal last week. We will continue to engage across the House and with the devolved Administrations, and we are optimistic that we will continue to make amendments to the document that will gain a deal with the European Union.
Hywel Williams
In an excellent briefing on the 9th, organised by the Secretary of State for Northern Ireland, on the effects of leaving the European Union on businesses in Northern Ireland, I was told the slightly unknown fact that 40% of Northern Ireland perishable food exports come through Holyhead. This fact was not known to the people I met then, and is perhaps not known to other Members of this House. What assessment has the Secretary of State made of the impact of a no deal on the supply chains that sustain the exports of such foods through the port of Holyhead, and will he confirm what steps he is taking personally to mitigate that impact?
Alun Cairns
The hon. Gentleman makes an important point about the port of Holyhead. It is the second busiest port in the UK during the summer months, but of course all year round it is pretty critical to the supply chain, particularly for foodstuffs that come from both Northern Ireland and the Republic of Ireland. A ports working group has been in place for quite some time—it involves the UK Government, the Welsh Government and the relevant UK Government agencies—to plan for a deal, and also to plan for no deal, as a responsible Government would do.
Stephen Crabb (Preseli Pembrokeshire) (Con)
Does my right hon. Friend agree that voters in Wales will not forgive this place if we fail to respect the outcome of the 2016 referendum, and that businesses in Wales will not forgive us if we create a set of circumstances that makes their job of creating jobs in Wales even harder? Given those two imperatives, does my right hon. Friend agree that actually passing a withdrawal agreement—passing a deal—is absolutely essential now?
Alun Cairns
I am grateful to my right hon. Friend for his question. He obviously recognises the importance of gaining a deal, and I have no doubt he will play a significant part in working with the Government and influencing colleagues in understanding the opportunities and the challenges that we face. He is absolutely right: the ports in Pembrokeshire are extremely important to the Welsh economy—my right hon. Friend regularly highlights those—but he also understands the importance of agriculture and manufacturing, and why a deal is so important to those sectors, too.
Bob Blackman (Harrow East) (Con)
What assessment has my right hon. Friend made of the opportunities for Wales, once we leave the European Union, of more jobs and investment, and also of the potential for Wales to boom, as opposed to the doom and gloom of the Labour party?
Alun Cairns
I am grateful to my hon. Friend for raising that question. He will be well aware that, in the past quarter, the UK economy was growing faster than the eurozone economy—the UK grew by 0.6% while the German and Italian economies went into decline. That highlights some of the opportunities that we face but, of course, we can grasp them in the smoothest way only if we manage to get a deal with the European Union.
Wayne David (Caerphilly) (Lab)
Given that the Wales CBI has said that a no-deal Brexit will see a £7 billion annual fall in Welsh manufacturing output and output generally in the economy, will he, for goodness’ sake, simply admit that a no-deal Brexit will be bad for Wales? Before he responds, let me say that I do not want a Maybotic answer.
Alun Cairns
The hon. Gentleman will know that there are many predictions in economic forecasts, but they are forecasts rather than fact. He will have predicted a recession after the 2010 general election—he may well have even predicted a double or treble-dip recession—but I hope that he will recognise the fantastic employment data that was published yesterday showing record numbers of people in work in Wales. The inactivity rates in Wales are at staggeringly positive numbers, matching the rest of the UK for the first time since records began.
Christina Rees (Neath) (Lab/Co-op)
I echo the words of the Secretary of State with regard to Steffan Lewis and Emiliano Sala.
The Secretary of State voted for the Prime Minister’s disastrously flawed withdrawal agreement—he was one of the few, not the many. Will he explain why the Government pretend that nothing has changed, despite their suffering the biggest defeat in parliamentary history?
Alun Cairns
It is no secret that the House did not support the deal that was presented to it last week, but we are committed to working with colleagues across our own Benches, and across the House, to come forward with a proposal that can gather the support of the House of Commons and, obviously, to negotiate with the European Union in order to get a deal. I am sure that the hon. Lady would much prefer to see a deal and I challenge her to say whether she was comfortable being in the same Lobby as some colleagues, from all parts of the House, who would like to see no deal.
Christina Rees
I think that that was a Cairnsbotic answer.
Yesterday, the First Minister of Wales, Mark Drakeford, cleared Government business in the Welsh Assembly so that he and his Cabinet Ministers could make urgent statements on how a no-deal outcome would be so disastrous for the people of Wales. Will the Secretary of State tell us if he will be voting for amendments put forward in this House to avoid a no-deal outcome, or will he, like his Prime Minister, put party before country?
Alun Cairns
I can advise the House that the UK Government have laid 75 statutory instruments at the Assembly’s request. We have had countless meetings of the Joint Ministerial Committee and the Prime Minister has agreed to invite the First Minister to the European Union Exit and Trade (Preparedness) Sub-Committee. I hope that that demonstrates the joint work that is taking place. The hon. Lady talks about putting party interests first. I cannot understand why the First Minister of Wales is happy to meet the Prime Minister—they will be meeting later today—but the Leader of the Opposition refuses to meet her to discuss the prospect of a deal, yet seems always happy to meet the IRA.
Jessica Morden (Newport East) (Lab)
Ben Lake (Ceredigion) (PC)
The Secretary of State for Wales (Alun Cairns)
I have regular discussions with Cabinet colleagues and Welsh Government Ministers on a range of issues affecting Wales, including on the UK shared prosperity fund.
Jessica Morden
EU structural funds have been crucial for communities across Wales, and it is vital that Wales must not be left behind—we need that assurance. Why has it taken so long to get any detail from the Government on the shared prosperity fund, not least the consultation, which was promised by the Government before Christmas?
Alun Cairns
I agree that the UK shared prosperity fund will be extremely important to all parts of the UK. My specific interest is protecting Welsh interests in the development of that policy. On 14 January, I spoke to the Welsh Government’s Brexit Minister, Jeremy Miles, to update him on the latest stages of the plans for consultation, and I also committed to sharing that with him before we formally consult. Of course we want to engage with a whole load of stakeholders. There is widespread recognition that the current structure does not work, and we have an opportunity to get it right.
Ben Lake
Between 2014 and 2020, Wales will have received £2.4 billion in structural funding, or over 20% of the total UK allocation of EU funds. Will the UK Government ensure that Wales continues to receive at least an equivalent share of funding from the shared prosperity fund?
Alun Cairns
I am grateful to the hon. Gentleman for his question, in which he highlights some of the most recent data. The complete data on the period since European structural funding was introduced show that more than £4 billion has been spent over 17 years, but I am sure he agrees that we have not always got the best value out of that investment—there are several audit reports to that effect. Of course, any quantum of the UK shared prosperity fund is a matter reserved for my right hon. Friend the Chancellor during the comprehensive spending review.
Mr David Jones (Clwyd West) (Con)
Given the not unreasonable concern in north Wales about Hitachi’s decision to suspend development of Wylfa B, is my right hon. Friend willing to meet representatives of the North Wales Economic Ambition Board to discuss ways in which the shared prosperity fund may be used to support the regional economy?
Alun Cairns
I pay tribute to my right hon. Friend’s work in securing Hitachi’s interest in Wylfa when RWE and E.ON withdrew their interest from the project. Although last week’s decision is disappointing, our focus is on maintaining momentum towards the development consent. Of course I am happy to meet the board and my right hon. Friend to discuss how we can best use influences such as the shared prosperity fund and the north Wales growth deal. We will happily keep an open mind, but these matters are project-led, and the strength of resource depends on the quality of the project.
Stephen Kerr (Stirling) (Con)
The UK shared prosperity fund should be just that—a UK-wide fund. What discussions have my right hon. Friend and the Secretary of State for Scotland had with the Treasury to ensure that the UK Government have a positive impact on the lives of the people of Wales and Scotland?
Alun Cairns
My hon. Friend has highlighted inefficiencies in the current proposal, and there is a range of options for how we can best work on those. We are going out to consultation very soon. We have cross-Government discussions and consideration of this subject, but I do not want to pre-empt the consultation. I encourage my hon. Friend to engage with me, the Secretary of State for Scotland and the Treasury.
Susan Elan Jones (Clwyd South) (Lab)
In the late 1990s, the Secretary of State’s party was voting against the existence of the National Assembly. In 2005, it had a manifesto option of abolishing the Assembly. Can he understand why many Opposition Members do not believe that he truly wants to involve our National Assembly for Wales in the governance of the UK shared prosperity fund?
Alun Cairns
That question is a bit rich coming from the hon. Lady, given that her party’s Government left us with the famous legislative consent order motions, which meant that the Welsh Government could not even pass primary legislation in certain areas without Parliament’s explicit control. I point to the Wales Acts 2014 and 2017 and to the referendum, which extended the powers of the Welsh Assembly, as well as countless Joint Ministerial Committee meetings and this afternoon’s meeting between the Prime Minister and the First Minister to discuss how best to manage Brexit.
Ruth George (High Peak) (Lab)
Nick Thomas-Symonds (Torfaen) (Lab)
The Parliamentary Under-Secretary of State for Wales (Nigel Adams)
Universal credit is available in every jobcentre in Wales. Our welfare reforms are incentivising work and supporting working families, and employment in Wales is at a record high.
Ruth George
Twenty-six per cent. of people in Wales have a disability and 39% of them are in poverty—both the highest proportion in the UK. What assessment has the Minister made of the number of people who lost severe disability premium when they transferred on to universal credit and the impact on those individuals, their families and their communities?
Nigel Adams
In recent weeks, an assessment has been conducted by the Department for Work and Pensions and the Secretary of State has made it clear that it is vital that we reform to deliver a fair and compassionate welfare system. This is an ongoing piece of work. It is essential that people who have been trapped out of work by a confusing and complex mix of tax credits and benefits are helped into work.
Nick Thomas-Symonds
Many organisations in my constituency do great work mitigating the effects of the universal credit roll-out, but it is still causing great hardship. Have Ministers asked the Prime Minister to fully stop the roll-out, or are they simply not standing up for Wales?
Nigel Adams
My right hon. Friend the Secretary of State for Work and Pensions is fully committed to not rushing the migration of universal credit; she will proceed with the utmost care and attention. As she has announced, managed migration will be piloted this year, involving 10,000 people, following which the Government will report on their findings. Migration beyond the pilot number will not occur until my right hon. Friend has brought legislation back to this House to extend that migration.
Kevin Foster (Torbay) (Con)
The Secretary of State for Wales (Alun Cairns)
The removal of the tolls from the Severn river crossings will drive the biggest economic stimulus Wales has seen in decades, putting over £1,400 a year back into the pockets of hard-working motorists and boosting the south Wales economy alone by £100 million.
Kevin Foster
I am delighted to hear that positive assessment from my right hon. Friend of the impact of removing the tolls, which add a significant cost to doing business between the south-west of England and Wales. Will he advise on what discussions he is having to exploit this opportunity by identifying any job-creating developments this might inspire on the M4/M5 corridor?
Alun Cairns
I pay tribute to my hon. Friend for his work in this area to encourage closer working between this super-region that is being developed. The great western powerhouse allows the south-west of England and south Wales to market themselves jointly to start competing with the northern powerhouse and the midlands engine. I know that he has a strong interest in the M5 and the business around it. I obviously have a strong interest in the M4, and together we will attract more investment.
Chris Evans (Islwyn) (Lab/Co-op)
May I begin by associating myself with the comments that the Secretary of State made about Steffan Lewis? As his local MP, I always admired and respected him, and his passion for Wales will be greatly missed within the Assembly. It is a loss to Welsh political life.
The closing of the tolls at the M4 bridge creates massive opportunities. What discussions has the Secretary of State had with other Government Departments to bring regional offices and Government jobs to Wales?
Alun Cairns
I am grateful to the hon. Gentleman for such a question. A number of discussions are going on across Government Departments about the drive to decentralise civil service opportunities from London. He will be aware of the Cardiff hub, and we are looking to where other opportunities exist. But abolishing the Severn tolls has also created challenges. We need better integration for projects such as the Chepstow bypass and other road projects that work cross-border, and we need to harness those as priorities.
Mark Tami (Alyn and Deeside) (Lab)
The Parliamentary Under-Secretary of State for Wales (Nigel Adams)
The Welsh economy has shown significant progress in recent years. The rate of employment in Wales is at a record high and increased by more than that in any other part of the UK over the last year, with 64,000 more people in work. There is a wealth of world-leading innovation in Wales, with Welsh businesses spending over £450 million on research and development in 2017.
Mark Tami
The decision on Wylfa Newydd is a massive setback, not only for Anglesey but for the whole north Wales economy, and the project was a central plank of the north Wales growth deal. When it comes to major infrastructure projects, the Secretary of State has a record of unmitigated failure; he has a kind of reverse Midas touch. When will he start to speak up for Wales in Cabinet? If he is not prepared to speak up for Wales, will he step aside and let someone else have a go?
Nigel Adams
I can tell the right hon. Gentleman that there is no greater champion for Wales than my right hon. Friend the Secretary of State. However, the hon. Gentleman raises a very serious and important point regarding Wylfa. This does affect the whole region. The Government were willing to offer a significant and generous package of potential support, but despite that, Hitachi decided that the project was still too great a commercial challenge. We are still committed to nuclear sites as part of the UK’s future energy mix, and we will also continue to support the Isle of Anglesey with initiatives such as the north Wales growth deal.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
I understand from my colleague Rhun ap Iorwerth AM that, given the economic uncertainty now surrounding Hitachi’s future at Wylfa Newydd, the Welsh Government have indicated that they are prepared to commit further funds to the north Wales growth bid if Westminster makes the same commitment. Will it?
Nigel Adams
The hon. Lady makes an important point. We are certainly open-minded. Commitments such as this must be project-led. I reiterate that we recognise the significant impact that Hitachi’s decision will have on the region and planned investment, some of which could be co-dependent on the growth deal. We are committing £120 million, as the hon. Lady knows, and we will certainly talk to our partners in Wales. In fact, I am going there next week to talk with Ministers and stakeholders.
Liz Saville Roberts
I greatly appreciate that the Minister sees the importance of the north Wales growth bid, particularly in relation to the news at Wylfa. It is interesting that the British Government offered Hitachi a one-third equity stake in the £20 billion nuclear power development in Ynys Môn. Now that Wylfa Newydd looks set to be the latest project to join the Welsh infrastructure scrapyard, will the Minister guarantee that his Government will use the previously promised equity to create 850 alternative, permanent and well-paid jobs in north-west Wales?
Nigel Adams
The hon. Lady raises an important point. We are certainly not abandoning that area of Wales. I reiterate that this was a commercial decision. We are committing £120 million to the north Wales growth deal, which we hope to get over the line as soon as practically possibly. The Government’s decision to agree to take an equity stake, to secure a strike price and to underwrite the debt on that project, was incredibly generous.
Chris Ruane (Vale of Clwyd) (Lab)
Since 2013, we have seen the cancellation of the Atlantic Array wind turbines off south Wales, the cancellation of the Celtic Array wind farms off north wales, the cancellation of the Cardiff-Swansea rail line in 2018, the cancellation of the Swansea bay tidal lagoon in 2018 and—to cap it all, the cancellation of cancellations— the cancellation of Wylfa Newydd last week, which was a £16 billion investment that would have transformed the economy of north Wales. Will the Secretary of State support the establishment of an inquiry, which the CBI in Wales has called for, to uncover why this Conservative Government are incapable of delivering large infrastructure projects in Wales?
Nigel Adams
The hon. Gentleman seems to miss the fact that these are commercial decisions to put these projects on hold. In terms of Hitachi, it is a suspended project. We will continue to engage with Hitachi regarding options for the site. We are absolutely committed to creating a broad-based, resilient economy through our industrial strategy, and we will continue to work with the private sector, local partners and the Welsh Government to ensure that Wales prospers. I hope that Members across the House welcome the news this week that the employment rate in Wales now matches that of the UK for the first time since my right hon. Friend the Member for Wokingham (John Redwood) was the Secretary of State for Wales.
Robert Halfon (Harlow) (Con)
The Parliamentary Under-Secretary of State for Wales (Nigel Adams)
The Government recognise that transport is a major cost for households and businesses, so it was announced at last year’s Budget that fuel duty across the UK will remain frozen for the ninth successive year.
Robert Halfon
Despite the excellent fuel duty freeze from the Government, oil companies are still hitting motorists across Wales and the UK by increasing petrol prices hugely when the international oil price goes up but taking a long time to reduce it when the oil price goes down. Will my hon. Friend work with the Secretary of State for Transport and the Treasury to introduce a “pump watch” regulator, as recommended by FairFuelUK, so that there are fair prices for motorists at the pumps?
Nigel Adams
There is no greater champion for consumers than my right hon. Friend, but we do not believe that setting up a regulator would be justified, given the costs of doing so. This sector, like every other, is subject to the normal competition and consumer protection law. We are committed to passing on savings to commuters and, due to nine years of fuel duty freezes, the average car driver in Wales and the UK will have saved a cumulative £1,000 by April 2020.
Owen Smith (Pontypridd) (Lab)
Can the Minister confirm that 30,000 low-income families in Wales will lose £2,500 a year as a result of the imposition of the two-child policy? Does he think that that is fair?
Nigel Adams
The Secretary of State for Work and Pensions has announced that she will not extend the two-child limit on universal credit to children born before April 2017, when the policy first came into effect. That will benefit about 15,000 families, and the decision restores the original intent of the policy, which will give parents in receipt of universal credit the same choices as those in work.
Anna McMorrin (Cardiff North) (Lab)
The Secretary of State for Wales (Alun Cairns)
As we leave the European Union, our economy is growing faster than the eurozone, employment is at record high levels, and economic activity in Wales is at the highest level since records began.
Anna McMorrin
May I associate myself with the Minister’s comments on Steffan Lewis, who was one of the most able and talented politicians that Wales has ever had?
With days to go until we crash out with no deal, we know the devastating impact. The CBI is warning us, the Army is on stand-by to slaughter lambs set for export, and the Government are refusing to rule out no deal. What does the Minister say about that, given that the Prime Minister is not going to get her deal through?
Alun Cairns
My right hon. Friend the Prime Minister has set out our position and is determined to work not only on our side of the House but across the House to introduce proposals that will allow the House of Commons to support a deal. It is interesting that the Welsh First Minister, Mark Drakeford, is prepared to meet her to discuss the proposals, but the Leader of the Opposition refuses to do so, in spite of being more than happy to meet the IRA on other occasions.
Several hon. Members rose—
Mr Speaker
I am calling the right hon. Member for Cynon Valley (Ann Clwyd) in spite of time constraints. I know that she will ask a commendably brief question.
Ann Clwyd (Cynon Valley) (Lab)
The Parliamentary Under-Secretary of State for Wales (Nigel Adams)
I thank the right hon. Lady for raising this very important issue, and my thoughts are with all those families affected. I recognise her continued and passionate dedication to this issue and to ensuring that we have a health service that is fit for everyone. It is imperative that both the internal and external reviews of maternity services in Cwm Taf are both comprehensive and timely. Those affected will rightly be looking for urgent answers and clear action to ensure improvements in patient care and safety.
Nigel Adams
Of course. At present, this is a matter for the Welsh Government and for the health board, but we await the findings of the review, and we will act accordingly. In the meantime, the Government will continue to ensure that the NHS has the funding that it requires. I can assure the right hon. Lady that we will work with her to ensure that we get the right outcomes.
Stephen Kerr (Stirling) (Con)
The Prime Minister (Mrs Theresa May)
I am sure that Members across the House will wish to join me in marking Holocaust Memorial Day this Sunday. It is an opportunity for us to remember all those who suffered in the holocaust and in subsequent genocides around the world. It is a reminder that we must all challenge and condemn prejudice and hatred wherever it is found.
This morning, I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.
Stephen Kerr
May I associate myself with the comments that the Prime Minister made in relation to Holocaust Memorial Day? May I also say as a proud Scot that the United Kingdom of Great Britain and Northern Ireland is the most successful political union that the world has ever known? That said, does the Prime Minister agree that, when Nicola Sturgeon demands a second independence referendum, only four years after we had the last one, the UK Government should side with the majority of the people of Scotland and firmly tell her no?
The Prime Minister
My hon. Friend is absolutely right. As he points out, Scotland held a referendum in 2014. It was legal, fair and decisive, and the people clearly voted for Scotland to remain part of the United Kingdom. More than that, at the last general election, the people of Scotland again sent a very clear message that they do not want a second divisive referendum, but the SNP sadly is out of touch with the people of Scotland and has not yet heard that message. The last thing we want is a second independence referendum. The United Kingdom should be pulling together, and should not be being driven apart.
Jeremy Corbyn (Islington North) (Lab)
Sunday is Holocaust Memorial Day, a time for us all to reflect on the horrors of genocide and to recommit to never again allowing the poison of antisemitism and racism to disfigure our society in any way. The Prime Minister was also right to acknowledge the other genocides that have happened since the second world war. It is up to us to try to prevent such horrors from ever happening again anywhere in the world.
After the overwhelming defeat of the Prime Minister’s deal, she says she wants solutions to the Brexit crisis that command sufficient support in the House. The Chancellor and the Business Secretary agree that there is a “large majority” in the Commons opposed to no deal, so will the Prime Minister listen to her own Cabinet members and take no deal off the table?
The Prime Minister
What I, members of the Cabinet and the whole Government are doing is working to ensure that we leave the European Union with a deal. That is the way to avoid no deal: to leave the European Union with a deal. I say to the right hon. Gentleman that what I have wanted to do—I have been doing it with Members across the House—is sit down and talk about how we can secure support in this House for a deal. He has been willing to sit down with Hamas, Hezbollah and the IRA without preconditions, yet he will not meet me to talk about Brexit. In this case, he is neither present nor involved.
Jeremy Corbyn
Actually I reached out to the Prime Minister last September when I offered to discuss our deals with her. It appears that, while the door to her office may well be open, the minds inside it are completely closed. She has shown no flexibility whatsoever on taking no deal off the table.
The Chancellor reassured businesses that amendments would be put down that
“would have the effect of removing the threat of no deal...which is binding and effective”.
Given that those amendments are now tabled, will the Prime Minister confirm that, if passed, they would rule out no deal?
The Prime Minister
We have seen amendments that seek to engineer a situation in which article 50 is extended. That does not solve the issue that there will always be a point of decision. The decision remains the same: no deal, a deal or no Brexit. I am delivering on Brexit. I want to do it with a deal. Why will the right hon. Gentleman not come and meet me and talk about it?
Jeremy Corbyn
The only consistency in the Prime Minister’s strategy seems to be running down the clock by threatening no deal as an alternative to her dead deal.
The CBI says that the “projected impact” of no deal on the UK economy “would be devastating”. Leaving with no deal would be a hammer blow to manufacturing in this country, costing jobs and damaging living standards.
Last week, the Justice Secretary was asked whether he ruled out a customs union. He said:
“I don’t think we can”.
However, that same day, the Leader of the House said that we cannot be in a customs union. Can the Prime Minister be clear? Do her Government rule out a customs union with the European Union?
The Prime Minister
The right hon. Gentleman talks about a customs union and I note that he has tabled an amendment. The Labour party used to refer to a comprehensive customs union, then it was a new customs union and now it is a permanent customs union, but the question—[Interruption.] I am happy to sit down to talk to him about what he means by that. Does he mean accepting the common external tariff? Does he mean accepting the common commercial policy? Does he mean accepting the Union customs code? Does he mean accepting EU state aid rules? If he will not talk about it, there is only one conclusion: he hasn’t got a clue.
Jeremy Corbyn
My question was: does the Prime Minister rule in or rule out a customs union? It is not complicated. She could have said yes, she could have said no. It is a key part of what Labour is putting forward and it is backed by the TUC, representing millions of workers; by the CBI, representing thousands of businesses; by the First Ministers of Wales and Scotland; and indeed by many members of her own party, including apparently her own chief of staff. So can the Prime Minister explain why she is ruling out a customs union as a solution to the crisis? She could for once actually answer the question.
The Prime Minister
Perhaps I can try to help the right hon. Gentleman here. When many people talk about a customs union, what they want to ensure is that businesses can export to the EU without facing tariffs, quotas or rules-of-origin checks. I agree, and the deal we negotiated delivers just that, but it also allows us to have an independent trade policy and to do our own trade deals with the rest of the world—the benefits of a customs union and the benefits of our own trade policy.
Jeremy Corbyn
The International Trade Secretary promised 40 trade agreements the second after Brexit. This morning, he could not name a single one. His own Business Minister said that he was not impressed by “sham trade agreements” and
“not prepared to sell business down the river for other people’s political dogma.”
So why is the Prime Minister prepared to sell people’s jobs and living standards down the river, rather than negotiating a customs union that would be part of a sensible deal for the future?
The Prime Minister
The deal that we negotiated did protect jobs—[Interruption.] And it was rejected by this House. There are some specific issues that Members across this House have raised in relation to that deal and we work on those. We have already responded on a number of issues—parliamentary involvement, workers’ rights, citizens’ rights—as a result of the conversations that we have had with Members of this House. What we want to ensure is that we get a deal that protects jobs, but the right hon. Gentleman is doing exactly what he always does. He just stands up and uses these phrases. The honest answer is that I do not think he knows what those phrases mean and what the implications of those phrases are. We will be protecting jobs in the UK with a good trade relationship with the European Union—enhancing and increasing jobs in the UK, and by the way I see that the right hon. Gentleman has not referred to this week’s employment figures, which show employment up in this country as a result of this Government.
Jeremy Corbyn
What the Prime Minister clearly did not have time to mention was the rising levels of in-work poverty, personal debt and the problems that people face in surviving at work. The door of her office might be open, but the minds are closed—[Interruption.] The Prime Minister is clearly not listening—[Interruption.]
Mr Speaker
Order. People making an extraordinary noise from a sedentary position do not have the slightest prospect of being called to ask a question, unless it is on the Order Paper. I hope that they realise that and recognise their own folly.
Jeremy Corbyn
Thank you, Mr Speaker. Across the country, people are worried about public services, their living standards and rising levels of personal debt. While a third of the Prime Minister’s Government are at the billionaires’ jamboree in Davos, she says she is listening, but rules out changes on the two issues where there might be a majority: against no deal and for a customs union—part of Labour’s sensible Brexit alternative. If the Prime Minister is serious about finding a solution, which of her red lines is she prepared to abandon? Could she name a single one?
The Prime Minister
The right hon. Gentleman makes claims about minds being closed and asks about red lines. Why does he not come and talk about it? He talks about what people up and down this country are seeing. I will tell him what we have just seen this week: borrowing this year at its lowest level for 16 years; the International Monetary Fund saying we will grow faster than Germany, Italy and Japan this year; UN figures showing foreign direct investment in the UK up last year; the employment rate up; the number of people in work up; and wages up—and the biggest threat to all of that would be a Labour Government.
Craig Tracey (North Warwickshire) (Con)
The Prime Minister
My hon. Friend is absolutely right. Not just he, I and all Conservative Members, but all Labour Members stood on manifesto pledges to respect the result of the referendum and to leave the EU. I have set out several times my concern about returning to the British people in a second referendum. People sent a clear message. We asked them to make a choice, they made that choice, and we should deliver on it.
Ian Blackford (Ross, Skye and Lochaber) (SNP)
I join the Prime Minister in marking Holocaust Memorial Day. It is important that we reflect on man’s inhumanity to man at that time and subsequently, most recently towards the Rohingya people. More must be done to eradicate the risk of genocide that is suffered by peoples throughout the world.
Last November, the Government published an economic analysis of Brexit that looked at four scenarios, but it did not include the Prime Minister’s deal. Has she done an economic analysis of her deal?
The Prime Minister
The right hon. Gentleman obviously looked carefully at the economic analysis, and he will have seen that it looked at the impact of different issues in relation to the trade relationship and set that out very clearly. It made it absolutely clear that the proposal the Government had put on the table was the best in terms of delivering on the referendum result, maintaining people’s jobs and enhancing the economy.
Ian Blackford
I can only take it from that answer that there is no analysis of the Government’s plan. According to the paper last November, Brexit will lead to the loss of up to 9% of GDP throughout the UK. That will cost jobs. It is the height of irresponsibility for the Prime Minister to bring to Parliament a deal for which we have not seen the economic impact. People up and down the UK are going to lose their jobs and economic opportunities because of the ideology of this Government. It is important that the House reflects on that and on the economic security of our citizens. We have to be honest with people. We need to go back to them, have a people’s vote and let them determine what should happen.
The Prime Minister
We have been reflecting on the economic security of our citizens across the whole of the UK, and that is why we put forward the proposals that we did last summer and why the proposals in the deal—in the political declaration—we negotiated with the EU set out an ambitious future trade deal. If the right hon. Gentleman wants to reflect on the interests of the citizens of Scotland, he should reflect on the fact that being part of the UK—[Interruption.] He says he wants to know the figures and the economic analysis. In that case, it is no good his dismissing the figures and the economic analysis that show that being part of the UK is worth £10 billion in additional public spending and nearly £1,900 for every single person in Scotland. If he is interested in economics, he should want to stay in the UK and stop his policy of independence.
Andrew Rosindell (Romford) (Con)
The Prime Minister
Yes. My hon. Friend is absolutely right. This is not just an arbitrary date. It is a date to which the House effectively agreed when it triggered article 50, because it understood that the article 50 process was a two-year process, and, as I said in response to the Leader of the Opposition, that process will end on 29 March 2019. I do not believe that extending article 50 resolves any issues, because at some point Members must decide whether they want a no-deal situation, to agree a deal, or to have no Brexit.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
The Prime Minister
Let me first thank Denis for his commitment to serving in our armed forces. All our armed forces do an incredibly important and brave job for us.
I am sure that the hon. Gentleman will not expect me to be able to look at the details of the case at the Dispatch Box on the Floor of the House, but I will ask the Home Secretary to look into it and respond to him.
Mr Peter Bone (Wellingborough) (Con)
The Prime Minister
I have heard some job applications in my time, but that was quite an interesting one.
My position, and the position of this Government and Ministers across this Government, is very clear. It is our duty to deliver on the vote of the British people to leave the European Union, and the two-year process ends on 29 March. That is the position of the Government. Of course I am always happy to consider job applications from my hon. Friend, but I have to say that the basis of his application was not correct, because the Government are committed to taking the United Kingdom out of the European Union.
Mr Steve Reed (Croydon North) (Lab/Co-op)
The Prime Minister
As the hon. Gentleman will know, there are many cases in which some of the measures that have been used do not properly reflect the situation on the ground, but obviously we look very carefully at the formula to ensure that we have that fair funding between local authorities.
Gillian Keegan (Chichester) (Con)
The Prime Minister
I thank my hon. Friend for raising this important issue and highlighting that case, which shows the horrors that so many people went through during the holocaust. We welcome the Chichester choir to Parliament performing “Push”, and I commend it on its work in keeping alive the remarkable story of Simon Gronowski. As I have just indicated, his story reminds us of the millions who were killed in the concentration camps and the absolute horror of the holocaust. We should all remember that, and remember genocides that have, sadly, occurred since, and condemn hatred and prejudice in all its forms, including antisemitism wherever it is found. There is no place for racial hatred in our society. I apologise because I suspect I may not be able to attend the performance my hon. Friend referred to, but I hope she will pass on my thanks to the choir for coming here and for the work it is doing.
Sarah Jones (Croydon Central) (Lab)
The Prime Minister
It is obviously very important for all of us that people are able to feel and be safe in their homes, and I understand residents’ concerns over this issue of cladding. We fully expect building owners in the private sector to take action and make sure that appropriate safety measures are in place. Interim measures are in place where necessary on all of the 171 high-rise private residential buildings with the unsafe ACM—aluminium composite material—cladding, but permanent remediation is rightly the focus, and we have repeatedly called on private building owners not to pass costs on to leaseholders. As a result of our interventions 212 owners have either started, completed or have commitments in place to remediate; 56 owners are refusing to remediate. We are maintaining pressure on this but we rule nothing out.
Alberto Costa (South Leicestershire) (Con)
The Prime Minister
First, may I extend my deepest sympathies to Rachael Knappier? We recognise that this growth in non-surgical treatments increases the need for consumer protection, and we are currently working with stakeholders to strengthen the regulation of cosmetics procedures. We are committed to improving the safety of cosmetic procedures and there are a number of ways in which that can be done: better training and robust qualifications for practitioners, but also clear information so that people can make informed decisions about their care. We would urge anyone seeking a cosmetic procedure to take the time to find a reputable, safe and qualified practitioner who is subject to statutory regulation or on an accredited voluntary register. My hon. Friend has raised an important issue.
Stephen Kinnock (Aberavon) (Lab)
The Prime Minister
First, it is not the case that that is the only way to provide frictionless trade between the United Kingdom and the European Union. Other options have been put on the table. The question of the extent of that frictionless trade will be a matter for the second stage of the negotiations.
Michael Fabricant (Lichfield) (Con)
The Prime Minister
I am pleased to say to my hon. Friend that thanks to our economic record there are 90,000 more small businesses in the west midlands since 2010, that the national living wage is giving more than 170,000 people a pay rise in the west midlands this year and that employment in the west midlands has risen by 252,000 since 2010. I can also tell him that we will continue to support the region by investing more than £430 million as part of the Greater Birmingham and Solihull local enterprise partnership.
Michael Fabricant
As ever, that is great news for the west midlands and it shows our firm economic policy, but will my right hon. Friend now welcome the new Birmingham airport masterplan, which addresses its growth in services for businessmen and holidaymakers for the west midlands? Will she also commit the Government to work with the airport to help it to expand its long-haul route network, which is so important for the businesses and holidaymakers of Lichfield and beyond?
The Prime Minister
We are certainly supporting airports beyond Heathrow, such as Birmingham, to make the best use of their existing runways. I am happy to welcome Birmingham’s decision to publish this masterplan because I understand that, as my hon. Friend says, it aims to attract new long-haul routes in addition to the routes that it already runs. We are also committed to improving access to Birmingham airport. For example, by 2026 the airport will be served by HS2, which will significantly reduce journey times to London and dramatically increase the catchment area of the airport.
Ann Clwyd (Cynon Valley) (Lab)
The Prime Minister
What we are saying is that this House overwhelmingly voted to have the referendum in 2016 and for people to be asked for their choice as to whether to leave or to stay in the European Union. There will have been a variety of reasons why people voted to leave the European Union in 2016. Many wanted an end to free movement, and that is what we will be delivering. For many, it was about sovereignty, and that is why ending the jurisdiction of the European Court is important. Independent trade policy is also part of it, and that is what the Government are delivering. We are delivering on the vote that took place and ensuring that we do it in a way that protects jobs and gives people certainty for the future.
Rachel Maclean (Redditch) (Con)
The Prime Minister
My hon. Friend’s experience shows exactly why it is so important for women to take up this test. We need to do more to encourage women to take up their cervical screening tests, and Public Health England will shortly launch a national campaign to highlight the risks of cervical cancer and encourage women to attend the screening appointments. I can stand here as the Prime Minister and say that I know what it is like to go through a cervical smear test, and it is not comfortable. For some it will be embarrassing, and it is sometimes painful, but those few minutes can save lives, so I would encourage all women to take up their smear tests.
John Mann (Bassetlaw) (Lab)
On the Monday before Christmas, my constituent Nathan Garrett, aged 18, was referred by his GP for emergency mental health support. On the Tuesday, he was helping others and delivering my Christmas cards, just as he had delivered many election leaflets over the years. Later, he asked the crisis team for emergency help, but none was forthcoming. On the Wednesday, Nathan went missing. On the Thursday, I learned at the volunteers’ event that we hold every Christmas, when I was expecting to see Nathan, that it had all got too much for him and that he had taken his own life.
Nathan Garrett was a brilliant, engaging, kind young man. He was a county athletics champion, a talented and brilliant musician, and incredibly popular. His parents and his grandmother are here today. Does the Prime Minister agree that when a teenager needs emergency mental health support, that support should be available within 24 hours? Will she ask the appropriate Minister to meet me and Nathan’s family to push that matter forward today?
The Prime Minister
I am sure that all Members will join me in sending our deepest condolences to Nathan’s family and friends and to all those who knew him. From what the hon. Gentleman said, it sounds as though he was an incredible young man. Every life lost is a tragedy, and incidents of suicide are deeply concerning, which is why we are taking action in relation to suicide prevention. The hon. Gentleman has also raised the issue of mental health provision. We recognise the importance of increasing provision for people who are suffering from mental health problems. I am happy to ensure that the hon. Gentleman can meet the appropriate Minister to discuss the matter.
Lucy Allan (Telford) (Con)
The Prime Minister
My hon. Friend has raised an important issue. The crimes were utterly appalling. That is why we have given tackling child sexual abuse and exploitation the highest priority, and it is concerning, as my hon. Friend said, that the inquiry has taken so long to start, having been announced in the spring of last year. It is in the interests of victims and survivors that the inquiry is up and running as soon as possible. People deserve to see that inquiry taking place, and I will ensure that a Home Office Minister meets my hon. Friend to discuss that further.
Stewart Hosie (Dundee East) (SNP)
At Prime Minister’s questions last October, I asked the Prime Minister about my constituent Hassan Mirza and his 10-year battle simply to renew his passport. I wrote to the Prime Minister and received a holding response two months ago. Since then, Hassan’s uncle has passed away, but he could not attend the funeral. His wife is ill, but he cannot visit her or his children. This is unacceptable. When will the Prime Minister finally give me a detailed answer, and when will she get a grip on the failings in the Home Office?
The Prime Minister
I can only apologise to the hon. Gentleman that he has not had a detailed answer from me before now. I will ensure that he gets one but, more than that, my right hon. Friend the Home Secretary is happy to meet him to discuss the case.
Jack Lopresti (Filton and Bradley Stoke) (Con)
Will my right hon. Friend join me in paying tribute to my constituent Bob Woodward, who sadly died on Sunday? When Bob’s son Robert was diagnosed with cancer aged eight in 1976, he founded the charity CLIC—Cancer and Leukaemia in Childhood. Over the following decades, he changed lives by raising over £100 million in support of worthy causes. He was an inspirational figure and a great and compassionate man, and he recently had a new Great Western Railway train named after him. Will my right hon. Friend also join me in offering our condolences to his friends and family?
The Prime Minister
I am certainly happy to join my hon. Friend in expressing our sympathies and condolences to Bob Woodward’s friends and family and in paying tribute to Bob. After tragically losing his son to cancer, as my hon. Friend pointed out, he dedicated his life to young cancer patients and their families and was able use his success as a property developer to provide residences where families of young cancer patients could live while their child is receiving treatment. It is a fitting legacy that there are now 10 of these properties in the UK, and CLIC is now a global organisation raising funds for the care of families around the world. Bob Woodward suffered a terrible tragedy with the loss of his son, but he ensured that his work throughout his life is benefiting others.
Liz McInnes (Heywood and Middleton) (Lab)
This morning I received a letter from Santander saying that it is closing the branch in Middleton and suggesting that my constituents should avail themselves of banking services at Middleton post office, which in turn is being franchised into the back of WH Smith. Can the Prime Minister say what her policy is for our high street, other than just managed decline?
The Prime Minister
Obviously individual banks take commercial decisions, and it sounds as if there will still be post office services available on the high street to which the hon. Lady refers. We are concerned about helping to manage our high streets and ensuring that we have good high streets for the future. That is why, in the Budget, the Chancellor announced funding that is available to local authorities to work on plans for their high streets.
James Gray (North Wiltshire) (Con)
Will the Prime Minister join me in reassuring the people of North Wiltshire and, indeed, the nation that, despite yesterday’s announcement that he is to move his corporate headquarters and two senior executives to Singapore, the commitment of Dyson to Britain remains undiminished, as evidenced by the £200 million he is investing in his research and development site at Hullavington and by the £40 million he is investing in the engineering and design college at Malmesbury? He is totally and utterly committed to Great Britain, and yesterday’s announcement has no effect at all on that commitment.
The Prime Minister
Dyson is clear that it will continue to have a long-term future in the UK, and it has trebled its workforce to 4,800 over the past five years. Of course, what matters to companies like Dyson is having a Government who are unapologetically pro-business, which this Government are, and a Government who are ensuring that our balanced economic policy sees increasing employment, exports and foreign direct investment in UK companies at record highs.
Tim Farron (Westmorland and Lonsdale) (LD)
Mr Speaker, may I wish you, the Prime Minister and everybody here a very happy Cumbria Day? A vast array of produce is available: beer from Kirkby Lonsdale; relish from Hawkshead; deli.sh pies; and tea and coffee from Penningtons—all the stuff the Prime Minister might need for a packed lunch if she is considering a walking holiday anytime soon. I remind her that, after London, Cumbria contains Britain’s biggest tourism destination, but today Cumbria has come to London. I invite her and, indeed, everybody here to come and join us in the Jubilee Room straight after PMQs to sample the best of Cumbria.
Mr Speaker
The hon. Gentleman is a one-man tourist board, and we are grateful to him.
The Prime Minister
The hon. Member for Westmorland and Lonsdale (Tim Farron) has done a good job of promoting the benefits of Cumbria, and I am sure he will be joined by my hon. Friends and others from across the House. I thank him for listing the very many items I might want to put in my packed lunch when I go on a walking holiday, but I am afraid I am bound to say that, although I recognise that Cumbria has good produce, Berkshire has good produce, too.
Courts IT System
(5 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
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Yasmin Qureshi (Bolton South East) (Lab)
(Urgent Question): To ask the Secretary of State for Justice if he will make a statement on the failure of the central courts IT system.
The Parliamentary Under-Secretary of State for Justice (Lucy Frazer)
I am grateful for the opportunity to update the House on the IT issues facing the Ministry of Justice over recent days.
I start by apologising to those who have been affected by the intermittent disruption, which was caused by an infrastructure failure in our supplier’s data centre. Although services have continued to operate and court hearings have continued, we know how frustrating this is for everyone. The issue is that some of our staff in the Courts and Tribunals Service, the Legal Aid Agency, probation and Ministry of Justice headquarters have been unable to log on to their computers, but we have contingency plans in place to make sure that trials can go ahead as planned.
The Prison Service has not been affected and—to correct inaccurate reporting—criminals have not gone free as a result of the problem. We have been working closely with our suppliers, Atos and Microsoft, to get our systems working again, and yesterday we had restored services to 180 court sites, including the largest ones. Today, 90% of staff have working computer systems. Work continues to restore services and we expect the remainder of the court sites to be fully operational by the time they open tomorrow morning. We are very disappointed that our suppliers have not yet been able to resolve the network problems in full.
This afternoon, the permanent secretary, Sir Richard Heaton, will meet the chief executive of Atos and write personally to all members of the judiciary. I am very grateful to all our staff who have been working tirelessly and around the clock, alongside our suppliers, to resolve the issues.
Yasmin Qureshi
I thank you, Mr Speaker, for granting the urgent question, and the Minister for her reply.
Members will be concerned by the failure of the multiple vital IT systems that our courts require, including systems supplied by Atos and Microsoft. Indeed, I saw those failures at first hand last week, when I visited one of the Crown courts. The chair of the Criminal Bar Association described our courts system as being “on its knees” following that failure, and blamed
“savage cuts to the MoJ budget”.
Reports in The Times suggested that there is a risk of defendants being released before trial. Will the Minister confirm whether any defendants have been released without trial? What costs has the failure incurred? Have Atos and Microsoft paid any penalties for failures on the contracts so far? Can the Minister guarantee that all costs arising from the failures will be recovered from the suppliers?
Of course, such failings do not happen in a vacuum. The Ministry of Justice has faced cuts of 40% in the decade to 2020. The Government are pursuing a £1.2 billion courts reform programme, which has seen hundreds of courts close, thousands of court staff cut and a rush to digitise many court processes. Are the plans to cut 5,000 further court staff by 2023 still being pursued?
Will the Minister explain why the Government ignored the Association of Her Majesty’s District Judges, which called for courts closures to be stopped until
“fully functioning IT systems are demonstrated to be up and running successfully”?
Finally, will the Minister now commit to a moratorium on further cuts, closures and digitisation of our courts until a Bill has been brought to the House so that we can fully scrutinise the Government’s plans?
Lucy Frazer
I am grateful for the opportunity to answer the points that the hon. Member for Bolton South East (Yasmin Qureshi) raised. She suggested that the problems are related to cuts—they are not. They relate to an issue in a contractual supplier’s system. She suggested that defendants were being released. I hope she heard in my initial reply that that was incorrect reporting. No prisoners have been released. The prison system is different from the MOJ’s and I repeat that no prisoners have been released as a result of the problem.
The hon. Lady asked about penalties. As I said, the permanent secretary is meeting the supplier’s chief executive this afternoon and of course we will look carefully at the contracts, which include penalty clauses.
The hon. Lady suggested that the issue is related to a rush to digitisation. I would like to clarify that Her Majesty’s Courts and Tribunals Service operates on a legacy system, which needs to be updated because issues arise in it, and we are therefore investing significantly in our digitisation programme to ensure that our courts system runs well in the future.
The hon. Lady talked about cuts. I started with that and I will end with it, as she did. We are not cutting our justice system and our Courts Service. Indeed, as she rightly identified, we are putting £1 billion into it.
Robert Neill (Bromley and Chislehurst) (Con)
I am glad to have the Minister’s reassurance that this situation has nothing to do with the common platform, as that is indeed the case. Does she accept that senior members of the judiciary, as I know from my conversations with them, are most anxious that the roll-out of the common platform proceeds, because the difficulties come from the failures of the old system? Will she ensure that the new initiatives that we are bringing in, such as digital portals, are fully and robustly tested before they come into use, so that court users can have full confidence in them?
Lucy Frazer
As always, my hon. Friend the Chairman of the Justice Committee makes important points. I am pleased to clarify that the common platform is not affected—it is being trialled—and that in fact the reform programme in its totality is not affected by these issues. Our divorce and probate application systems are not affected. As I said, the point of reform is to ensure that these systems work in future—my hon. Friend referred to the need to ensure that our systems work—and we will be carrying out a rigorous evaluation of our court reform programme.
Ellie Reeves (Lewisham West and Penge) (Lab)
Prisons being issued urgent notifications, private probation services needing bailouts, trials collapsing because of disclosure failures, MOJ staff on strike over the failure to pay them the London living wage—and now the court system is in disarray. When will the Minister finally understand that the 40% real-terms cut to the MOJ budget since 2010 has consequences, and that austerity has left the justice system at breaking point?
Lucy Frazer
As I identified at the start, this issue was caused by an infrastructure failure in our supplier’s data centre. It is not the result of cuts. My Department received some funding in relation to the building of a prison in the recent Budget, and it received investment into the courts service and into its estates. We are investing £1 billion in our courts service.
Victoria Prentis (Banbury) (Con)
I should declare that as a judge my husband has been affected by these outages, and I am lobbied heavily on this matter at home. In the light of that, I would be grateful if the Minister confirmed my understanding that 75% of court staff are now back online and working normally. When will the rest of them be?
Lucy Frazer
I am disappointed that my hon. Friend’s husband, whom I should declare I know, is affected, and I send my apologies to him. Indeed, more seriously, I send my apologies to all court staff, judges and professionals who have been affected. This has obviously been a disruption to their business and I am truly sorry for that. As my hon. Friend mentioned, we are working hard to ensure that these issues are resolved, and in fact 90% of staff have working computer systems today. We expect our court sites to be fully operational by the time they open tomorrow morning.
Mr Speaker
It looks as though an end to domestic lobbying is in sight. I am sure the hon. Member for Banbury (Victoria Prentis) is extremely appreciative of that important fact.
Christine Jardine (Edinburgh West) (LD)
We have heard that this incident has caused a great deal of disruption for the judicial system, and the Minister has apologised to staff, but will she also take into account the very many individuals who are awaiting court sentencing and appearances? They have undergone unbelievable stress and gone through a great deal of personal sacrifice and disruption because of this incident, so will she apologise to them and ensure that future investment in the Ministry of Justice ensures that this does not happen again?
Lucy Frazer
The hon. Lady makes an important point. It is of course users who are at the heart of the justice system. Professionals work in the justice system, but they and the system work for justice for individuals. This morning I was at a court that was functioning—I was sitting at a hearing—and of course there is that continuous reminder that we are there to serve people who want to get justice done.
Anna Soubry (Broxtowe) (Con)
I declare an interest, because I am still a member of the Criminal Bar Association. I am grateful to the Minister for her assurances that this situation is not related to cuts, but the simple truth of it is that if we had a better, more fully funded system, there would be proper back-ups and this rumbling problem would have been sorted out a long time ago. I am afraid I share the views of the chairman of the Criminal Bar Association. The system is now reaching crisis point and funding is primarily a problem, but it is not just about money; we could spend the money in better ways. I would be grateful if the Minister would meet me and other members of the criminal Bar in particular to discuss how we can sort out what is, I am afraid to say, a broken system.
Lucy Frazer
My right hon. Friend has a great deal of expertise in this subject area and I am always happy to meet her and to speak with her. She talked about back-ups, and I should say that it is because we have recently invested in the courts service that we had wi-fi back-up. The issue was in relation to the server, but because we have invested in wi-fi in courts up and down the country, many staff could continue to work during this incident.
My right hon. Friend mentioned the criminal Bar; I am a big supporter of the independent criminal Bar, as I am of solicitor advocates, who play a vital role in the delivery of justice, which is why we have recently given them £23 million more for the advocates’ graduated fee scheme. We are investing in encouraging them and hope that they continue to do their work.
My right hon. Friend mentioned the CBA; I work closely with the CBA and have met its representatives on several occasions recently, and I also work closely with the Bar Council. I want to continue to work closely with them as we move forward.
Stephen Pound (Ealing North) (Lab)
As we must do this, may I declare a personal, rather than a pecuniary, interest? I have been married to a senior member of the west London magistracy for many, many years. Mrs Pound is incandescent with fury, because those on her particular bench find it impossible to operate within the common platform. The iPads with which they have been issued are useless, and many defence barristers and solicitors are having to print out copies of the documentation before they come to court. Will the Minister accept that it is our unpaid magistracy who have been making this system work despite the IT nightmare? Will she take this opportunity, on behalf of Her Majesty’s Government, to pay tribute to and thank the magistrates for making a broken system work?
Lucy Frazer
I am honoured that we have so many well-connected Members of Parliament present in the House to share with us their personal knowledge of the justice system. I thank the hon. Gentleman’s wife for all the work she does. I do indeed recognise the significant contribution that the magistracy makes. I was pleased to go to the Magistrates Association annual conference late last year. Magistrates do indeed make a significant contribution to our criminal justice system.
Mr Speaker
I very much hope that the hon. Gentleman will present a copy of the Official Report, when it appears tomorrow, to Mrs Pound, or Maggie, as I think she is known.
Vicky Ford (Chelmsford) (Con)
The listing team in Chelmsford administers the calendars and diaries for all Essex and Suffolk magistrates and county courts—that is more than 30 different courts sitting every day—so when the computer systems have been down it has been an administrative nightmare. I am glad to hear that nine out of 10 computers are back up and running and that we expect full service back tomorrow. Will my hon. and learned Friend confirm that this incident was not because of a cyber-attack and that there has been no loss of data, and will she let us know what is being done to make sure that this situation does not recur?
Lucy Frazer
As a diligent MP working for her constituency, my hon. Friend raised the particular issue of the Chelmsford courts with me yesterday, and I was pleased to tell her yesterday that Chelmsford Crown court was included in the sites that were fixed last night. We are currently working on, and perhaps might even have fixed, the combined family and county court, and hope that they will be online. I can confirm to my hon. Friend that this incident was not the result of a cyber-attack.
Steve McCabe (Birmingham, Selly Oak) (Lab)
Does the Minister accept that it is not quite fair to characterise this as a single or unusual event, and that her Department has been receiving reports of failures in the criminal justice secure email service for at least six months now?
Lucy Frazer
The hon. Gentleman makes an important point. In fact, there were two separate incidents in relation to the HMCTS-MOJ site: one that occurred on Tuesday night, which was fixed by the weekend; and a separate incident that occurred on Sunday, which we are continuing to work through. The issue he identifies in relation to the secure system is, again, separate and unrelated. Some 75,000 people were affected by that, which is only 12.5%. By Monday, we had restored user access to 40,000 of those people. We restored access to the remainder on Tuesday, and we have dealt with the issue. I hope people will identify that issues are occurring, and HMCTS is working through the night to resolve these issues. As I have mentioned, we hope that they will be fully resolved by tomorrow morning.
Robert Courts (Witney) (Con)
I, too, declare my interest as a member of the Bar and one who well remembers the frustrations caused by the legacy system. Will my hon. and learned Friend reassure me that her teams are working around the clock to make sure that all court users have access to the reliable IT system they need?
Lucy Frazer
I can give my hon. Friend that assurance. Issues have arisen, but HMCTS staff have been working around the clock to resolve them. They have been working extremely hard, and I would like to thank them for that work. Issues have arisen, but we have attempted to resolve them as quickly as possible.
Catherine West (Hornsey and Wood Green) (Lab)
What compensation will be made available to victims of crime who wait so long to get justice, and to other court users who often give up days of work? There is a massive loss of productivity in the system already, and issues such as this continue to aggravate the situation. Will there be a compensation system that is open, so that people can claim back for such lost productivity and make other claims they may have in relation to this matter?
Lucy Frazer
The issue that has arisen relates mainly to email systems. There has been minimal disruption, I am told, to the courts system as a whole. Obviously, where issues arise, we will investigate them and look into them thoroughly. Our whole programme of reform is intended to ensure that the users are at the heart of the system and that we ensure swift justice, with effective hearings delivered in the most efficient manner to ensure justice for everybody.
Kevin Foster (Torbay) (Con)
I must say it is a relief to hear that the Prison Service was not affected by this problem. Will the Minister reassure me completely that there is no prospect that any criminal hoping this may allow them to escape justice or be released slightly earlier will benefit? In essence, they will be very disappointed.
Lucy Frazer
I am very glad to give the confirmation that the Prison Service system is a different IT system and no defendant has been released as a result.
Andy Slaughter (Hammersmith) (Lab)
My constituents have contributed £43 million to the stalled digitisation process, thanks to the closure and sale of Hammersmith magistrates and county courts. Their reward is to travel for an hour or more to courts at Clerkenwell or Hendon. The Minister says the courts system is running well; it is not: it is in freefall. Will she at least postpone any further closures until she can guarantee a working service?
Lucy Frazer
I know the hon. Gentleman does a great deal of work in this area; he is very involved in the local law centre and has a great deal of knowledge. He will therefore be aware that we have recently consulted on what our guidelines should be in relation to any future closures. We will be guided by the response to that consultation, which is due out shortly.
Matt Warman (Boston and Skegness) (Con)
Remote and rural constituencies will often benefit most from technology—especially in my own constituency, where the regrettable closure of Skegness court means there is even greater reliance on it. May I urge the Minister to bear in mind that the use of technology will always produce more good than harm if it is done properly, and that she should proceed on the basis of that maxim?
Lucy Frazer
My hon. Friend makes an important point. Technology has opened the door—not just in justice, but in all areas of our lives—to more efficient and progressive ways of doing things. However, technology should always be our servant, not our master. We in the Ministry of Justice would like to ensure that technology will enable answers, not frustrate traditional ones. The technology that will be rolled out in hearings—if we have video hearings, for example—will always be used at the discretion of the judge, and we will ensure that it enables, not restricts, justice.
Mary Glindon (North Tyneside) (Lab)
Earlier this week, a constituent contacted me because of MOJ cuts. He is concerned that Newcastle county court is at least 22 staff short and is two months behind with its workload. As well as overstretched staff having the added problem of the IT failure, he is extremely concerned that they cannot deliver for the people they are there to serve. How does the Minister respond to these legitimate concerns?
Lucy Frazer
Of course, where there are particular concerns in any particular court, I am happy to look at them. If the hon. Lady would like to write to me or meet me, I would be happy to discuss any particular concerns.
Ian C. Lucas (Wrexham) (Lab)
The Minister says that she wants the user at the heart of the system. Under this Government, Wrexham in north-east Wales is run by an administrator in Llanelli in south-west Wales. That has led to our having a magistrates court without any cells—the equivalent of a pub without any beer—and the result is that the users have to go to a different town. All of this is as a result of Ministry of Justice incompetence. How can we have confidence in the administration of the justice system when this sort of chaos is an everyday occurrence?
Lucy Frazer
A number of people, such as the hon. Gentleman, have referred to court closures. In circumstances where 41% of our courts were used at less than half their available capacity last year, it is incumbent on a Government to look at where they should use their resources and where they should use their resources well. All money from court closures goes back into the courts system, and we ensure that the money is spent and spent well on our justice system.
Nic Dakin (Scunthorpe) (Lab)
When the Government closed Scunthorpe magistrates and family courts, against the wishes of local people, much was made of the way in which digitisation would mitigate the risk of threats to access to justice. Given this shambles, what evaluation is being done of whether, where there have been court closures, access to justice is still being delivered effectively?
Lucy Frazer
It is vital that we continue to reform our courts and to take advantage of what technology offers us. We have had extremely positive reports from people who are using our online services, such as our online applications for probate, online applications for divorce and—I was in a social security tribunal this morning—online applications for social security tribunals. There is the fact that people can get updated on their social security hearing on their mobile phone, and the fact that we are now piloting the ability of a judge to email and liaise with a tribunal applicant before they get to court so that their hearing is ready, effective and useful when they get there. We of course evaluate this at each stage. Our systems are user-based and have been adapted because of the feedback we have had from users in the course of using them, but we will be evaluating the reform programme overall.
Ancient Woodland Inventory (England)
Wednesday 23rd January 2019
(5 years, 9 months ago)
Commons ChamberRead Full debate Ancient Woodland Inventory (England) Bill 2017-19 View all Ancient Woodland Inventory (England) Bill 2017-19 Debates Read Hansard Text
A Ten Minute Rule Bill is a First Reading of a Private Members Bill, but with the sponsor permitted to make a ten minute speech outlining the reasons for the proposed legislation.
There is little chance of the Bill proceeding further unless there is unanimous consent for the Bill or the Government elects to support the Bill directly.
For more information see: Ten Minute Bills
This information is provided by Parallel Parliament and does not comprise part of the offical record
Michael Fabricant (Lichfield) (Con)
In the year that the Government have designated the year of green action, I beg to move,
That leave be given to bring in a Bill to make provision for the periodic updating of the Ancient Woodland Inventory for England; and for connected purposes.
Colleagues may be relieved to learn that this Bill is all bark and no Brexit, so it is going to be a change. As any Member of this House who has watched my recent videos on YouTube explaining parliamentary Committees will know, I am a tree hugger, and I am proud of it. I am a member of the all-party group on ancient woodlands and veteran trees, which is so ably led by my hon. Friend the Member for Taunton Deane (Rebecca Pow), because I am fighting to save them—all of them.
Ancient woodlands are an irreplaceable habitat and cover only 2.6% of land in the UK—that is 2.6% that we know of, so there could be a lot more. I cannot say whether that is the case, because the database that records ancient woodland in England, the ancient woodland inventory, is out of date.
I am introducing this Ancient Woodland Inventory (England) Bill because the present inventory is outdated and, as a result, has many inaccuracies and omissions that need to be corrected. My right hon. Friend the Secretary of State for Housing, Communities and Local Government introduced an updated national planning policy framework last July, which included long-overdue protections for ancient woodland. The framework makes it clear that developments that damage or destroy ancient woodlands should be refused except in exceptional circumstances. That is fabulous news, and the Secretary of State has my thanks for that, but, in order to protect those ancient woodlands, we do need to know where they are.
The existing inventory has become an essential reference tool for planners, developers, landowners, foresters, conservationists and others who are keen to protect and restore these irreplaceable wooded habitats. It tells us, for instance, that HS2 will destroy at least 56 hectares of this irreplaceable habitat. Indeed, the number of hectares of all threatened ancient woodlands is now at 811.
The inventory was originally developed back in the 1980s when computerised mapping was in its infancy—as were a good many hon. Members—and the lack of updates to it has meant that it is missing data. This has, in some cases, resulted in ancient woodlands being lost or damaged by development or mismanagement simply because they are not recorded in that inventory. That is particularly true of smaller sites that are often not yet recorded. Our knowledge of different types of wooded habitats and their values has increased, particularly our understanding of ancient wood pastures.
Significant steps have also been taken to restore some ancient woodlands damaged by conifer plantations, yet these positive changes also go unrecorded. The basic methods for identifying ancient woodland have not changed but, as I mentioned earlier, the policy and technology have—as have public awareness, appreciation, expertise and research—which makes a full update both more feasible and more urgent.
Small sites have regularly suffered due to this inaccuracy. There are few sites smaller than 2 hectares—that is 5 acres in old money, so not that small—recorded in the inventory, yet we know that they exist, and they are often the most at risk of loss or damage. A simple comparison between ancient maps and the inventory, which can be done relatively simply in this computerised age, shows countless small sub-2-hectare copses of ancient woodland that are on one map but not on the other. They are unregistered, unprotected, gone. That is the wrong attitude.
Give us examples, I hear you cry—[Hon. Members: “Give us examples!”] I will. In the Derbyshire Dales, just two months ago, a 1.25-hectare wood—that is 3 acres —stood for sale near the village of Middleton. On either side of it, ancient woodlands of some 40 hectares still stand proud. In the middle, this little clump lies forgotten. Its size means that it does not come up on the current inventory, so any planner or developer would not notice it, and could well decide to cut it down and put up some houses, caravans or even glamping pods among its hallowed groves—and do so unimpeded. Three acres is significant. It also appears on ancient maps dating back to the 1600s, so it is ancient. If it is on those ancient maps, it should be available on the inventory to planners. If the inventory were updated, the wood would be recognised. Without recognition, there is no protection.
The Government pledged to improve protections for ancient woodlands, and that means all of them. We cannot rely on out-of-date data to prop up a system that has seen countless hectares of this irreplaceable habitat lost. We have to update it.
I do not intend this to be any sort of blocking Bill to good, well-sited and much needed construction. I merely wish to ensure that the protection we have pledged ourselves to provide is backed up by the information required to make such protection real and meaningful on the ground. Indeed, it will actually help to speed up development, helping to avoid lengthy disagreements and costly proposals that have been put forward on the basis of incorrect and outdated evidence.
Much of my own constituency of Lichfield is filled with wonderful ancient woodland, which provides so many benefits and so much public good that cannot be replaced. Untilled soil is capable of storing carbon and provides a nutrient-rich mix for thousands of species of plants, fungi and lichen, and ancient oaks, alder, hazel and birch, which provide the very air we breathe as well as food and shelter for the creatures that we care about. These and so much more may be lost. This is a loss that my constituents, and doubtless hundreds of thousands of fellow constituents across the country, including those who made their voices heard in support of various Woodland Trust campaigns, are unwilling to accept. This is what the Bill will address. If people need numeric costs—figures to satisfy their minds alongside the compelling arguments for the intrinsic value of ancient woodland—they need look no further than the strategy that my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs will be introducing through the forthcoming England tree strategy, which will establish and confirm the benefits that we value from the trees that we cherish. Then they may see for themselves the irreplaceability of these ancient woodlands through the numbers that they well understand.
Frustratingly, ancient woodland inventories are a devolved matter, which is why this Bill applies only to England, but hon. Members from across the House have kindly sponsored it. I hope that they might provide the necessary leadership so that the devolved Administrations can update their own inventories in my beloved Wales, as well as in Scotland and Northern Ireland.
I am introducing this Bill now because, even as I speak, unregistered, unnoticed and ignored ancient woodlands are at risk of being lost, much to the dismay of our constituents who do cherish these forgotten vales of tranquillity. Only by updating the inventory will that not happen. We need to let the people know that, by the power of this Bill, when a tree falls we will hear it.
Question put and agreed to.
Ordered,
That Michael Fabricant, Sir Oliver Heald, Liz Saville Roberts, Rebecca Pow, Mr David Jones, Angela Smith, Stephen Timms, Mr Clive Betts, Henry Smith, John Mc Nally, Jim Shannon and Mr Jim Cunningham present the Bill.
Michael Fabricant accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 15 March, and to be printed (Bill 324).
Tenant Fees Bill (Programme) (No. 3)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Tenant Fees Bill for the purpose of supplementing the Orders of 21 May 2018 (Tenant Fees Bill (Programme)) and 5 September 2018 (Tenant Fees Bill (Programme) (No. 2)):
Consideration of Lords Amendments
(1) Proceedings on consideration of Lords Amendments shall (so far as not previously concluded) be brought to a conclusion three hours after their commencement at today’s sitting.
Subsequent stages
(2) Any further Message from the Lords may be considered forthwith without any Question being put.
(3) The proceedings on any further Message from the Lords shall (so far as not previously concluded) be brought to a conclusion one hour after their commencement.—(Jo Churchill.)
Question agreed to.
Tenant Fees Bill
Wednesday 23rd January 2019
(5 years, 9 months ago)
Commons ChamberRead Full debate Tenant Fees Act 2019 View all Tenant Fees Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 23 January 2019 - (23 Jan 2019)
14:37 - The House having divided: - Ayes: 293 / Noes: 220 - Question accordingly agreed to.
Mr Speaker
I remind the House that the Bill has been certified as relating exclusively to England and within devolved legislative competence. Any Divisions will be subject to double majority voting, whole House and Members representing constituencies in England.
The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)
I beg to move, that this House agrees with Lords amendment 1.
Mr Speaker
With this it will be convenient to discuss the following:
Lords amendments 2 to 35.
Lords amendment 36, and amendment (a) in lieu.
Lords amendment 37, and amendments (a) and (b) thereto.
Lords amendments 38 to 47.
Lords amendment 48, and amendment (a) thereto.
Lords amendments 49 to 60.
Mrs Wheeler
I draw Members’ attention to my entry in the List of Ministers’ Interests.
I am delighted that today we have a final opportunity to scrutinise the Tenant Fees Bill. I am grateful for the considered contributions from hon. Members to date. In particular, I thank the members of the Housing, Communities and Local Government Committee, chaired by the hon. Member for Sheffield South East (Mr Betts), for their pre-legislative scrutiny. I also thank the Opposition Front Benchers, the hon. Members for Great Grimsby (Melanie Onn) and for Croydon Central (Sarah Jones), for their constructive engagement.
It has been clear throughout that the Bill is one that we all support and that will deliver important changes in the private rented sector, improving the lives of millions of tenants. Letting fees can impose a significant burden on tenants, who often have little choice but to pay them time and again. The Bill will put a stop to such practices by banning unfair and hidden charges, making it easier for tenants to find a property at a price they are willing to pay, and saving renters an estimated £240 million in the first year alone. I know the changes may worry some in the lettings market, but agents who offer good value and high-quality services to landlords will continue to be in demand and play an important role in the sector.
Before I speak to the Government amendments made in the other place, I want to put on the record my thanks to my noble Friend and ministerial colleague Lord Bourne of Aberystwyth, who ably steered the Bill through the House of Lords, and to my noble Friend Lord Young of Cookham, who assisted. I also thank all peers who contributed positively to the debate. The Bill has benefited from their constructive engagement and scrutiny. Finally, I thank the Under-Secretary of State for Housing, Communities and Local Government, my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak), for his efforts in leading the Bill through this House last year.
I believe the Lords amendments strengthen the Bill and respond to many concerns raised during the debate in this House. Lords amendments 1, 2, 5 to 12, 15 to 18, 28 to 35, 49 and 55 are minor and technical inclusions that ensure consistency in the Bill and that the Bill best delivers on the policy intent. Lords amendment 5 clarifies that letting agents are prohibited from requiring a tenant or relevant person to enter into a contract with themselves—for example, for additional services such as providing an inventory. Lords amendment 1, 2, 6 to 12 and 28 to 35 replace references to “tenant” with references to “relevant person”. Amendment 55 changes a reference to “incorrect and misleading information” to “false and misleading information”, to align with other references in schedule 2. Amendment 15 to 18 ensure that the language around “day” and “date” in clause 11 is consistent, and amendment 49 makes it clear that the definition of a television licence in paragraph 9 of schedule 1 applies to the entire Bill.
I know that many hon. Members feel passionately about capping tenancy deposits. The issue has been discussed in great detail in both Houses, and we have listened carefully to the arguments made. That is why we tabled Lords amendments 36 and 37 to lower the cap on deposits to five weeks’ rent for properties where the annual rent is less than £50,000; where the annual rent is £50,000 or more, the deposit cap will remain at six weeks’ rent. The vast majority of tenants will be subject to a deposit cap of up to five weeks’ rent. The higher six-week deposit cap will apply only to properties where the monthly rent is £4,167 or more. Valuation Office Agency data show that across England the median monthly rent is significantly less than that. The upper quartile monthly rent for properties with four or more bedrooms in London is £3,142. The higher deposit cap is intended to apply not to the bulk of the private rented sector, but to high-end rentals—a niche area of renting where the costs involved are greater, making a deposit cap of six weeks’ rent more appropriate.
The Government took a balanced view. We wanted to ensure that landlords had sufficient financial security and flexibility for their properties, but recognised concerns that a six-week cap for all tenants might not best deliver the changes to affordability that are needed at the lower end of the market. Importantly, a cap of five weeks’ rent for properties with an annual rent of less than £50,000 extends the benefits of the deposit cap to an estimated one in three tenants. I am sure hon. Members agree that that is a laudable outcome. Also importantly, a cap at five weeks’ rent also aligns with a recommendation made by the Housing, Communities and Local Government Committee.
The amendment tabled by the hon. Member for Great Grimsby would lower the tenancy deposit cap to three weeks’ rent for all tenancies. Above all, the amendment would not help tenants and it risks distorting the market and causing behavioural change. Using data from deposit protection schemes, we estimate that some 93% of deposits now exceed three weeks’ rent. A cap of three weeks’ rent would greatly increase the risk of the deposit not fully covering damage to the landlord’s property or any unpaid rent.
Mr Mark Prisk (Hertford and Stortford) (Con)
As a member of the Housing, Communities and Local Government Committee, I am delighted that the Government have adopted the recommendation of five weeks. Does my hon. Friend agree that having a three-week cap is a rather peculiar notion? I do not recall a single piece of evidence from any expert citing that cap. Does she agree that the evidence for such an amendment needs to be produced?
Mrs Wheeler
My hon. Friend is completely right. The evidence to the Select Committee showed that there was no reason to have a three-week cap and that five weeks was better.
Richard Graham (Gloucester) (Con)
The Minister is absolutely right: the Select Committee was clear in its recommendation, and when the matter was discussed in the Public Bill Committee, a lot of evidence was produced to demonstrate that five weeks was a good compromise, which landlords could accept and which would benefit most tenants. The Opposition’s object in proposing three weeks is purely political, enabling them to say to tenants, “We tried to get it much lower,” when in fact the result would surely be many fewer properties available in the market for renting, which would hurt our constituents.
Mrs Wheeler
I could not have put it better myself. We do not want to create a situation that encourages landlords to withdraw from the market or ask tenants for more rent in advance, thus decreasing the overall net benefit of the ban on unfair charges. Also, we do not want to legislate in a way that would disadvantage certain groups, including pet owners and those who have lived abroad or have a poor financial history.
The real risk, as we have heard throughout the parliamentary process, is that a cap of four or three weeks’ rent could encourage tenants to forgo their final month’s rent payment. The Housing, Communities and Local Government Committee and peers in all parts of the other House recognised that risk and agreed that a deposit of five weeks’ rent was the right compromise. Lords amendments 36 and 37 are the result of cross-party discussion and agreement. It is worth noting that the hon. Member for Great Grimsby publicly welcomed the five-week deposit cap when it was announced. With that in mind, I hope hon. Members recognise that the Government have already proposed the best solution to the tenancy deposit cap.
Kevin Hollinrake (Thirsk and Malton) (Con)
Is my hon. Friend aware of anywhere in the world, and certainly any part of the United Kingdom, where deposits are capped at three weeks’ rent? Indeed, as she knows, the cap in Scotland is eight weeks’ rent.
Mrs Wheeler
I thank my hon. Friend. He has great knowledge of these matters and it is always helpful to hear that. In Scotland, it is eight weeks. We are putting forward five weeks. No, I am not aware of a cap at three weeks.
Liz Twist (Blaydon) (Lab)
The Minister will recall that, during the pre-legislative scrutiny in the Select Committee, one of the issues raised was about enforcement of rights. Does she agree that it is necessary to properly fund local authorities so that they can challenge landlords who seek to charge unfair fees?
Mrs Wheeler
Yes, indeed. I thank the hon. Lady for her intervention. I will get on to that point later in my speech, so she will have to stay and listen to the end, I am afraid.
Kevin Hollinrake
I must draw the House’s attention to my entry in the Register of Members’ Financial Interests. The Minister talks about agents and landlords having reassurance about being able to make reasonable charges where their action or work is required through the fault of the tenant. The Bill does make provision for this in a situation with the loss of keys, but it makes no provision for the costs of chasing late rent, despite the fact that it may take several attempts to collect it. In effect, that means that charges would be increased on the landlord at the expense of good tenants, on the basis that some bad tenants who do not pay their rent on time create a lot more work for the agent or the landlord.
Mrs Wheeler
Again, I thank my hon. Friend for his intervention. He is so deeply imbued with knowledge of these issues that I take note of it. I think he will find that later in the Bill there is a clause that might be helpful to him.
There is also a power in clause 3 to amend the list of permitted payments, including the level of the deposit cap and types of default fees that can be charged, should this be required.
Lords amendment 48 clarifies that landlords and agents will still be able to charge for any damages for contractual breaches as they do now. On this point, the hon. Member for Great Grimsby has tabled an amendment seeking to ensure that, where a landlord or agent wishes to charge a payment for damages, they must provide evidence in writing to demonstrate that their costs are reasonable. I would like to reassure her, and other hon. Members, that that amendment is not necessary. It has never been the intention that the Bill affects a landlord or an agent’s right to recover damages for breach of contract under common law. That is why we brought forward Lords amendment 48 to clarify the position and to ensure that such payments will not be outlawed under the ban. I want to reassure hon. Members that this does not create a back door to charging fees. I repeat: it does not create a back door to charging fees. Damages are generally not meant to do anything more than put the innocent party back in the position they would have been in had the contract not been breached. No reasonableness test is therefore needed. There are already large amounts of case law that deal with what is appropriate in a damages case. If an agent or a landlord attempts to insert a clause that requires a payment—for example, saying, “If you do X, you must make a payment”—this will be prohibited under clause 1(6)(b) or clause 2(5)(b). Further, landlords or agents are required to go to court if they want to enforce a damages claim, or they could seek to recover them from the tenancy deposit. In both cases, they would need to provide evidence to substantiate any claim, and they would only be awarded any fair costs.
As such, the hon. Lady’s amendment is unnecessary. It would also not be appropriate for this Bill to start tweaking years of existing case law regarding damages payments. We are more likely to confuse the landscape than to clarify it. We are committed, on this matter, to working with Citizens Advice, Shelter and other industry groups to ensure that tenants fully understand their existing rights with regard to paying and challenging contractual damages. We have already taken steps to update our guidance to make this point clear. I hope that, with those reassurances, the hon. Lady feels able to withdraw her amendment.
Hon. Members will be aware that the Bill introduces a clear set of rules around holding deposits. This will improve transparency and provide assurances from both tenant and landlord around the commitment to entering into a tenancy agreement. To minimise the risk of abuse, Lords amendment 54 introduces a formal requirement for landlords and agents to set out in writing why they are retaining a deposit. This will empower tenants to challenge decisions that they believe to be unfair. It will also ensure that tenants do not continue to apply for properties and risk losing their holding deposit time and again without understanding why.
We also agree that it is not right that landlords and agents accept multiple holding deposits for the same property. That is why Lords amendment 41 ensures that a landlord or an agent can only take one holding deposit at any one time for a property, unless permitted to retain the earlier deposit. Lords amendment 50 will ensure that a tenant receives their holding deposit back when the tenancy agreement is entered into. Previously, it could have been the case that a landlord might have had grounds to retain the holding deposit, and done so but entered into the tenancy anyway. Further, Lords amendment 59 clarifies that a holding deposit must be refunded where a landlord or an agent imposes a requirement that breaches the ban or behaves in such a manner that it would be unreasonable to expect the tenant or relevant person to enter the tenancy. This will, for example, give tenants greater power to object where a landlord or agent has asked them to pay an unlawful fee or to enter into an agreement with unfair terms.
Rebecca Pow (Taunton Deane) (Con)
This is a very stressful time for tenants; I have had a case raised with me very recently. That is particularly so for those who are forced, for one reason or another, to move frequently, which seems to happen more often in London than elsewhere, including Taunton Deane. Does the Minister agree that these amendments and this Bill are going to make a real difference to their security, particularly the fact that they have redress over the deposit issue, which is incredibly stressful if they have to try to claim it back?
Mrs Wheeler
My hon. Friend is quite right. It does seem to be a bit more of a thing in the south-east than anywhere else. Nevertheless, this Bill, which we hope to get through tonight with no ping-pong, will apply across the whole of England, and it will help tenants going forward, so I thank her for her question.
Lords amendments 13, 14, 19, 20, 38 to 40, 51 to 53 and 56 to 58 are consequential to those on holding deposits that I have just described.
I would like to discuss some amendments made to ensure that the Bill does not adversely affect organisations that were never intended to be in scope. We have taken local housing authorities and the Greater London Authority, or any organisation acting on their behalf, out of the definition of “relevant person”. Lords amendments 3 and 4 ensure that those authorities and those acting on their behalf will be able to make payments in connection with a tenancy when acting on behalf of a tenant or guaranteeing their rent.
Local authorities have a duty to help the homeless find accommodation. We recognise that, as part of this, councils may need to provide assistance to applicants—financial or otherwise—to access private rented accommodation. We do not want inadvertently to prevent a local authority from carrying out that vital work.
Further, Lords amendments 24 to 26 exclude certain licences to occupy where advice or assistance is provided in connection with the grant, renewal or continuation of the licence by charities or community interest companies. The types of licence that will be excluded are those that have been granted primarily for the provision of companionship or companionship combined with care or assistance where no rent is paid. This ensures that the important work of schemes such as Homeshare can continue. Homeshare matches a person in housing need—often a young person—with a householder, who is often elderly and needs companionship, sometimes combined with low-level care or assistance. I am sure we all agree that that is a worthy cause that was never intended to be in scope of the ban on letting fees.
Lords amendments 21 to 23 and 27 ensure that the forthcoming client money protection provisions work as intended. We want to give landlords and tenants financial security, but not in such a way as to impose disproportionate and unnecessary burdens on industry, which might adversely impact tenants and landlords. We have clarified that money that has already been protected through a Government-approved tenancy deposit scheme is not required to be doubly protected by a client money protection scheme. That was never the policy intention.
We will also not require schemes to pay out where certain risks are excluded by insurers. Those policy exclusions typically refer to events such as war, terrorism or confiscation by the state. Neither can we expect schemes to hold insurance for every penny held by agents. Our amendments ensure that the level of insurance held by schemes is proportionate to the risk of client money being lost. We are permitting schemes to impose limits per individual claimant and aggregate limits, where they are at least equivalent to the scheme’s maximum probable loss. That is an accepted industry practice, and the Financial Services Compensation Scheme imposes such limits.
The amendments on client money protection also provide for a transitional period of 12 months after the requirement to belong to a scheme comes into force, permitting agents to join a scheme where they are making all efforts to apply for a client account but have not yet obtained one. We want to give agents sufficient time to find a bank that offers a pooled client account. Schemes will be able to work with agents to find an appropriate banking provider where they are having difficulty. I would like to be clear that the 12-month transitional period only applies in relation to applying for a pooled client account and not the requirement to belong to a client money protection scheme more broadly. That is intended to come into force on 1 April 2019, prior to the ban on fees, and as long as we do not have ping-pong.
Lords amendment 27 clarifies that the lead enforcement authority set up under the Bill can also enforce the client money protection regulations, and Lords amendment 60 is a consequential amendment to the title of the Bill. These amendments will ensure that client money protection gives tenants and landlords the financial security that they want and deserve, without imposing unreasonable and disproportionate costs on industry, which could increase costs for tenants and landlords.
Above all, these amendments improve affordability, strengthen protection for tenants and minimise the risk of abuse by the minority of rogue landlords and agents. They ensure that the Bill’s key provisions are clear and transparent on the face of the Bill, offering tenants the certainty and security that they deserve. I hope that Members will welcome the changes that have been made, which I firmly believe address the key concerns raised in this House. I am confident that the measures in the Bill will help to deliver the fairer and more affordable private rented sector that we all want to see for tenants, but also for decent, professional landlords and agents who are providing a vital service.
It is in all our interests to see this crucial legislation become law as quickly as possible and avoid any delay that ping-pong would inevitably cause. We need to allow a short period following Royal Assent to enable agents and landlords to become compliant with the new legislation. We therefore intend the provisions in the Bill to come into force on 1 June 2019, which means that the ban would apply to all new tenancies entered into on or after that date.
Bob Stewart (Beckenham) (Con)
Does the Minister feel, as I do, that the Bill will incentivise private landlords to give more tenancies, particularly to people who are on social benefits?
Mrs Wheeler
Always gallant. The Bill will help enormously to ensure landlords’ safety, while financially benefiting tenants.
Bob Blackman (Harrow East) (Con)
I think my hon. Friend is coming to the conclusion of her contribution. She mentioned when these measures will come into force for new tenancies. Could she clarify that the Bill will apply to not only brand new tenancies, where a tenant moves into a property, but also existing tenancies that are renewed by being rolled over or where the tenant remains in situ and enters into a new tenancy agreement?
Mrs Wheeler
I thank my hon. Friend, who has been assiduous in his time on the Housing, Communities and Local Government Committee. The intention is for the Bill to apply to all new tenancies signed after 1 June. As he said—he must have better eyesight than anyone—I am close to concluding.
The exception to the 1 June date is the client money protection provisions in the Bill, which, as I have said, come into force on 1 April 2019. Ahead of that, we will continue to work closely with key stakeholders to support implementation of the ban. We will work with industry groups to ensure that the ban is properly communicated, and we continue to work with local authorities to ensure that they are ready to enforce it. I have already shared the draft consumer and enforcement guidance with Members, and it is now being updated to reflect the Lords amendments.
Jeff Smith (Manchester, Withington) (Lab)
I am pleased that the Government want to act quickly on this. Given how hard-pressed local authorities are, what will the Government do to help them manage this situation?
Mrs Wheeler
Like my hon. Friend the Member for Harrow East (Bob Blackman), the hon. Gentleman is prescient about what I am about to say. We are working with National Trading Standards to appoint the lead enforcement authority under the Bill. That will be a local trading standards authority appointed by the Secretary of State, and we intend the body to be in place ahead of implementation.
In conclusion, I very much hope that Members will support the amendments made by the Government and look forward to seeing the legislation implemented. I also hope that the hon. Member for Great Grimsby, having heard and accepted my assurances, will withdraw her amendments.
Melanie Onn (Great Grimsby) (Lab)
It is a pleasure to speak in this important debate. I would like to thank the Minister for her approach and the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks) (Rishi Sunak), who steered the Bill through Committee and was open to hearing the Opposition’s views on this small but very important Bill.
I shall speak in support of amendment (a) to Lords amendment 36; amendments (a) and (b) to Lords amendment 37; and amendment (a) to Lords amendment 48. I shall also pay tribute to the work that has been done in Committee, where there was a lot of fruitful conversation and consideration, and in the other place, which has resulted in the Bill arriving back in the Commons in a far better state. It is not just my hard work or the Minister’s hard work that has gone into the Bill. We are backed up by an enormous number of people, including charities, members of the Housing, Communities and Local Government Committee, who are listening keenly to our debate, and civil servants, who have put in many hours to make sure that the Bill is fit for purpose. I am very grateful to all those people who have participated.
In Committee and on Report, we discussed at length the default fee clause. Originally, the Government fought very hard against opposition from Labour and charities such as Shelter to remove a gaping loophole, which would have left the definition of a default to the discretion of those drafting tenancy agreements. It is interesting that Lords amendment 47 bears a striking resemblance to amendment 3, which I pressed on Report. Back then, the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for Richmond (Yorks), said:
“We believe it is for the tenant and the landlord to determine what it is necessary and fair to include as default charges, on a case-by-case basis. There are other potential default charges besides those for late payment of rent and lost keys.”—[Official Report, 5 September 2018; Vol. 646, c. 208.]
It is welcome that the Government have rowed back on that, despite being so bullish about it during the Bill’s passage through the Commons. I do hope that they bear that in mind when considering amendments to future housing Bills, in which I hope to play a role, and are more thoughtful. If amendments are tabled in good faith, I hope that Government Members would accept that, and if they are worth adopting, do so at an early stage, so that we do not appear conflicted on measures that are positive overall, particularly in this case for people in the private rented sector who are seeking a home and trying to access one.
As the Under-Secretary of State for Housing, Communities and Local Government, the hon. Member for South Derbyshire (Mrs Wheeler), pointed out, Labour always welcomes Government acceptance of the principles and details of our ideas, and we welcomed their acceptance of a Labour proposal in Lords amendment 47 to enshrine what counts as a default fee in the Bill. We believe that that will close a significant loophole in the Bill, moving it far closer to the type of tenant fees Bill that Labour has been proposing since 2013.
We have a number of concerns about the Lords amendments, as the Bill still does not reach its full potential to protect tenants from unscrupulous landlords who want to charge unfair fees. We are very keen to point that this is about the unscrupulous few, not the fair-minded, reasonable and proper many who exist out there. First, Lords amendment 48 adds a new permitted payment of damages to the Bill. The Minister touched on that, so I may have to revise what I am going to say—I hope that hon. Members will bear with me. We tabled an amendment because we are concerned about Lords amendment 48, but that does not extend to a belief that damages in principle are fundamentally wrong. Landlords should not have to pay for repairs when tenants cause damage to their properties, but we do not understand why the Lords amendment is necessary, and why it seemingly misses out a number of protections that are present in other parts of the Bill.
Richard Graham
When we discussed this matter in Committee the hon. Lady was very reasonable, and seemed perfectly happy with the five-week proposal that the Government have made in the Lords amendment. It would be much easier if the hon. Lady did not press her amendment, so that we may secure confirmation across the House that this is the best way forward, especially given that there is not a single Labour Back Bencher present to support the hon. Lady’s amendment
Melanie Onn
It is a busy day in other parts of the Palace of Westminster; we should give colleagues credit for the fact that they have other work to do. I shall come on to the detail of my amendment and the issue of five weeks. I think that the hon. Gentleman has misremembered the extent of my acceptance of the five-week period. It was a reluctant acceptance at the time, with a view to tabling a further amendment if we thought that necessary. Having heard the Minister’s explanation, I think that it is still necessary to press that point, and I shall address it further in my speech.
I am discussing the damages that landlords can claim if a tenancy agreement is breached, rather than the issue of deposits. I urge the hon. Gentleman to bear with me and allow me to finish making that point. The fact that this is the first reference in the Bill to claiming damages shows that the Government were confident until recently that the Bill as originally drafted would not interfere with the current system. Indeed, the Government’s draft guidance, which we received from the Minister on 5 November, said:
“The Act does not affect any entitlement to recover damages for breach of contract…If a tenancy agreement does not permit a landlord or agent to charge default fees, the landlord or agent may still be able to recover damages.”
It continued:
“What is the difference between a default fee and damages? A default fee is a payment that can be required by a landlord or agent under an express provision in the tenancy agreement and would therefore be permitted under the Tenant Fees Act.”
Finally, it said:
“Can a landlord or agent recover costs for damages if they didn’t write them into the tenancy agreement? Yes. The Act does not affect the landlord’s entitlement to recover damages”.
The draft guidance that we received from the Minister’s Department only two months ago indicated on multiple occasions that the Bill would not impact on a landlord’s ability to claim damages, and it spelt out the difference between a default and a deposit. There is therefore a concern, because what was seemingly settled has become unsettled as the result of an addition which, to all intents and purposes, and given the explanation that we received, does not need to be made. What is the purpose of that? However, the Minister’s assurance on the intention to reassure landlords and innocent parties that they are simply going to be in the position that they were in before any such harm was caused perhaps gives me reason to reconsider.
Kevin Hollinrake
Does the hon. Lady think that good tenants who comply should subsidise poor tenants who do not comply?
Melanie Onn
I think it is absolutely right that if a landlord experiences a breach of tenancy, those tenants are considered responsible for the situation. It should not rest on others who adhere to the tenancy agreement that they signed, so I concur with the hon. Gentleman.
I really do not see why Lords amendment 47 on default fees necessitates change, as the Government clearly defined damages as separate from defaults. I therefore wonder why Lords amendment 48 is necessary in the first place. Without it, would the Bill impede the current system? Would it prevent landlords from claiming damages through deposits or the courts? Can the Government reassure me—I would say that perhaps they have done so to some extent—that Lords amendment 48 will not create powers for landlords to bypass current systems and charge as they see fit? I certainly hope that the Minister believes that to be the case. If Lords amendment 48 is not necessary, perhaps it is in the Minister’s gift to reconsider the position and remove the provision, rather than adding confusion, as it is not necessary, and previous statements have made it clear that it is not necessary.
My amendment (a) to Lords amendment 48 would bring that into symmetry with powers in the Bill and add a requirement for charges brought under the amendment to be reasonable, and to be evidenced by invoices. That is just to ensure that no loophole is sought. Throughout the debate we have discussed the need for permitted payments in the Bill to be subject to rigorous checks and balances, to ensure that unscrupulous landlords and letting agents cannot continue to charge unjustified amounts for things such as a lost key. Thanks to the hard work in both Houses, we have closed a number of loopholes that could have been exploited to allow some landlords to profit from tenants by unfair and unjustified means.
Lords amendment 48 does not contain those protections and seemingly could allow for open-ended charges without mind to the cost to the landlord, and to whether the charges could be backed up by evidence. I do not intend to press the amendment to a Division, but I would welcome additional reassurances from the Government that the principles discussed throughout the Bill will not be undermined by the Lords amendment, and that it is not a new loophole that landlords and letting agents can exploit for profit.
Mrs Wheeler
I am always willing to give the hon. Lady greater reassurance. Lords amendments 42 and 47 ensure that landlords and agents can charge default fees only in specified circumstances, which are listed in the Bill. Lords amendment 48 permits landlords and agents to recover costs for damages only in breach of contract.
Melanie Onn
I thank the Minister for that very helpful further explanation.
Another Opposition concern about the Lords amendments is that the Bill still does not go far enough to remove the barriers that high deposits pose to millions of renters across the country. Our amendments seek to address two points. The Minister says that reducing the deposit cap from five weeks to three would not help tenants, but I believe it would. A reduction of two weeks’ advance payment will of course help tenants to access properties. It would reduce barriers for private renters and enable them to access the rental markets, including for the first time. Turning that into a negative takes some extraordinary creative gymnastics, on which I congratulate the Minister.
Mr Prisk
The Select Committee looked at the Bill in detail in pre-legislative scrutiny. We all signed up to five weeks, including six distinguished Labour Members, including the Chairman, the hon. Member for Sheffield South East (Mr Betts), who knows the subject well. Why does the hon. Lady believe they are wrong?
Melanie Onn
Having served on that Committee with the hon. Gentleman previously, I absolutely support its work and congratulate it, but it is always in the interests of a Select Committee to achieve consensus whenever possible and to try to agree a report that has unanimous support. That is the purpose and intention, and this case is a demonstration of excellent chairmanship and co-operation.
I congratulate the hon. Gentleman on playing his part in that, but it is the Opposition’s role to speak up for tenants. If we can make the process better, and if there is an opportunity for the Government to go further in assisting tenants—tenants are hard-pressed and this is a very expensive period of their lives—it is right that we speak up for them. We should try to encourage the Government to accept that they can reduce the barrier of high deposits to assist people directly. I just cannot support the view that charging more will assist renters in any way.
The Minister mentioned that I welcomed the Government’s reduction. I am delighted that they have listened to common sense and reasonableness, and that they have reduced the cap to five weeks from six, which was far too high, but it is not enough. If the Government can go further, I believe they always should.
Melanie Onn
I will move on because I am absolutely convinced that hon. Members will want to address these points in their speeches—they are committed to the subject and have taken a close interest, whether in the Bill Committee or in Select Committees. I look forward to hearing their comments in the remainder of the debate, but I will move on if that is okay.
Melanie Onn
I have already given way generously.
The first point that our amendments seek to address is the financial staggering for the cap level that landlords are allowed to impose. I have sympathy with the Government’s aim of prioritising a reduction of the deposit burden on those at the cheaper end of the market, but the specific provisions in Lords amendment 36 could mean that those in joint tenancies end up being subject to the higher cap, despite individually paying significantly less in rent than is used as a threshold in the amendment. It is counterintuitive to create a cap that allows deposits to be relatively higher for someone paying £5,000 a year in rent in a 10-bed large house in multiple occupation than for someone paying £45,000 in an individual rent, so I would welcome reassurance that joint tenants will not be short-changed by the differential cap. If they will be, I would welcome an explanation of the logic behind the decision to allow those in joint tenancies to be charged relatively more.
Regardless of the functioning of the differential cap, the Lords amendment will do little for the majority of tenants in this country. The cap will have a negligible effect on the majority of deposits in the country and will allow the current system to function virtually unchanged. For the graduate who cannot afford the up-front costs to move to a city for a new job, or for the family given just two months to save enough money to find a new flat and avoid homelessness following a section 21 notice, the system is simply not fit for purpose and needs urgent change.
According to the English housing survey, a five-week rental deposit will set new tenants back an average of almost £1,000 across the country, and over a staggering £1,500 in London. For many in society who are living pay cheque to pay cheque, saving that sort of money would take an enormous amount of time, and certainly far longer than the two months that tenants are given when they are served with section 21 notices. That means that many struggle to access the flexibility that renting should offer. They fear being served notice to vacate because that could result in homelessness. That is simply not how the private rented sector should function.
Our amendments would change that. Lords amendment 36 introduces an ill-thought-through staggering system. Amendment (a) in lieu would reduce the cap on deposits from five or six weeks to three, and our amendments together will reduce deposits to three weeks for all, closing the loophole that could be opened by Lords amendment 36.
I was interested to hear the Minister’s announcement of the enactment date. A written statement is due today, which I look forward to reading. I was also interested to hear her comments in response to my hon. Friend the Member for Manchester, Withington (Jeff Smith), who is no longer in his place, on enforcement and trading standards. She said that the consumer money protection measures in the Bill would be in place before enactment. I would appreciate clarity on whether she meant enactment on 1 June 2019, which is rapidly approaching, or whether she was referring to the commencement date of April next year.
Labour’s amendments would give private rented sector tenants a very welcome helping hand at a very expensive time. If passed, the amendments would reduce the deposit barrier by almost £400 across the country, and by over £600 in London, offering significant change to tenants from all backgrounds and building a better private rented sector for the many.
Bob Blackman
I draw the attention of the House to my entry in the Register of Members’ Financial Interests.
It is a pleasure to follow the hon. Member for Great Grimsby (Melanie Onn). I had the opportunity to chair—and the challenge of chairing—the Housing, Communities and Local Government Committee during pre-legislative scrutiny in the absence of the elected Chairman of the Committee, the hon. Member for Sheffield South East (Mr Betts), who unfortunately was undergoing health treatment at the time. I take absolutely the praise that the hon. Lady pours on me for reaching the judgment of Solomon—[Interruption.] It was possibly unintended at the time. From the outset of our pre-legislative scrutiny, on an all-party basis, we sought to balance good landlords and tenants, who are the overwhelming majority, with the small minority who are rogue landlords and rogue tenants. The risk here is the balance that is struck.
I do not intend to go over all aspects of the Bill but, clearly, I am absolutely delighted that the Government have seen fit to endorse all the Select Committee’s recommendations, especially the reduction of deposits from six to five weeks’ rent. I will again set out why we came to that conclusion. As Members might recall, we had a long discussion about it in Committee. Some promoted the concept of a six-week deposit and some a four-week deposit. No one but no one on the Select Committee promoted less than four weeks, for very good reasons.
Our view was that a six-week deposit was clearly too onerous for tenants. I accept what the hon. Member for Great Grimsby says about the cost to tenants of a six-week contribution, but there is also a clear risk with only a four-week deposit—or, worse still, her proposed three-week deposit—because we might get to a position in which, in the last month before the end of a six-month assured shorthold tenancy, a tenant has no incentive whatever to pay their last month’s rent. Tenants could just skip, and the landlord would then have to pursue them through the courts, bearing incredible costs unreasonably.
The issue for us was that four weeks would lead to a position whereby the tenant had an incentive to say, “Okay, I won’t pay the last month’s rent—just take it out of the deposit,” and then if the landlord could reasonably wish to claim money from the deposit because of damage or other reasons, they would have to pursue court action to recover it. That would be grossly unfair on good landlords, who are the vast majority in this country. Other members of the Committee promoted six weeks, so we ended up with the view that five weeks struck a balance between giving tenants an incentive to pay their last month’s rent, in the knowledge that they would get back their deposit had they been good tenants, and landlords being forced to go through a proper claim process to recover moneys as a result of damage by a tenant.
Richard Graham
I am afraid that the Opposition spokesperson, the hon. Member for Great Grimsby (Melanie Onn), will not give way on this matter because she is making a purely political point by wishing to appear to be helping tenants more, but the interesting silence in the debate so far has been from Scottish National party Members, because of course there is an eight-week deposit in Scotland. What does my hon. Friend think about that?
Bob Blackman
Clearly we are not talking about the position in Scotland, but I suspect—I might be wrong—that rental levels in Scotland are very much lower than elsewhere in our urban conurbations, and certainly in London. Scotland also perhaps has a lot more social housing than England—
Bob Blackman
I see the hon. Lady nodding about that point. Those two things are equally important.
Another consideration, which has not yet come out in the debate, is the economic impact of what happens with deposits. If we lowered deposits, I suggest that landlords would likely increase the rent over the period and—this is the key point—tenants would end up far worse off as a direct result, because landlords would have inflated the rent in order to recover the moneys due.
Mrs Wheeler
Let me clarify something about the ban applying to all new tenancies from 1 June. There will be a 12-month transition for tenancies signed before 1 June during which tenants can be charged. After 1 June 2020, no tenants can be charged fees banned under the Bill, which gives a clear date for when the provisions of the Bill will apply to all tenancies.
Bob Blackman
I thank the Minister for that helpful intervention, which clarified her earlier remarks and what was said when I intervened on her speech.
It is reasonable to set a position whereby we are abundantly clear in the Bill—I hope it will soon become an Act—that letting agents, estate agents or whoever are working on behalf of landlords, not tenants. I therefore warmly welcome the Lords amendment on holding deposits that was wisely tabled by the Government. What happens at the moment is an absolute outrage: some unscrupulous letting agents take a variety of competing holding deposits to inflate rents by almost having an auction for rental properties. That is grossly unfair on prospective tenants who are just looking for a property, so I warmly welcome that decision. It will be a welcome change for tenants throughout the country.
I am glad about the clarity of the Lords amendments that ensure that we are clear about the charges a landlord can make, what their purposes are and what the standards of evidence must be so that tenants do not bear a ridiculous price for, say, a lost key. Any charge will have to be evidence-based—the cost of replacing keys or other such security devices will be set out—and any cost will be reasonable, not inflated. One of the problems has been that certain unscrupulous individuals have been getting away with ripping off tenants with such charges in a grossly unfair way.
I warmly welcome the Lords amendments. The whole Select Committee welcomes the fact that the Government have finally got to where we were in the first place on deposits. I trust that we will reject the spurious Opposition amendments and ensure that the Bill, which has been warmly welcomed throughout the country, rapidly becomes law so that we can implement a process that is fair for tenants.
One thing that we desperately need to introduce is a national rental deposit scheme. My hon. Friend the Member for Colchester (Will Quince) and I managed to convince the Chancellor to do that at the time of not the most recent Budget, but the one before, and money was allocated to the Department to make that happen. When the Minister sums up, I would welcome her assuring us that we will speed up the process of introducing such a scheme so that those for whom the deposit is the key issue in getting a tenancy can be funded by public money, thus protecting them and giving them the opportunity to get a tenancy and a home of their own.
Angela Crawley
As the lonely Member on the SNP Benches, and given that the Bill applies solely to England, I will endeavour to keep my comments brief. The Government’s Bill is, however, welcome.
This Government are playing catch-up with the Scottish Government, who abolished tenant fees in 2011. The Scottish reforms gave tenants longer notice periods, indefinite security of tenure and limited rent rises, so it is most welcome that this Government are making changes here now. In Scotland, in many instances, money has gone back into the pockets of Scottish renters, but renters in England are currently losing out due to this Government’s inaction and failure to offer the same protections.
The Government have maintained the right-to-buy policy, but they must recognise that to give people the greatest choice and flexibility, they have to ensure that the opportunity of the right to buy is matched with an increase in home building and access to socially affordable housing. I am afraid the Government have not quite hit the mark on that yet, and people are simply being driven into the private rented sector, which limits their options and opportunities.
The Bill is very welcome. As we heard from Conservative Members, there remains the fear that this policy will mean that the costs of the abolished fees will be passed on to tenants in an underhand way, but that concern is unfounded. It has not happened in Scotland, where there has not been a significant spike in rents since the ban on fees, so I hope that the Government will take heed of that fact. Independent research commissioned by Shelter found that since 2012 landlords in Scotland had been no more likely to increase rents than landlords in other parts of the UK. Between 2012 and 2016, rents increased by 5% in Scotland, compared with 9% in England, so the abolition of tenant fees does not appear to have had a significant impact on costs.
That said, although such a policy has been shown to work in tenants’ favour, we must be vigilant about rent prices, so I hope that the Minister will outline how the Government will ensure that their policy puts tenants first. Landlords in Scotland can only increase rents with three months’ notice and no more than once a year, and tenants can contact a rent officer if they think that a rent increase is too high. I would be interested to know whether the Minister envisages similar protections and criteria for the policy in England. In Scotland, other than rent and a refundable deposit, which is capped at no more than two months’ rent, landlords cannot levy any additional charges, which means no holding deposits, administration fees, premiums or additional charges, whether refundable or not.
Tenants are secure when landlords can end a tenancy only on strict eviction grounds. The Scottish National party commends the work of charities and campaigners who secured additional renters’ rights from the Government in the House of Lords, and both Shelter UK and Generation Rent are happy for the Bill to pass with the Lords amendments. These rights include a short definitive list limiting default fees to charges for chasing late rents and for replacing lost keys or equivalent security devices. I noted the comments made by the hon. Member for Thirsk and Malton (Kevin Hollinrake) and I hope he is reassured that welcome mechanisms are in place. The provision closes the default fee loophole so that landlords will no longer be able to charge for a whole host of spurious defaults. It is also clear to landlords that they can continue to recover damages as they do now.
I welcomed the comments of the hon. Member for Harrow East (Bob Blackman), who, when comparing the position with the cap set in Scotland, rightly mentioned the greater availability of social housing in Scotland. He observed that a five-week cap was welcome, especially given that rents in England and Wales can be two to three times higher than those in Scotland. A five-week deposit cap is reasonable and will help renters to meet the initial fees needed to secure a home. Although Shelter originally argued for a lower cap, even it has said that it is
“pleased that the government didn’t stick at 6 weeks and we believe the 5-week cap will be a big improvement”.
That takes heed of the fact that costs are substantially higher in England, meaning that a five-week cap is much more reasonable.
Holding deposits are now illegal in Scotland, and that ought to be the case in England as well. Under the Lords amendments, if a tenancy does not go ahead, landlords or letting agents will be required to set out in writing the reasons why—they will also be required to give reasons for withholding some of a deposit—and they will have to do so within seven days of the decision not to progress with the tenancy. That will give tenants some clarity on exactly what happened to their money and ensure that there is a paper trail, which will make challenging unfair practices easier. Ultimately, both the landlord and the tenant will have more protection.
The ban on tenants fees in Scotland has made the rental sector fairer and easier to access. While I congratulate the Government on taking this positive step in the interests of people in rented accommodation, I urge the Minister to consider my points about abolishing tenant fees, while balancing protections for landlords with the rights of renters. The Bill will protect renters, many of whom do not have the luxury of owning their own home, and that ultimately is what we all want.
Kevin Hollinrake
I will try to keep my comments brief—apparently time is pressing—although there is much I would like to say about the Bill. I draw the House’s attention yet again to my entry in the Register of Members’ Financial Interests.
I am in principle and in practice very supportive of the Bill—I have been right from the start—despite my business interests and despite the extreme consternation within the industry at my support. It is absolutely right that there be a firewall around a tenant’s ability to shop around when they have found a house or flat they want to rent. We are right to believe in free and competitive markets. This was not a free and competitive market, and it is right that we act in this area. It is right that landlords pay for their own tenancy agreements, inventories and referencing. I support all those things. I also want to put on the record my support for the Minister. She has done a great job on the Bill and engaged with me and other colleagues who have had concerns about some of its provisions.
I would like to touch on two things: deposits and default fees. I will begin with Lords amendments 36 and 37. To say that three weeks would be an appropriate deposit length, as the hon. Member for Great Grimsby (Melanie Onn) has done, shows a complete misunderstanding of the issues. She is absolutely right to want to protect tenants—everyone in this place wants to protect tenants—but to do that we must be fair to landlords as well. She asked how a longer deposit period would help tenants. It would not help tenants not to be able to find properties to rent. If we deterred landlords from entering the marketplace, as a three-week cap would do, that would not help tenants.
I speak as somebody who has been in this business for 30 years. When I started, the only thing I could find in the marketplace was a shabby, damp, dark terraced house in the middle of York. It was not like today’s marketplace; tenants now have a breadth of choice, and that is because landlords have invested because they are treated fairly. The hon. Lady wants to treat tenants fairly, as I do, but we would not be treating them fairly if our policies resulted in their being refused tenancies by landlords worried about not getting their rent, not regaining possession of a property that had had significant damage done to it or not having enough deposit left for the remedial work. Her proposals would potentially put landlords in that situation, given that many tenants use their deposit as the last month’s rent, meaning there would be nothing left.
I still have concerns about restricting the deposit length to five weeks. As we know, it is eight weeks in Scotland. The average deposit in London is five and a half to six weeks, and in the rest of England it is not far below that, so the Bill will mean a change for many landlords, and we will have to keep this under review to make sure it does not have adverse consequences for tenants—that is the principle. Landlords are happy as long as they keep their properties well maintained and the rent is paid. If that is not the case, landlords will exit the market, which is not good for the tenants the hon. Lady looks to protect.
Bob Blackman
Does my hon. Friend recall that, during the Select Committee process, one of our considerations was that, if we set a six-week deposit limit, every landlord would rapidly move to six weeks from the current UK average of between four and a half and five and a half weeks?
Kevin Hollinrake
No, I do not agree with that because at the moment we have some flexibility. Under the Bill, we have no flexibility above five weeks. The trouble with that is this. I could charge a tenant five weeks, but what if they have a pet or certain other circumstances that make me less likely to want to rent it to them? I, as a landlord, will be less likely to rent to that person, under this measure, whereas with six weeks I would have some flexibility. We must make sure that this does not deter landlords from renting properties to people with pets. We do not want that, but it could happen. The Minister has promised to keep this measure under review, and I am absolutely sure that she will.
I want to touch on default fees and amendments 42 to 47. I welcome the clarification from the Minister in the letter she sent me a couple of days ago. She assured me that landlords and agents would still be able to charge for things above and beyond their existing obligations, and that is absolutely right, but the Bill itself only makes a couple of provisions on default fees, and one of those is for the replacement of keys. It sounds like a simple process, but it is possible to spend hours and hours chasing the tenant, chasing the keys, and then chasing the tenant to come and collect the keys. Someone has to pay for that work. It is not a question of the keys themselves; it is a question of the time and labour involved in their delivery.
Wera Hobhouse (Bath) (LD)
I, too, draw the House’s attention to my entry in the Register of Members’ Financial Interests.
The Bill has returned to the Commons in a much better state than it was in when it left. The loophole relating to default fees has now gone. The detail on default fees will be on the face of the Bill, which will specify
“a key…or other security device”.
There is much more transparency in relation to the holding of deposits, with a fairer transaction between letting agents and tenants, and the deposit levels are better aimed at people on low incomes, having been reduced to five weeks’ rent.
I listened carefully to both sides of the argument about the length of deposits. I listened to what was said by the hon. Member for Great Grimsby (Melanie Onn), but I also listened to the counter-arguments. I entirely agree with the hon. Lady that we need to protect tenants and make the system easier for them, because there is a tough world out there for people on low incomes. I also agree that we should not inadvertently disadvantage renters. As long as we do not have the number of affordable and social homes that we need, they will always be in that tough world in which, ultimately, they are at the mercy of landlords when it comes to charges. This is only the beginning of an overall improvement for renters, and I hope very much that we will continue to make changes in the law that will make life easier for them, but I also hope that we will eventually provide the number of homes that we need in order to create an entirely fair rental market.
I pay tribute to my colleagues in the House of Lords, Lord Shipley and Baroness Grender. Lady Grender initiated these proposals in a Private Member’s Bill in 2016 and, with Lord Shipley, worked assiduously with the Government to improve the Bill. I also congratulate the groups that have long campaigned for this change in the law, including Shelter, Generation Rent and Citizens Advice.
For too long, upfront costs—often rip-off fees charged to tenants by unscrupulous lettings agencies—have pushed people into unmanageable levels of debt, and sometimes into homelessness. The current system means that people, particularly those on low incomes, must pay as much as £3,000 to move, even if they will be paying a lower rent. Some have predicted that we will see a rise in rents as a result, but evidence from Scotland suggests that that is unlikely. If rents rise, the relatively small amount per month will be manageable in comparison to the extortionate amount that it costs to move.
For too long people living in the private rented sector have been treated as second-class citizens, and the Bill goes some way towards putting that right. The Liberal Democrats welcome it, and welcome the Conservatives’ change of heart. We look forward to its introduction on 1 June, with only the small regret that it has taken so long for it to reach this stage. As I said earlier, I hope that we will continue to make changes in the law to make it easier for people to rent in a fair market where there is a good number of affordable and social homes.
Mrs Wheeler
With the leave of the House, Madam Deputy Speaker. I shall be very short and very pithy.
I thank Members on both sides of the House for their passionate and constructive contributions to the Bill’s passage. I also thank the civil servants who have worked so hard to bring the Bill to this successful stage. We particularly wanted that to happen quickly so that the lady who is pregnant would not give birth in the Box. I have told her that if the baby is a boy, it must be called Bill!
I hope we can all agree that improvements have been made, thanks to the work of many Members on both sides of the House, and that as a result the Bill will be even more effective in delivering its promise to protect tenants from unfair charges. I hope that the assurances I have been able to give will mean that the Commons amendments will not be pressed to the vote.
Lords amendment 1 agreed to.
Lords amendments 2 to 35 agreed to.
Schedule 1
Permitted Payments
Motion made, and Question put, That this House agrees with Lords amendment 36.—(Mrs Wheeler.)
The House proceeded to a Division.
Madam Deputy Speaker (Dame Eleanor Laing)
I remind the House that the motion is subject to double majority voting of the whole House and of Members representing constituencies in England.
Madam Deputy Speaker (Dame Eleanor Laing)
We now come to motion 4 on private Members’ Bills.
Sir Christopher Chope (Christchurch) (Con)
On a point of order, Madam Deputy Speaker. That motion would have given us some certainty that this House would be sitting on Friday week, for example, to consider private Members’ Bills. Is it not extraordinary that we now have no certainty about that? The presumption now is that we will not be sitting on Friday 1 February. At one stage we were told that we would be sitting on Friday 25 January. My point of order relates to the amendment that I tabled to the business in motion 4. Prior to hearing that the motion was not going to be moved, I sought to find out whether my amendment had been selected. It is the convention of this House that if someone has tabled an amendment, they get advance notice prior to the debate as to whether it has been selected. We often get printed papers telling us which amendments have been selected and in what order. Can you tell us, Madam Deputy Speaker, whether my amendment and/or the one tabled in the name of the Labour environment spokesman, amendment (b), were selected for debate, subject of course to the debate starting at the behest of the Government? The other point I would like to make is to ask whether I am correct in saying that the only way in which we can avoid this sort of scenario is for Back Benchers on both sides to sign Government motions so that they cannot be withdrawn?
Madam Deputy Speaker (Dame Eleanor Laing)
Order. I beg the House to be a little quieter because, as a matter of practicality, I could not hear the hon. Gentleman—[Interruption.] I am politely asking for a little bit of quiet. Just talk quietly among yourselves.
The hon. Gentleman makes a perfectly reasonable point. As to whether it is extraordinary, I cannot possibly comment from the Chair. However, he has asked me, as a point of order, whether his amendment (a) to motion 4 was selected and, indeed, whether amendment (b) was selected, and I can tell him that I do not know the answer to his question. The selection of amendments is entirely a matter for Mr Speaker, and the Deputy Speakers have no part in the consideration or discussion of whether an amendment should be selected. I do not know whether either amendment was selected, but I have every sympathy with the hon. Gentleman.
Sir Christopher Chope
Further to that point of order, Madam Deputy Speaker. I accept your ruling in relation to the prerogative of the Speaker to decide which amendments are selected and which are not, but what I was really concerned about was the fact that the Member who tabled the amendment was not notified as to whether it had been selected. Is there now a new convention in this place that a Member does not know whether their amendment has been selected until the debate starts? If that is a new convention, let us all be clear about it, but my understanding, after more than 30 years in this place, is that if a Member moves an amendment, they normally get advance notice of whether it has been selected.
Madam Deputy Speaker
The hon. Gentleman again makes a perfectly reasonable point about his experience over the past 30 years, but we live in ever-changing times, and I genuinely do not know the answer to his question.
Hilary Benn (Leeds Central) (Lab)
Further to that point of order, Madam Deputy Speaker. First, if the Government Whip had not said, “Not moved,” we would now be in the debate on the motion. If we had had that debate, I would have spoken against the amendment of the hon. Member for Christchurch (Sir Christopher Chope), so at what point would those who had put down amendments have known that they would be put to a vote? Secondly—maybe the Leader of the House can assist with this—have you had any indication that the Government intend to move the order relating to private Members’ Bills days at some point in the future? If so, when might that be?
Madam Deputy Speaker
Again, the right hon. Gentleman makes a perfectly reasonable point. I should point out to him and to the House that Mr Speaker‘s selection of amendments is published as a provisional selection of amendments. It is then up to Mr Speaker which amendments he finally selects. That would be the normal course of action. I am unaware of a provisional selection of amendments having been published in relation to motion 4 today.
Mr Mark Francois (Rayleigh and Wickford) (Con)
Further to that point of order, Madam Deputy Speaker. As you can well imagine, there may be a lot of interest in this House about the selection of amendments over the next few weeks, so this is not merely some esoteric question. Now, I have been here for only 18 years—I am a relative newbie—but the Speaker’s conference would have taken place this morning, and the usual practice is that a provisional selection of amendments is issued thereafter. As you say, it is provisional, but it can at least guide the House as to what is likely to be available for debate.
Now, today’s Bill was relatively uncontroversial. Being able to rent a home is important, but it was not as controversial as, say, some of last week’s debates, so it was not beyond the wit of man to work out that the debate on the Tenant Fees Bill would end early. The Speaker’s conference should have practically been able to foresee this situation. That being the case, why was no provisional selection of amendments issued in the normal way?
Madam Deputy Speaker
I appreciate the right hon. Gentleman’s point, and I can give him a very direct answer. I will not disclose to the Chamber or in any other way what happens at the Speaker’s conference in the morning. It is a private meeting between Mr Speaker and his Deputies and senior Clerks, and I will not and cannot answer questions about it.
Ms Angela Eagle (Wallasey) (Lab)
Further to that point of order, Madam Deputy Speaker. As someone who has been here for 27 years, my service is obviously larger than that of the right hon. Member for Rayleigh and Wickford (Mr Francois). Can the—[Interruption.]
Madam Deputy Speaker
Order. The hon. Lady is making an important point. Just be quiet.
Madam Deputy Speaker
I am delighted to answer the hon. Lady’s perspicacious point of order. She is absolutely correct that amendments cannot survive the withdrawal of the main motion. I will say it again that the selection of amendments is entirely a matter for Mr Speaker, and I am sure that if Mr Speaker had been here, as he will be at some future point, he would have been delighted to answer these questions.
Sir Oliver Heald (North East Hertfordshire) (Con)
Further to that point of order, Madam Deputy Speaker. Can you confirm that it would be in order for the Government to propose a future motion—hopefully very quickly—that would allow the Service Animals (Offences) Bill finally to make progress and get its Third Reading? The Bill has support on both sides of the House and had cross-party support in Committee last week.
Madam Deputy Speaker
I am happy to confirm to the right hon. and learned Gentleman that that would be perfectly in order. He also reminds me that I did not answer the second point of the right hon. Member for Leeds Central (Hilary Benn) about whether the Government intend to bring forward motion 4 again at a future time. I am not aware at this point of any such intention, but one would hope so.
Business without Debate
(5 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text
15:09 - The House divided: - Ayes: 293 / Noes: 235 - Question accordingly agreed to.
Fire Safety and Cladding
(5 years, 9 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Steve Reed (Croydon North) (Lab/Co-op)
I am grateful for the opportunity to raise the issue of fire safety, which is of great concern to many people in my constituency and throughout the country, particularly since the Grenfell Tower fire 19 months ago. The debate is happening somewhat earlier than we envisaged. I hope that means that there will be more opportunities for other Members to participate, because I know that the issue affects many constituencies.
I want to cover two areas: first, the major fire that happened at the Shurgard self-storage centre in my constituency on new year’s eve; and secondly, fire safety and the use of flammable cladding in residential and other buildings throughout the country, about which there has been great disquiet since the Grenfell Tower fire.
The fire at the Shurgard self-storage centre was massive. More than 1,200 people had stored their goods and possessions in that facility, which was one of the largest in London. When I was first alerted to what had happened, my first thought was, “I hope everybody is safe,” and it was reassuring to hear that there had been no loss of life. However, a couple of weeks later I had the opportunity to meet a group of Shurgard customers who had lost everything they had put in storage at that facility. The scale of loss, devastation and harm that that caused cannot be overstated. The losses were enormous.
As with all self-storage centres, the Shurgard facility was marketed as a safe place to store goods. It was even advertised as a place for those who had suffered a bereavement to store the belongings of a loved one.
Sarah Jones (Croydon Central) (Lab)
I thank my hon. Friend for bringing this important debate to the House. Constituents of mine had their goods burnt in the Shurgard fire. I am sure that hon. Members will be interested to know that, having advertised as “safe and secure”, since the fire the Shurgard website has removed 35 mentions of that phrase. Its use is nothing short of mis-selling.
Mr Reed
I am grateful to my hon. Friend and neighbour for her intervention. It is telling that Shurgard saw fit to remove all the language about safety from its website after the fire. I hope that, during the debate, we will expose the fact that the facility was far from being as safe as it was marketed to its customers.
Chris Philp (Croydon South) (Con)
I thank the hon. Gentleman for raising this important issue in the Chamber. Like the constituents of my other neighbour, the hon. Member for Croydon Central (Sarah Jones), many of my constituents had possessions at the facility. Does the hon. Gentleman agree that it is essential that the London fire brigade carries out a full investigation to establish whether the operators of Shurgard had implemented all the relevant fire safety measures? It seems that the fire spread so quickly and so extensively that it requires a thorough investigation.
Mr Reed
I completely agree and am grateful for that intervention. Everybody who uses self-storage facilities needs to know that their possessions are safe when they put them in storage. We need to know that Shurgard and other providers of such services abide by the regulations, and that the regulations are sufficiently robust to provide the reassurances that customers deserve and need.
When I spoke to the group of customers, I found that the single biggest reason for storing possessions at the facility was being between homes. People were not just putting some spare goods into self-storage; they had left the place where they were living and had not yet moved into their new home, so everything they owned was stored at the facility. As a result, everything was lost; everything was destroyed in the fire. As one of them said to me, “It’s bad enough to lose a sofa, a bed or a sideboard, but at least you can replace those things. What about your keepsakes from loved ones who have passed away?” The company advertised its facility as a safe space to leave keepsakes for those who had suffered a bereavement. What about someone who has lost a lifetime of family photographs—all their memories of their family experiences and of the people they most love? A price cannot be put on that. It cannot be insured. If it is gone in a fire, it is gone forever and it is irreplaceable. The devastation, pain and stress of losing such things can be incalculable.
I met one family—a husband, his wife and their three children—who, because of benefit-system failings, had been evicted from the home that they rented just before Christmas. They had put everything they had into this Shurgard self-storage facility. They were penniless because of the problems with universal credit so they could not afford insurance. They have now lost absolutely everything that they owned. They have been left absolutely devastated, without any possessions at all, and they are living in bed-and-breakfast accommodation. That family need help, and they need it urgently, because they are facing critical hardship as a result of what happened.
Marsha De Cordova (Battersea) (Lab)
I thank my hon. Friend for securing this debate. He has picked up on a crucial point—that the storage centre claimed that it was safe, and so on. Does he agree that when the Minister responds he should refer to the specific case of those individuals, who have lost everything because of the social system and are now living in a bed and breakfast? These must be considered special cases, in which the Government need to step in and act.
Mr Reed
I am grateful for my hon. Friend’s intervention and completely agree with her. I hope that when the time comes the Minister is able to respond to that point. People who have been left in severe hardship as a result of what happened have had nowhere to go for the help that they deserve.
Jim Shannon (Strangford) (DUP)
I thank the hon. Gentleman for bringing this issue to the House. It is important that evaluations are made of properties where the same thing might occur. Does he agree that there has been ample time to assess the number of buildings that are in danger? My local authority in Northern Ireland, Ards and North Down Borough Council, carried out evaluations and provided reports within six weeks of the disaster. Does the hon. Gentleman agree that additional funding must be put in place to help local councils to make evaluations and to help those people who need compensation, and that that needs to be done as a matter of urgency? Furthermore, on the changes to fire safety regulations, does he agree that the real, live testing of materials in the construction sector is urgently required?
Mr Reed
The hon. Gentleman makes an important point, with which I have great sympathy. I believe that in this particular case the investigation is also in the hands of the police, because we do not yet know whether arson lay behind the tragedy at the Shurgard facility on Purley Way in Croydon.
Andy Slaughter (Hammersmith) (Lab)
My hon. Friend is making a strong point that—I am sure he will come on to this—applies as much to residential fires as to the case he is talking about. First, there is the issue of insurance, with people in these situations often underinsured or not insured. There is also the issue of who is liable. As he says, the case he is describing may be a criminal matter. At Shepherd’s Court in my constituency, there was an obvious cause—it was a tumble-drier fire—but the manufacturer denies liability and will not pay out. As a consequence of cases like that, people can lose everything and go for years and years without being able to replace their belongings.
Mr Reed
My hon. Friend makes an important point. I am also interested in the insurance aspects of this case, including whether people were wrongly advised by the self-storage company about the level of insurance that they should have taken out and, indeed, whether there was mis-selling of insurance. I have contacted the relevant authorities—the Financial Conduct Authority and others—to seek their advice. I hope we can bring that issue back to the Chamber at the appropriate time, and I would be delighted to work with my hon. Friend on that, since he has an interest in it.
I return to my attempt to establish the extent of the harm that has been caused to people’s lives by the fire. I met another woman—a customer—who had stored in the facility her mother’s and her grandmother’s ashes. One simply cannot imagine what it would feel like for an individual to lose something of such enormous human value to them.
Sarah Jones
My hon. Friend is giving way generously. On that terrible point, last weekend I met some people who were affected, and I have a constituent whose pictures of her deceased children were burned. These things are so irreplaceable and so sad. People really did believe that their things would be kept safe, and that everything would be okay. We cannot emphasise enough what a horror they have been going through.
Mr Reed
I am grateful again to my hon. Friend for her intervention. One really cannot exaggerate the pain that has been caused. When anybody puts their most beloved and treasured possessions in a facility and are assured that it is safe, they deserve to know that it actually is safe. I met an artist who had lost a lifetime’s artworks, which she had created. I met a DJ who collects first-edition reggae albums on vinyl. All of that is gone in the fire, all of it irreplaceable. No money can replace that.
Of course, many businesses today keep their stock in facilities like these, and many businesspeople have lost their stock. Even if it was properly insured, the short-term loss of that stock means that they have lost a whole quarter’s trading, which is enough to put many small businesses under. I really do think that the Minister needs to consider what emergency support is available for the people facing real hardship and crisis as a result of the fire.
Many colleagues have raised concerns about the level of fire safety at the Shurgard facility, and I share those concerns. When I met a group of customers, that was one of the biggest areas giving them cause for concern that they raised with me. A customer putting their possessions in a self-storage facility would assume that there had been some effort, when designing it, to prevent the spread of fire, should a fire take hold. In fact, the walls in the individual units in this facility did not go right up to the ceiling—there was a gap between the top of the unit and the ceiling—so a fire that started in one unit could quickly and easily move into the next, and then the next and beyond. It seems to me shocking that these facilities are built without designing in measures to prevent the rapid spread of fire.
Customers using that facility reasonably assumed that a sprinkler system was installed in case of fire. In fact, there is no sprinkler system in that facility, and there is no requirement for self-storage units to have sprinkler systems. Another point is that Shurgard did not ask their customers to report or keep a record of what they were storing in that self-storage facility. Someone could put all their most treasured possessions in the unit they were renting, but the next-door unit could be filled up with barrels of oil or something equally flammable, and nobody would ever know.
If we put all that together, there were in effect no fire safety measures whatsoever in this facility. It was advertising a service as safe and secure for people to keep their goods in, but it simply was not. It was taking money from people, and then not providing the service that people expected. If things go wrong—and on new year’s eve in Croydon they went severely wrong—everything people owned would have gone: it would have been taken away, and they would have lost it.
Shurgard has been very clear with me—I have met it to discuss this—that it has complied with all UK fire safety regulations. I do not know whether that is true, but that is the point it has made to me. If what it says is true and it was fully compliant, those regulations need to be reviewed and tightened as a matter of urgency.
Sarah Jones
At the meeting with customers last weekend, they made two really interesting points. One was that Shurgard in other European countries would have to have sprinklers, because in other European countries there are regulations requiring a building of a certain size to have sprinklers, so the same company would have sprinklers in another country but not here. They also made the point—I do not know whether this is 100% accurate—that, about 40% of Europe’s storage is in this country. There is something about the nature of the cost of housing and the fact that people have to put so much stuff into storage, perhaps because of the value of land, that means our country has a particular problem in this area and needs to look at the regulations for the storage sector in particular.
Mr Reed
I am sure that many people who keep their possessions in such self-storage centres will be astonished to learn that the multinational companies, where they are multinational, operate safer and more secure facilities abroad than they operate in the United Kingdom. That seems to me entirely wrong. I hope the Minister, when he responds, will explain to the House what he intends to do about conducting a review of the levels of fire safety in these facilities, and whether he believes there is a case for tightening those regulations.
Many, many people use these facilities. They are very common all over London, and we all know about them and have them in our constituencies. The customers include people who are between homes—moving from one place to another—either as buyers or as renters. Many newly built flats are very small and are built without adequate storage, so people use self-storage centres instead. If people have suffered a bereavement and have lost a relative, they need somewhere to store their possessions; we do not all have the space in our home to store these things. All those people need to know that their possessions are safe, and if the regulations are not allowing that to happen right now, the regulations need to change.
My concern is that the fact that the regulations are inadequate has created a race to the bottom in fire safety standards, as self-storage companies compete with one another on price. The way in which they reduce price is to reduce staffing in the facility and reduce the level of security and fire safety measures. They do so to minimise their costs, so that they may offer as low a price as possible. The only thing that will maintain minimum standards—and people need know what they are—is to ensure that there are adequate fire safety regulations for self-storage facilities. I am afraid that we do not have those at the moment.
Finally on this particular issue, does the Minister see the case, or the need for, providing specific help to people facing severe financial hardship—whether it be from the relevant public authorities, the Government, or even perhaps the company itself, which must bear some responsibility towards their customers for what has happened to them?
I will turn now, if I may, from the subject of self-storage towards wider issues of fire safety in residential blocks. The issue of cladding in particular has become very significant and of great concern throughout the House ever since the tragic fire at Grenfell Tower 19 months ago.
In today’s Prime Minister’s questions, my hon. Friend the Member for Croydon Central (Sarah Jones) reminded us that, days after Grenfell went up, the Prime Minister promised to do everything in her power to keep people safe. Since that time—19 months have passed—the Government seem to have done precious little in concrete terms to reassure people that they are safer now than they were then.
Marsha De Cordova
I thank my hon. Friend, who is being generous with his time, for giving way once again. He rightly points out that, 19 months on, we still have many blocks covered in this cladding. Residents in my own constituency are living in an unsafe block, and they might have to pay tens of thousands of pounds for fire safety remedial work. Does he agree that it should not be the leaseholders who foot the bill, and that the Government need to intervene to ensure that freeholders or the Government themselves can implement it? They must take the pressure and the burden off leaseholders.
Mr Reed
I am grateful to my hon. Friend for her intervention. I completely agree: the leaseholders seem to be the innocent party in all this. They certainly should not be forced to bear the cost, the stress or the worry of having flammable cladding on the place in which they live.
Robert Neill (Bromley and Chislehurst) (Con)
It is very clear—the Government have made this clear—that leaseholders should not be left footing the bill. When the developer is also the freeholder, as was the case in the hon. Gentleman’s constituency, and is prepared, because of the potential reputational damage, to step up to the mark, the problem is resolved. However, as he will know from experience, a difficulty arises when the freehold is sold on, often to a trust company or a financial institution. Unlike a firm of developers, such a body will not be trying to sell houses to the public and is not subject to any reputational pressures, and will use very common clauses in their leases to pass back to their leaseholders any cost that, say, the local authority or Government push on to them. Do we not need a legal mechanism to override that, which is difficult to do with leases, or, in such cases, to compensate leaseholders directly so that they do not lose out? It has to be one or the other.
Mr Reed
I am grateful to the hon. Gentleman for his intervention. I know that he is fighting very hard on behalf of his residents who are living in these circumstances, and he makes a point with which I agree. That is at the heart of our problem with the Government’s response. The Government can say what they like in support of leaseholders, but if they do not act, they are not actually helping them and, unfortunately, a moral obligation is not enforceable in court. We need a legal means of redress for people who have been damaged.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
My hon. Friend is making a very powerful and moving speech. I am sure that his constituents are incredibly grateful to him for his tireless campaigning to support them. We are talking about residents, but I wish to draw the House’s attention to a different issue—schools. Hundreds of schools across the country are also covered in combustible material, and the Government have not included them in the building safety programme. [Interruption.] Well, that is the latest report. The Minister suggests that there are not hundreds, so I would be very happy to send him the report that I have read that gives that evidence. When he responds to the debate, will he also talk about how he can ensure that our children are safe when they attend school?
Mr Reed
I am very grateful to my hon. Friend for her intervention. I, too, look forward to hearing a response from the Minister. I have tried to find out whether a newly rebuilt school in my own constituency has flammable cladding, but it seems impossible to do so. If I, as the local Member of Parliament with the access that I have to the relevant authorities, cannot find out, I pity those poor parents who are trying to find out whether their children will be safe after they have taken them to school each morning. I look forward to hearing the Minister’s response on that point.
I came to this subject because a block in my constituency, Citiscape, has the same sort of cladding—aluminium composite material cladding—that was on Grenfell Tower. The cost of removing and replacing the cladding was £2 million. The managing agents wrote to leaseholders in the block, who received estimates of up to £30,000 each for the work to be carried out. Of course the vast majority could not afford that—not many people have £30,000 lying around in the bank, particularly not those who have just bought their first flat and are stretched on their mortgage—but they were told that unless everybody paid up, the work would not happen. In effect, nothing would be done to keep the people in the block safe. We approached the freeholder, but the freeholder is not legally liable to carry out the work and there was no way to compel the freeholder to do it. The builders also are not legally liable to carry out the work. They can rely on the fact that there are concerns about lack of clarity in the building regulations and guidance, and they had been following the guidance that they believed meant that the cladding was safe. It turned out at Grenfell that ACM cladding is absolutely not safe.
When the case came to the housing tribunal, it ruled that the leaseholders were liable. We hear welcome words from Ministers at the Dispatch Box saying that leaseholders should not be made to pay, but in fact the housing tribunal—the legal body responsible for adjudicating on the matter—said the leaseholders were indeed responsible and would have to pay. In the case of Citiscape and others where not all the leaseholders can pay, the work will not be done. People are stuck living in blocks with Grenfell-style flammable cladding strapped on the outside; they are living with their families, their children and their parents in absolute terror.
Mr Jim Cunningham (Coventry South) (Lab)
I congratulate my hon. Friend on his speech and the argument he is making. It has long been argued that there should be some reform of leasehold law. We have tinkered with it over the years, but it needs to be dealt with properly, and Governments have shied away from doing so. I thought that the Secretary of State had said that he would discuss leaseholds with the people involved, some of the companies and so on. About 12 months ago, I said to the previous Secretary of State that what the Government should have done after Grenfell was to take emergency powers. Had they done so, we would not have some of these problems now. They did not do it and the rest is history.
Mr Reed
I am grateful for that helpful intervention and look forward to hearing the Minister’s response.
I said that there were concerns about the state of the building regulations and the guidance, and it is worth exploring briefly how we got into a position where the regulations were so lax or could be interpreted in such a way. Back in 2009, there was a fire in Lakanal House in Camberwell, central London, that resulted in the death of six people, including a baby. An inquest conducted an inquiry, which took a number of years, and reported in 2013 in a very long document that contained some very clear recommendations. The inquiry said that the fire safety regulations—specifically, part B of the building regulations, which cover fire safety, and the associated guidance—were unclear, and that that was the reason why unsafe and combustible cladding was being strapped on buildings where people lived with their families. The coroner was absolutely clear that if that lack of clarity was not remedied, we would be running the risk of further fires and further deaths.
Andy Slaughter
I mentioned Lakanal House, where six people died 10 years ago, yesterday. There was combustible material involved, but it was not ACM cladding. Is it not extraordinary that the Government’s building safety programme is only tracking identification and remediation of residential buildings over 18 metres with ACM cladding? Should not the programme apply to all potentially combustible cladding?
Mr Reed
I agree with my hon. Friend. It is absolutely extraordinary that we are not looking, right now, at a ban on all forms of flammable cladding. It is now 10 years later.
What we see now is still evidence of a go-slow and foot-dragging approach by the Government that is highly inappropriate—I would almost say negligent—given the risk to life that we know exists from the deaths that happened at Lakanal House and those that happened in even greater numbers at Grenfell Tower. [Interruption.] It is no good the Minister shrugging his shoulders and grunting from the Front Bench. Grenfell happened after Lakanal because Ministers refused to act on the guidance—the instruction—that they were given by the coroner. Eric Pickles, who was the Secretary of State at the time, refused to act on the advice given by the inquest into Lakanal House in 2013. In 2016, because it had not been banned, ACM cladding was strapped to the outside of Grenfell Tower. In 2017, it went up in flames and 72 people lie dead as a result. It could not be more serious.
We need properly to understand how this came to be, why the Government did not act, and why the Government still have not acted to ban that type of cladding from buildings. They are talking about banning it, but all flammable cladding has not been banned from all buildings—[Interruption.] The Minister will have an opportunity to respond later in the debate, and we look forward to hearing him. [Interruption.] If he wants to intervene, I will take his intervention.
The Minister for Housing (Kit Malthouse)
I am quite happy to intervene, and I am grateful to the hon. Gentleman. It should be clear that in December last year, we banned flammable cladding of all types on buildings over 18 metres. This is an absolute and complete ban, and nobody should be under any illusion about that, or represent it as being anything other than that.
Mr Reed
As I will come on to say during what remains of this debate, a partial ban is not a ban. This kind of cladding is still permitted on far too many buildings, and too many people are not safe. There has been no action to take flammable cladding off buildings where it already exists. Those are the issues that I want to come on to. In fact—
Mr Reed
I will take an intervention in a moment, but I want to make this point, because it is linked to the issue that we are debating right now.
In fact, there are still thousands of terrified residents living in blocks with the same kind of cladding, or a very similar kind of cladding, as that which went up in flames at Grenfell Tower. There are still 56 private blocks of flats around the country—that is 56—that have no clear plan in place to remove and replace it. People are left living in fear. There is no point in the Minister standing up and telling me the Government banned it last December when right now, in 56 blocks around the country, people are living with flammable cladding strapped to the outside of their homes and no plan whatsoever to remove it.
Kit Malthouse
We went through this yesterday during the urgent question. I am sorry that the hon. Gentleman is seeking to make an issue of it. We have made it very clear that while he is correct that there are still a number of private sector residential buildings that do not have a clear plan for remediation, it is the case, as I said yesterday, that 100% of those buildings have temporary measures in place that have been agreed and certified by the local fire and rescue service as appropriate for the building. My primary concern, and the Department’s primary concern, has been to make sure that people are safe tonight. As I am sure he would acknowledge, it is not possible, by some feat of magic, to make this cladding disappear overnight. We must, however, make sure that everybody is safe overnight. That is where we have been focused.
The hon. Gentleman says that thousands of people are living in terror in blocks, but that should not be the case, on the basis that every local fire and rescue service has visited, inspected and agreed temporary measures with every residential building over 18 metres in height that has this cladding, and they are going back to check and monitor to make sure that they are in place. I really would urge him not to cause undue alarm among this residential population, because steps have been taken to keep them safe.
Mr Reed
I have to say, with all due respect to the Minister, that I find that comment rather complacent. It is all well and good to say that this cladding cannot be taken down overnight, but it is 19 months since Grenfell Tower went up in flames, it is 10 years since Lakanal House went up in flames, and it is eight years since the coroner told the Government that there needed to be a ban on this kind of cladding—that is not overnight. The Government have not acted with anything like the requisite speed, given the scale of threat to human life. It is completely unacceptable.
Jim Fitzpatrick (Poplar and Limehouse) (Lab)
I am grateful to my hon. Friend for giving way. I apologise for missing the start of his speech, but I have been watching it from outside the Chamber. Notwithstanding the Minister’s defence of the position, he accepted yesterday during proceedings on the urgent question that there are 42 blocks whose freeholder is saying that leaseholders have to pay for remedial works, as my hon. Friend said. The dangers may be temporarily resolved—there are big question marks about that—but the financial distress that has been caused to leaseholders by the prospect of hundreds of thousands and sometimes millions of pounds of debt has not been resolved.
Sarah Jones
I am sorry to keep intervening—my hon. Friend is being incredibly generous—but I just want to make a point about waking watch. Having talked to the fire services, I know that it is not an ideal situation. The fire services are worried that companies have come out of the woodwork and started doing waking watch, but people are not always well-trained and there are not always enough of them on site. Waking watch is very much a temporary measure. To have 19 months of waking watch is expensive, but also not ideal, and we cannot be 100% sure that these people are trained and doing what they are supposed to be doing.
Mr Reed
I am grateful for my hon. Friend’s intervention. As the hon. Member for Bromley and Chislehurst (Robert Neill) will know, residents in Northpoint Tower in Bromley face bills of up to £70,000 each. People simply cannot afford that, and the stress they suffer from receiving that bill and knowing that, unless they find a way to pay it, they will be left living in a block with potentially flammable cladding on, is simply unacceptable.
Robert Neill
I am grateful to the hon. Gentleman for giving way again and for mentioning the problem at Northpoint. There is a certain insecurity about the risk of human error at the very least with a waking watch, but the difficulty is compounded by the cash flow impact. Most of these leaseholder groups will have a sinking fund that has been set up over the years, but that is quickly dissipated by the cost of the waking watch. In the case of my constituents, there is an enforcement notice running out in April. They could have the waking watch until then, which will exhaust all the reserves and will mean further calls on funds from people who often have mortgages, because they are often first-time buyers, and who effectively cannot raise any more money because the flats are currently valueless. It is a Catch-22: the money is exhausted, and they have no means of raising any more.
Mr Reed
I am grateful to the hon. Gentleman for his intervention; he makes an important point well. The other course of action that would normally be open to a homeowner—selling their home—is not open, because their homes are unsellable. Nobody will buy a flat in a block that has flammable cladding strapped to the outside of it. Whatever the Minister tells us, if we speak to people living in these blocks, they say that they feel abandoned by a Government who told them in the aftermath of Grenfell that everything would be done to keep them safe. They do not feel that they have been kept safe, and they manifestly have not been.
Thangam Debbonaire (Bristol West) (Lab)
I thank my hon. Friend for giving way; he is being very generous and making an excellent speech. Does he agree that part of the problem is the lack of trust? When I met residents in my local tower blocks, they said, “You’re telling me that this cladding on my block of flats is okay, but how can I trust?” That is compounded by the fact that the Lakanal House fire report, published in 2013, was not fully acted on by the previous Government but one.
Mr Reed
I am grateful for my hon. Friend’s intervention, and she is absolutely right. I have seen previous Secretaries of State stand at the Dispatch Box and say that those responsible need to take responsibility. It is the Government who are responsible because the Government failed to act on the instructions and advice of the coroner following the tragic and fatal Lakanal House fire in 2009. The Government are responsible for the situation that these people find themselves in, and the Government should take responsibility for giving those people a way out of this, without burdening them with unmanageable debt or pointing the finger at all sorts of other people who they say have a moral obligation to act, when that is unenforceable in any court.
The only way this can be dealt with is if the Government take direct action. As my hon. Friend said, the Government failed to clarify the regulations and guidance after the fire at Lakanal House. It is not about an individual Minister or Secretary of State—there has been a whole string of them ever since that time: Eric Pickles initially, but subsequently Greg Clark, Sajid Javid, Dominic Raab—[Interruption.] I am sorry, Madam Deputy Speaker, I cannot remember their constituencies. A string of Secretaries of State have failed to take appropriate action in line with the guidance that they were given. A previous Housing Minister, who is now the Prime Minister’s chief of staff, failed to act in this circumstance. I am afraid that collectively the Government are culpable for what has happened, and failed to act when they were told that action was necessary to prevent a repeat of Lakanal House. Of course, it was repeated horrifically in the disaster at Grenfell Tower.
I thought long and hard about why the Government would not act on that advice, and I have come to the conclusion that what is going on in this sector is nothing short of a national scandal. There is a tangled web of conflicts of interest that have led to the framework for fire safety regulations being wholly inadequate. The Building Research Establishment is a privatised organisation that helps to write fire safety regulations and drafts fire safety guidance. Its chief executive sits on the Government’s expert panel on fire safety, and one of its trustees, Sir Ken Knight, was until recently the Government’s chief fire safety adviser.
The BRE has a direct financial interest in the sector. It makes money by allowing cladding manufacturers to run fire safety tests on rigs that it sets up. The manufacturers are allowed to rerun those tests multiple times, with various adjustments, until they get the result that they want. There is no requirement on them ever to disclose the outcome of the final successful fire safety test—it is considered commercially confidential—nor is there any requirement on them to report publicly how many times their product failed a fire safety test before finally passing it.
The BRE makes money every single time a different rig is put up and a product is tested for combustibility. It has a direct financial interest in permitting the use of flammable cladding, because testing it is how it makes its money, and it was people with a direct interest in the BRE who advised Ministers not to ban combustible cladding. It is an absolutely shocking and scandalous network of conflicts of interest that the Government should never have allowed to happen.
Jon Cruddas (Dagenham and Rainham) (Lab)
My hon. Friend is getting to the fundamentals of the issues. Let me give an example. I met a bunch of laggers, who handed me a document about the combustible compounds contained in phenolic foam insulation, which is used in multiple buildings. That document was 15 years old, and it detailed the combustible properties of that foam, which is still used and passes Government tests. The whole industry has to put up its hands on its historic culpability and the way it has dodged the inspection regime. These are life and death issues for our constituents.
Mr Reed
I am grateful to my hon. Friend for the important point that he has made. He has emphasised that this is not just about ACM cladding—there is a problem with wider fire safety regulations in the entire building sector—which we cannot allow, not just on residential blocks but on many different kinds of buildings. We need to understand properly those conflicts of financial interest if we are to understand what led Ministers to reject advice that they should have followed all that time ago.
I hope the Minister will put me right on this point, but I fear that subsequent Secretaries of State and Housing Ministers did not correct the mistakes made in the decision to ignore the Lakanal House findings because, if they recognised it as political failure, they would have to take political responsibility for the 72 deaths at Grenfell Tower after it went up, which they did not want to do. That is an extraordinary thing to have to say, but I believe it is true because I can think of no other reason why Minister after Minister failed to correct regulations and guidance that were so manifestly unacceptable, and that posed such a threat to life. That is not just supposition—we saw that it was a threat to life in the scale of the tragedy and the deaths that happened at Grenfell Tower. I would go so far as to say that, if the Government were a private company and acted as they have, Ministers could be in the dock for corporate manslaughter.
Thangam Debbonaire
My hon. Friend makes incredibly powerful points that must be taken seriously. Does he agree that the Government need to trace it back to the source and say which local government Ministers did or did not take seriously the Lakanal House report recommendations?
Mr Reed
I agree with my hon. Friend. It is critical that that happens so that we can understand what went wrong in the process. If we do not understand it, we cannot stop it from ever happening again.
The Minister mentioned the partial ban on flammable cladding that the Government have announced, which is welcome. Industry bodies have said on the record that they welcome it, but have also said that it is not enough and that we need to go further. The Government have proposed a ban on ACM cladding on new buildings that are over 18 metres high—that is roughly six storeys—but have excluded hotels and office blocks. I simply do not understand why. What evidence is there that a hotel or an office block is any safer than a block of flats? Surely if someone is in a hotel where they have never stayed, they are less likely to know the fire safety escape routes than if they are living in a block of flats, where they may have lived for some considerable time.
Many people at work have disabilities and are immobile. Why do we assume that somebody on the 18th floor of a tall office block will be able to get out, but that somebody living on the 18th floor of a residential block needs protection from flammable cladding? It makes absolutely no sense to me whatsoever, and I would like the Minister to explain to the House today what evidence there is that hotels and office blocks of more than six storeys or 18 metres are any safer than blocks of flats of the same height.
As my hon. Friend the hon. Member for Kingston upon Hull West and Hessle (Emma Hardy) said, after the new partial ban, the Government will still permit the use of flammable cladding on schools, care homes and hospitals under six storeys high, which of course most of them are. I wonder whether the Minister would feel comfortable telling a group of parents that he is allowing flammable cladding to go up on the building where they take their children every morning for an education. I certainly would not.
Emma Hardy
One justification for not having sprinklers in schools is that it is easy to vacate a building. Having been a teacher for 11 years, I know that it would need only a couple of young children to go a-wander, as they can sometimes do, to create a risky situation. If I can dare to use this opportunity to put another point to the Minister, I would ask him not only to look at banning combustible materials, but to look again at putting sprinklers into schools.
Mr Reed
I look forward to the Minister’s response, but I agree completely agree with my hon. Friend.
I will draw to a close soon and I look forward to the Minister’s response to hon. Members, but we need to recognise the scale of Government failure to put things right in any acceptable way, given that it has been 10 years since Lakanal House and 19 months since Grenfell Tower. The best way to meet the Lakanal House coroner’s demand for clarity is to implement a complete ban on the use of flammable cladding on all buildings where people live or work. It is crystal clear; it is understandable to the building industry and everybody else; and it could be implemented if the Government had the will. In addition, we cannot look only at new builds. We need to look at all buildings where flammable cladding exists and continues to pose an unacceptable danger to people’s safety and even to their lives. We need an action plan from the Government, for which they take responsibility, to strip flammable cladding from every single building where it exists. Many European countries have such a ban. Scotland is introducing a ban. We need that ban here, too.
There is one fire a month on average in buildings with flammable cladding. It is only a matter of time before one of those fires is not put out. The Government simply cannot risk the horror of another Grenfell. This is a time for action, not for words.
Madam Deputy Speaker (Dame Rosie Winterton)
Before I call the next speaker, I must inform the House of an error in calculating the number of votes of Members for English constituencies in the Division on Lords amendment 36. The figures for the England-only vote should not have been announced as Ayes 265 and Noes 193; they should have been announced as Ayes 261 and Noes 194. The result is unaffected.
Andy Slaughter (Hammersmith) (Lab)
I am grateful for the time that has become available to make some brief remarks, although my hon. Friend the Member for Croydon North (Mr Reed) set the case out fully and persuasively, covering many of the points.
We all wait keenly to hear what the Minister has to say in his response. Notwithstanding his comment that we went through all this yesterday, rather than being bored by the subject or not interested in responding, he should seize the opportunity to give a fuller account of where the Government stand. As my hon. Friend set out, the Government’s inactivity and partial solutions mean that we are in a state of some confusion—certainly our constituents are—and severely worried about the risks that remain. That is not scaremongering; those are real concerns felt by our constituents.
In a block in my constituency—I am going to a residents’ meeting tomorrow night, the fourth on the removal of flammable cladding that I will have attended—the residents are fortunate in the sense that they have a housing association as a landlord, it has accepted liability and is removing the cladding at its own expense, and it is prepared to put up non-flammable cladding instead. The situation is still incredibly worrying: fire marshals have been in for periods, and there are concerns about the structure and other potential damage to the building, causing a huge amount of anxiety and of time taken up in negotiation.
I feel very much for my constituents and those of other Members who do not have similar advantages, but that introductory point allows me to say that the problem is widespread and hugely complicated. The Government seem to rely, as if on a crutch, on the Dame Judith Hackitt report. It is a good report, but it approaches the matter in a certain way—she would like to see a “golden thread of information” through UK projects from “design and construction” to “operation”—and at the moment we do not have a clear picture of which buildings are at risk.
Dame Judith can set out a preferred method of operation, but that does not resolve any of the many problems, or the conflicts of interest over time, set out by my hon. Friend, and nor does the report actually implement anything. Those are both matters for Government, and in those respects they are singularly failing. In clarification from the Minister, I want to hear in respect of existing buildings with all types of flammable cladding what the Government’s policy is likely to be. My understanding, from responses to questions I asked before Christmas, is that the policy is likely to cover residential buildings, buildings over 18 metres and buildings with aluminium composite material cladding systems. That excludes a very large number of buildings that we know could have flammable cladding. I cannot understand the logic of the policy not being comprehensive, other than that the Government might not want to put in the resources or are phasing it in over a very long time.
Kit Malthouse
In all the assessments we make or have made around the ban on combustible cladding, we are guided by the expert panel. It is effectively the expert advisory panel that is setting the 18-metre limit, deciding which buildings are within scope and where there is most risk to life. This decision has not been made by politicians in the absence of expert advice. As I said yesterday, I cannot pretend to be a fire safety expert. Both I and the Secretary of State take into account the advice of a group of people that includes Dame Judith Hackitt, and it advises us regularly on these measures.
Andy Slaughter
With respect to the Minister, he may be listening to what he wants to hear. He should listen to a wider range of voices. I will give an example. In yesterday’s urgent question, several Members—I was not one of them—mentioned the Rockwool company. I have quite a knowledge of this, because I have three very tall buildings—over 23 storeys—in my constituency that are just a few hundred metres from Grenfell Tower and which were fully clad by Rockwool. Following testing, the local authority was able to assure tenants that it was non-flammable cladding and that it met some of the highest standards.
The Minister, with almost wilful misunderstanding, said yesterday that he was not there to listen to people promoting individual companies. That is not the point. No one is promoting the commercial interests of Rockwool—in my dealings with it, it has been perfectly clear about that. We are pointing out that its standards are higher than many others in terms of the combustibility of the cladding, the insulation and the combination of materials. That is the point. No Member on either side of the Chamber is standing up and saying, “Please buy this particular product”; we are asking the Government to listen to the voices saying that their limitations and expectations do not go far enough.
Kit Malthouse
I want to reiterate what I said yesterday. I agreed with whoever it was who questioned me that it was not appropriate for us to promote a particular product from a particular company. As the hon. Gentleman says, the job of the Government is to set the standards, through building regulations, to which products must adhere and to make sure that the regulatory inspection regime works so that people can have confidence that the right product is being used in the right place. To reach those assessments, the Government require the advice of non-commercially interested expert opinion. The British people would not think it unreasonable for us to assemble a group of fire safety experts to advise on those standards and the circumstances in which they should pertain. That is all I am saying. As far as I can see, the Government are acting perfectly reasonably in taking this kind of advice. He may well dispute that advice, and he might think he can go further, but he needs to find evidence of where his expertise is coming from, and if it can be demonstrated that the independent expert advisory panel—the great and the good of fire safety—is incorrect, of course we will listen.
Andy Slaughter
I find the Minister’s attitude astonishingly complacent. I am a member of the all-party group on fire safety rescue, which has done a lot of work on this, but it cannot possibly compete with the resources of the Government, so let us not be ridiculous about who should do the groundwork. I have taken part in a number of seminars with a number of experts. On those occasions I have heard a variety of views, but even now I still hear, from experts, manufacturers and others, special pleading for the acceptability of either leaving combustible materials—some of them more combustible than the materials used on Grenfell Tower—on blocks, or continuing to install them. That terrifies me, and I think that it ought to worry the Minister.
Jon Cruddas
When it comes to the question of complacency and how much confidence we have in the system, I should repeat what I said earlier today about the laggers who put in the insulation, and who are aware of health and safety reports that undermine confidence in the materials that the Government are standing by on behalf of their regulatory bodies. Something must be systemically wrong if the guys who put the stuff on these buildings—and they are guys—are aware of that, and have commissioned reports because they are being damaged by those materials. If they are aware of it, it should not be beyond our collective wit for the Government to be aware of it.
Andy Slaughter
My hon. Friend has made a telling point. We will not find things that are wrong unless we go and look for them, and I do not feel that the Government are going to go and look for them.
Mr Reed
I completely agree with my hon. Friend’s point about the cladding manufacturers seeking better reassurance for themselves. Of course, it is not just the cladding that is flammable; it is the combination of the cladding with the insulation. Because the Government permit what are called desktop studies—
Mr Reed
—which have allowed a particular cladding to be enriched with a particular form of insulation, they do not always know what is being put together and how dangerous that will be, and the cladding manufacturers do not want to know that their products are being used in ways that threaten life.
Andy Slaughter
I think that the Minister was trying to intervene on an intervention. I am glad to see that he at least has some interest in the subject. I shall make a little progress, and then I will take an intervention from him.
My hon. Friend is absolutely right. I do not think we are being paranoid about this. What concerns us is that a whole industry has developed on a defective basis over time, and has not been corrected: it continues to function as an industry and to make profits. No one is saying that we are going to wipe the slate clean overnight, but a lot of people have a lot to hide, and I therefore think it particularly important for the Government—who, as my hon. Friend the Member for Dagenham and Rainham (Jon Cruddas) said, may have something to hide as well—to be rigorous in shaking this out. They should look at the history—at the defects and malpractices that have grown up over the last 10 years or more—but they should also be very sceptical in future about some of the advice that they are getting. They should obtain the broadest possible range of advice.
Kit Malthouse
Let me again correct the record. I do not know whether the hon. Gentleman was absent in December, but he should know that we have banned desktop studies, and restricted them in other circumstances, to try to discourage their use. We did that before Christmas.
The hon. Gentleman made a good point about the effect of insulation combined with cladding. Our ban on the use of combustible materials on buildings more than 18 metres high applies to everything that makes up the skin of a building, and that includes the insulation, not just the cladding. The 18-metre rule was of course introduced on the basis of advice from the expert panel. As I have said, if there is evidence to show that there are significant dangers to buildings that are less than 18 metres high, we will of course be happy to look into it.
I realise that Labour Members are trying to make this point, but I want to dispel the idea that we are complacent, because that is absolutely not the case. An enormous amount of effort, time and energy has been put into getting this right, and a large number of voices have been prayed in aid.
The hon. Gentleman is correct in saying that a defective industry has grown up over the last 20-odd or 30 years, under Governments of all stripes. As I said yesterday, the Grenfell disaster lifted a big flat rock from the building regulation system, which has not been functioning well for some time. It falls to me, and to the Secretary of State, to play our part in correcting that, and we are trying to do so with all speed.
Andy Slaughter
I am grateful for that “intervention”. I think that the Minister was using me as a kind of Ouija board to communicate with my hon. Friend the Member for Croydon North, but that is fine.
Andy Slaughter
Returning to the central point, what we all want is the Government to take a comprehensive view of these matters in respect of both existing and new buildings. My understanding is that only a selective number of existing buildings are covered, based on height, use and the type of material used. I ask the Minister to confirm how far their scrutiny goes at the moment, and explain why he thinks it should not go further. The Government did make announcements on new buildings back in October; they talked about high-rise residential buildings, including schools, hospitals, student accommodation and care homes. That excludes certain types of building—such as office buildings, as has been said—and we cannot see why that is the case.
Emma Hardy
The announcements fail to recognise that most schools are not particularly high. I do not understand why the Government do not include all schools in this list, or else they are pretty much ruling out every school in the country.
Andy Slaughter
Absolutely; and if the Minister did not like us quoting commercial companies in this way, perhaps he will listen to the Local Government Association. It continues to strongly urge the Government to ban the use of any combustible materials, including cladding panels, insulation and other materials, on the external walls of high-rise and high-risk buildings—including all hospitals, care homes, schools both residential and non-residential, and offices—of below, as well as above, 18 metres in height. That reinforces my hon. Friend’s point. I understand that the Government are considering height again, but hopefully they will do that quite quickly and come to the conclusion that it is a somewhat arbitrary determinant, because there are other factors, such as means of escape, that can control how easily buildings can be evacuated. That is why I say this is a very partial solution.
If the Government do not like the LGA, perhaps they should listen to the Association of British Insurers. In all my experience in the time that I have been here, the Government have been the greatest friends of the insurance industry, and that has been mutual, but in the briefing for this debate the ABI says that it
“remains concerned over the limitations of the MHCLG ban, including the exclusion of buildings lower than 18m and limiting the ban to only care homes, hospitals and student accommodation. It makes no sense that someone can live in a high-rise residential building to which the ban applied but commute to work every day in an office block covered in combustible material.”
That is just common sense, but it comes from an industry body. I will wait to hear the Minister’s response on that.
There are other issues that go beyond fire safety. Some Members took the opportunity to raise them during yesterday’s urgent question, and the Minister commented yesterday that he was quite in favour of ’60s and ’70s buildings coming down per se—a radical solution, which was picked up by Inside Housing. I would give a qualified welcome to that: yes, if they are unsafe, unsuitable or not performing their function, but given the extraordinary housing shortage that this Government have presided over, perhaps the Minister should insist that we get rather more going up than coming down.
Kit Malthouse
What I said yesterday was that it was very often the case with buildings of the ’60s and ’70s that it was more efficient, and financially easier, to demolish and replace than to refurbish, and that many of these buildings, particularly LPC buildings, present technical difficulties that make them very expensive to deal with. I would add, frankly, that given the lessons over the years of high-rise living, councils should consider whether people would prefer to live in lower-rise, more gentle-density housing that could be provided on the same space.
Andy Slaughter
I will not be tempted into a wider debate, except to say to the Minister that it depends very much on the circumstances. Sometimes it is a matter of choice, and many high-rise buildings offer very good-quality accommodation and have good space standards. The space standards of the 1960s and 1970s often gave people very good, large accommodation, so I think he needs to be careful before wishing to be an iconoclast in quite the way that he does.
I find it deeply troubling that, as my hon. Friend the Member for Croydon North has said, there are still probably hundreds of thousands of people around the country living with insecurity. Nobody wants to exacerbate that unnecessarily. The Government must be clear and authoritative in the way that they present their plans to deal with the risks that Grenfell so tragically exposed. I will quote one more thing that the Minister said yesterday. He said in response to the right hon. Member for Chelsea and Fulham (Greg Hands):
“It can be extremely debilitating, concerning and worrying for any resident to have the future of their home mired in uncertainty. I hope that he gets the clarity that his residents need.”—[Official Report, 22 January 2019; Vol. 653, c. 137.]
He was responding to the right hon. Gentleman about a separate issue, which is being dealt with by the same local authority, Hammersmith and Fulham. I understand that that authority is being extremely responsible in relation to fire safety generally and also in relation to the specific blocks that were mentioned there. Indeed, there is a council meeting tonight to discuss that. It is about dealing with the system-built blocks of which Ronan Point was an example. Some local authorities, including my own, are dealing with these matters very responsibly. I absolutely agree that residents need to be given certainty, so it is ironic that within a few minutes’ walk of those blocks that were being discussed yesterday there are two estates—the West Kensington and Gibbs Green estates—that have been under threat of demolition because of the actions taken by the previous Conservative council, in collusion with the regime at City Hall when the Minister was there. So we can all learn lessons from this.
On fire safety, the Government have a lot more to say and a lot more action to take, and I hope that the Minister will go some way towards doing that this afternoon by telling us what the Government’s intentions are now in relation to existing cladding systems and any future new buildings, of whatever type.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. This is an important debate, and it is true that we are not short of time, but before I call the next speaker, I want to stress that the principle that interventions from both sides of the House should be short and to the point still remains.
Jon Cruddas (Dagenham and Rainham) (Lab)
I was not going to speak, but given that we have more time than we anticipated, I shall make a few comments on the basis of the meeting—which I mentioned earlier—with members of the GMB heat and frost laggers’ branch in Dagenham. They are legendary in the sector for their knowledge of building materials and their compounds and properties, not least because they are the people who handle them. They also have a long-term legacy of dealing with the consequences—namely, an extraordinary profile of asbestos-related deaths and injuries—so it is in their interest to be acutely aware of the properties of the materials they are dealing with.
I am not a chemist, but given the nature of the debate and the brilliant speech by my hon. Friend the Member for Croydon North (Mr Reed), I think it is worth adding the contribution of those who deal with some these materials at the front end, including their introduction in high-rise properties such as Grenfell. Over the years, those people have briefed me on a number of the health and safety tests applied to installations and foams, and I want to address the question of foams specifically this afternoon. I will come to what they have told me in a minute, but it is worth reminding ourselves first of the consequences of Grenfell and what the Government are doing about them. They sought to commission an audit of buildings across England to establish what types of aluminium cladding were in use on which buildings. They also audited the types of insulation that lay underneath the cladding. They found, as I understand it, that three broad types of aluminium cladding are in use. The first is PE cladding—the type used at Grenfell—which is the least fire-resistant type of panelling. The second is the so-called FR or fire-resistant cladding, which is a bit better in a fire. The third is A2 cladding, which has a mineral core of limited combustibility.
The Government subsequently commissioned six large-scale tests that sought to establish which types of insulation could be used with each type of cladding, which relates back to the combination issues mentioned earlier. One type of combustible insulation identified was polyisocyanurate or PIR foam—the type of insulation used at Grenfell—and the other was traditional mineral wool insulation. However, I was informed this morning that the Government also commissioned a seventh test, the rationale being that not all plastic foams are alike. The original tests used only PIR foam insulation, but there is another popular type of combustible plastic foam known as phenolic foam, which is held to have quite different fire performance.
I want to focus on the consequences of that seventh test, because phenolic foam did indeed perform a little better than PIR foam, but it still failed the test. Phenolic foam was deemed to have failed the test after 28 minutes, compared with PIR’s 25 minutes. Altogether, that test means that the Government know of over 200 buildings with cladding that is of a configuration that failed the test post-Grenfell. However, it is my understanding, following this morning’s meeting, that the National House Building Council, which has the authority to sign off buildings, still appears prepared to sign off a variety of combustible insulation boards combined with cladding with a combustible core, having stated in 2017 that
“this is on the basis of...having reviewed a significant quantity of data”.
Therefore, as far as I am aware—this relates back to a point made by my hon. Friend the Member for Hammersmith (Andy Slaughter)—building inspectors still appear to believe that phenolic insulation could be used safely with FR-grade aluminium panels.
I know that sounds pretty complicated. I am not an expert on building regulations. Nevertheless, the devil really is in the detail. It appears that, with the Government test results and industry guidelines, phenolic insulation in combination with safer claddings is still deemed safe today; but that is not the point I really wished to raise this evening. My point is that tests are still coming to light that actually undermine some of the assumptions that were made, even post-Grenfell, as to the satisfactory status of some materials. That is why I had a meeting this morning with several laggers to hear about their concerns, because my lagger friends have known for many years of the problems with phenolic foam. I am simply using that as an example to demonstrate some of the systemic problems and the lack of confidence in the system and its regulation, and to point to the need for the industry to put its hands up about what it has known for years and years—even decades—predating Grenfell, predating earlier fires.
For example, this morning I was given confidential technical report 41772 into the volatiles of phenolic foam, dated 18 September 2003—some 16 years ago. The tests found
“a wide range of organic compounds varying in chemical nature and volatility”
contained in the foam. It was found that such products could release a
“series of compounds toxic by inhalation, in contact with the skin and if swallowed, that can cause burns and have possible carcinogenic effects”.
That, of course, is bad enough, particularly for the laggers who administer such materials. However, the laggers came to see me and handed me that report because they are aware of details of some of these materials that have never come to light. If they are aware of them, that shows that they have no confidence in the system of regulation and the working knowledge in the Department of the properties of some of these materials.
The report goes on to state that compounds that are flammable, highly flammable or extremely flammable, such as acetaldehyde, can be released from the foam. I am not a chemist, but the compound that interested me most was methyl dioxolane, which “may form explosive peroxides”. A number of questions follow from that that have implications for our confidence in the system as whole. How long have we known about the possibility of extremely flammable and explosive properties in phenolic foam, which is widely used in signed-off cladding systems across the country? We should remember that these tests took place 14 years before the Grenfell fire. Given what we know, how is that foam still deemed safe, even after the post-Grenfell test results called that into question? Do the Government still assume that phenolic foam is safe? Is this foam still being administered? Given that—and I have had the report—will the Government investigate what we know, and what we have historically known, about this specific foam, as an example of the compounds administered in these buildings, and their explosive properties?
Generally, the comments of my hon. Friend the Member for Croydon North demonstrate the need to know more—way more—about these cladding systems, including the foams. Unless we get satisfactory answers to some of the questions he has asked, and that have been raised by the discovery of confidential reports on the compounds released by materials such as phenolic foam, how can we expect our residents to feel reassured? I am more than prepared to hand the Minister this report as an example of some the combustible properties of the materials that are signed off in the present building regulations.
The Minister for Housing (Kit Malthouse)
I commend the hon. Member for Croydon North (Mr Reed), notwithstanding his partial recitation of Government policy in this area, for recognising the importance of fire safety and cladding, and for securing this debate. I am always grateful for the chance to talk on a subject of such importance as fire safety and ensuring that residents are safe, and feel safe, in their homes.
I take this opportunity to express my sorrow at the obvious emotional distress caused to the hon. Gentleman’s constituents and others by the Shurgard fire. He spoke very movingly about the fire’s impact, particularly on families who are between homes, and I recognise the distress it may cause. Although I am sure he will recognise that building regulations are largely focused on preserving life, I nevertheless recognise the importance of what he says, and I will come back to that later.
A tragedy like Grenfell should never have happened in 2017, and this Government are determined to ensure that such a tragedy can never happen again. In the immediate aftermath of the fire, we acted quickly to establish a comprehensive building safety programme, which has involved many people working tirelessly to identify and remediate buildings with unsafe cladding. We also established the independent expert panel to advise the Secretary of State on immediate measures, and we agreed to fund a comprehensive testing programme for all building owners to establish whether their units are cladded with unsafe ACM material. We have also worked with local authorities and with fire and rescue services, as I have explained, to implement interim safety measures in all buildings to ensure that people remain completely safe in their homes until remediation is completed.
Through the testing and the hard work of local authorities, we are confident that we have identified all social housing in England with unsafe ACM cladding systems. We have made good progress in making those buildings permanently safe. Of the 159 social sector buildings, 118 have either started or completed remediation. There are plans and commitments in place to remediate the remaining 41 buildings. To help to ensure swift progress, we have made £400 million-worth of funding available to social sector landlords to fund the removal and replacement of unsafe ACM cladding.
However, I regret that remediation in the private sector has been more challenging, with negotiations in some instances disappointingly slow. Since Grenfell, we have worked intensively with local authorities to identify and collect data on high-rise buildings with ACM cladding. We have also provided £1.3 million of funding to assist local authorities in that work. Local authorities across England have assessed around 6,000 private sector high-rise buildings. They have needed to take samples to test and, in some cases, take legal action to get owners to co-operate. We have taken strong action to give local authorities the support they need to enforce the removal and replacement of unsafe cladding, we have established a taskforce chaired by me and the Secretary of State to actively oversee the remediation of private sector buildings, and we have set up a joint inspection team to support local authorities and to give them the confidence to pursue enforcement action.
On 29 November 2018, the Government went further and announced that we will back local authorities to step in and take emergency remedial action where building owners are not co-operating in the remediation of cladding. This includes financial support, where necessary, to enable the local authority to carry out the emergency work. As a result of our interventions, we have made progress on securing commitments from owners to replace unsafe cladding. At the end of December, of the 268 privately-owned buildings, 212 have either started or completed remediation, or have commitments in place to remediate. There remain 56 private buildings where the owners’ plans are unclear. That number has fallen from over 200 buildings last June.
We remain concerned about and engaged with the many leaseholders who find themselves in this difficult situation through no fault of their own. We have made it clear that we expect building owners in the private sector to protect leaseholders from the costs of remediation, either by funding it themselves, or by looking to alternative routes such as insurance claims, warranties or legal action. A growing list of companies have done the right thing by protecting leaseholders, including Barratt Developments, which has agreed to fund remediation at Citiscape in the constituency of the hon. Member for Croydon North. I am pleased to say that I sought and received confirmation that Barratt has started on site this week and is on site today.
The Government have made the remediation of ACM cladding a priority. That is because our large-scale testing programme has conclusively shown the particularly high risk posed by that form of cladding. However, it would be wrong to say that that has been our only focus. The expert panel has regularly considered the risks of non-ACM material and the action we should take. As a result, in December 2018, we issued updated advice to building owners about how to investigate non-ACM cladding systems on their buildings, and how to remediate them. In addition, we have commissioned the Building Research Establishment to conduct a testing programme on non-ACM materials, and we expect the first test results by the summer. We have also issued specific advice on other fire safety risks, for example, spandrel panels and external wall insulation.
However, it is clear that, while we must do all we can to protect people now, we need a systemic overhaul, as several hon. Members have pointed out. With that in mind, we commissioned Dame Judith Hackitt to undertake an independent review of building regulations and fire safety. Her report concluded that the current system is not fit for purpose, and charted the direction for a radical new system.
There is no question but that such a change will take time. None the less, the Government have not hesitated, and will not hesitate, to act where we can make a difference now—today. That has been clear for all to see, as we have gone further than the review’s recommendations, including banning combustible cladding. Regulations were laid in November to give effect to the ban, ensuring that cladding of that nature is no longer allowed on the external walls of new buildings over 18 metres containing flats. We are also testing and trialling elements of the new system to ensure that they are effective before they are implemented at scale.
Kit Malthouse
The hon. Gentleman is right to raise that issue, which the expert panel has obviously considered. I would be happy to write to him with its considerations. In broad terms, it has focused on ensuring that purely residential buildings, where people sleep overnight, are inherently safe.
Kit Malthouse
Exactly. Although the hon. Gentleman is right to say that people sleep overnight in hotels, staff members are present in hotels and office buildings. There is always an awake watch in a hotel and that is not necessarily the case in a residential block. However, those matters are obviously open to review, and if the hon. Gentleman wants to put forward evidence that contradicts the expert panel’s, I will be more than happy to consider it. On all the issues, I do not want to give hon. Members the impression that our mind is closed. If evidence is presented to show that measures should be taken because there is a significant safety concern in buildings other than high-rise residential buildings, we will be happy to look at it.
Mr Reed
I am grateful to the Minister for giving way again and for saying that he is keeping an open mind on these issues. That is the right thing to do, and I commend him for it. He mentioned the independent expert panel again. I reiterate a point that I tried to make in my speech. An expert panel is not fully independent if some of its members have a financial interest in a particular outcome. Will he commit to reviewing the panel to ensure that there are no such conflicts of interest?
Kit Malthouse
I am happy to review the panel, but I have confidence in its members and the advice that they are giving, not least because they are a plurality of voices. The panel does include Dame Judith Hackitt, along with several other people who have been involved in the fire and rescue service over the years, but I am happy to review its membership, as we would do generally, to make sure that we have the right range of expertise thereon.
As part of our plans, we also have our new joint regulators group and our early adopters group. They have come forward to help to drive culture change and demonstrate that the industry can put building safety first. I recognise, though, that there is much more to do. Our implementation plan, which we published before Christmas, sets out what the far-reaching overhaul of the system will involve over the coming years. The work spans four areas: first, a stronger, more effective regulatory and accountability framework; secondly, clearer standards and guidance to support better understanding by those carrying out building work of what is required to make buildings safe. This is an area in which we have already taken action, by consulting on a clarified approved document B to enable the guidance to be revised. We have also completed a consultation on restricting the use of desktop studies and published amended guidance on this matter. Thirdly and most crucially, a stronger voice for residents will be at the heart of the new system. Finally, the implementation plan sets out how we will work with industry to help it to prioritise public safety and lead the culture change—a change that we all agree is badly needed.
Andy Slaughter
Will the Minister address one specific point? We have seen the conversion of a lot of office buildings for residential use, which the Government have been promoting for some time under the permitted development rules. A lot of these conversions are of poor quality and, frankly, the buildings are unsuitable for residential use, but they have been converted anyway. I understand that, if that happens in future, the building regulations will subject converted buildings to the same requirements as new builds, but what about those that have already been converted? Will the Minister look into that specific issue in relation to cladding?
Kit Malthouse
Buildings that have already been converted and are within scope should have been part of the local authority inspection regime to ensure that they are safe. All buildings obviously have to comply with fire safety regulations and the local fire and rescue service should be engaged. I am more than happy to write to the hon. Gentleman with the details on how we are dealing retrospectively with buildings that were converted under permitted development rights.
Before I close my speech, let me turn to a couple of the specific points that were raised. On self-storage, as I said to the hon. Member for Croydon North, current regulations are focused on life safety and have been for many years. Pleasingly, the number of deaths and injuries in commercial fires is very low, but that does not mean to say that we should be complacent and should not consider the issue. We have called for evidence on the review of approved document B and therefore do not rule out any changes to commercial fire regulations in those circumstances as well.
Following Grenfell, all schools, colleges and universities have been contacted to tell them to carry out building checks. All schools have to follow a range of strict fire safety regulations, which are designed to ensure that schools are as safe as possible and extremely well prepared in the event of a fire. The Department for Education has conducted an exercise to review all its buildings and has taken action where necessary. We continue to work closely with the Department.
Emma Hardy
May I ask the Minister again to look into reviewing whether to put schools on to the building safety list, because they are currently not on it? I would be grateful if he would take that away and look into it again.
Kit Malthouse
I am certainly happy to investigate that issue but, as I say, one of the delineations that the expert panel has made in its the consideration of safety is the notion of residence and people sleeping overnight in a building. As the hon. Lady will know, all schools have to conduct regular fire drills to make sure that they are prepared. It is also worth remembering that, sadly, fires happen in all sorts of buildings, many of which do not have cladding on them. There are all manner of buildings made from materials that are potentially flammable—wood, asphalt or whatever it might be—so we need to be proportionate in respect of the risk, while bearing in mind that we want to minimise it in all circumstances, when possible. A range of measures can be taken to ensure fire safety beyond the pure construction of the building, such as evacuation procedures, fire suppression techniques—sprinklers or whatever—heat sensors or smoke sensors. A number of things can be done to ensure that buildings are safe, but I am happy to take the hon. Lady’s request away and consider it.
Mr Reed
I take all the points the Minister makes in a generous spirit, but parents clearly would not want there to be flammable cladding on their children’s school, whatever other fire safety measures are in place. It is a simple thing to do, so why do not the Government just ban its use on new school buildings?
Kit Malthouse
As I have said, the Department for Education has conducted an exercise in which buildings have been reviewed and measures have been taken to ensure that those buildings are safe. I speak as somebody who has two children at school, and I understand that schools go through their fire drill, have fire doors, know where all the children are and are very focused on the notion of fire safety. I am more than happy to have a think about the point the hon. Gentleman makes. As I say, we constantly keep these things under review, and the vehicle for that will be the review of approved document B in the building regulations in all circumstances.
I am not saying no, but the hon. Gentleman would expect us to have a proportionate response that minimises the threat of fire in all circumstances. If we were to extend his thinking, we might say that we do not actually want anybody in a wooden building. A single-storey wooden building—a mobile classroom or whatever it might be—is an issue that we need to think about. [Interruption.] I understand, but that is why height matters. The particular height of 18 metres has been selected by the expert panel.
As I have said, I am happy to keep that under review, and my mind remains open. The hon. Gentleman would expect me, I hope, to be constructive in such a way. None of us has an interest in there being fire casualties; we all have an interest in getting this right. My objection to the tone of some of his speech was that he should not infer that we do not care. Indeed, there is a huge amount of effort to get this right, both politically and on the part of the remarkably hard-working and dedicated civil servants in the Department. That is why we have a comprehensive work programme, with lots of calls for evidence. A number of groups are meeting to discuss the various issues and early adopters are moving towards a new building regulations system. As I have said, it is quite obvious that the Grenfell tragedy lifted a big flat rock on a system that has not been working for many years, and our commitment is absolutely to get that right.
My understanding is that phenolic foam is covered by the ban. However, I will commission a report from the Department to give me a quick review of the points raised by the hon. Member for Dagenham and Rainham (Jon Cruddas) to satisfy myself about our approach on that particular issue. I recognise his point about the potential toxicity of fumes that may occur, whatever the height of the building. We ought to have a look at that, and I am more than happy to do so.
This is a major programme of work—now slightly more major, given the undertakings I have made to do some more work—but it is one that befits the challenge we face. It ensures that everyone with a stake in keeping people safe plays their part, and it is the programme we need to rebuild public trust and to deliver meaningful and lasting change. I believe that this is the best tribute we can offer to those who lost their lives at Grenfell Tower and those who are left behind.
Once again, let me thank the hon. Member for Croydon North for securing this valuable debate. I want to assure him and everybody in the House that this Government are determined to learn the lessons of Grenfell Tower and to ensure that nothing like it can ever happen again.
Sue Hayman (Workington) (Lab)
On a point of order, Madam Deputy Speaker. I wish to correct today’s record. Earlier, when the motion on private Members’ Bills was being discussed in a point of order, the hon. Member for Chichester said that amendment (b) had been proposed by the Labour spokesperson for the environment, which is, of course, me. I was quite surprised to hear that, as it was not something that I had done. I just want to set the record straight to confirm that it was the Labour spokesperson for communities who had put forward amendment (b) to the motion on private Members’ Bills.
Madam Deputy Speaker (Dame Rosie Winterton)
I thank the hon. Lady for her point of order and for giving me prior notice of it. I think that she did try to contact the hon. Member for—I think—Chichester. [Interruption.] Sorry, Christchurch. The hon. Lady has contacted the hon. Member for Christchurch (Sir Christopher Chope) and she has, obviously, put the record straight.
Question put and agreed to.
Draft Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Transport (Ms Nusrat Ghani)
I beg to move,
That the Committee has considered the draft Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Mr Robertson. The draft regulations are made under the European Union (Withdrawal) Act 2018, which retains EU-derived legislation in UK law. Section 8 of the Act makes provision for correcting deficiencies in EU-derived legislation that may arise as a result of the UK leaving the European Union.
Ensuring the safe and environmentally sound dismantling and recycling of ships at the end of their operational life has been a concern for a number of years. Many ships are currently dismantled on beaches in Asia, with little regard for human safety or environmental protection. EU Regulation 1257/2013 transposed into EU law key parts of the Hong Kong convention on recycling ships. The main provisions of the regulation have applied since 31 December 2018. They include requirements that EU-flagged ships be recycled at an approved ship recycling facility and that new EU-flagged ships carry a valid inventory of hazardous materials. The provisions apply to ship recycling facilities in the EU and to EU-flagged ships above 500 gross tonnes.
The draft regulations will ensure that the legal framework for ship recycling remains operable when the UK leaves the EU on 29 March 2019, by making amendments to the EU ship recycling regulation and the Ship Recycling (Requirements in relation to Hazardous Materials on Ships) (Amendment etc.) Regulations 2018. They will also amend legislation on waste management and ship recycling facilities to address a number of deficiencies arising from EU exit that would hinder the operation of the UK ship recycling regime.
The EU regulation establishes a European list of approved recycling facilities that must be used for all EU-flagged ships, including UK ships, when they need to be dismantled and recycled. After we leave the EU, it would not be appropriate for the EU to decide where UK-flagged ships can be recycled, so the draft regulations provide for a UK list that will replace the European list for UK-flagged ships. The Secretary of State will have the power to add or remove facilities. However, the UK list will include all recycling facilities on the European list.
Ships typically contain quantities of hazardous materials. The EU ship recycling regulation requires new ships to carry a list of such materials from the beginning of this year, and existing ships to carry such a list from 31 December 2020. Since the 2018 Act will retain in UK law only EU measures that are in force when we leave the EU, it will not retain the requirement under the EU regulation for existing ships to carry a valid inventory of hazardous materials, but the Government will seek to implement that requirement when the opportunity arises. Ships will still need an inventory before they can obtain a “ready for recycling” certificate, which is required when a ship is sent for recycling.
The draft regulations apply to waste management, which is a transferred matter under the Northern Ireland Act 1998. The Government are committed to restoring devolution in Northern Ireland, but time is short. We have therefore, in consultation with Northern Ireland Departments, included provisions in the draft regulations that relate to waste management legislation that applies in Northern Ireland.
The changes made by the draft regulations will ensure that environmental law continues to function after the UK’s withdrawal from the European Union. They will enable the UK to continue to comply with its international obligations, as established by the International Maritime Organisation, and maintain the highest environmental and safety standards. They are fully supported by the Government, and I commend them to the Committee.
Karl Turner (Kingston upon Hull East) (Lab)
It is a pleasure to see you in the Chair, Mr Robertson. The Opposition support the draft regulations, which we recognise will be required as we leave the EU, but there are one or two points that we wish to raise with the Minister. Will she explain the impact on the amount of ship recycling work carried out at the UK-based facilities that are currently on the EU list? What plans have the Government to support ship recycling in the UK once we leave the EU? UK facilities will still want to be able to recycle vessels flagged in the EU after Brexit. How does the Minister plan to ensure that the EU will make sure our yards are listed, and that competition between the EU and the UK is not distorted?
Will the Minister clarify what impact the regulations will have on the statutory responsibilities and duties of UK regulatory bodies, including the Maritime and Coastguard Agency and, indeed, the Department for Environment, Food and Rural Affairs? Finally, in relation to the inventory of hazardous materials and mutual recognition between the UK and the EU, it would be useful if the Minister could clarify whether ships might end up having to submit two applications—one to the EU and one to the UK. I would be happy for the Minister to answer any of those questions in writing.
Ms Ghani
I thank hon. Members for giving their time and consideration so early this morning. The regulations will ensure that we continue to combat environmental pollution and enforce safety standards in the maritime sector after we leave the European Union. They make changes only to ensure the functionality of EU retained law on the UK statute book after exit day. I am pleased that we seem to have cross-party support for this statutory instrument.
The hon. Member for Kingston upon Hull East asked about the UK ship recycling list. I want to remove any concern by confirming that the UK list will be the same as the European one when we leave the EU on 29 March. The two lists may diverge over time as the Secretary of State rather than the EU will decide which facilities can be added to or removed from the UK list. In practice, however, we expect the two lists to remain closely aligned. I shall of course drop the hon. Gentleman a note on all the points he raised.
I am pleased that we can agree that protecting the environment from all kinds of shipping pollution and ensuring that ship recycling is undertaken in a responsible manner is vital to broader Government commitments to environmental standards and shipping safety. I hope that the Committee will agree that the SI is essential to ensure that legislation on environmental protection and ship recycling will continue to work effectively in the UK from day one after exit.
Question put and agreed to.
Draft Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018
(5 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
I beg to move,
That the Committee has considered the draft Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2018.
It is a pleasure to serve under your chairmanship, Sir David. This instrument, laid before the House on 4 December 2018, is part of our EU exit contingency planning; it will not be needed should the UK conclude the withdrawal agreement with the EU. Several laws allow for collective redress when infringements of consumer protection laws take place. The first is the consumer protection co-operation regulation, known as the CPC regulation. The reciprocal arrangements set out in that EU law require enforcers to act on requests from their counterparts in other EU member states. They are required to investigate and, if necessary, take action to end infringements of EU consumer law when the collective interests of consumers in other member states are harmed.
The second of those laws is the injunctions directive. The reciprocal arrangements in that EU directive allow enforcers to take action in the courts of other member states to stop the relevant infringements. In the UK, part 8 of the Enterprise Act 2002 implements the injunctions directive, as well as providing the UK’s enforcement mechanism for the CPC regulation. It enables certain UK and EU enforcers to apply for enforcement orders to stop the infringements in question when listed EU consumer laws are being breached—these are known as Community infringements—and the collective interests of consumers are being harmed. Finally, UK enforcers are given the necessary investigatory powers through schedule 5 to the Consumer Rights Act 2015.
In the absence of a deal, after the UK’s exit from the EU, the CPC regulation and the injunctions directive will no longer apply to the UK as we will cease to be an EU member state. In consequence, UK consumer enforcers such as the Competition and Markets Authority will no longer be part of the reciprocal cross-border enforcement arrangements. This instrument therefore revokes the CPC regulation, which would otherwise continue to apply in UK law. Doing so prevents a situation in which UK enforcers would be required to assist their EU counterparts, while EU enforcers would not be under the same obligation. This instrument also amends the Enterprise Act so that EU enforcers cannot apply for enforcement orders in UK courts, preventing a situation whereby EU enforcers would remain able to bring legal proceedings in UK courts under the injunctions directive, while UK enforcers would lose their equivalent right to bring proceedings in the EU.
This instrument does not prevent UK enforcers from co-operating with their EU counterparts: UK public bodies will remain able to share information they hold in their capacity as enforcers under part 8 of the Enterprise Act to assist their counterparts abroad. However, we recognise that cross-border enforcement co-operation to protect consumers would become more limited in a no-deal situation. The instrument also ensures that UK enforcers retain the powers they now have within the UK, and can continue to investigate and address infringements of UK consumer law—including retained EU consumer law—after exit day. Those laws are set out in the new schedule 13 to the Enterprise Act to certify this instrument.
These changes are a necessary use of the powers of the European Union (Withdrawal) Act 2018, and I commend the instrument to the Committee.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
It is a pleasure to serve under your chairpersonship, Sir David. It is with deep regret that we find ourselves in a situation in which we are even considering leaving the EU with no deal—a decision that would have enormous political, social and economic impacts on the UK. There is no majority in the House for such a course of action. With 40 years’ worth of intertwined regulation and policies, the proposals introduced by the Government risk cutting the vital cross-border work that is so fundamental to the protections that our citizens enjoy.
Mr John Baron (Basildon and Billericay) (Con)
Will the hon. Lady give some concrete evidence, rather than speculating, that leaving on WTO terms, on which we trade profitably with the rest of the world, would mean us being unable likewise to trade profitably with the EU, given that all the projections of fear and economic gloom predicted when we simply voted to leave have transparently been proved to be wrong?
Gill Furniss
I think it has been made clear by many experts, including at the Bank of England, that, should we crash out with no deal in a few weeks’ time, the economy will shrink by about 8%. We are here today to look at spending many millions of pounds.
Mr Baron
This is the same Bank of England that predicted economic woe if we voted to leave the European Union, suggested there would be 500,000 extra unemployed people by December 2016, and then had to apologise very publicly for getting it so wrong. I would caution against the hon. Lady quoting the Bank of England, because it got it so wrong last time.
The Chair
Before this continues, I remind Members that this is not an opportunity for a general debate on whether we should be leaving the European Union. The circumstances of this delegated legislation are very tight, so I remind hon. Members to keep their remarks specifically to the legislation we are discussing.
Gill Furniss
Time after time, the Prime Minister has been consistent in saying that the Government will ensure that UK consumers will not face any detriment following our departure from the EU, yet the Government’s own analysis in their paper, “Consumer rights if there is no Brexit deal”, outlines that there would be a watering down of consumer rights in the event of no deal. Indeed, consumer rights bodies such as Which? have made it clear that no deal would mean a direct and hard impact on areas including travel, food and energy. The EU system, in which we have been partners for over 40 years, has devised solutions to remove risks in cross-border trade, including a deep harmonisation of substantive standards, enforcement mechanisms and redress mechanisms.
UK consumers rely on the assurance that should they buy a product from the EU, they will be protected in the event that something goes wrong, and that our competition authorities can take action on their behalf or request their European counterparts to do so in their respective countries. This confidence in cross-border trade and protection has resulted in trade flourishing between EU member states, and UK consumers have been protected. The purpose of these draft regulations is to remove current reciprocal arrangements that oblige member states to co-operate in the cross-border investigation of, and enforcement on, infringements of EU consumer laws where the collective interest of consumers is harmed.
The Chair
Order. There is a Division in the House, so the Committee will stand adjourned for 15 minutes. Should there be a second Division, we will adjourn for a total of 25 minutes.
Patricia Gibson (North Ayrshire and Arran) (SNP)
My remarks on this statutory instrument will be very brief. The SI repeals the consumer protection co-operation regulation in full to ensure that there are no unilateral obligations or rights conferred on or between EU member states and/or the UK after Brexit, in the event of a no deal.
Is it the Government’s policy to ensure that, as far as possible, UK consumers are no worse off after Brexit than before? However, it is also the case that there are no substantial policy changes proposed for UK consumer law in the event of no deal, and after Brexit. My concern is that there are absolutely no guarantees that UK consumer law will continue to evolve and develop to ensure that UK consumers are not disadvantaged and left, over time, with fewer protections relative to their European counterparts. That must be a cause of concern to us all.
Furthermore, I am well aware that the Minister simply cannot guarantee that our rights will not diverge from Europe’s over time, because that is not in the gift of the Minister. That is why this is a matter of concern. We are being asked blindly to step into the unknown. That is the nature of Brexit, deal or no deal, whether we like it or not, regardless of how we voted.
Given the circumstances today, may I throw out for the Minister’s consideration a matter I have written to her about? I thought this might be a timely moment to bring it up. She will be aware there are many areas of concern for the future, but one example that concerns me is that the EU is now set to move on standardising the expiry dates on all gift cards at five years, instead of the mishmash of confusion that we have now.
The Minister will perhaps remember that I have made inquiries. I found that the UK Government are reluctant to examine this matter carefully, despite the fact that the industry is worth billions of pounds in the UK and that the measure would cost the UK Government nothing to implement. This is one simple area where UK consumers will be left behind when such provision is adopted across the EU post-Brexit. I know that the Minister suspects that that may not happen in Europe, but I can assure her that there are definitely moves afoot for it to happen. As the CPC regulation makes clear, it is the “collective interests of consumers” that we need to be protecting.
The reality is that Brexit, with or without a deal, can only—perhaps in moments of self-reflection, the Minister will see this—reduce the UK’s influence and that of UK enforcement bodies. I do not think that is a matter of dispute. She said in her opening remarks that co-operation will continue. I of course very much hope, for the sake of consumers, that that will be the case. No one wants to see a diminution of consumer protection. No one voted for that in the referendum. Whatever they voted for, they were not voting for fewer protections as consumers. However, concerns remain, because the UK will lose the influence that it has in the area of consumer protection, and of course in other areas, as we ironically will be forced to look inwards, instead of outwards, if we are engulfed by the chaos of no deal.
Kelly Tolhurst
I thank the hon. Lady for her contribution. As a responsible Government, we continue to prepare proportionately for all scenarios, including the scenario that we leave the EU without a deal. That is what this statutory instrument ensures: it revokes provision in the CPC regulation and the injunctions directive that will not be reciprocated by the EU in a no-deal situation.
I recognise the hon. Lady’s concern about the particular issue that she has raised. It is not in the scope of these regulations, but, as she knows, I am more than happy to communicate with her outside this statutory instrument Committee. Importantly, the instrument ensures that, after EU exit, UK enforcers retain powers to continue protecting UK consumers in the case of infringement of UK consumer law. That includes EU-derived consumer law.
Patricia Gibson
What does the Minister think will be the effect on the UK’s influence in European markets, for example? After Brexit, does she think that the UK’s influence on consumer protection will increase or decrease?
Kelly Tolhurst
The statutory instrument before us talks about UK enforcement, and that, through our UK enforcement agencies, which are already registered under EU law, will be retained under UK law. As always, this Government and our enforcement agencies are committed to the protection of consumers in this country and will do whatever they can, in the event of no deal, to ensure that the relationships with our European neighbours will be maintained as far as possible, but obviously a lot of that will rest with the EU and how it wants to deal with us after EU exit.
Mr Baron
The additional point, in answer to the SNP, is surely that we will have control over our own laws more and therefore can even enhance consumer protection within these shores—rather than following on the tails of the EU—and no doubt there will be many areas in which we do that.
Kelly Tolhurst
I thank my hon. Friend for his comment; he is quite right. There are examples of where UK consumer law is superior to EU law in some elements, and this Government are committed to doing that. We will be able to maintain and, obviously, change our laws. Any EU provider selling into the UK market—whatever the product or services—will still have to comply with UK law and therefore be subject to UK enforcement agencies.
Question put and agreed to.
Draft Market Abuse (Amendment) (EU Exit) Regulations 2018
Draft Credit Rating Agencies (Amendment, Etc.) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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The Committee divided: - Ayes: 9 / Noes: 7 - Question accordingly agreed to.
The Economic Secretary to the Treasury (John Glen)
I beg to move,
That the Committee has considered the draft Market Abuse (Amendment) (EU Exit) Regulations 2018.
The Chair
With this it will be convenient to consider the draft Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019.
John Glen
It is a pleasure to serve under your chairmanship again, Mr Davies. The Treasury has been preparing extensively for a range of outcomes in the context of the UK’s withdrawal from the EU, including a no-deal scenario. The draft regulations form part of the necessary work to ensure that there will continue to be a functioning regulatory and legislative regime for financial services if the UK leaves the EU with no deal and no implementation period.
Sir Greg Knight (East Yorkshire) (Con)
Although explanatory memorandums are not technically part of regulations, it is important that they be accurate and up to date in all respects. Will the Minister confirm that that is the case? In particular, will he confirm that the first sentence of paragraph 7.1 of both memorandums is still Government policy? It states:
“The UK will leave the EU on 29 March 2019.”
John Glen
I am happy to confirm that point—I wondered what my right hon. Friend was going to come out with.
As part of the programme that I have set out, the draft regulations will address legal deficiencies in retained EU legislation relating to market abuse and credit rating agencies. They are important for regulating market conduct practices and safeguarding market integrity. Their approach aligns with that of other legislation laid before Parliament under the European Union (Withdrawal) Act 2018, providing continuity by maintaining existing legislation at the point of exit, but amending deficiencies where necessary and introducing transitional provisions to ensure that they work as effectively as possible in a no-deal context. I shall first outline the 2018 draft regulations and then turn to the 2019 draft regulations.
Market abuse can involve a range of illegal practices relating to financial markets, including unlawful disclosure of inside information, insider dealing and market manipulation. MAR—the EU market abuse regulation, which came into effect in 2016—prohibits market abuse practices, thereby increasing market integrity and investor protection and enhancing the attractiveness of the EU securities markets for capital raising. It gives EU regulators powers and responsibilities to prevent and detect market abuse; the Financial Conduct Authority is the regulator that currently enforces it in the UK. MAR applies to financial instruments traded on EU trading venues, as well as market abuse that concerns such instruments anywhere in the world.
The 2018 draft regulations will make amendments to MAR and related legislation to ensure that the UK continues to have an effective regime to regulate market abuse once it leaves the EU. In line with our general approach of onshoring EU legislation by transferring powers and functions in the remit of EU authorities to the appropriate UK institutions, they will transfer powers from the European Commission to the Treasury, including the ability to make delegated Acts related to market abuse, and from the European Securities and Markets Authority to the FCA, enabling the FCA to make binding technical standards.
The FCA has consulted on its proposed changes to its binding technical standards, and it will continue to enforce the market abuse regime in line with its current role as part of the EU framework. That approach reflects the FCA’s extensive experience, expertise and capability to continue in that function post exit. I remind the Committee that it has 158 full-time employees working on Brexit—an increase from 28 in March 2018—and that in a few months it will publish its plans for the year 2019-20.
Furthermore, the statutory instrument retains the existing scope of MAR, so that it continues to apply to financial instruments traded on both UK and EU trading venues, as well as to conduct anywhere in the world that concerns these instruments. That means that the FCA will continue to be able to investigate, prohibit and pursue cases of market abuse related to financial instruments that affect UK markets, as far as is possible in a no-deal scenario. The scope has been limited to the UK and EU, and is not worldwide, given that markets in both jurisdictions are highly integrated due to the current arrangements.
The SI also retains exemptions in MAR—and amends the scope of the exemptions to UK-only—that relate to certain trading activities that cannot be enforced against the regulation[Official Report, 5 February 2019, Vol. 654, c. 1MC.] They include exemptions on monetary and public debt management activities, buy-backs and stabilisation, and accepted market practices. Power will be conferred on the Treasury to extend the exemptions related to monetary and public debt management activities. That power is currently held by the Commission.
In addition, the SI retains references to emission allowances. That will allow UK firms to continue to participate in secondary market trading under the emissions trading scheme, despite the UK leaving it, and will enable the FCA to continue to monitor and enforce against UK-registered emission allowance market participants.
Additionally, the SI removes co-operation requirements between the UK and EU counterparts. The UK will no longer be obliged to share information related to market abuse with the EU, given that there would be no guarantee of reciprocity. However, the FCA will still be able to respond to information requests from third-country regulators; indeed the existing domestic framework for co-operation on information sharing with countries outside the UK already allows for that on a discretionary basis.
Finally, the SI will make further amendments to retained EU and UK legislation, including EU legislation that amends MAR, to ensure that it is operable in a UK-only scenario; to the Criminal Justice Act 1993 to remove references to directly applicable EU regulation; and to the Financial Services and Markets Act 2000 (Market Abuse) Regulations 2016 to ensure that the UK’s market abuse regime works effectively once the UK leaves the EU.
Mr Ranil Jayawardena (North East Hampshire) (Con)
Will the Minister make it his business to ensure that credit rating agencies share information appropriately not only with each other and with regulators, as necessary, but with consumers? Too often, they are inaccessible to consumers, and consumers cannot even write to them to have the appropriate information registered with them. Will he make it his business to sort that out or to impart that to the FCA?
John Glen
To pick up from where I left off, the best solution would be for my hon. Friend the Member for North East Hampshire to write to me about his specific concern. I will look into it thoroughly and get back to him as quickly as possible.
Let me turn to the 2019 draft regulations. A credit rating is used to assess the creditworthiness of an entity or financial instrument for regulatory purposes. CRAR, the credit rating agencies regulation, was introduced after the financial crisis in 2009 to ensure that EU bodies—in this case ESMA—could supervise credit rating agencies in a suitable way. The draft regulations will amend CRAR and related legislation to ensure that the UK continues to have an effective framework to regulate credit rating agencies once we have left the EU.
First, the draft regulations will transfer supervisory and enforcement powers from ESMA to the FCA to ensure that the FCA can effectively supervise credit rating agencies and enforce the new UK regime, as well as becoming responsible for the regulatory functions relating to the endorsement process. I should note that this provision was drawn to the special attention of the House of Lords in the 9 January report of Sub-Committee A of the Secondary Legislation Scrutiny Committee. It is a sensible provision, given the FCA’s role in regulating the operation of markets and safeguarding market integrity; it will enable the FCA to assess whether a third country’s regulatory and legal framework is as stringent as the UK’s, thereby enabling credit rating agencies in the third country that are affiliated with a UK-based credit rating agency to endorse ratings into the UK for regulatory use.
Secondly, the SI will transfer equivalence powers from the European Commission to the Treasury, which will enable the Treasury to determine whether a third-country regime is sufficiently aligned in its regulatory outcomes to be declared equivalent and allow for the clarification process, allowing unaffiliated CRAs in third countries to issue ratings in the EU for regulatory purposes. That is consistent with the transfer of equivalence powers across other areas of retained EU law in SIs that have already been debated in this Committee.
Thirdly, the SI will enable credit ratings to be used in the UK for regulatory purposes, should those ratings be issued by a CRA established in the UK with an FCA registration. The instrument will also allow for a transitional period of one year to enable credit ratings issued prior to exit day by EU firms that register or apply for registration with the FCA to be used for regulatory purposes in the UK. Furthermore, the SI sets out that firms are required to establish a legal entity in the UK to register with the FCA.
There are three types of registration regimes that will smooth the transition from ESMA registration to FCA registration: the conversion regime, which will enable UK-established CRAs to notify the FCA of their intention to convert their ESMA registration; a temporary registration regime, which will allow newly established legal entities in the UK to operate in the UK if they are part of a group of CRAs with ESMA registration; and an automatic certification process, which will allow certified CRAs established outside the EU to notify the FCA of their intention to extend certification to the UK. As part of the additional powers granted to it, the FCA will receive pre-exit powers to begin the preparatory work for registering CRAs before exit day.
Additionally, references to EU institutions in relation to appeal rights will be replaced with appropriate UK bodies. Given the new enforcement powers given to the FCA, where its warning and decision notice will apply to CRAs, a right to appeal such actions has also been provided. The relevant UK body will be the upper tribunal.
Finally, further amendments to UK legislation are made. The Financial Services and Markets Act 2000 is amended to enable the FCA to charge fees in relation to its new supervisory functions in respect of CRAs, as well as ensuring that the FCA is exempt from liability for damages relating to its new supervisory functions.
The Treasury has been working closely with the FCA and the Bank of England and engaging with industry bodies on both instruments. They have both been published in draft form, accompanied by an explanatory policy note, to maximise transparency to Parliament, industry and the public before being laid before Parliament.
In summary, the Government believe that these SIs are necessary to ensure that the regulatory regimes relating to market abuse and credit rating agencies work effectively if the UK leaves the EU without a deal or an implementation period. I hope colleagues will be able to join me in supporting the regulations, and I commend them to the Committee.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to serve in this Committee with you in the Chair, Mr Davies. I am grateful to the Minister for those helpful explanatory remarks.
Of course, the Minister and I are here once again to discuss two of the many Treasury statutory instruments that make provision for the financial regulatory framework after Brexit in the event that we crash out without a deal. On each such occasion, my Front-Bench colleagues and I have spelled out our objections to the use of secondary legislation in this manner, as well as the challenges of ensuring proper scrutiny of the sheer volume of legislation that passes through delegated legislation Committees.
As I mentioned yesterday in relation to another statutory instrument, the Committee takes place in the context of a Government refusal to allow debate on the Floor of the House concerning the exceedingly complex MiFID transposition legislation, and just a couple of days following a Division on statutory instruments to implement a customs union with our Crown dependencies, with little to no indication of how that would interact with our future customs relationship with the EU27. The prospect of no deal looms large, given the Government’s refusal to rule it out, so we must recognise that, on 29 March, instruments considered by delegated legislation Committees such as this may well become what we rely on, especially given the very real risk that the Government are simply running down the clock. Such instruments could represent real and substantial change to the statute book; they need proper scrutiny and in-depth analysis.
Paul Masterton (East Renfrewshire) (Con)
I take the hon. Lady’s point, but is it not a bit rich to go on about the necessary scrutiny when half the people on her own side have not turned back up after the Division?
Anneliese Dodds
I do not know why other hon. Friends are not here. I am sure they will be coming back soon. It may be because they have been informed that another vote is just about to happen. I apologise if my remarks have to be cut in half as a result, as the Minister’s were.
Yesterday, in another Committee, I had a long discussion with the Minister about why an impact assessment had not been produced for the statutory instruments we were considering. I am grateful to him for the clarification he gave me earlier, but although we have an impact assessment for one of the instruments this Committee is considering—the credit rating agencies regulations—we do not have one for the market abuse directive and market abuse regulation transposition regulations. Yesterday, I and other hon. Members indicated our frustration at being required to be prepared to pass legislation without having been provided with an impact assessment, and that remains the case.
I note the comments by the right hon. Member for East Yorkshire about the details of the explanatory memorandum. In yesterday’s Committee, it was intimated in the explanatory memorandum that an impact assessment had been produced. The Minister generously said he had left that statement in the explanatory memorandum to draw the Committee’s attention to the fact that there was not an impact assessment. That was a valiant attempt to explain the situation, but it is my understanding that we have the same situation with the MAD-MAR regulations. I hope that is resolved as soon as possible. We need those impact assessments to be able to understand the potential impact of this significant legislation.
As the Minister explained, the two statutory instruments we are considering relate to important elements of the post-crisis financial architecture. With the Committee’s permission, I will discuss them in reverse order and begin with the credit rating agencies regulations. Regulations were introduced at EU level following credit rating agencies’ failure properly to assess the riskiness of complicated financial instruments—not least those structured finance products, such as collateralised debt obligations, that were backed up by sub-prime mortgages—in the run-up to the financial crisis. We all know the impact of what occurred then, when credit rating agencies were improperly regulated or, indeed, not regulated.
Arguably, credit rating agencies also facilitated the very sudden downgrade of the credit ratings of a number of countries, which obviously had a significant impact on their ability to borrow and on the cost of their doing so. If the Government continue on their current trajectory and we leave the EU without a deal, it will be essential that we do not dilute the regulatory framework for credit rating agencies in the UK, and that any ratings used for regulatory purposes, such as assessing capital adequacy, are robust.
With that in mind, I have a number of questions about the credit rating agencies regulations. First, I would like to push the Minister a bit more on the FCA’s capacity to deal with the new tasks and powers assigned to it by the draft regulations. I believe he said that the FCA now has 158 staff working on Brexit, but of course the draft regulations give it significant new powers with respect to criminal sanctions and investigations. Many of us may feel that such an extension of its role would have been better dealt with through primary legislation. I will come back to that, but there remains an issue with the FCA’s capacity to exercise those no-deal powers.
Yesterday, the Minister maintained that resourcing had not been raised with him at his last meeting with the head of the FCA. The Minister stated previously that the FCA would be able, in extremis, to garner additional resources by raising its levy on market participants. If there is a no-deal Brexit, markets may be operating in conditions of extreme uncertainty and considerable turbulence, so they may not greet an additional levy request from the FCA at that moment with unadulterated joy. I hope the Government are considering that point and what might happen if the FCA needs additional finance but its request is contested by market participants.
Secondly, under the draft regulations, the FCA will have the power to develop regulations relating to credit rating agencies. I am concerned about the scope of the draft regulations and whether they really fall within the powers provided by the withdrawal Act. In particular, regulation 3 states:
“The FCA may make such rules applying to credit rating agencies…(a) with respect to the carrying on of a credit rating activity, or (b) with respect to the carrying on of an activity which is not a credit rating activity, as appear to the FCA to be necessary or expedient for the purpose of advancing one or more of its operational objectives under Part 1A of the Act”—
the Financial Services and Markets Act 2000. That seems a very broad power: it appears to empower the FCA to add to the corpus of law developed by the EU in its regulations on credit rating agencies. It is unclear where the justification for such a power lies. Is it provided for by the withdrawal Act deficiency powers? If so, will the Minister indicate under exactly which circumstances he envisages the power being used? I think the Committee needs that information before it can approve the draft regulations.
I also have a question about co-operation. As the Minister outlined, the draft regulations will remove any obligation to co-operate in processes intended to ensure appropriate regulation of credit rating agencies. Again, that seems like a policy decision rather than a technical one. For example, although in theory it would be possible to participate in the European ratings platform from outside the EU, that appears not to have been envisaged— the draft regulations do not provide the mechanisms to allow even the possibility of it. It would be helpful to understand why not.
Lastly, I am a bit confused by the manner in which the draft regulations have been presented. For example, the background information in the explanatory memorandum focuses on the use of credit ratings for regulatory purposes, but of course the EU’s regulatory machinery for credit rating agencies also imposes a large number of requirements on the agencies themselves, including many requirements to prevent any kind of conflict of interest. They are not allowed to provide advisory services or rate financial instruments without sufficient high-quality information on which to base their ratings, and they have to disclose their models and methodologies and publish an annual transparency report.
There are also a number of requirements that relate to directors on boards. Those goals have not been referred to; I assume that that is because they were already dealt with in the 2009 credit agencies regulation, but I hope that the Minister can confirm that. On my reading, the purpose of the 2009 regulation was to set out the means of implementing those requirements, rather than to provide a level 1 justification, as it would be called in EU parlance.
I have a related concern that it could be difficult to perform functions that relate to the internal operations of CRAs outwith the regulatory colleges that operate at EU level. It would be helpful if the Minister indicated whether, in his view, those controls will be maintained adequately without such co-operation.
Let me move on to the 2018 draft regulations, which implement what is colloquially known as MAD-MAR. MAD-MAR II was implemented in 2014—
Anneliese Dodds
I had just begun to discuss the second SI, which implements what is colloquially known as MAD-MAR—the market abuse directive and the market abuse regulation. As I mentioned, MAD II was implemented in 2014 and contained provisions on insider dealing and the unlawful publication and communication of inside information and market manipulation. As well as empowering national regulatory authorities to investigate and deter those activities, MAR widened the scope of MAD, strengthening the regime for commodity and other derivative markets and banning the manipulation of benchmarks such as LIBOR and reinforcing regulators’ powers.
I have two questions about the instrument. As with the other, it “removes co-operation requirements”—to use the Minister’s terms—but it does not provide a clear legal basis for that co-operation to continue. I am rather concerned about that in the context of the many regulatory developments in that area, particularly where technology is radically changing the channels and methods of communication within financial institutions.
As I am sure the Minister and anybody else who has been covered by those regulations will be aware, a large number of records need to be held by any market participant who needs to disclose on potential insider information for five whole years under MAD-MAR. That includes a list of all people who might be receiving insider information, as well as a record of the conversation that might have relayed that information. If conversations are not recorded, minutes are required. Even the format of those minutes is stipulated in a template set out by ESMA, so the requirements are very detailed. There are various stipulations in the event that minutes are not agreed within five business days and so on and so forth.
An issue with that process is the emergence of modern, Snapchat-type applications, which maintain no record of any conversation. I know that the EU was grappling with that matter and that ESMA is aware and vigilant about it, but I am not aware of any legislative changes to deal with it. I hope that the Minister can assure us that he will work with the FCA to ensure that any undermining of the MAR provisions through the use of new technology would be dealt with firmly, and that he feels satisfied that the FCA would be sufficiently empowered to do so.
Finally, it would be helpful if the Committee had a bit more information about how the Government intend to operate the system of notification of issuers when the issuer is not registered in the UK. Under MAD-MAR, the issuer would need to notify the competent authority of their home member state if they are not from the jurisdiction in which they operate. How will we ensure that issuers, many of whom will be from the EU27, are doing so under this new approach?
Martyn Day (Linlithgow and East Falkirk) (SNP)
It is a pleasure to serve under your chairmanship, Mr Davies. I am grateful for the other two Front-Bench spokespersons’ positions.
As I recognise the significance of the regulations in the event of the worst-case scenario, I will not be opposing them. I have some concerns, however, that moving away from the EU will make regulation more difficult and may add to the red tape that businesses face, with companies having to pay heed to numerous historic regulations in both EU and UK law. That would be detrimental. I have said before on many occasions that the effort we are expending on such regulations could be better used in other areas, but I understand why we need them. I would be grateful to the Treasury and other Departments if there were more advance on these SIs.
John Glen
I am extremely grateful for the comments from the hon. Members for Oxford East and for Linlithgow and East Falkirk. I shall try to respond to the points raised in detail.
The hon. Member for Oxford East raised five substantive points on the credit rating agencies. The first referred to the impact assessments, whose importance I recognise. I will not go over the full discussion that we had in Committee yesterday, but for the benefit of this Committee, I confirm that I will make the assessments available as soon as possible. I am in discussions with the Regulatory Policy Committee to get the impact assessments completed to its satisfaction. It quite rightly has exacting standards, with which I am keen to fully comply. I can commit to publishing the impact assessments when they are ready; I hope that will be next week, in time for the SI we have scheduled for next Wednesday. That is my expectation at this point.
The hon. Lady also mentioned FCA resources—I will not repeat the numbers that I gave earlier—and said that the powers in certain areas appear to go beyond ESMA’s powers. Why has that been deemed necessary? The FCA has powers deemed necessary for a wide range of firms. It is appropriate that those powers are consistent and that the FCA exercises them in accordance with its statutory objectives. The obligations on CRAs under the UK regime will remain aligned with those in the EU.
A point was also raised about fees. Andrew Bailey, the chief executive of the FCA, has said that he expects to hold FCA fees steady for a year or two, assuming an implementation period. Obviously, if it were necessary to increase those resources in a no-deal situation, that cost would have to be borne. That is why the Government’s position is that we are seeking to secure a deal. This whole programme of SIs—all 53 of them for financial services—is a precautionary measure.
The hon. Lady raised the issue of co-operation arrangements between the UK and the EU post-exit. After exiting the EU, the UK will no longer be obliged to undertake co-operation and information sharing with EU authorities. We will remove that legal obligation but UK authorities will continue to establish ambitious co-operation arrangements with our EU counterparts. The hon. Lady’s deep expertise in this area is testimony that we in the UK have led much of the sharpening of the regulations within the EU.
The FCA will look to put in place alternative arrangements for co-operation and information sharing with ESMA and EU regulators. The FCA and ESMA have publicly stated their ambition to agree a memorandum of understanding in relation to CRAs. That is what we anticipate and it is confirmed in ESMA’s statement of 9 November 2018.
The hon. Lady also raised an issue around the relationship to the 2009 regulations of the FCA. It would be appropriate for me to reflect and write to her with more detail. I emphasise that the point of these SIs is to hold regulations steady before and after exit in the circumstances of no deal. I make the general point that if we have no deal, the obligation on the Government to come forward with a whole range of additional regulation in financial services would be immediate and significant. Clearly, what we are doing here is transferring the appropriate powers for continuity at the point of exit. We are not saying that that will be the final state.
The hon. Lady raised two significant points with respect to the market abuse statutory instrument. On the point about the co-operation requirements being removed, I do not need to say more than I have already. The aspiration to have an ongoing, positive dynamic is there but, of course, in an unplanned no-deal scenario, we cannot anticipate the degree of co-operation. We would seek to be proactive in driving that and there is obviously a desire from market actors for us to achieve that. Changes made by the SI, and existing gateways for the FCA sharing confidential information, will enable the FCA to continue to co-operate and share information with ESMA and EU regulators, where we choose to do so.
The hon. Lady wanted to know whether UK authorities will build co-operation arrangements for their UK counterparts. I think I have covered that. Memorandums of understanding are being negotiated between regulators and we hope to reach an understanding on those before the end of March. We cannot do that unilaterally, but progress is being made.
What is the impact on EU issuers? There will be a change for EU issuers with financial instruments admitted to trade or trading on UK trading venues. UK MAR requires EU issuers with financial instruments admitted to trading or traded on UK trading venues to provide such notifications and reports to the FCA. That will mean that EU issuers with financial instruments admitted to trading or traded on UK trading venues will need to send reports to the FCA and their home regulator.
The hon. Lady has deep knowledge of this subject and has set out the considerable burden that that would place on the FCA. As I say, that is unavoidable at this stage, but obviously we would need to do some more work following exit in this no-deal scenario. I am grateful for the comments of the hon. Member for Linlithgow and East Falkirk, and I reiterate that the Government’s objective is to secure a deal, but, in the absence of that, this is none the less a comprehensive piece of work. We are working hard to secure the impact assessments and a fully functioning regulatory regime in the instance of no deal, which I and the Government believe to be wholly undesirable.
I hope that that adequately responds to the questions on both those statutory instruments. I think I have demonstrated that there is a need for these provisions to be made and passed by this Committee. I acknowledge the enduring concern about impact assessments; I accept that we are not in the optimal place, and I can only say that I am doing all I can to meet the appropriately exacting requirements of the RPC. I can do no more at this stage. I ask for the Committee’s support for these regulations.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Market Abuse (Amendment) (EU Exit) Regulations 2018.
Draft Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019
Motion made, and Question put,
That the Committee has considered the draft Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019.—(John Glen.)
Draft Air Services (Competition) (Amendment) (EU Exit) Regulations 2019
(5 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for Transport (Jesse Norman)
I beg to move,
That the Committee has considered the draft Air Services (Competition) (Amendment) (EU Exit) Regulations 2019.
It is a pleasure to serve under your chairmanship, Sir Henry. The draft instrument will be made under the powers conferred by the European Union (Withdrawal) Act 2018 and will apply if the UK leaves the European Union in March without a deal. Although we strongly believe that leaving with a deal is the best outcome for the UK and the EU, it is the Government’s duty to make reasonable preparations for all scenarios. That includes ensuring that there is a functioning statute book, irrespective of the outcome of negotiations. The regulations are of a very minor and technical nature.
The effect of section 3 of the 2018 Act is that any direct EU legislation in force and applicable on exit day will automatically become part of the UK’s statute book. That includes Regulation (EC) 868/2004, which is intended to provide protection for Community air carriers against injury caused by subsidisation and unfair pricing practices relating to air services between EU member states and third countries. However, as Members may be aware, that EU regulation has never been used and is currently in the process of being replaced. The instrument we are considering today therefore simply makes the corrections necessary so that the version of Regulation (EC) 868/2004 brought into UK law by the 2018 Act is in principle legally operable after exit day.
The EU regulation sets out the process and requirements for imposing redressive measures—in practice, fines or tariffs—where it has been demonstrated that subsidies or unfair pricing practices by third-country bodies and air carriers on routes between EU member states and third countries have caused injury to the EU aviation industry.
Turning first to subsidies, under the EU regulation, subsidies are deemed to exist where a Government or regional or other public body of a third country has transferred funds, forgone revenue or provided services or goods beyond basic infrastructure. The same applies if that Government or regional or public body has made payments to a funding mechanism or has instructed a private body to do so.
Turning next to unfair pricing practices, the EU regulation sets out that such practices are considered to exist in relation to specific routes where non-Community carriers benefit from a non-commercial advantage and charge air fares that are sufficiently below those offered by competing Community air carriers as to cause injury. The provisions in the regulation for imposing redressive measures apply to unfair pricing practices only where these go beyond normal competitive pricing practices. The regulation sets out factors that should be considered when comparing airfares, which include: the actual price at which tickets are offered for sale; the number of tickets available at the allegedly unfair price; any restrictions and conditions attached to these tickets; the level of service provided by all carriers operating the air service in question; and the actual costs of providing the services.
Where an investigation has determined that the subsidies or unfair pricing practices in question have caused injury to the EU aviation industry, the EU regulation sets out that redressive measures can be imposed. These measures can be either provisional, for a maximum period of six months, or definitive. The EU regulation envisages that any redressive measures would be imposed by means of a regulation and enforced by member states.
The level of the measures should be set so that they offset the benefit from which the non-Community carrier has benefited and should be less than the total amount of any subsidies. Any measures imposed to offset unfair pricing practices should not exceed the difference between the fares charged by the non-Community carrier and the fares offered by the Community carrier. Definitive measures should remain in force only for the length of time necessary to offset the subsidies or unfair pricing practices that are causing injury.
The draft instrument makes only minor corrections to the retained EU Regulation (EC) 868/2004 to ensure that the regulation continues to be legally operable after exit day. The substantive requirements for assessing whether there has been subsidisation, unfair pricing practices or injury to industry remain exactly the same. The changes made by the instrument are intended primarily to ensure that the scope of the retained EU regulation is correct once the UK has left the EU. Amendments made by the instrument include, for example, the substitution of references to “Community” with references to the “United Kingdom”.
The draft instrument has a number of effects. The retained regulation applies where there has been injury to the UK aviation industry instead of the Community industry. Instead of applying where there are unfair pricing practices by non-community air carriers on certain routes to and from the EU, the retained regulation will apply where non-United Kingdom air carriers have engaged in unfair pricing practices on certain routes to or from the UK. Similar changes apply in relation to the subsidisation provisions in the retained EU regulation. The instrument also transfers functions currently carried out by EU institutions to appropriate bodies in the UK. The European Commission, for example, is currently tasked with carrying out investigations covering subsidisation and/or unfair pricing practices. The draft instrument transfers that function to the Civil Aviation Authority.
Finally, the draft instrument transfers the function of imposing provisional or definitive redressive measures. As the EU regulation sets out that that should be done using a regulation, the draft instrument also sets out that any provisional or definitive redressive measures would be imposed by the Secretary of State through regulations. I want to make it clear that we do not expect to use those powers, but if we do, in order to allow parliamentary scrutiny and debate, any such regulations must follow the affirmative resolution process and be approved by both Houses of Parliament.
We continue to work hard to achieve a positive future relationship with the EU and to ensure that the UK’s aviation framework in law remains operable in a no-deal scenario. I commend the regulations to the Committee.
Karl Turner (Kingston upon Hull East) (Lab)
It is always a pleasure to serve under your chairmanship, Sir Henry. As the Minister said, the draft instrument will retain Regulation (EC) 868/2004 in UK domestic law. It permits the Civil Aviation Authority to initiate proceedings where there is evidence of anti-competitive practices, by countries other than the UK, that adversely impact on the United Kingdom. Although, as the Minister said, that EU regulation has never been used, we recognise its importance and support the draft statutory instrument.
Jesse Norman
I am very grateful to the Opposition for their support for the instrument. I am very glad that we can bring this small but important change into law with their support.
Question put and agreed to.
Ministerial Corrections
(5 years, 9 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text
Health and Social Care
(5 years, 9 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Caroline Dinenage
As the right hon. Gentleman said, artificial pancreas devices are an emerging technology that combines continuous glucose monitoring with insulin pumps. One system, the Medtronic 670G system, which he mentioned, was recently approved by the US Food and Drug Administration and a European licence is being pursued.
[Official Report, 12 December 2018, Vol. 651, c. 361.]
Letter of correction from the Minister for Care:
An error has been identified in the response I gave to the right hon. Member for Knowsley (Mr Howarth) in the debate entitled Diabetes: Artificial Pancreas.
The correct response should have been:
Caroline Dinenage
As the right hon. Gentleman said, artificial pancreas devices are an emerging technology that combines continuous glucose monitoring with insulin pumps. One system, the Medtronic 670G hybrid closed loop system, which he mentioned, was approved by the US Food and Drug Administration in 2016 and received a Conformité Européenne mark in June 2018.”
Foreign and Commonwealth Office
(5 years, 9 months ago)
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Brendan O'Hara (Argyll and Bute) (SNP)
Alistair Burt
I met the Prime Minister of Lebanon, as did my right hon. Friend the Foreign Secretary, on his visit to the United Kingdom. We work very closely with all parties in Lebanon to encourage the process of Government formation. We are acutely conscious of the pressure of 1.3 million refugees in Lebanon. We would encourage the return of refugees from Lebanon to Syria, but only when it is safe to do so. Support for Lebanon and its economy is a fundamental part of the United Kingdom’s engagement in the region.
[Official Report, 22 January 2019, Vol. 653, c. 118.]
Letter of correction from the Minister for the Middle East:
An error has been identified in the response I gave to the hon. Member for Argyll and Bute (Brendan O'Hara).
The correct response should have been:
Alistair Burt
I met the Prime Minister of Lebanon, and my right hon. Friend the Foreign Secretary spoke to him on the telephone, on his visit to the United Kingdom. We work very closely with all parties in Lebanon to encourage the process of Government formation. We are acutely conscious of the pressure of 1.3 million refugees in Lebanon. We would encourage the return of refugees from Lebanon to Syria, but only when it is safe to do so. Support for Lebanon and its economy is a fundamental part of the United Kingdom’s engagement in the region.
Parliamentary Constituencies (Amendment) Bill (Twenty Sixth sitting)
(5 years, 9 months ago)
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The Chair
I give the usual reminder about electronic devices: switch them to silent. As the Committee cannot consider the clauses of the Bill until the House has agreed a money resolution, I call Afzal Khan to move that the Committee do now adjourn.
Afzal Khan (Manchester, Gorton) (Lab)
I beg to move, That the Committee do now adjourn.
Another week and another statement by the Prime Minister on Brexit. Following the crushing defeat last week, the highly anticipated statement made by the Prime Minister on Monday revealed that plan B is just sticking to plan A. Disappointingly, the Government are now experts in delaying and running down the clock. Evidently, nothing has changed.
In contrast, we could make some meaningful change by progressing with this Bill. As my hon. Friend the Member for City of Chester highlighted last week, the Minister now has an opportunity to restore some order by presenting the current boundary proposal orders for the House to decide on. I wonder whether the Minister can enlighten us any further.
Christian Matheson (City of Chester) (Lab)
It is a great pleasure to serve under your chairmanship again, Ms Dorries. My hon. Friend the Member for Manchester, Gorton makes an interesting point: he says that the Government are now experts in running down the clock. We have long feared that that is the status of this Committee, as well as—obviously—wider events in relation to the Brexit deal or no-deal scenario.
However, my concern this week is about the capacity of Departments to deal with matters such as the one before the Committee. The Minister has told us that we are waiting for the orders to be drafted on the current proposals in relation to the boundary review—those that were published in, I think, September or October, which are based on 600 constituencies—and until they have gone through and been decided on by the House, it would not be appropriate further to consider my hon. Friend’s Bill.
My concern is that Brexit, the preparations for Brexit and, indeed, the preparations for a no-deal Brexit are sucking the life out of Departments. Right across Government, we see Departments in this position. I believe that the Department for Environment, Food and Rural Affairs has 70 statutory instruments to be considered; the Treasury has 200 to 300. The Minister’s own Department, the Cabinet Office, which I shadow, is starting to see statutory instruments rack up. My concern is that much as the Minister was certain before Christmas that the drafting of the orders was on time, it is no longer on time, because resources are being diverted to other affairs to deal with the possibility of a no-deal Brexit. I press it upon the Minister that the matters before the Committee need to be considered.
We are hearing now that the February recess might be cancelled. That would have one benefit: the Committee would meet for one extra week in February, which I look forward to. I would miss the time to be with my constituents and family in Chester, but the benefit would be that I got to spend the time with hon. Members on the Committee. Can the Minister give an assurance that work is continuing to progress on the orders for the current boundary proposals, so that the House may dispose of them one way or the other, and that the life is not being sucked out of the regular work of the Department as it appears to be being sucked out of every other Department of State by Brexit?
David Linden (Glasgow East) (SNP)
It is a pleasure to serve under your chairmanship, Ms Dorries. I very much echo what was said by the hon. Member for City of Chester. This is a great day to be one of those folk who get obsessed about the procedures of the House, because we have a debate this afternoon on private Members’ Bills. Hon. Members will have seen, on page 6 of the Order Paper, the motion standing in the name of the Leader of the House to provide extra days for consideration of private Members’ Bills. That consideration will take place on 1 February, 8 February, 1 March, 8 March and 15 March. I think that that is rather hopeful for those of us who serve on this Committee, because I was rather of the view that we were about to approach a point in the parliamentary calendar at which, even if the Government had served up a money resolution and we managed to complete consideration in Committee of the Bill, there would be no further days for us to consider it in the main Chamber.
However, the Leader of the House has helpfully tabled a motion, which I expect will pass later today, that means that, if the Government table the money resolution now, I have complete confidence that the Committee will be able to whiz through the Bill and make any necessary amendments. We could then take it back to the Floor of the House on the dates set out by the Leader of the House.
Finally, has the Minister had any conversations with the Chancellor of the Duchy of Lancaster, who is also chairman of the Conservative party, about this issue? We know, as it has been briefed to the press today, that Conservative campaign HQ has been preparing for the possibility of a snap general election, so I am interested to know whether the Chancellor of the Duchy of Lancaster has had discussions with his colleagues about expediting plans for 600 seats.
If the Conservative party is serious about going back to the country, I suspect that such considerations will have taken place in the Department, perhaps amplifying my view that this Government are more interested in their own party affairs than those of the country.
The Chair
The process is that, when Mr Khan sits down after his speech, you rise at that point to indicate that you want to speak, not later.
Karen Lee
I just want some guidance, please, Ms Dorries. We are on our 26th sitting and there are 16 people in a room that costs money to heat and light. On other weeks, we have perhaps had 10 or a dozen people. There is a cost to that. I would like to submit a freedom of information request to find out what the cost, on average, might have been of all those 26 sittings. Can you or anyone advise me to whom I might submit that freedom of information request, please?
The Chair
Obviously, you cannot do that through me. I suggest you go through the Speaker’s Office to make that request. Minister do you wish to respond?
The Parliamentary Secretary, Cabinet Office (Chloe Smith)
I have no further update to offer the Committee, other than that the order is in progress.
Question put and agreed to.
Westminster Hall
(5 years, 9 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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FTSE 100 Company Pay Ratios
(5 years, 9 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Siobhain McDonagh (Mitcham and Morden) (Lab)
I beg to move,
That this House has considered FTSE 100 company pay ratios.
It is a privilege to be under your chairship today, Mrs Moon. I have to be honest and open with the Chamber: I am guilty of trying to dumb down parliamentary proceedings; I attempted to call this debate “Fat Cat Friday”. However, the Table Office pointed out that that would not be correct in the circumstances. I wanted to call the debate that because by lunchtime on Friday 4 January, the UK’s top chief executives had earned more than their average employees would earn over the entire year. Those chief executives take home astronomical figures that are more like telephone numbers than salaries. Although the average employee has seen their salary remain stubbornly low, the pay packets of the FTSE 100 chief executive officers have risen by an average of 11% over the last year alone, soaring to a staggering average of £3.9 million per year. How can that be right, just or fair?
Let me emphasise right from the beginning that I have absolutely no qualms about those at the top being paid well; I appreciate the demands of running one of the UK’s biggest organisations. And I am not, at the moment, calling for a pay cap or a widespread cut to chief executives’ pay. I am calling for fairness—for the importance of the contribution of those at the bottom to be recognised in line with the contribution of those in the boardroom; and for organisations to determine the pay and reward schemes of all employees in one whole-company pay policy.
I will describe in more detail the pay ratios across the FTSE 100, and will consider the causes and consequences of such extreme differences in pay within organisations. Then I hope to detail the reality in some specific organisations, before considering the tangible steps that the Minister and this Government should take to combat such unfairness in the workplace.
Let us start with the FTSE 100. In advance of this debate, Will Turvill of The Mail on Sunday made a remarkable analysis of the pay ratio between FTSE 100 CEOs and the average wage of workers at their firms. Staggeringly, his results reveal that one FTSE 100 company, Melrose Industries, pays its chief executive a completely eye-watering 1,000 times more than the average wage of its employees. I appreciate that this is an extreme example, but few of the other 99 companies on the FTSE 100 index can consider themselves exempt from being similarly unjust.
Even among the FTSE 100, there is inconsistency and disparity. A FTSE 100 CEO is more likely to be called David or Steve than to be a woman or to come from an ethnic minority. What is more, the six female FTSE 100 chief executives earn just 54% of the salary of their 94 male colleagues. However, that is a debate for another day, because it is the FTSE 100 index as a whole that I will focus on today.
Back in the late 1990s, the pay of a FTSE 100 CEO was an extortionate 59 times higher than that of their average employee. If we fast-forward 20 years, it has sky-rocketed to being an eye-watering 145 times higher, and rising. Let that sink in: it means that it would take the median UK worker an extraordinary 137 years to earn a FTSE 100 CEO’s annual pay. Is a chief executive today working that much harder than they did just 20 years ago? The statistics suggest otherwise, as there is very little evidence that soaring CEO pay has incentivised or been the reward for better company performance, because the value of the FTSE 100 has changed little since the late 1990s. However, the pay of FTSE CEOs has increased by 300%. Meanwhile, two thirds of these top firms fail to pay the living wage.
Such mind-boggling figures are difficult to comprehend. To provide some perspective, a FTSE 100 CEO is paid an estimated 132 times more than a police officer, 140 times more than a teacher, 165 times more than a nurse, and an astronomical 312 times more than a carer. These indefensible ratios are a slap in the face for hard-working employees across our country who, at the very least, expect to take home a fair day’s pay for a fair day’s work.
Before this debate, the House of Commons digital engagement team kindly sought the views of the public on this matter. One person said that
“when their employees are working full time and not being able to afford proper accommodation, energy, food, transport or children, suddenly the difference in pay seems rather stark.”
Another person suggested that
“there should be a pay ratio, so if CEOs wish to continue enjoying these luxuries they must ensure that their lowest paid employees are earning a sufficient amount.”
I believe that the pay ratios that I am describing are utterly unacceptable, unjust and unfair. As the executive director of the Equality Trust, Dr Wanda Wyporska, says:
“A society that values its teachers, care workers and nurses at less than 1% of a FTSE CEO is beyond broken”.
Her view is a common one, with an Oxfam survey finding that 72% of people want to see the Government urgently addressing the income gap between rich and poor.
What is causing such extraordinary executive pay to continue soaring? Perhaps it is the fact that former or serving chief executives pack the remuneration committees that set pay levels at large companies; perhaps it is the decline in trade union membership; or, most likely, it is the inaction of the Government on ensuring that fairness is at the heart of the world of work.
These pay ratios stem not just from extortionate salaries, but from extraordinary incentive schemes that are increasingly reserved only for those in an organisation’s boardroom. I must be clear once again: I have no problem retaining incentive pay for executives. However, incentive schemes should be available to all staff on the same terms.
Hugh Gaffney (Coatbridge, Chryston and Bellshill) (Lab)
I am sorry for stopping a good speech, but my hon. Friend mentioned incentives; these CEOs also have the incentive of awards, including CBEs. Paula Vennells of the Post Office got a CBE, as most of these fat cats do. They end up getting awards, OBEs, knighthoods and all the rest of it, while the workers are suffering. There are people at the Post Office who face difficulties because of Horizon, a new system that has come in. Good postmasters—good people who are loyal to their communities—have been taken to court, and some of them are now going back to court. Will these CEOs be stripped of their knighthoods and awards?
Siobhain McDonagh
I thank my hon. Friend for that intervention. I will consider the Post Office a little later in my speech.
Having such incentives for all staff seems like a common-sense way of providing sensible alignment between average workforce pay and executive pay. It is a straightforward, practical idea to have a whole-company pay policy. Let me describe in more detail the reality at specific organisations in the FTSE 100 to illustrate the inequality that grows in the absence of a whole-company pay policy. I will start with Persimmon, whose former boss, Jeff Fairburn, last year received, on the back of Help to Buy, £47 million, which is an extraordinary 882 times the average salary of his workers, before he lost his job. We all remember the backlash when Mr Fairburn was granted a £75 million bonus. In the heart of a housing crisis, do we really think that he should receive such a staggering sum, or should we have seen that money helping young couples who are looking to get on the housing ladder?
How about the owner of Ladbrokes, GVC, whose chief executive, Kenny Alexander, raked in pay that was a huge 484 times higher than the average pay of his workforce? And how about Tesco, whose CEO, Dave Lewis, received a £4.9 million pay packet, which is 303 times greater than the average pay of his employees? Is he working 303 times harder, longer, or better than them?
Then there is Sainsbury’s: a pillar of the Great British high street. Over 148 years, it has established a reputation as a leading retailer and a good company to work for, but its lack of a whole-company pay policy has led to the most disgraceful discrepancy in its staff salaries. Under the guise of an increase in basic pay, 9,000 loyal and long-standing Sainsbury’s staff are set to lose up to £3,000 a year from 2020. They will forgo their paid breaks, the night shift will be shortened, and their Sunday premium will be removed. While those shop floor staff will see their bonus scheme scrapped under these new contracts, CEO Mike Coupe takes home an eye-watering bonus of £427,000 as part of his £3.4 million pay packet, and although the salaries of those staff are crumbling, their bills, mortgages and rent are still the same at the end of each month. I wonder whether Sainsbury’s remuneration committee gave a moment’s thought to those staff when it signed off its executive bonuses. When the board and remuneration committee sit down to discuss what the pay package for Sainsbury’s CEO is going to be, they should also be deciding the pay and conditions for their lowest-paid staff. If they thought about those two things together, there would be a bit more modesty, a bit more honesty and a bit more embarrassment.
Such inconsistency and injustice has grown to become the norm throughout the FTSE 100 and across the high street, with treasured organisations such as Marks & Spencer and B&Q falling foul of the expectation of organisational fairness. The absence of a whole-company pay policy in such organisations has led to unjust disparities. It is at this point that I turn to the Royal Mail.
Of course, examples of those disparities can be found outside the FTSE 100, and I thank the Communication Workers Union for bringing the following example to my attention: since the Royal Mail was privatised by the coalition Government, the pay of its CEO has soared beyond recognition. Before privatisation, the total pay of the chief executive, excluding their golden hello, stood at just over £1 million, 50 times higher than the average wage in the organisation and 78 times higher than the lowest wage. Since privatisation, the chief executive’s salary has doubled; it is now 90 times higher than the average wage and an unjustifiable 123 times higher than the lowest wage. What would have been money for a public asset and its workers is being pocketed for private profit at the very top of the company.
As for Post Office Ltd, things started to change once it was decoupled from the Royal Mail. A postal assistant earns just 3% of the salary of the chief executive, who received a 7% pay rise last year. This is an organisation that is overseeing the privatisation of Crown post offices across the country and the potential transfer of hundreds of Post Office staff to WHSmith, rated by Which? as the worst retailer on the high street. I emphasise once again that I am not calling for a cut to, or a cap on, the chief executive’s salary; I am calling for consistency, parity and fairness across her organisation.
I am pleased to see the Minister here to respond to the debate. She may remember that we met last year to discuss exploitative pay in assignment contracts, which are thankfully about to be abolished, so she has shown that she is willing to listen. Let me assess the further steps that could be taken to bring fairness back to the world of work. In August 2017, the Prime Minister described the “excesses and irresponsibility” of some big business moguls as undermining confidence and damaging the social fabric of our country. If only she had followed those strong words with strong action!
Granted, new rules that will force all UK firms with 250 or more employees to start publishing their pay ratios should be warmly welcomed. However, those figures will be based on the median average of UK employees—that is, the salary of the employee halfway between the top of the scale and the bottom. A truer reflection would be to use the mean figure, taking into account the ratio of the lowest-paid employee compared with the highest. I ask the Minister how that policy will ensure that such extreme pay ratios do not occur in the first place, and what happens if and when they are shown to continue.
As the Chairwoman of the Business, Energy and Industrial Strategy Committee, my hon. Friend the Member for Leeds West (Rachel Reeves), says:
“If shareholders won’t or can’t hold these companies to account, then we will need Government to step in with tougher rules that clamp down on this kind of executive reward.”
Naming and shaming companies, and other piecemeal reforms that rely on organisations’ good will, have proven wholly ineffective. What is more, it is overwhelmingly clear that such excessive and unequal pay ratios are unpopular with the general public and reduce staff morale. The Mail on Sunday revealed this weekend that CYBG, the owner of Clydesdale bank and Yorkshire bank, faces a shareholder revolt at its annual general meeting over excessive bonuses for bosses.
However, we should not wait for isolated pushbacks. I suggest that the Minister takes note of the example of Sweden, ranked one of the happiest countries in the world, where companies with pay gaps face fines if they fail to close them. Furthermore, trade unions should have reasonable access to workplaces, and all FTSE 100 companies should strive to be accredited by the Living Wage Foundation. Most of all, I call for the important contribution of those at the bottom to be recognised in line with the contribution of those at the top, and for organisations to determine the pay and reward schemes of all their employees through one whole-company pay policy. If an incentive scheme is made available for some staff, it should be on offer for all within that organisation, on the same terms. Why should any organisation have a rule for just some employees, not a rule for all?
If a whole-company pay policy does not work, perhaps it is time to introduce a maximum pay ratio at those organisations. In an ideal world, I would not want society to be so prescriptive, but the worsening inequality I have described undermines our democracy, and I believe that our social democracy relies on fairness. It is based on the belief that people will behave reasonably, so when our democracy is not fair, the state must become involved. This is about more than just money, the economy and the world of work. Unfairness at these levels breeds cynicism—the feeling that the system just does not work for the ordinary person—and if that system does not work, why should a person trust in, vote in or participate in it? A lack of fairness produces spiralling disharmony and disaffection in society, and it is our duty as democrats to solve it.
The fact that it takes just three days for the UK’s top chief executives to earn more than the average employee is utterly shameful. After a hard day’s work, the very least that an employee deserves is to take home a fair wage that is in proportion to that of their colleagues. Across the FTSE 100, the absence of whole-company pay policies results in organisations rewarding the minority in the boardroom at the expense of the majority at the bottom. Enforcing or encouraging a whole-company pay policy in those organisations would be a sensible, logical and practical step towards ensuring that all hard-working employees receive a fair deal at work.
Kirsty Blackman (Aberdeen North) (SNP)
It is a pleasure to take part in this debate, Mrs Moon, and I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on having secured it. It is unfortunate that it is not as well subscribed as I had expected it to be; I had thought that this was a great debate to be involved in, on an issue that matters a huge amount to an awful lot of people who live in all the countries of the UK. I will highlight a few figures, some of which have already been mentioned by the hon. Lady; I will also talk about what we are doing about some of these issues in Scotland, and what we would like to do about them.
The remuneration of FTSE 100 CEOs between 2009-10 and 2017-18, over the course of this Conservative Government, has gone up by 66%, which is a significant increase. One of the interesting stats that I discovered when I was looking into this issue is that in 1980, median FTSE 100 CEO pay was 11 times that of the median worker. By 2010, that had risen to 116 times the pay of the median worker—an absolutely massive increase that surely does not reflect an increased workload of that level. I imagine that those CEOs are not doing 10 times the amount of work they were doing in 1980, and that the people who are working at the bottom of those companies are working just as hard as they were in 1980. An increase in the ratio to that extent cannot be justified.
In 2017, the mean pay of a FTSE 100 boss was £5.7 million. Compared with many people who live in my constituency or throughout these islands, I have a significantly large salary. I am very grateful for that, but even on my relatively large salary, £5.7 million is a number that I cannot even comprehend. It is a ridiculous amount of money for people to be earning.
I understand that the hon. Member for Mitcham and Morden was talking not about the particular salary that those individuals receive but about the ratio, and that is what I want to come on to. The important point about this debate is that it is about equality, and it goes much wider than FTSE 100 companies. We have massive inequality throughout the countries of the UK and much more can be done to improve the situation. When seeking to improve things, I tend to say that we can do so in Parliament, because we have the ability to lead the way as parliamentarians. We often fail, but we have that ability. We also have the ability to legislate to ensure that FTSE 100 companies can lead the way for all companies across the UK in removing the levels of inequality.
It is not only the person on the street or the person working at the bottom of these companies who is unhappy; there is also continuing shareholder dissent. It is important that shareholders are empowered and have the ability to make changes. They are unhappy and there is backlash from them about the massive bonuses and huge pay increases received by CEOs. If we empowered shareholders a bit more, they would have the ability to make those choices to help reduce inequality throughout the companies. Shareholders do not want to be associated with a company that has a CEO receiving a massive salary, massive bonuses and massive pay rises while the worker working on the basic wage is having their bonus scheme removed, for example. It is important that shareholders who have that moral compass can make that mark on the company.
It is important to look at corporate governance legislation and regulations. The changes on reporting the gender pay gap are helpful, but they do not go far enough. It is good that we have reporting on the gender pay gap, but there should be something—not so much a carrot, as a stick—to ensure that the gender pay gap improves. It would be unreasonable to ask companies with a massive gender pay gap to reduce it to nothing in one year, but it would be reasonable for the Government to mandate companies to show progress in reducing the gender pay gap. That should involve not just saying, “This is what we will do about it”, but, “This is the timeline on which we expect to make progress. We will reduce our gender pay gap by 5% in the next two years and reduce it further after that.”
A similar approach could be taken to wage ratios. Companies could be subject to a reporting requirement to submit details on how they will improve the ratio with set targets, and they could be subject to some kind of punishment if they do not meet those targets, rather than them just saying, “This is what we are doing”, but with no set outcomes. That is where a lot of people are on gender pay reporting and ratios.
In Scotland, the Scottish Government have put social justice at the heart of civil service pay policy. Public sector employees in Scotland are paid at least the Scottish living wage, and we have no age requirement for that. Under-25s who would receive a lower minimum wage under UK legislation are eligible to receive the Scottish living wage if they work in the Scottish public sector, no matter their age. We recognise that just because someone is 24, it does not mean they have fewer outgoings than someone who is 25. They could be in exactly the same set-up, renting a flat and with a small child, whether they are 24 or 25. The Government desperately need to tackle the fact that under-25s are being paid less. The Scottish National party has been vociferously making that case at every possible opportunity, including my hon. Friends the Members for Glasgow Central (Alison Thewliss) and for Glasgow East (David Linden) with a ten-minute rule Bill.
The UK Government are not taking the necessary action, so we are asking them to give Holyrood the power to legislate on maximum and minimum wages. That would address the lower end of the spectrum where people should be paid an actual living wage—one that they can really live on, not a pretendy living wage—and, at the other end, maximum wages and bonus payments. We want power over wage ratios. That is not to say that we have a set idea of exactly how we would legislate on high wage ratios, but if Holyrood had the power to do so we could at least have those conversations and consultations. We could come up with a policy that would work for employees, shareholders and the general public. We believe that we are more likely to take action than the UK Government, given their track record. They have not moved as far as we would to tackle inequality in Scotland.
In terms of SNP policy, in June 2018 we had a very good debate at SNP conference about wage ratios. We agreed as a party—our policy is made at party conference—that wage ratios would be one way to tackle inequality and that we would consider it and take it on. An independent Scotland would have a wage ratios consultation and discussion and, if possible, a policy. We would look at the best possible way to do that.
I want to talk a little about the real living wage and employment in Scotland. Employment law is reserved to Westminster, which we have argued against because the SNP and Scottish parliamentarians in general—this view is not reserved to the SNP—have much more respect for workers’ rights, so there is much more likelihood of them improving if we had the ability to legislate in our Parliament. Despite not having power over the issue, we have tried to make changes in our society and, to a limited extent, we have. A lower proportion of people in Scotland are on zero-hours contracts than in any other nation of the UK. The Scottish Government were the first Government in the UK to become a living wage employer, so we are putting our money where our mouth is. We are saying to people, “We are proving that we can do this. We are proving that we will put workers’ rights at the heart of what we do. That is why we believe that Holyrood should have power over that.”
Down here, we vociferously opposed the Trade Union Act 2016. We disagreed with a huge number of things in it. It is incredibly important that we have strong trade unions. If trade unions had the abilities that they previously had, their voice would be heard much more loudly. It would be amplified by the legislation, rather than quashed. Wage ratios would be tackled much more vociferously by the trade unions.
In this Parliament, we have also promoted a Bill to ban unpaid trial shifts, which would give rights to those workers who are forced to work for nothing while doing a trial shift. We promoted a Bill to give workers in precarious work the same rights as employees. It is incredibly important to ensure that they enjoy the same rights as people in more stable employment. In fact, it is even more important for someone in precarious work to have those rights than someone in work that is a bit more stable. That was a good Bill, promoted by the SNP.
Our most recent Bill was on employment rights. It would have stopped gig economy workers and small and medium-sized enterprises getting late payments, which is important for cash flow. Our Bill made clear the importance of someone working in the gig economy being paid on time.
Lastly, I want to talk about what the Scottish Government have done. In Scotland, we have the fairest income tax system in the UK. Some 55% of our taxpayers pay less than they would if they lived elsewhere in the UK. About half of English taxpayers pay more than they would if they lived in Scotland. It is the lowest-paid workers, not those at the top, who are paying more in England and less in Scotland. Next year, the top 1% will be asked to pay a little more on their income, and the remaining 99% will pay the same or less than at present. I therefore suggest that the Scottish Government’s policy on income tax is much better and fairer than that of the UK Government.
We are regularly attacked by the Scottish Tories for what we have done to improve fairness in income tax, but since we introduced the Scottish rate of income tax and varied the rates, our economy has grown faster than that of England, so the suggestions that all sorts of chaos would follow have not come to pass. There is a real difference between the actions of the Scottish Government and those of the UK Government. At every opportunity the Scottish Government have pursued fairness and attempted to reduce inequality, and the Bills that the SNP has promoted down here have attempted to reduce inequality in the whole of the UK because workers’ rights are currently a reserved matter.
Holyrood does not have the full range of powers over this matter. We want workers’ rights to be devolved to Scotland. However, given the chaos that is happening and the impact that Brexit will have on the lowest paid in particular, it is increasingly evident that Scottish independence is the only way forward. If Scotland had control over workers’ rights, we would make better decisions than the UK Government are currently making, and that makes the case for Scottish independence ever stronger.
Laura Pidcock (North West Durham) (Lab)
I thank my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for securing this important and timely debate. Such debates expose our politics and the difference between political parties. It is vital that we discuss not only pay ratios, but solutions to extortionate pay, such as an excessive pay levy, and improved collective bargaining for workers through strong trade unions as a way to uplift the pay of millions of workers. It is also crucial that we are able to place the extortionately high pay of FTSE 100 chief executives in the context of low pay and the crisis of work in this country, where millions struggle to make ends meet, and where work is certainly no longer the preventer of poverty, which is a reality for millions of people.
Despite this state of affairs, as was mentioned, by lunchtime on 4 January, the top chief executives in the UK had been paid more than their average employee is paid in an entire year—an extraordinary fact. Every single year, that date and time comes sooner in the year. Unless action is taken, it will be one minute past midnight on 1 January when those people will have been paid much more than their employees. Every year, the Government take no action on that extraordinary fact. Those at the top are increasing their wealth.
I agree with my hon. Friend: perhaps this place should relax a little, because “fat cats” is exactly the right title for those executives who now get 133 times more than the average worker, which means that the salary of the average FTSE chief executive is the same as that of 386 workers on the minimum wage. It is politically poignant to note that some people are not outraged by that statistic. They are quite comfortable with the inordinate, huge salaries of executives who are paid grossly more than those who work for them.
I am sure that nobody would argue—my hon. Friend touched on this—that a FTSE 100 chief executive works 133 times harder than a hospital porter, a cleaner or a caterer. I went on a solidarity protest yesterday with strikers at the Ministry of Justice and the Department for Business, Energy and Industrial Strategy. Let us think about the caterer on exactly £8 an hour fighting for the London living wage. That works out at about £1,280 a month if they work a 40-hour week every single week of the month. If we think of rent, transport, bills and food, that person has a tiny amount to live on every month. I am sure nobody would argue that a FTSE 100 chief executive works 133 times harder than a teacher or a nurse in our NHS, or that they somehow have a combined worth of 386 workers.
Kirsty Blackman
The hon. Lady is making an incredibly powerful point. Does it annoy her as much as it annoys me that the Tories talk about hard-working families, but they do not mean hospital porters? They mean people who are much higher up the tree. Hospital porters, cleaners, chefs and the people she talks about work incredibly hard every day just to make £8 an hour.
Laura Pidcock
And that work should be valued. It is no coincidence that those people who work really hard, but very often still cannot survive and do not have enough money to pay the bills, get into debt to pay for everyday items—not for luxury holidays, or any luxuries at all. Those people should be at the heart of our concerns in this place. I am mindful never to use the word “earn” when we talk about the pay of the very few at the top. What could they possibly do to earn such large amounts of money?
It is crucial to recognise the context in which FTSE 100 pay ratios are widening. In a stark contrast to the stockpiling of wealth by a few, years of austerity and wage stagnation mean that millions of workers across the country struggle to make ends meet, as I say. In-work poverty is rising and household debt is at its highest rate. Many people rely on borrowing, and one in five workers—more than 5 million people—are paid less than a living wage. That is a huge increase from 3.4 million in 2009. Insecure work has without a doubt become the norm, with nearly 4 million people—one in nine workers—facing uncertainty and worry. They are trapped. To illustrate the low-pay trap, one in four employees earning the minimum wage for five years has been unable to move out of that low-pay trap. Some people do two or three jobs to try to pay the bills, but it has not always been like that.
In 1980, as was mentioned, the median pay of directors in FTSE 100 companies was £63,000, and median pay across the country was £5,400. The ratio of executive pay to the average wage then, less than 40 years ago, was 11:1. In 2002, the pay of a FTSE 100 CEO had shot up to 79 times that of their average employee, and last year it had reached 150 times. This place is doing nothing to stop that runaway train of inequality. I seriously hope that those ratios are unacceptable and completely unjustifiable to anyone. It is particularly obscene that this escalation has come at a time when millions of people are struggling. There is a stark contrast between those two sets of people.
No doubt the Minister will refer to the Government’s reforms to tackle excessive pay in her speech shortly, but I want to make it absolutely clear that under this Government, not only has pay inequality continued to rise, but so has the speed at which it increases. I am proud that Opposition MPs are committed to taking action, because doing nothing is not good enough. When I have been out campaigning, loads of times I have heard people say, “The rich continue to get richer and the poor get poorer. There is nothing we can do about it,” but I fundamentally disagree. Yes, the rich are getting richer, but we can definitely do something about it.
In contrast to the Tories, a Labour Government would ensure pay ratios of no more than 20:1 in the public sector, for example, and we would introduce an excessive pay levy that would charge a 2.5% levy on earnings above £330,000 a year, which is a huge amount, and 5% on those above £500,000. It is estimated that that alone would raise £1.3 billion a year.
I am sure that the Minister will mention that from 1 July the Government will ensure that companies with more than 250 employees will be obliged to reveal and justify their pay ratios. However, there is no obligation on those companies to take any meaningful action beyond the act of publishing those facts. It is yet more empty rhetoric. How is it helpful just to have the injustice out there, without any action to remedy it?
We need practical, political solutions to curb undeserved excessive pay, and to create mechanisms for better income distribution. That is why we commissioned a report by Prem Sikka, published last year, suggesting a range of measures that would apply to the more than 7,000 companies in the UK that have more than 250 employees, accounting for more than 10 million workers. Needless to say, we are looking at the report’s recommendations closely, including proposals requiring executive remuneration packages of all large companies to be subject to a binding vote.
That is just one solution to excessive executive pay. Trade unions are the collective voice of workers, and they have to be central to the debate. They are a huge player in reducing inequality in the workplace, but, after years of anti-union policies, the vast majority of workers have absolutely no say over their pay, conditions or hours of work. Protections that existed before under collective bargaining agreements have been completely lost.
Workers deserve a lot more. Pay ratios are just one aspect of tacking pay inequality. That is why a Labour Government would set up a new Department to roll out sectoral collective bargaining—protecting the interests of workers, strengthening trade unions, and introducing new rights and freedoms so that every worker gets the support, security and pay at work that they deserve.
Surely it is time to end the excessive greed. People are feasting on the backs of workers who are struggling to make ends meet, and who have the gut-wrenching feeling that they cannot afford nappies for their children, even though they work more than 40 hours a week. Surely that cannot be right. The Government must act to end that injustice.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Kelly Tolhurst)
It is a pleasure to serve under your chairmanship, Mrs Moon. I congratulate the hon. Member for Mitcham and Morden (Siobhain McDonagh) on securing today’s important debate. She has a strong, long-standing record of campaigning on behalf of low-paid workers in the economy. I highlight the constructive way in which she approaches working across the House on some of these issues; I know that she secured an Adjournment debate on whole-company pay policy last July.
Executive salaries and pay ratios are undeniably high. Currently, the ratio of the pay of the average FTSE 100 chief executive officer to that of the average UK employee is around 160:1, based on the mean. The median average is 145:1, but it is important to set current levels of pay in a longer-term context. The data shows that executive pay more than quadrupled from the late 1990s to the early 2010s. Pay ratios increased over that period from 47:1 in 1998 to 132:1 in 2010. However, that has stabilised in the last five to seven years, albeit with minor fluctuations from year to year.
The High Pay Centre, which campaigns against high levels of executive pay, acknowledged in its most recent report that UK executive median pay peaked at £4.2 million in 2013, and is around £3.9 million for the latest reported year. That puts the UK on a par with Germany and only slightly above other major EU countries on executive pay levels, despite our quoted companies generally being much larger. In the US, CEO pay is much higher. Median CEO pay for Standard & Poor’s 500 companies in 2017 was around £9.3 million, giving the US a pay ratio of 399:1.
That sets the context, but it is certainly not grounds for complacency. Shareholders and people in wider society have increasingly been questioning how such wide differentials can be justified, both in terms of individual performance and in relation to company pay policy as a whole. The Government share those concerns.
We do not believe that it is the job of the Government to set company pay levels or impose arbitrary caps. However, it is our position that there must be transparency and accountability in executive pay, and that shareholders must have the information and the powers to challenge unjustified pay in the boardroom. That is why we legislated in 2013 to require listed companies to secure binding shareholder approval for their executive remuneration policies at least once every three years, and to disclose every year the total single figure that each director is paid.
It is also why we are continuing to take steps to force companies to disclose and explain how executive pay is matched by performance, and how it relates to wider employee pay. In particular, we recently introduced a new requirement for companies to disclose and explain every year the ratio of their CEO pay to the average pay of their employees. I am pleased that the hon. Member for Mitcham and Morden welcomed the legislation, which came into effect at the beginning of this year, meaning that companies will have to report their ratios when they publish annual reports next year.
Pay ratio reporting will, for the first time, show systematically and clearly how pay at the top of quoted companies relates to pay across the rest of the company. Companies will have to report each year the ratio of the CEO’s pay to both the median and the quartile employee pay at the company. The hon. Lady expressed concerns that the pay ratio was being calculated only in relation to the median; in fact, we require pay ratios to be published for the first quartile, the median and the upper quartile. We thought hard about whether to use the median or the mean, and finally decided on the median as a more robust figure. In part, that was a response to the TUC, which argued strongly that we should use the median. In most cases, we use the median because the result is the bigger ratio.
Shareholders, employees and others will get a clear and consistent picture from year to year of how CEO pay relates to pay across the whole company. Companies will need to explain the reasons for any change from previous years, and any pay ratio trend over time. They will also need to explain whether any change is due to a change in the company’s employment model—for example, if the reason was the outsourcing or offshoring of low-paid workers. Critically, the company will have to explain whether, and if so why, it thinks that the ratio is consistent with the pay, reward and progression policies of the company’s UK employees as a whole.
Those pay ratio explanations will be watched closely by investors, who are strongly behind the new pay ratio reporting, as well as by employees and wider society. Any company that puts forward weak or misleading explanations can expect to face significant shareholder and public criticism. As the Financial Times wrote in 2017 when we announced the plans,
“a single-figure ratio will attract attention. And that will help investors curb companies’ attempts to inflate chief executive pay—and the pay gap”.
Pay ratio reporting is part of a wider package of reforms aimed at making a real change to the level of engagement between boardrooms and employees. That package includes an important new provision in the UK corporate governance code for remuneration committees to consider workforce pay alongside executive pay, and to engage with the workforce to explain how executive pay aligns with wider company policy. It is too early to tell what the impact of the new reforms will be. The Government expect companies to respond positively and creatively to the new requirements, recognising that no one size will fit all and that there will be a variety of approaches.
We are already seeing some encouraging progress, on a voluntary basis, this year. For example, Marks & Spencer has agreed that the chair of its business involvement group, which represents the interests of the company’s 81,000 staff, will be invited to attend two boardroom meetings and at least one remuneration committee meeting each year. We must also remember that pay ratios are determined by average pay in the workforce, as well as by pay at the top, so ratios will fall where average pay increases faster than executive pay. In that respect, the Government are taking steps to boost the wages of working people through our industrial strategy to deliver better-paid jobs across the country, our £37 billion productivity investment fund and our increase in R&D investment to 2.4% of GDP by 2027.
We have taken concrete action for low-paid workers by introducing the national living wage, which is on track to hit its target of 60% of median earnings by 2020. Its introduction marked a pay rise for more than a million workers across the UK and has helped to deliver the fastest wage growth for the lowest-paid in 20 years. In April, we will increase it again to £8.21 by an inflation-busting 4.9%—an increase in earnings of more than £690 a year for a full-time worker, and a total pay rise of more than £2,750 a year since we first brought it in. Up to 2.4 million workers are estimated to benefit.
Real progress is being made for hard-working people. As a working-class Conservative MP—as a Tory—when I speak about hard-working families and hard-working people, I find that I am accused of referring to higher earners. As somebody who undertook many of the jobs outlined in this debate before I came to Parliament, I actually find it offensive that when I talk about hard-working people, I am accused of not referring to hard-working people separated across our economy.
Kirsty Blackman
I appreciate the Minister’s honesty. The problem is that when the middle-rate income tax threshold goes up, there are Conservatives who make the case that it will improve life for hard-working families, but very few people in the jobs we are talking about are making £43,000 a year. Maybe the Minister needs to tackle the issue with some of her colleagues.
Kelly Tolhurst
I thank the hon. Lady for clarifying her point, but I have to say that it is this Government who have increased the threshold year on year. As a working-class Conservative MP, I am proud to say that I am standing up for hard-working people—and when I talk about hard-working people, I mean people who go out every day to earn a living, no matter what sector they are in or what job they are doing.
The Government have responded to the challenging world of work with plans for the biggest upgrade of workers’ rights in 20 years. In December we published the good work plan, which sets out how we will implement the recommendations of the Taylor review. The plan commits us to introducing a right to request a more predictable and stable contract for all workers and to bringing forward proposals for a single workers’ rights enforcement body in early 2019.
Laura Pidcock
The right to request a contract is often signalled as some kind of big victory, but have not workers always had that right? This is nothing new.
Kelly Tolhurst
We will be making the options for employees clearer. For example, we have already laid statutory instruments to ensure that on their first day, employees are able to get a written statement of their rights. It is about making sure that workers are able to know what rights they have, and that they know that they can ask for that ability.
The Government have also laid legislation that will repeal the so-called Swedish derogation and guarantee agency workers their right to equal pay. After April 2020, agency workers will no longer be able to opt out of their right to equal pay after 12 weeks in the same assignment. In short, we are shining a light on pay at the top and taking action to improve the pay and employment rights of ordinary workers.
I want to touch on a few points made by the hon. Member for Mitcham and Morden. She rightly raised the issue of diversity on boards and gender balance, which the Government are very concerned about. We have started to see results from work on the gender pay gap: we are now at 17.9%, the lowest figure on record. We are working to improve gender diversity on boards, and we have made great progress. The next target and challenge is black and minority ethnic representation—not just on boards, but in the pipeline and among executives in general. That is one of the policy areas in my portfolio, and I take a lot of interest in it.
The hon. Lady asked whether it is right that those in large companies—I think she was referring to companies that are private, but not necessarily listed—are taking large salaries but have not signed up their employees to the living wage. I quite agree that that is not a satisfactory situation, but what is massively important is the highlighting of the issue by the media and wider public, and the transparency that we have enabled so that those companies are held under a tougher spotlight. Customers and suppliers out there who know that information about those companies will need to decide whether they want to deal with them. Things are moving, and it helps that the issue is on the agenda more widely and that more people are aware of what the big bosses are being paid.
The hon. Lady also raised long-term incentive schemes. The data show that long-term incentive schemes linked to valuation and share prices have increased over time, which has contributed to the rise in CEO pay. I absolutely accept her point, but one of the reasons for bringing in pay ratios and specifying in our rules that companies must give an illustration of the breakdown of executive pay is to enable shareholders to take a view. It will also provide real information about how that narrative relates to wider pay structures across organisations. We are hoping that the reforms will give shareholders the tools and powers to hold boards to account, and that they will exercise that right further as the legislation and the changes work their way through.
The hon. Member for North West Durham (Laura Pidcock) raised the issue of pay caps and suggested a 20:1 pay ratio. As I have outlined, the Government do not feel that it is our responsibility, or that we are in a position, to limit what companies can pay their employees. Our role is to ensure that shareholders and stakeholders have the tools to make judgments and hold boards and remuneration committees to account. We believe that the reforms that we have made over time are going some way towards achieving that.
Laura Pidcock
For information, my point about the 20:1 ratio was about the public sector.
Kelly Tolhurst
I thank the hon. Lady for that clarification. However, I point out that a pay ratio of 20:1 could extend to foreign companies bidding for Government contracts, which would raise state aid and World Trade Organisation issues. There are issues with some of the policies and the refining that she may want to clarify further.
I thank again the hon. Member for Mitcham and Morden, who has taken the opportunity to bring this debate about company pay ratios to Westminster Hall. They are an important means of shedding light on pay distribution within companies and how that is changing over time. Their publication will spur companies and their remuneration committees to give greater thought and show more sensitivity to how pay in the boardroom aligns with employee pay. Along with other reforms implemented by the Government, they will ensure that the UK remains a world leader in corporate governance and an excellent place in which to work, invest and do business.
I have had many conversations with the hon. Lady, and I thank her for the way in which she approaches these matters. As I said yesterday in the Business, Energy and Industrial Strategy Committee, these issues will always be under review and we will always be looking at what can be done to improve transparency and clarity so that the spotlight can be shone on organisations. I look forward to working with the hon. Lady constructively on the number of issues that I know she is interested in in this area over the coming months.
Siobhain McDonagh
Can I ask for your clarification, Chair? Do I have a minute, or two, because we have not reached the time limit?
Mrs Madeleine Moon (in the Chair)
You can take as many minutes as you feel are appropriate.
Siobhain McDonagh
That’s a very dangerous thing to say!
I thank all hon. Members for taking part in the debate. Although there are not huge numbers of us here, as a Back-Bench Opposition MP, the tools that I have to make small changes are sometimes about shame. The fact that we are here talking about this issue, that the House magazine has taken it up, and that Sainsbury’s has already sent me a very cross word about what was in the article, means that we are having some impact. As a Catholic, I completely understand the role of shame in controlling behaviour!
I come to these things as a patriot. I am the daughter of two people who came here in 1947, fleeing a small island that could not support them and could not feed their families. By dint of their own hard work and labour, they made a good life for themselves. I want that for everybody else. I believe that people should work hard. I believe that work is empowering—not just through someone supporting themselves and their family, but to the human spirit and purpose. I think it can be one of the best cures for mental health problems. To have something to do and to do a job well is a great feeling: I am grateful every day to do this job, because I love it and it leads me to do stuff. That is where I am coming from.
Like all Members here, I have an advice surgery every Friday. People come in and I look at their payslips and I think, “How do they live? How do they support their families and pay their rent? How do they get by?” I see that increasing, and I do not think that is what Britain should be about. We should be about reasonableness and fairness and giving people hope for a better future. I want work to pay, and for so many people who work so hard, who work such antisocial hours, in such poor conditions, that is not happening at the moment. Given where I come from politically, I never thought I would agree with pay ratios, but I am coming to the point of thinking that if other things cannot work, we may need to look at them.
Question put and agreed to.
Resolved,
That this House has considered FTSE 100 company pay ratios.
Widowed Parent’s Allowance
(5 years, 9 months ago)
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Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
I beg to move,
That this House has considered the widowed parent’s allowance.
It is a great pleasure to serve with you in the Chair, Mrs Moon. I felt compelled to call for this debate about the marital status requirements of widowed parent’s allowance and the need to update the eligibility criteria of its successor, bereavement support payment, following contact by parents affected by the loss of partners. I wish especially to raise the case of Mr Arwel Pritchard and his family.
I have known Arwel, a police officer, since he was in my class in the sixth form at Coleg Meirion-Dwyfor. He met his partner, Donna, whom I also taught, while they both studied there. They were together from then until her untimely death. She leaves two young sons, Cian and Danial. The letter Arwel wrote to me 11 days after Donna’s death is heartbreaking, and his justifiable anger at the callousness with which he and his children have been treated deserves to be put on the record. If I may, I will read some of his words. He wrote:
“On the 20th of May 2018 the mother of my children and my long term partner Donna Claire McClelland passed away following a long illness with breast cancer.
She had been my partner since the time we met in college approximately 24 years ago.
During our time together we got engaged but, due to financial constraints, we did not get married as we had to make the difficult decision either to purchase a home together or get married. Wanting to raise a family, we decided to buy a house in order that we could have a home for our children.
The decision was made to become home owners, and, due to the inflated cost of living and the pay freeze that I received at work, we were never able to afford to be married.
Why am I—a person who has been a lifelong partner to Donna, who has two children with Donna and who has been in a relationship and living with Donna for more years than she lived with her parents—why am I treated as nothing in the eyes of the government?
Why am I treated differently to a person who could afford or was willing to get into debt to be married?
Why are my children not going to receive bereavement benefit for their loss just because their mother and father were not able to get married?
Why is the government discriminating against unmarried people?
Why is the government discriminating against people from different social backgrounds?
Why are children punished financially when one of their parents dies, just because their parents were unable to afford to get married?”
I am proud to be able to put those words on the record.
In many ways, widowed parent’s allowance has been around in one form or another since the inception of the modern welfare state. Society recognises that the death of either parent causes great trauma in a family and seeks to alleviate that distress with financial support. But although the names and conditions of bereavement support payments to widowed families have evolved since the days of Beveridge and Attlee, the requirement for widowed parents to be in a legally licensed relationship —either married or in a civil partnership—is a throwback to the social mores of the 1940s.
The Beveridge report of 1942 acknowledged, in a very different social context, the “problem” of unmarried couples being discriminated against, but none the less recommended limiting widow and guardian benefits to
“the legal wife of the dead man.”
That principle has remained enshrined in certain aspects of our social security system ever since.
That discrimination on the grounds of marital status was challenged in Northern Ireland by Siobhan McLaughlin, whose appeal was ultimately backed by the UK Supreme Court last summer. Ms McLaughin’s partner, John Adams, died in 2014. The couple were not married, but they had lived together for 23 years. At the time of his death, the couple had four children, aged between 11 and 19. The late Mr Adams had made sufficient contributions for Ms McLaughlin to be able to claim widowed parent’s allowance had she been married to him. The Supreme Court ruled by a majority of four to one that denying those payments to Ms McLaughlin was incompatible with article 14, in conjunction with article 8, of the European convention on human rights. Its judgment also sets out incompatibility with articles 2 and 3 of the United Nations convention on the rights of the child.
Essentially, the Court reasoned that although the promotion of marriage and civil partnerships as a policy goal is a legitimate aim for any Government, denying Ms McLaughlin and her children the benefit of Mr Adams’s contributions simply because they were not married was not a proportionate means of achieving that policy goal. In other words, privileging marriage and civil partnerships with tax breaks is one thing, but denying money to grieving children simply because they come from unmarried households is quite another. I say “children” quite intentionally.
Patricia Gibson (North Ayrshire and Arran) (SNP)
The hon. Lady is making a very eloquent case for children who are punished because their parents chose, for whatever reason, not to get married. Does she agree that the entire bereavement support regime introduced in April 2017 punishes all children, because some families with children lose up to £12,000 a year under the new system—working-age parents with children may lose up to £23,500 a year on average—despite this being a contributory benefit?
Liz Saville Roberts
Indeed. It interests me that the Supreme Court judgment makes reference to article 2 of the UN convention on the rights of the child, which decrees non-discrimination in relation to children, and to article 3, which endorses Governments’ working for the best interests of the child first and foremost. Those principles apply not just to the matter we are debating but to other issues.
Jim Shannon (Strangford) (DUP)
I thank the hon. Lady for bringing forward this important matter. She outlined clearly a case in Northern Ireland. Does she agree that going from having a wage coming into the house to receiving £117 a week is a massive step, and that that help needs to continue for more than a year for homes with children? That needs to be reviewed. A year is not long enough for someone to sort out how to cope financially in the long term without their spouse and how to raise their children alone. This matter is highly important, and I congratulate the hon. Lady on bringing it forward.
Liz Saville Roberts
I thank the hon. Gentleman for his intervention. It is evident that this matter raises a whole number of questions over and above the one I am specifically addressing.
I reiterate—I hope I say this regularly during the debate—that I say “children” quite intentionally. The great majority of EU member states make children themselves directly eligible for bereavement benefits up to a certain age. Essentially, bereavement benefits function as a sort of topped-up child benefit for children who have lost a parent and therefore require additional support. It is not, however, within the remit of the Supreme Court to correct primary legislation; that duty lies with us in Parliament.
Let me make it clear that despite the title of the debate, I believe the principle established by the Supreme Court ruling extends beyond the widowed parent’s allowance. We have heard that families in which a spouse has passed away since April 2017 are entitled to bereavement support payment, which replaced widowed parent’s allowance. It is therefore implicit in the Court’s ruling that bereavement support payment, too, ought to be extended to children regardless of their parents’ marital status. After all—I wish to impress this upon everyone present, including the Minister—the key takeaway of that ruling is that refusing to extend payments to the children of unmarried couples is of material detriment to those children and is discriminatory against those children.
In the eyes of the Supreme Court, a policy may offer special treatment to married couples when children are not involved, but it may not do so in relation to a benefit targeted at the needs and wellbeing of children. That is directly relevant to both widowed parent’s allowance and bereavement support payment, as in both instances the wellbeing of the children is the primary purpose of the benefit. That is expressed very convincingly in the Supreme Court judgment. It is not acceptable for the state to discriminate against children who happen to hail from unmarried households—to confer stigmatising status on families as either legitimate or illegitimate in the eyes of their own Government. If the support is there, it must be there for all children.
The Minister may well argue that there are bureaucratic barriers to extending widowed parent’s allowance to the children of unmarried couples. He may suggest that the requirement of a legal union protects widowed parent’s allowance from abuse. In reply, I would highlight the armed forces pension scheme, which successfully utilises a definition of “eligible partner” that is not narrowly restricted to the confines of marriage and civil partnership. Of course, the Department for Work and Pensions routinely assesses whether individuals are cohabiting, in pursuit of rolling back their means-tested social security benefits. In many such cases, there is considerably less evidence of cohabitation on display than the existence of living, breathing children. In fact, widowed parent’s allowance itself can be withdrawn if a parent later cohabits with a new partner. It is striking that Governments past and present have been willing to recognise the validity of cohabiting couples in life but not in death.
The Minister may highlight that discrimination against the children of unwed couples was debated during the passage of the Pensions Act 2014. I would reply that the legality of the Government’s standpoint is now informed by the Supreme Court’s ruling from last summer. Where Parliament previously debated in a fog of unknown quantities, we now know that the legal union requirement violates the human rights of children born to parents who are neither married nor in a civil partnership. Defenders of restricting payments to married households typically concern themselves with spousal rights, but the crux of this issue can no longer be allowed to rest solely on the rights of a bereaved spouse. Today’s debate is about whether the Government can continue to materially disadvantage children born to unmarried parents.
Household compositions have changed visibly since the widowed mother’s allowance of 1946, and the Supreme Court ruling is a reminder that our social security system must evolve to keep up. According to the Office for National Statistics, cohabiting couple families have been the fastest-growing family demographic across the UK for two decades, and in the past few years, families headed by cohabitating couples have been more prevalent than lone-parent families in the UK. By 2017, 17% of all households with dependent children were headed by a cohabitating couple.
We also know that there is a socioeconomic and geographical element to family composition, and 49% of cohabitating households in Wales are home to dependent children—the highest proportion throughout the UK. Poorer families are more likely to be headed by unmarried parents, and both mothers and fathers in married couples are more than twice as likely to have a degree as their counterparts in cohabiting couples. Children in lower socioeconomic households are therefore disproportionately exposed to bereavement support discrimination of this type, compared with their wealthier counterparts. That is deeply ironic given the Government’s approach to non-means-tested benefits: to those who can afford to marry, they give more, but to those who have less, they seek to justify denying them at the most traumatic time.
When will the Government formally respond to the issues raised in the Supreme Court ruling and in this debate? The Minister said on 5 September last year that there would be a response anon, but a number of months have since passed. If he will not provide a set timetable today for a response, will he explain why? Could the Government use legislative vehicles to make such a change? I think particularly of the Civil Partnerships, Marriages and Deaths (Registration Etc.) Bill promoted by the hon. Member for East Worthing and Shoreham (Tim Loughton). A private Member’s Bill might well be a vehicle through which to make such a change.
Extending widowed parent’s allowance as well as bereavement support payments was recommended back in March 2016 in a report by the Select Committee on Work and Pensions, “Support for the bereaved”. It outlined, as I have done today and as the Supreme Court did last year, that excluding the children of unmarried couples from bereavement support in the 21st century is both unjust and unjustifiable.
The Parliamentary Under-Secretary of State for Work and Pensions (Justin Tomlinson)
It is a pleasure to serve under your chairmanship, Mrs Moon. I pay tribute to the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) who is a passionate advocate of this issue, and I thank her for giving me advance notice of the topics she intended to cover so that I could consider seriously the points raised. She gave an impassioned interview on BBC Radio Wales today, and her work in this area is a credit to the campaign she is championing. I also thank other Members who have contributed to this short but important debate.
Bereavement is one of the toughest experiences that people face, particularly with the immediate upheaval. I know that from first-hand experience because I lost my father at an early age. My parents ran their own small business and—this is a sign of times gone by—it was predominantly in my father’s name. At the point when grieving should have been the natural process, my mother was required to go back into work and fight the banks to try to keep a roof over our heads, and I was back in school the following lunchtime.
The Government’s focus is very much on appropriate and immediate support, and that has been reflected in some of the changes we have made. That is an important focus for the Government, and we spend £464 million a year on various forms of support for those who have been bereaved. Recent changes mean that over the next two years we expect to spend an additional £40 million. I recognise that the thrust of this debate is to encourage and push for further changes, particularly for children, and we have demonstrated a willingness to do that where appropriate.
Changes to the bereavement system will cost an additional £40 million over those first two years—something we all welcome. As a principle, such support will be easier to claim, and it will provide the immediate support that was very acute on the list of asks in the 2011 consultation—the need for help in those early months is paramount. Such support is now paid in addition to other household income, and it is not taxed, means-tested or applied to the benefit cap. After we listened during the consultation we widened the support available to include anyone of working age, and younger spouses and civil partners without children will now get support. It also removes the potential trap that stops people being able to move on because if they found a new partner they would lose any support, even if they are still in need of it.
Having listened to the consultation responses we increased the initial lump sum for those with children by an extra £1,500, to recognise that additional need. That support is in addition to the initial sum of £2,500 for those without children, and £3,500 for those with children, and therefore provides 18 months of support, rather than 12. Those without children receive £100 a month, and those with children get £350 a month, for 18 months. Overall the changes not only reflect that immediate need for support, but target those on the lowest incomes and those most in need, who will receive cash on top of what is already provided.
Liz Saville Roberts
I appreciate the Minister informing us of that, but he has not said whether the Government intend to move on cohabiting couples, and whether—five months down the road—they intend to respond to the Supreme Court judgment, and if so, when. Forgive me, but I feel it is my duty, given the title of the debate, to press those points.
Justin Tomlinson
We are only five minutes into my response—fear not, there is more to come, and it will cover exactly those points.
After the introduction of the bereavement support payment, a broader point was raised about how and when we will evaluate the effectiveness of that new system. We recognise that, as with many Government changes, we need to listen, learn and act, and that is separate from any legal judgment. We intend to assess the situation once sufficient evidence is available, and we must have enough data to examine fully the continued circumstances of the bereaved once their benefit payments come to an end. We will analyse that information, which will include looking at the characteristics of those in receipt of benefits, such as age, gender and other sources of income, as well as how bereavement support payments interact with other benefits. We will also look at outcomes for recipients once bereavement support payments come to an end. At this stage, we do not have a specific timescale for that evaluation, as we must ensure enough time to allow other forms of support fully to bed in.
Let me turn to the thrust of the hon. Lady’s intervention and the principle of cohabitees. The question of opening up bereavement payments to cohabitees was debated and decided against in Parliament during the passage of the Pensions Act 2014, which legislated for the introduction of bereavement support payments in the UK. Restricting bereavement payments to claimants who are in a legal union with the deceased has been a feature of bereavement support since the 1920s. That was based on the outdated assumption that someone would rely solely on their spouse for income and would never work themselves. The concept of a legal union is a constant feature of contributory benefit schemes. It promotes institutions of marriage and civil partnerships by conferring eligibility to state benefits derived from another person’s national insurance contributions only on the spouse or civil partner of the person who made the contributions.
Cohabitation is not a straightforward concept and can sometimes be open to interpretation; unlike a legal union, it is not a black-and-white issue. That is partly why it is taking time for us to reflect very carefully. An extension to cohabitees could also trigger multiple claims on behalf of the same deceased person—for example, if the deceased was legally married to one person but cohabiting with another. That has the potential to lead to delays and additional burdens to claimants that are likely to cause distress at a time of bereavement. It is an important factor. I am not saying that the issue is insurmountable, but that is why this is a complex issue to reflect on.
Liz Saville Roberts
I am sure the Minister needs no reminding that the UK Government ratified the UN convention on the rights of the child in 1991, and I am sure that he would therefore share my concern that if discrimination against children is being facilitated on the grounds that it is bureaucratically too difficult to resolve the issue, that is not making the interests of the child a priority.
Justin Tomlinson
I thank the hon. Lady for her invention and have two points to make in response. I am not necessarily questioning that. What I am demonstrating is that we have acknowledged that we need to respond—we need to act. This is not a black-and-white issue, so we cannot do that within 24 hours. In effect, there are two asks. One is that people want me to do something, and to do something quickly; and that is what I am—
Justin Tomlinson
I am coming to the issue raised by the hon. Lady. The second point is that we do recognise the principle in respect of children, which is why, under the bereavement support payment, there is additional money for those with children; that principle is there.
Justin Tomlinson
Let me cover a bit more and I will happily take interventions, because we are okay for time.
Last year, the Supreme Court declared that the primary legislation that governs widowed parent’s allowance is incompatible with the principles of human rights law, as it
“precludes any entitlement to widowed parent’s allowance by a surviving unmarried partner”.
The courts cannot strike down primary legislation; only Parliament can change primary legislation. Therefore, that ruling does not change the current eligibility rules for receiving bereavement benefits. I am keen to take action, however, in the light of the Supreme Court ruling. I made that very clear in my statement on the Floor of the House, and since then, to help to shape the response—this debate will also be taken into consideration—I have met a number of MPs and campaigners personally. That has been an important part of the process.
However, the issues are complex and there is no quick fix. As Lady Hale herself noted in her judgment:
“It does not follow that the operation of the exclusion of all unmarried couples will always be incompatible. It is not easy to imagine all the possible permutations of parentage which might result in an entitlement to widowed parent’s allowance.”
Crucially, that is not a clear steer—a clear steer equals a much swifter response from us—and we have to take that into consideration; Lady Hale herself acknowledged that. That does not mean that we are pushing this into the long grass. As I confirmed on the Floor of the House and I am hoping to convey here, we are taking it very seriously. There is extensive and comprehensive work to look into it to ensure that we get it right.
To go back to the earlier point, we do not wish to unintentionally cause additional stress where there could be competing people who feel, under the new rules—new potential rules—that they would have the claim. Each in their own right would feel that it should be them; and at a time of bereavement the last thing we want to do is cause undue stress.
Liz Saville Roberts
I remind the Minister that virtually every other European state treats the children as eligible, in which instance the legality and licence of the relationship between the parents is inconsequential. I wonder whether the Minister would move to support such a principle, but none the less I would greatly appreciate some sense of the timeframe. I understand his point that the matter is complex and thus deserves a thorough response, but I would press him to give an indication of when he is likely to come back.
Justin Tomlinson
In terms of the way other European countries do this, that is part of our work, because we are looking at what has worked, what the potential unintended consequences are and what can be done to mediate that. That is shaping much of the work. I absolutely understand why the hon. Lady would love me to be able to give a specific timeframe, but I cannot do so, other than to say that it is an absolute priority for us to do this and to do it thoroughly and properly and to avoid unintended consequences. We absolutely recognise the importance of this.
Patricia Gibson
I am gratified by what I think the Minister said, which is that eligibility based on marital status cannot be determined purely on the basis of convenience. I am glad that he seems to have said that, but like the hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts), I ask him to assure the House right now that the children will be at the heart of any way forward that the Government embark on.
Justin Tomlinson
Many of the things that we do as a Government rightly recognise the importance of children. As the state, we have a duty of care to ensure that all children, regardless of background and circumstances, have the opportunity to unlock their full potential. Whichever political side they are on, every individual Member would echo that, in their own terms.
As I said, we have recognised the importance of the hearing. We are keen to do this thoroughly. We are taking it very seriously. We wish to do it as swiftly as possible, but it has to be done absolutely right. Let me give further reassurance. Although there is no one simple or obvious solution following the declaration of incompatibility, the officials are working very carefully, and ultimately I will return with potential solutions. This must go through the House’s legislative process, so all Members will have further opportunities to shape what we then believe would be the right conclusion. We are working very closely with our counterparts in Northern Ireland, recognising that the specific case was from there. But this must be done very thoroughly.
In conclusion, we are carefully considering the McLaughlin court ruling. We recognise that we currently have incompatible law on the statute books, and we are actively considering all options. With the introduction of the bereavement support payment, we have demonstrated that we will seek to make sensible and positive changes to target support at those most in need.
It is very clear that the hon. Members present feel strongly that the emphasis has to be on the children; I have heard that loud and clear. As I said, it has always been our intention to assess the impact of the bereavement support payment, which we will do once we have sufficient data. We are committed to supporting the bereaved and ensuring that they receive the right support at a difficult time. I echo my tribute to the hon. Members who care so passionately about this subject. It is a real priority for the Government and for me, and as we make progress I will be very happy to meet again, individually, those who are interested, in order to update them on the work. I want to be inclusive, because we all want the right outcomes. It is just that the issue is complex. There was not a clear steer, which meant that there could not be a quick fix, but the issue is a genuine, real priority for us.
Question put and agreed to.
Balanced Budget Rule
(5 years, 9 months ago)
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Lee Rowley (North East Derbyshire) (Con)
I beg to move,
That this House has considered the balanced budget rule.
It is a pleasure to serve under your chairmanship, Mr Stringer. I am extremely pleased to have secured this debate to consider an issue that has slipped down the agenda in recent years, namely that of fiscal responsibility and the actions the state can take in order to uphold and, in some cases, guarantee it.
I am delighted to see so many right hon. Members and hon. Members here today. It is packed to the rafters and standing room only, which demonstrates the level of interest in the subject. I hope that, by holding such debates in Westminster Hall, and by dragging so many hon. Members to them to volunteer contributions, we can slowly raise this important issue back up the agenda and draw attention to it.
The particular issue I want to discuss is the principle of the United Kingdom adopting a balanced budget rule as a way to improve its finances, and the underlying responsibility of Members in this place to ensure that the country pays its way in the future. The idea, which though simple is not universally liked, is that over an appointed period, within an agreed timeline, Governments should follow the novel concept of living within their means and not spend more than they can afford. Crucially, that commitment goes beyond words and there should be consequences if there is a failure to adhere to it.
To some, that is dramatic news; to others, such as myself, it just makes sense that Governments should not seek to balance the books on the back of the nation’s children and grandchildren. The principle of the never-never is, with appropriate structuring, just as apt for the Exchequer as it is for the average household in towns such as Dronfield, Eckington, Clay Cross and Killamarsh in my North East Derbyshire consistency.
It was James Madison, one of the US founding fathers, who said in 1790 that he went
“on the principle that a Public Debt is a Public curse.”
We would do well to take heed of such sentiments.
I have prepared a long speech, because I did not think that so many Members would be here. Before I begin, I will frame the discussion to ensure that the next few minutes can be constructive and useful. The debate could easily, quickly and seamlessly descend into the usual tit-for-tat and back-and-forth on the current state of our national finances, who got us to where we are and why we are there. I am sure that that may happen during the debate. I will say a few words about that in a moment, but I hope we will not dwell on it too much. The idea is to take a broader and longer-term look at where we are, and how we ensure that we leave our country safer, more secure and more resilient than we found it. That resilience should stretch to the nation’s finances as much as it does to its borders and national security.
I declare this debate, in so far as I am able, a Brexit-free zone. That is not because Brexit will not have repercussions or implications for the issue at hand, because it blatantly will, given that the Government’s deficit elimination target has been revised in recent years. I hope my hon. Friend the Member for Southport (Damien Moore) will still have a speech to make after those comments. This debate is about a time beyond Brexit, if we can possibly imagine such a nirvana, and about the day when headlines talk about police, health and education again, rather than backstops, Juncker and tariffs. I have been in this place less than two years, and I would say that at least 90% of what we talk about is Brexit. It sucks the oxygen out of the room, and I say that as committed Brexiteer. It also looks likely to continue to do so for much of the next year, so I hope that for the next few minutes we can try to avoid it.
My proposition is simple: that the United Kingdom considers over the long term the adoption of the balanced budget rule, set in statute, which requires Government to spend only as much as they raise, over a set agreed period, and that there will be consequences if they fail to do that. That would not be an aim or an ambition, but a hard rule, which would be flexible only inasmuch as anything can be flexible when it is set down in law. To be provocative, if we were so minded we might even consider tying any attempt to change future legislation—presumably by a spendthrift Government eager to give out sweeties or goodies to buy votes—to a referendum of the people themselves, given that we have become so adept at referendums in recent years. That would certainly focus minds.
What is the point of legislating on this issue? First, we should all have a moral problem with excessive Government debt. The United Kingdom’s general Government gross debt in September 2018 was, according to the Office for National Statistics, about £1.8 trillion, which is equivalent to about 85% of our country’s GDP. Last year we borrowed, and therefore added to that figure, about £40 billion. In the last couple of decades, our debt as a proportion of GDP has risen from approximately 40% to more than 80%. Those may be just numbers, but they have real-life and real-world implications.
I acknowledge the challenges that the Government have had in trying to get the country’s deficit under control. My party remains resolutely of the view that the Administration prior to 2010 both mismanaged the country’s finances and failed to prepare for the inevitable recession, which could not be avoided given that mere mortals cannot abolish the cycle of boom and bust, and given the well-recited failure to mend the roof when the sun was shining. I support the Government’s deficit strategy and the work they continue to do to manage it down. It has proved a difficult issue to resolve, but we should acknowledge the important milestone that we hit this year, which is that debt as a proportion of GDP is falling for the first time in many years.
Even with the acknowledgement of the good work that has been and continues to be done, the reality is that we are going to run a deficit for a good number of years to come. Even when we eliminate that deficit, which I hope will be as soon as possible, we are merely returning to a place that stops us piling on any more problems for our children and grandchildren, without really having a way to cut down the problem that has already been created in absolute terms. What is the long-term strategy for cutting that debt pile in absolute rather than relative terms? How do we avoid the current position becoming the baseline and the place we start from when the next recession comes? That place would, by default, reduce our firepower to deal with those hard times.
It is worth dwelling on the moral case for not running a deficit and for keeping debt low. The debt that we run up, for whatever good or bad reason, needs to be paid back, and if we cannot pay it back, we need to service it or pay for it. That limits the headroom of future generations to make decisions about what they spend their taxes on, because some of their taxes will go on servicing the debt. It mandates that spending that benefits one generation will be dealt with by another, which is an intergenerational unfairness that we should reflect on much more deeply than we do today, as ever-eager politicians dream up another opportunity to spend.
Reducing our firepower or fiscal space in the event of a recession is the worst kind of lack of planning, and one that will hamstring our ability to pull ourselves out of those recessions, when they inevitably come. As Ryan Bourne of the Cato Institute pointed out in his excellent recent paper on the subject, at least some of the literature that has reviewed the issue highlights that when Government debt gets too high for too long, it tends to reduce growth rates overall, meaning less economic activity, less growth and less prosperity in the long run. [Interruption.]
Graham Stringer (in the Chair)
Order. There is a Division in the House. We will recommence in 15 minutes.
Graham Stringer (in the Chair)
Sorry about that. I had been told there was definitely a second vote, which there clearly was not. I call Mr Lee Rowley.
Lee Rowley
Before we went to vote I was talking about the moral case for low debt and ensuring that the servicing of that debt was as minimal as possible, to retain and support our ability to ensure economic activity in the future. It was not for nothing that Herbert Hoover intoned sarcastically:
“Blessed are the young, for they shall inherit the national debt.”
In this context, perhaps we can bestow a few less blessings on them in the future.
Putting aside the morality of debt, the key issue, which should drive all politicians regarding the accretion of Government debt, is the year-on-year cost of servicing and holding it, as mentioned earlier. The proponents of unfunded spending may highlight how the markets are not that concerned with relatively high borrowing so long as it can be funded. That may be the case. Let us hope, for all of our sakes, that we do not enter a period of high interest rates in the coming decades when national debt is to be rolled over.
The opportunity cost of that funding, on an ongoing basis, is much less understood in this place than in public discourse. It comprises a tax, year on year, on today’s generation for yesterday’s spending. Unlike the total debt to GDP ratio, which has oscillated wildly in the last century due to wartime spending, the cost of servicing the UK’s debt has been on an upward trajectory for the last century. Adjusted for inflation, the cost of servicing that debt has risen from an average of £12 billion per annum between 1900 and 1960 to nearly £30 billion at the turn of the 21st century. Since 2009, that average has hit £43 billion every year. In total, since 1900 the UK has spent something like £2.5 trillion just on servicing its debt. About half of that has been spent since I was born—I still like to think of myself as being relatively young.
The bad news is not likely to stop there. With the continuing running of deficits until well into the 2020s, the annual cost of servicing that debt is projected by the Office for Budget Responsibility to hit more than £50 billion by the start of the next decade. In this Parliament alone, debt servicing costs are projected to be about a quarter of a trillion pounds over the five years. The sums are huge and growing. They represent a significant opportunity cost to the UK as a whole.
Alex Chalk (Cheltenham) (Con)
My hon. Friend is making a powerful point. To put it into sharp focus, does he share my concern that the annual cost of servicing the United Kingdom’s national debt is more than we spend on schools? As a matter of morality, we need to keep debt under control so that we can truly allocate resources where they are most valued.
Lee Rowley
I could not concur more with my hon. Friend, as I will address in my next paragraph. Putting this into context, about 8% of all current Government spending is diverted towards debt servicing. In 2015, that made interest payments the joint fourth largest proportion of spending by the UK after health and welfare, and on a par with defence. Spending on education, the police and transport pales in comparison with the budget allocated to debt interest. That budget could be used, as my hon. Friend has just outlined, for myriad other more socially useful activities, such as paying for a hospital to be built every four days, or for approximately 2,500 nurses, police or teachers to be hired every day throughout the year. For those of us with a more centre-right political outlook, the £45 billion spent on interest costs in 2015 could even have been used to reduce the size of the state through tax cuts, perhaps as large as 8% or 9% in the standard rate of income tax. If the populace actually knew that such a significant chunk of the taxes they paid every year was being used to pay for spending chalked up 20, 30 or 50 years ago, would they be content doing the same or worse for their children, given the sacrifices and opportunity costs involved?
We know what the problem is, so why do we not just do something about it? Why do we need a legislative solution for this issue? The problem is that we as a country are not that good at stopping adding to our debt. Our Labour friends—who have temporarily deserted the Chamber—have a tendency to spend money without a huge amount of regard for the implications. My party usually ends up having to clean up the mess. Even on my side, there are not insignificant number of people who cannot resist the temptation to spend when it comes down to it.
Our parliamentary system and representative democracy are excellent at pushing the cause of individual spending requirements, many of which, I do not contest, are no doubt noble. Yet there are few people who will exercise proper restraint or promote proper fiscal responsibility to ensure that all of these myriad pots of money are truly paid for. It is always tomorrow’s problem. Mañana, mañana, as they say. The numbers show just that: over the last century, the United Kingdom has consistently increased its national debt and its deficit spending. Both in absolute terms and as a proportion of GDP, the UK’s debt burden has grown significantly since the turn of the 20th century. The recent political consensus in the UK demonstrated a clear disregard—if we are honest—for the consequences of deficit spending.
Prior to the second world war, deficit spending tended to be closely correlated with war and national defence. In more than half the years between 1900 and 1939, the UK ran an absolute surplus, including during much of the late 1920s, during economic crisis. Since 1945, however, the achievement of a surplus in the UK’s national spending has been relatively rare. Only 13 out of 71 years saw the deficit being reduced, and on only two separate occasions—the late 1980s and the late 1990s—has the UK run surpluses for more than a couple of years at a time.
If all that sounds like one long criticism, it is not intended that way. It is just a statement of fact. Whether poverty or plenty, feast or famine, there is one almost universal constant: the Government spend more than they take in. That is not unique to the United Kingdom, but a feature of western democracy: red ink reigns supreme. The main variable in western liberal democracies is whether they overspend by a little or a lot. France has never run a Government surplus as a proportion of GDP since the 1970s, nor has Italy. The United States has managed to do so only once since 1960. Even Canada, one of the more enlightened in tackling public debt, has only managed to run surpluses in less than one third of financial years since the 1970s. The Maastricht protocol on excessive debt procedure says that countries should not exceed a 3% borrowing ceiling. Just think on that for a moment: there is a protocol that automatically sets an expectation of overspending—just that it is not excessive. And we wonder why debt has significantly increased in most western democracies over the past 30 years. There is an urgent requirement, over the long term, to address this inherent deficit bias in democracies.
The idea that we need to take more drastic legislative solutions is not that new; it is just that we have never properly applied it to national spending before. Sure, the Government have their charter of budget responsibility and an equivalent office creating the data and watching what is happening. Yet the charter requires people only to identify that they are changing policy. It does not really hold people to account or limit them.
Jim Shannon (Strangford) (DUP)
On changing policy, I am very aware of where we are at this moment in time. Does the hon. Gentleman agree that a post-Brexit economy will provide an incredible opportunity to expand and invest, that the Government must be prepared to invest in our own people, and that if we must borrow to do so, it must be done in a reasonable and controlled fashion? As he has said, we must be prepared to back our own people. I hope that the Minister will respond positively and say that he will ensure that there will be Government investment in our businesses. That is very important.
Lee Rowley
I completely agree that we have a big job to do after Brexit, in terms of ensuring that our infrastructure works and that our country is well prepared for the future and has the necessary flexibility to take the opportunities that will come our way in the coming decades. If, from a Government perspective, we need to spend in order to do that, we should do so. I am not here to disregard Government spending—it is a force for good. However, it has to be done properly, it must have a clear outcome and we have to pay for it.
Lee Rowley
I was talking about how legislative solutions are applied, what is already in place and the charter for budget responsibility. My point was that in non-financial areas of Government activity, we are happy to bind ourselves to long-term targets, because there is the political will. The most obvious instance in recent years was the Climate Change Act 2008, which created an explicit legal requirement for future Governments to reduce greenhouse gases by 80%. If a political consensus can be built for protecting the country against such a danger to our children, why cannot the same be done to prevent economic problems for future decades?
That is where a balanced budget rule could really make a difference, with a legislative requirement to balance our budget over a period, minimising the growth of the debt to be left for following generations to deal with. It is not all that innovative. The OECD estimates that about 100 countries have some kind of fiscal limiting framework. Those can be voluntary or compulsory, and they vary in strictness and the degree to which they are adhered to. None is perfect, but it is at least arguable that over time the focus on fiscal rectitude focuses minds and attention on delivering better outcomes.
Perhaps the most obvious example of a budget rule, and the best known, is Chile’s. In the 2000s, Chile adopted a rule requiring structural surpluses to be run, so that the national debt could be reduced significantly. Broadly, under the structure it created, an estimate was made of the country’s economic potential over future years, and spending was allowed only to match the anticipated growth and revenue.
What was the result? There was a sharp reduction in net debt, surpluses as high as 8% in the years leading up to the economic crisis, and the upgrading of the country’s credit rating. Admittedly, some of that was possibly because of the commodity boom. None the less, the rule permitting appropriate balance to be given to both revenue and spending was important. Even today, after the rule has been challenged and battered a bit more through experience and difficulty, Chile’s debt remains significantly below that of many other countries. It is about 20% of GDP, rather than the 80% that we are grappling with.
Switzerland is another example where a legislative solution has focused minds and improved overall fiscal discipline. The Swiss “debt brake” was introduced in 2001, having been approved in a referendum—something that that country is wont to use for important national policy questions. Integration into the national constitution followed. There is a requirement for structural balanced budgets, through the capping of annual spending with tax revenues, plus or minus some flexibility. Again, the change had a significant impact. A nation whose debtto GDP ratio had significantly increased—from around 15% of GDP in the early 1990s to 45% at the time of the referendum—saw a rapid reduction over the succeeding years. Debt to GDP is now about 25%, and is projected to fall.
Switzerland and Chile are not alone. Sweden is another country that learned from overspending, this time in the 1990s, and it has been relatively successful at maintaining surpluses. The Germans have introduced in their constitution a cap of 0.35% on structural deficits. It is not exactly a surplus, but it is a way to prevent large consistent deficits. Other examples that the OECD has highlighted include Argentina, Belgium, Denmark, Estonia, Hong Kong and the Netherlands, although their arrangements vary with respect to their legislative teeth and their success. Even the French, who have not been able to balance a budget for decades, have made tentative steps in that direction, with the transposition of their fiscal compact in 2012. The fact that that has not gone anywhere is a topic for another conversation, but at least they were moving in that direction for a time.
Of course, legislation is not the only solution, and it does not necessarily guarantee a positive outcome against politicians determined to get around it. The United States’ periodic fights over the debt ceiling—a mechanism that was designed to stop overspending—always have one outcome. In the 1980s, the attempts in the States to balance the federal budget under the Gramm-Rudman-Hollings Act, through mandatory sequesters—automatic cuts in spending in the event that politicians could not agree a budget that would fit—were unsuccessful, as resets and changes occurred when the going got tough. Nothing is infallible if we do not want it to be. Creative accounting, redefinition of spending as investment or capital, direct appeals and canny political manoeuvring can all undermine fiscal responsibility if politicians want that to happen.
I do not argue that a balanced budget rule would be a panacea. In Chile in recent years, there have been issues when estimates have not been realised and projections have been undershot. Switzerland also exempts elements of spending, such as social services, from the rules. If people want to get around this stuff they will, and no Parliament can truly bind the hands of a future one. Yet the idea of fiscal responsibility being formally codified beyond aspirations that can be amended by mere ministerial statements creates an impetus and a legal framework that focuses the political mind and public discourse on ensuring that we do something as basic as spending only as much as we raise.
What kinds of solutions should we consider? That depends on the political will and the desire to focus on the issue at hand. First, it is right to fix our immediate problem and finish the job of eliminating the deficit. I support what the Government are doing about that and want to give them gentle encouragement to accelerate it where possible. That is the first step. There is the potential to legislate in the future once we have reached a surplus, or perhaps even when the point is reached at which the deficit is relatively small, which we are starting to get to.
There are various options. We could try to act voluntarily. That, to some extent, is what we have done already, and it is absolutely better than nothing, but we can in truth see that that approach has shortcomings—for some of which there are good reasons. I shall not provide a running commentary on Government policy, which, as I have said, has been positive overall. Plans are moved, for good and bad reasons. The conveyor belt of politicians calling for more spending and pushing their own hobbyhorses—holding Westminster Hall debates—continues. Many such ideas have merit and value, but we have effectively created a pressure cooker in Parliaments such as ours, with a desire just to ask for more and do more, and seek out new ways to spend money on fixes. When one parliamentarian does it, others follow suit. We remain addicted to spending and voluntarism goes only so far.
How, then, can we formalise the approach I am outlining? We could, as happens in the United States, make it a formal requirement to vote on increasing debt when it approaches established ceilings, or when there is a question of its exceeding them. The Government debt is fixed and capped and politicians have to make a clear decision in front of their electorate to change it. That is useful but probably, as in the US, it would not focus the minds of politicians too much. Often people’s eyes glaze over when they see big numbers. That is one of the reasons why my party should stop trying to win the public services spending arms race with the spendthrifts on the Opposition Benches and focus instead on what the money is actually doing to improve outcomes. A debt ceiling has limitations, but it would send a clear signal.
Taking things further, we could establish a simple balanced budget rule that we would not spend more than we took in over a defined year or over the course of a few years. That could be done through adept forward estimating or by linking spending to the trajectory of past revenue growth. The Government would have a formal responsibility not to overspend, and to set out their plans clearly, on a short-term basis, showing how they intended to avoid overspending. In some ways, that would be the simplest solution—a clear understandable position and a clear understandable requirement to ensure that the budget is balanced. It might also improve public understanding of and support for the proposal.
Such rules, however, are often clunky and inflexible. Absolute requirements to budget on an annual or near-annual basis will significantly reduce headroom and the flexibility to deal with short-term shocks and recessions when there is at least an arguable case for fiscal stimulus in certain circumstances. That is probably one reason why such strict rules do not apply in many places around the world.
Alternatively, we could think about a more flexible approach that achieves the overall objectives, but that relies more heavily on estimating being correct, and on the Government not delaying hard decisions through a lack of political will. The requirement to balance a budget over an economic cycle would seem a strong starting point, although identifying the start and end point of that cycle will be difficult and reliant on guesswork that would no doubt not be correct in a number of cases.
Flexibility could be introduced through various mechanisms. For example, the Swiss debt brake accepts that at times the Government will need to amend their approach due to external factors. To accommodate that, it applies a model of debits and credits, so if a Government fail to achieve a balanced budget in one year, they carry over that failure to another year through a fiscal debit that needs to be made up. Similarly, fiscal credits can be built up in a bank in readiness for future problems. To avoid future debts being run up too heavily, once debits exceed 6% of total Government spending, an automatic requirement kicks in to eliminate them within three years. An exceptional rule also applies so that in times of genuine emergency or need, both Houses of the Swiss Parliament can approve spending on an exceptional basis that breaks the rules. Even then, however, the Swiss have found a way to accommodate that, and automatic amortisation of that exceptional spending must be dealt with within six years.
The challenge of the Swiss model is its relative complexity—try explaining that down the pub after a few pints or during hustings at the next election—but its beauty is that bygones cannot be bygones, which is often the flaw in attempts to regulate deficit spending and debt growth. If Chile gets its estimates wrong, it tries harder next time. If the Swiss get them wrong, they have to find a way to compensate, and all the while the cost of servicing debt remains low and does not threaten the financial health of the next generation.
Despite Brexit sucking the oxygen out of the room, and despite the challenges that the UK faces in the coming years—including from that B-word—we have to make a choice. The Government have been consistent and clear that they believe in fiscal responsibility and discipline. We have had success in restoring the UK’s financial health after such difficult times 10 years ago, and the trajectory continues—albeit a little slowly for my liking—to get us back to balance. Nevertheless, we need to talk about what we do when we get there. As some politicians occasionally point out, dealing with the deficit does not mean that we have dealt with the debt, and the conversation needs to move on to that.
Balanced budgets, fiscal rules and the promotion of fiscal discipline will be the weapons and constraints—perhaps we could call them the backstops—for when the next generation of politicians, whoever they are, are tempted to spend, spend and spend again. Indeed, some of the current generation are quite tempted to do that at the moment. Having balanced budget rules and the codification of fiscal discipline is one way to do that. It is not a perfect solution, but the status quo is far from perfect in this regard. Perhaps as a nation we should start to think more about how we create frameworks for future success, and how we address the fundamental challenge in western democracies of celebrating the money we want to spend—whether necessary and virtuous, or inefficient and virtue signalling—while not paying sufficient attention to the cost of it all. We cannot and must not keep spending today on the backs of our kids and grandkids tomorrow. If politicians are not willing voluntarily to adopt restraint, perhaps it is time to harden our resolve.
Stewart Hosie (Dundee East) (SNP)
It is a pleasure to serve under your chairmanship, Mr Stringer, and to take part in this debate. I congratulate the hon. Member for North East Derbyshire (Lee Rowley) on securing this debate, not least because we all want the debt, deficit and borrowing to come down to sustainable levels—there is no disagreement about that objective. At the end of his speech, he spoke about flexibility and not harking back to the debates of 10 years ago. We supported the New Zealand model that allows for maximum flexibility for a shock, while trying to reduce the debt and deficit, and we still think it has considerable merit.
While not wishing to be at all partisan, I must take issue with the hon. Gentleman in one regard, which is that one generation’s spending paid for by the next is not a characteristic of much of our investment. Roads, rails, bridges, water, sewerage, long-term health improvement, education and even paying the state pension to those who have already contributed are intergenerational investments, and I would not characterise them as being a burden on, rather than an investment for, the next generation. The hon. Gentleman and the hon. Member for Cheltenham (Alex Chalk) spoke about morality, but there is nothing inherently immoral about borrowing if it is to fund that intergenerational investment.
I wish, rhetorically, to ask a series of questions. How do we do this? How do we run a balanced budget? What would the mechanism be? It strikes me that there are three ways that one could begin to do it. First, we could set hard targets, but if the downturn comes unexpectedly, if the revenue yield is lower than anticipated or if the money runs out, there are a number of options. We could simply stop spending, leaving a half-built bridge, road or railway, with unpaid pensions and cuts to welfare, but that would be socially, economically and politically undesirable. We could ignore the failure and carry on spending, or we could have a hybrid rule akin to the welfare cap, and the poor Minister would have to report to Parliament on why they going to make were cuts or ignore the rule and keep on spending.
In any event, there are likely to be in-year budget changes. In-year budget cuts in Westminster had an immediate impact and drove a coach and horses through the already set, voted on and agreed Scottish Parliament budget. If that is multiplied across the Welsh Assembly, Northern Ireland, and every local authority and other public body, an in-year change has a sudden and profound cascading effect on every recipient of public cash in the country—again, that is politically, economically and socially damaging.
As we have seen, the setting of a hard budget creates a perverse disincentive to hoard cash. No politician has not struggled to get cash from one public body or another in June, July, August or September, but then found a huge splurge of cash towards the end of the financial year. I bet my bottom dollar that if money is spent in that way it results in—how can I put this gently?—not quite optimum value for money.
To get round that, we currently budget against future forecasts, but if GDP is lower—for whatever reason—or if the tax yield is lower, or if the public finances and fiscal numbers are not what they might be, we are left again with a number of options. We can stop spending, which is bad. We can have in-year changes, which are undesirable. We can also allow automatic stabilisers to take their course. That normally happens for a good reason, but the budget rule is then breached. We could introduce a corollary to the Bank of England failing to meet the inflation target, with some kind of letter or report to the House of Commons. If that happened too often, it would become rather meaningless; even worse, it could become a fiscal event in its own right. Watch how the markets would respond to that, rather than a sensible automatic implementation of the automatic stabilisers.
To avoid such difficulties—as the hon. Member for North East Derbyshire said, we have seen this in the past—we can have a balanced budget over the economic cycle. I am long enough in the tooth to remember my friends in the British Labour party changing the start and end dates of the economic cycle to make the numbers fit. It was not very credible, so I would rule that out, however superficially appealing.
All those mechanisms—all of them—depend on accurate forecasts. If there is optimism bias, our fiscal numbers and tax yield will be lower than anticipated on day one. We have seen, year after year, and even with substantial depreciation of sterling, that the contribution of trade to GDP growth was far lower than expected, or even zero or negative.
Secondly, it requires those doing the forecast to have comprehensive access to all of the information. The Office for Budget Responsibility has told us that it did not have access to some Government policy changes before it produced its report in advance of the Budget, and even the most recent Red Books make precisely no consideration of the impact of Brexit on the fiscal numbers —zero—or of the impact of a reduction in immigration, which could have a profound impact on GDP growth and tax yield.
We then have the issue of having to identify in advance—although it is impossible to do so, particularly in the case of certain sorts of external shocks—the precise implications for the fiscal numbers and revenue yield of both cyclical and structural flaws in the economy.
I say to the hon. Member for North East Derbyshire that we all want to see the debt come down, the deficit come down and borrowing come down—all of us want to see that. However, in addition we all want to maintain investment and to ensure that we do not punish those with least, who are dependent on public expenditure.
I also say to the hon. Gentleman, keep pushing. Let us see if we can get an answer from the Minister, and let us see if a flash of inspiration comes over all our heads at some point. If he can identify solutions to those problems—the optimism bias, the lack of information from the forecasters or to the forecasters, and information in advance about the precise impact of both a cyclical and a structural change to the economy—I suspect that I will be the first one to put him up for a Nobel prize for economics. However, in the absence of answers to those questions, I suspect that this issue will remain something that we will have to work at and something that is unlikely to be implemented, or at least implemented quickly.
Damien Moore (Southport) (Con)
It is a genuine pleasure to serve under your chairmanship, Mr Stringer, and it is a pleasure to take part in this debate. I congratulate my hon. Friend the Member for North East Derbyshire (Lee Rowley) on securing it. It is a pleasure to see the hon. Member for Bootle (Peter Dowd) in Westminster Hall. As I go through my speech, no doubt he will not agree with the things I say, but that aside, I have tremendous respect for him.
The balanced budget rule is an important one, as it takes seriously the principle of responsible spending and enshrines it in a fiscal policy. It forces Governments to think through their spending priorities and decisions, and it contributes to more open, transparent and affordable budgeting. Countries across the world have adopted this approach, and with the exception of periods of war, economic crisis or natural disaster, they have maintained that decision.
Of course, there are different types of balanced budget rule and some Governments allow for different types of spending, or adjust their spending, depending on where they are in the economic cycle. When designing such rules, it is key that they are simple enough to be understood, followed and monitored, but flexible enough to be durable against the unforeseen economic shocks that can temporarily derail attempts to meet the goal. Indeed, if there is any short-term economic shock to the United Kingdom from, say, leaving the European Union, the Government should have the space to cut taxes in order to boost growth. The balanced budget rule also prevents profligacy, which Governments may choose to deploy to obtain votes.
One of the things that a balanced budget rule does help to do is to reduce waste. My hon. Friend the Member for North East Derbyshire referred to cheap political points, but some of the numbers that I am about to give are by no means cheap. I am referring, of course, to the last Labour Government. Although I will not give an exhaustive list of what they did, I will mention just a few things: £26 billion wasted on computer blunders; £18 billion wasted on ID cards; and £50 million wasted on an Assets Recovery Agency that only recovered £8 million in assets. The list goes on, and of course vanity projects can happen on either side of the political argument and under either party, so at all times there must be checks and balances.
However, incompetence also has a lot to answer for and I believe that the balanced budget rule would, more than our current system, prevent incompetence. Under the last Labour Government, Gordon Brown described himself as the “Iron Chancellor”. Well, he may have known a lot about iron, but he did not know much about gold, given the fact that he sold it at the worst possible time, wasting billions.
The last Labour Government talked about benefits, as does the Labour party now. Of course, as the hon. Member for Dundee East (Stewart Hosie) said, people who do not have an income of their own and rely on the Government for benefits to exist deserve to be supported. What Labour does not like to talk about when it comes to benefits is the £2.6 billion that was wasted on benefit fraud and errors. If anyone thinks that is bad, £57 million of that money was wasted on paying benefits into the accounts of people who were dead.
This country was ill-prepared for the 2008 financial crash and the situation was summarised quite succinctly by the former Chancellor, George Osborne, who said that Labour’s problem was that it failed to fix the roof while the sun was shining. The difficult decisions that this country has had to make since 2010 are due in part to the policies of that Labour Government. With the greatest of respect to the hon. Member for Bootle, I would have thought that Labour would by now have learned that lesson, but it has not. Instead, hundreds of billions of pounds of unfunded spending commitments are being made by the Opposition, even now.
My colleagues have worked hard to provide the successes in our economy today, but I urge them and the Minister to look at balancing the books with a balanced budget rule.
Alex Chalk (Cheltenham) (Con)
It is a pleasure to say a few words in this debate, Mr Stringer, and I begin by congratulating my hon. Friend the Member for North East Derbyshire (Lee Rowley) on securing it.
This is such an important issue, yet looking around this Chamber—in which there are only a few people—we could be forgiven for thinking that it is somehow a dry, bookish or niche issue. However, the reality is that what Governments of all stripes do in respect of the public finances resonates in people’s lives, including the lives of people who might be some of the most vulnerable in our community. If we lose control of the public finances, it is not the rich and the powerful who suffer, but the poor, the sick and the vulnerable. That is why it is so important that we engage with this issue, and I congratulate my hon. Friend on doing so.
However, part of the problem with discussing this issue is that we as a political generation fail to communicate about it properly. That is because if people are anything like me, once a figure gets above, say, £50 million or so, it just sounds like a very big number, and what we sometimes fail to do is to put these figures in context. How many Members of Parliament would be able to tell people the total budget that we spend every year as a nation? I suspect fewer than half. As a matter of fact, it is something in the region of £840 billion. That is an important figure to keep in mind, because it puts in context what has happened to our national debt over the last 10 years. Back in 2007, our total national debt—the total pile that we had to service as a nation—was about £500 billion or so. Now it is £1.8 trillion, and as my hon. Friend indicated that debt burden has to be serviced in some way.
Again, it is all very well to say, “Oh well, it costs roughly £50 billion a year to service that debt pile”, but that is a meaningless figure unless we place it in some sort of context. As has already been said, that sum is higher than the total schools budget. People like me, who represent places like Cheltenham, go and speak to headteachers about the pressures they face in their schools, where they might be looking to increase the high needs budget, which is about £6 billion. However, the reality is that we spend about eight times more on debt interest than we do on high needs funding, which supports special schools in our country, and more indeed than we spend on defence.
To put things further into context, the mighty United States is currently in shutdown because of the inability to agree on how to pay for the US President’s border wall. The sum required is about $6 billion. To put things another way, every year we spend, on debt interest alone, a sum equivalent to about 10 of Trump’s border walls. It is a huge sum of money.
The reason this issue is important is because it has an impact on people’s lives. Here are two things that I think are axiomatic. First, there is no national security without economic security. In other words, unless we live within our means, we cannot be sure that our military and indeed our intelligence agencies, such as GCHQ, which is in my constituency, can rely on the knowledge that they will have the resources they need to keep our country safe into the future. Secondly, we cannot have economic security without fiscal security. In other words, unless we keep control of our finances, when economic shocks come, which they will, the nation will be ill-prepared to deal with them. Put bluntly, the cupboard will be bare.
That is precisely what happened in Greece. That nation had a debt to GDP ratio of about 90% to 100%, and when the storm came it was unable to deal with it. As a result, as I indicated before, it was the poor, the sick and the vulnerable who suffered, with Greece’s equivalent of NHS funding being slashed by half. The reason why that is so sobering is that the UK’s debt to GDP ratio is in the high 80s; it is not a million miles away from where Greece was 10 years or so ago. That is an important point to raise, and as a political group we need to do better in explaining its impact, but I say respectfully to the hon. Member for Bootle (Peter Dowd) that the Opposition need to be straight with people as well. It is easy enough to say, “We are going to spend £1 trillion”, but in the same sentence, Labour ought to explain the costs that will entail each and every year so that people can understand what that offer means.
The reality is that if Labour wants to spend another £1 trillion, that is absolutely fine for my generation—no doubt there will be more money for the NHS, and so on and so forth—but the next generation will suffer, because before they can pay for a single soldier, nurse, doctor or teacher, they will have to pay vastly more in debt interest. If that argument is made, people can make their choices, but everyone who does so has to be straight with the British people. I regret to say that that has not always been quite as transparent as it might be. There is a moral case for living within our means, and my hon. Friend the Member for North East Derbyshire has done an important service by making that case today. I am grateful to have had the opportunity to say these few words.
Marion Fellows (Motherwell and Wishaw) (SNP)
It is a pleasure to serve under your chairmanship, Mr Stringer, for what I believe is the first time. I congratulate the hon. Member for North East Derbyshire (Lee Rowley) on securing this important debate, and I thank all Members for their input and their erudite performances. They have caused me to think quite clearly, and at length, about what they were saying.
[Steve McCabe in the Chair]
The hon. Gentleman is passionate in his beliefs about balancing budgets, and used one quote that I find particularly apposite: that according to President Madison,
“a Public Debt is a Public curse”.
I do not think we need to go back that far to see the difficulties with balancing budgets. The hon. Gentleman wants a hard rule, and at some point he mentioned a referendum that could take place if that hard rule were broken; he also promised not to refer to Brexit. Unfortunately, I am going to break that rule: I think Brexit is important, as it has huge implications for the direction of our budget process. He also spoke about intergenerational fairness, a matter that is close to my heart, and I take his point. He is many years younger than I am, and I think I am allowed to say that he has the passion of youth in his ideology, which I do not always agree with.
My hon. Friend the Member for Dundee East (Stewart Hosie) made an erudite speech, especially in his description of the difficulties of forecasting when trying to get a balanced budget. He is absolutely right that past performances have shown how difficult it is to make accurate forecasts, and about how that will impact on this idea in its entirety. He referred to the New Zealand model, and we have also heard about models from the United States, Canada and Chile, as well as Greece, mentioned by the hon. Member for Cheltenham (Alex Chalk). There are lots of models and lots of places we could look to when considering this idea, but none seems to have the absolute answer.
The hon. Gentleman spoke briefly—for which I am grateful—but appositely. I have not forgotten the hon. Member for Southport (Damien Moore), but as he mainly went on the attack against the Opposition, I will leave it to the hon. Member for Bootle (Peter Dowd) to sum up what he said.
The Tories keep imposing deadlines for balancing budgets which they are missing. As far as the Scottish National party is concerned, their only interest is ideological cuts. Those cuts have not taken full account of circumstances at any given time, and in order to balance the budget, it has been impossible not to hurt those people whom some Members have already mentioned as needing the most from the public purse.
The Institute for Fiscal Studies has warned that wages have still not recovered to pre-crisis levels, and annual earnings are more than 3% lower than in 2008, with millennials the worst hit. Median earnings fell to £23,327 last year, 3.2% lower than in 2008, when the average wage was £24,088. People in their 20s and 30s have taken the biggest hit: those aged 30 to 39 have seen their earnings fall by 7.2%, to an average of £26,442, but I am not going to go on ceaselessly producing numbers. My children are affected by what has happened. It has not been a good idea to balance the budget on the backs of those people, and it is even more difficult for the Government when folk like Jonathan Cribb, a senior economist at the IFS, and Paul Johnson, director of the IFS, say as they did last year:
“The UK economy has broken record after record, and not generally in a good way: record low earnings growth, record low interest rates, record low productivity growth, record public borrowing followed by record cuts in public spending.”
If the UK Government genuinely wanted a balanced budget, they would not be giving a major tax cut to high-income earners. In sharp contrast with the Scottish Government, who are helping those on low and modest incomes, the Tory Budget gave a tax cut to the better off: it gave basic rate taxpayers £21 a year, compared with £156 for those on higher rates. Where the SNP has powers over tax in Scotland, it has introduced a progressive tax system, and 70% of all income tax payers will pay less tax this year on a given income than they did in 2017-18. If that were carried out across the UK, that surely would be something.
Scotland continues to have the fairest income tax of anywhere in the UK, with 55% of taxpayers paying less in Scotland than they would elsewhere in the UK. The draft 2018-19 Scottish budget aims for 99% of income tax payers in Scotland to pay the same or less than last year. Polling found that the public supported the SNP’s progressive tax changes for this year by 2:1—not something that we often hear stated in the Chamber. Conversely, it is not acceptable that the UK’s 2018 Budget gave the better off tax cuts at a time when those on low incomes continue to face tax squeezes on their income. Interestingly, the Government have rowed back on some of their proposed cuts. The UK Government fail to meet the Resolution Foundation’s test of spending £31 billion more to end austerity by 2022-23.
Scotland’s fiscal position is comparable to other parts of the UK, and revenue per head is the fourth highest among the UK’s countries and regions—£913 higher per person than the UK average, excluding London. Scotland’s fiscal deficit relative to its population is also better than that of Wales, Northern Ireland, and north-east and north-west England. The majority of advanced economies run a deficit; Scotland is not unusual in that regard, nor is the UK. Twenty-four out of 36 OECD countries ran a deficit in 2016, including the UK. The UK’s deficit stood at £40 billion in 2017-18, and as has already been mentioned, it has been in deficit for 53 of the past 60 years. I know that the hon. Member for North East Derbyshire wants to put an end to that, but we cannot put an end to it at the expense of the poorest and most vulnerable in our society. Scotland also has a deficit, but that has fallen by £1 billion in the past year alone, and is projected to fall further in the coming years, from 7.9% of GDP in 2017-18 to 7.4% of GDP in 2022-23.
It is difficult for this Government to talk about balancing budgets when they have not included Brexit in many of their forecasts. The Governor of the Bank of England, Mark Carney, says that Brexit has cost households £900 on average already and the Fraser of Allander Institute estimates that leaving the single market and customs union would cost 80,000 Scottish jobs.
Tough times lie ahead. Even if the UK signs a free trade agreement with the EU, Scotland’s GDP will be 6.1%—£1,610 a person—lower by 2030. It is clear that cuts to public services have markedly reduced life expectancy, with an even more significant impact in disadvantaged communities. Office for National Statistics figures show that the Tories have presided over a slowing of life expectancy increases. Between 2011 to 2013 and 2014 to 2016, improvements in a measure of life expectancy were the smallest seen in the 21st century. Is that what their ideology should lead us to?
The destruction done to the UK economy will have lasting effects on poverty and child poverty rates. The only way to avoid economic catastrophe is to stay in the single market and customs union permanently, and the UK Government have rejected that outcome. The Joseph Rowntree Foundation said last September that while child poverty rates are set to increase in spite of Brexit, many of the worst hit areas are
“highly exposed to change in trade with the EU and any loss of regional funding.”
According to the JRF, the benefits freeze will make a couple with two children £832 a year worse off by 2020. In those circumstances, can we continue to cut public spending to balance the budget?
UK private sector debt is staggeringly high, which will be a major risk in the next recession. It is now 5% of GDP. That is the largest percentage in the G7. The debt is 60% funded by capital real estate and the buying of leveraged loans. It is entirely reliant on external input. With tariffs and barriers, it is not sustainable. The Finance Committee heard last week that we face a painful adjustment post Brexit. The Bank of England has noted that personal unsecured debt now accounts for 40% of risk in its stress tests. As a nation, we are spending more than we earn. I know that is the point the hon. Member for North East Derbyshire made, and we would all like to see a balanced budget, as my hon. Friend the Member for Dundee East said, but we cannot continue to do that on the backs of the poorest and most vulnerable members of our society.
Peter Dowd (Bootle) (Lab)
It is a pleasure to serve under your stewardship, Mr McCabe. I thank the hon. Member for North East Derbyshire (Lee Rowley) for securing this debate, which gives us an opportunity to brush aside some of the myths that he referred to. I also thank the hon. Member for Southport (Damien Moore), the hon. Member for Dundee East (Stewart Hosie), who spoke eloquently and sensibly, and the hon. Member for Cheltenham (Alex Chalk), who referred to the Greeks. I remind him that Thucydides said that
“while the strong do what they will, the weak suffer what they must.”
That is precisely what the Tories have done. They talk about the poor all the time, but it is the strong that they stick up for, and they do it time after time.
The hon. Member for North East Derbyshire forgot to mention that the global financial crisis that the Tories use time and again started in the United States. [Interruption.] The hon. Member for Cheltenham can sit there and pretend to snore, but that is the reality: until the Tories accept that fact, we will not be able to move on. There is a danger that there could be accusations of dishonesty and disingenuousness—I am not making those accusations, Mr McCabe—until those on the Government Benches begin to acknowledge that.
The issue is not just about fixing the roof before the rain comes through; we were all in it together at the time, and we all know that we have not been in it together under Tory policies. The poor have been getting a stuffing year in, year out. The Tories have also missed every target they have set. Talk about a moving target! The situation was supposed to be sorted out years ago. The hon. Member for Cheltenham said there was a debt of £800 billion, but the Tories have doubled the debt since they came into power. They have borrowed more money than Labour ever has.
Alex Chalk
We have this extraordinary situation where on the one hand Labour complains that the national debt has gone up too much, and on the other it complains that the Conservatives are not spending enough. That kind of illogicality would embarrass a 10-year-old. Surely the hon. Gentleman can do better.
Peter Dowd
Of course I will do better. At the end of the day, it is about priorities. As the hon. Member for Motherwell and Wishaw (Marion Fellows) said, the Tories have spent the money in the wrong way. The hon. Member for Southport effectively accepts that. We have had £15 billion wasted on the introduction of universal credit by the Tory party, so let us get a little bit real.
I am sick to death of talking about how useless the Tory party is, so I will speak about Labour’s fiscal credibility, which I am sure will get a certain amount of unanimity in the Chamber, and the issue of balancing. [Interruption.] I am happy to deal with it. We could have discussed the issue in a mature and grown-up way with adults in the room. Yanis Varoufakis wrote a book called “Adults in the Room”, but there are not many in the Chamber today. I suggest Members have a read of that book; it will show them what happened to Greece.
Following discussions with our advisers, including Professor Joseph Stiglitz, on 11 March 2016, the shadow Chancellor announced a fiscal credibility rule, which has five key elements. I am happy to set that out in the symposium that hon. Members are here to attend. First, Labour committed to closing the deficit on day-to-day spending within five years. Secondly, we committed to excluding investment from that commitment so that we can borrow to invest, which is important. Thirdly, we undertook that Government debt as a proportion of trend GDP would be lower at the end of a five-year parliamentary term than at the start.
Fourthly, we committed to giving the Monetary Policy Committee of the Bank of England the power to suspend the rule if it determines that interest rates are not having their usual effect due to the lower bound. That would allow stimulus action to step in when monetary policy is ineffective. Fifthly, we would shift the reporting requirements of the Office for Budget Responsibility so that it reports to Parliament, rather than the Treasury, and ensures ongoing Government compliance, to which the hon. Member for Dundee East referred. All the facts are there, so let Parliament have them. The elements of the rule mean that a Labour Government would not need to borrow to fund our day-to-day expenditure.
Alex Chalk
The United Kingdom last lived within its means in 2001. Under a Labour Government, when would it next do so?
Peter Dowd
If the hon. Gentleman listens to what I have to say, he will find out in due course. [Laughter.] The hon. Gentlemen laugh and snigger. Meanwhile, millions of people suffer under their policies. They should stop their sniggering and listen. I know that the Tories think they have some divine right to rule and some divine economic ability, but they have not. They need to show a little humility occasionally and listen to other people.
Unlike the Conservatives’ different, haphazard and unsuccessful attempts to achieve fiscal credibility, our fiscal credibility rule has three criteria for good economic policy. I know that economic good in economic policy is an alien concept to the Tories, but they might learn one or two things if they listen to what I have to say. The three criteria are: responsibility in economic management; recognition of the value of long-term public investment; and flexibility for changing economic circumstances. A Government trying to bind themselves into a model that has palpably failed all over the world are not particularly helpful. There has to be some flexibility.
Stewart Hosie
Is the irony not that that model would look like Greece? It is running a current account surplus, but the pain of a decade of even more brutal austerity than was faced here will be felt for generations to come. That would be success according to the hon. Member for North East Derbyshire (Lee Rowley).
Peter Dowd
The hon. Gentleman is spot on. I do not want to misquote the Secretary of State for Transport, but when East Coast went bottoms up he said that that just proved that the market works. That is the sort of economic approach that the Tories take to our country.
Let me go through the three criteria one by one. We are a party that, first, takes seriously the mantle of being guardians of a sustainable economy. We fully costed our election promises in our grey book, “Funding Britain’s Future”. The Conservative party, by contrast, gave no costings whatever in its manifesto. As the shadow Chancellor said, the only numbers in the Conservative party manifesto were the page numbers.
Meanwhile, Carl Emmerson of the Institute for Fiscal Studies said in his election briefing that Labour’s
“forward-looking target for current budget has much to commend it”.
The IFS also estimated that we would have met our deficit target with £21 billion to spare, and that we would meet our debt target.
Secondly, we recognise that Government spending is not something to be scared of, or to have a phobia about, and that some economic metrics do not fully capture the benefits of the gradual build-up of public assets, as the hon. Member for Dundee East mentioned. That is why we distinguish between day-to-day spend and investment in our fiscal credibility rule, because investment is a different kind of Government activity that contributes to a stock of public assets, providing benefits over time. A country is not a house, or an individual who has a lifetime; it goes on, as we know, for a long time. Comparing us to a household might be a soundbite, but it is economic fantasy.
Lee Rowley
Given the hon. Gentleman’s point about us binding our hands, can he explain why, in 2006, I think, his sister party in Chile not only determined that it was going to adopt the kind of policies that he just described, but codified them into law?
Peter Dowd
I am not here to explain what sister parties anywhere do. I could quote sister parties for the Tories all over the place. The hon. Gentleman should be careful what he is wishing for when he starts to make those sorts of comparisons.
The Conservatives have been unable to appreciate this point in their words and in their actions: the Government’s fiscal target of cutting borrowing to less than 2% of GDP by 2021 does not exclude investment, or distinguish between spending and investment. In so doing, the Government overlook, and undervalue, the special character of investment. They do that time after time.
Their austerity programme, the mythical end date of which was in 2018—previously, it was before that—was more a signal of the Government’s failure than of any actual shift in approach. It has done lasting damage to our economy and society, and has left us with rough sleeping up by 169% since 2010, stagnant wage growth—the worst since Napoleonic times—and few examples of public infrastructure being patiently built up and supported.
The third aspect is flexibility when thinking about sound economic policy. The Tories’ austerity programme arises from, as the hon. Member for North East Derbyshire has reaffirmed today, a rigid ideological belief—not always reflected in practice, I have to say—that a smaller state is always better, notwithstanding good evidence of the state’s entrepreneurial capacity and the human costs of austerity. Such rigidity in approach is something that we have avoided in our fiscal credibility rule.
The zero bound knockout that we proposed, which would allow the Bank of England to change course in times of impending crisis when interest rates can do only so much, shows our willingness to adjust economic policy frameworks in the light of circumstances. Any sensible Government would do that—not bind themselves into a failed ideology and process. That knockout is informed by lessons learned after the global financial crisis—lessons that the Conservative party seems incapable of learning—when it became clear that continual cutting of interest rates was having little impact on spending habits and aggregate demand.
More was needed from fiscal policy, and that zero bound knockout—the fourth element of the fiscal credibility rule—acknowledges that that will sometimes be the case. Professor Simon Wren-Lewis writes that if that part of the rule
“had been in operation in 2010, we would have seen further stimulus in this and perhaps subsequent years, leading to a much quicker recovery from the GFC.”
Wren-Lewis describes that part of the rule—the part that allows a reversion to expansionary fiscal policy in times of crisis—as the part that makes the rule
“unique, and brings it up to date with current macroeconomic thinking.”
Stewart Hosie
Is it not part of the problem, although we are moving slightly away from a balanced budget, that there has not been a comparable fiscal response to the substantial monetary response that we have seen over the last decade?
Peter Dowd
That is a perfectly reasonable comment. Time and again the Conservative Governments whom we have had to endure—I choose to use the word “endure”—over the last nine years have failed to take a wider view on policy-making in the country. Petty in-fighting over Brexit has put us on a precipitous, catastrophic no-deal path. They failed, through austerity, to see, and to care about, how an ideological commitment to cutting apart Government would have ripple effects across the country on rough sleeping, indebtedness, demand and productivity, which is virtually the worst in Europe under this Government.
Our fiscal credibility rule, and economic policy in general, takes a wider view, which is important. We understand how fiscal and monetary policy have to interrelate for the economy to function well in different times, and we understand how principles of economic management such as our fiscal credibility rule have to fit into a broader vision of an economy that serves society, and not just those with the strongest voices.
The Exchequer Secretary to the Treasury (Robert Jenrick)
Thank you, Mr McCabe—it is a pleasure to serve under your chairmanship. When I saw that so few colleagues from both sides of the House had attended this debate, I thought that my hon. Friend the Member for North East Derbyshire (Lee Rowley) had rather made his point without having had to get to his feet. Of course, he continued with his speech for an hour, in three parts—a structure that all the best screenwriters tell people to use. He made some important points, and I do not demur from many, if any, of them.
Like my hon. Friend, I came to this House with the conviction that this country must live within its means, that it is the responsibility of our generation to be more fiscally responsible than those who came before us, that it is a moral imperative to do so, and that we must not leave the country in a weaker state, saddled with debt for the next generation to cope with. That is the task that the Chancellor, like his predecessor before him, and all of us at the Treasury have to take forward.
As my hon. Friend eloquently said, that task will also preserve what we care about in this country’s democracy. This is not unique to the United Kingdom; it is a feature of almost all liberal democracies that, unchecked, the constant desire of politicians to promise more and more and to borrow more and more may turn out to be one of those democracies’ gravest weaknesses. We want to leave the next generation a strong country, not one that is saddled with debt. The latter course would leave our economy, as my hon. Friend said clearly, at an unacceptable level of risk were there another macro- economic shock, which inevitably there will be. The Office for Budget Responsibility sensibly predicts that there is a 50% chance of one within the next five years.
As my hon. Friend also said, that latter course would leave us in an unacceptable position in terms of our competitiveness, our ability to invest in public services and in the economic infrastructure that will drive the economy forward, and our ability to reduce taxes—all of which we want to do.
Ian C. Lucas (Wrexham) (Lab)
Will the Minister confirm that he agrees that there was a macroeconomic shock in 2008?
Robert Jenrick
Of course there was a macroeconomic shock in 2008, but what I think the hon. Gentleman is asking is whether the then Government had prepared for that shock. Of course they had not: all the estimates and analysis suggest that public spending significantly overran growth in the years leading up to the macro- economic shock. That is exactly what this Government have set out to avoid.
Robert Jenrick
The hon. Gentleman was not here for the debate—he has come at the last minute—but I am happy to give way.
Ian C. Lucas
Did not the then shadow Chancellor, George Osborne—who is in Davos today, finding out how poor people live—actually tell us at the time that we were not investing or spending enough in the economy?
Robert Jenrick
I will not comment on the previous Chancellor, but he came into office to restore our public finances.
Robert Jenrick
As we have already heard today, a great deal of progress has been made in that respect. Of course there is more to do, but we have to recognise the considerable progress that we have made. In 2010, as my hon. Friend the Member for North East Derbyshire said, we inherited a very severe situation: debt had nearly doubled in two years and was snowballing, while the deficit soared to a near record level—the highest in 50 years. Of course the financial crisis had contributed to that, but so had poor management of the public finances in the years leading up to it. We have made progress, and we are nearing a turning point in the public finances. Debt has begun its first sustained fall in a generation and the deficit has been reduced by four fifths—from 9.9% of GDP to 2% at the end of 2017-18. That is an important step forward, but there is a great deal more to do.
Stewart Hosie
Does the Minister not accept that his party has any responsibility for slowing down the recovery? Does he not recognise that in 2010 the UK was one of only two countries—the other was Argentina—to completely end the fiscal stimulus, weakening the recovery and ensuring that the downturn lasted far longer than it ought to have?
Robert Jenrick
No, I do not accept that for one minute. It is exactly as a result of this Government’s fiscal responsibility in that period that the public finances have now improved, credibility has been restored in the market and business has continued to invest. For those reasons and others, we now have continued record levels of employment, record low levels of unemployment and an economy that remains remarkably resilient. Let us not forget that public spending is £200 billion higher today than it was in the last year of the last Labour Government.
We are not complacent about the debt or the deficit. The fiscal outlook may be brighter, but the need for fiscal discipline continues, as my hon. Friend the Member for North East Derbyshire made very clear. The debt is still more than 80% of GDP, which is equivalent to approximately £65,000 per household, and we want to reduce that figure, for a number of reasons. We are concerned to ensure that if there is a future economic shock, the economy is resilient, and we want to improve fiscal sustainability. In the most recent Budget, the Chancellor set aside £15 billion of headroom for economic shock, out of concern for any further uncertainty that might arise as a result of Brexit.
There is a broader point, however: servicing debt is costly. If our spending on debt interest were a Ministry, it would be the third largest, after health and education. Our spending merely on servicing our debt is equivalent to what we spend on the police and the armed forces. As my hon. Friend made clear, that has an opportunity cost, because that spending has no economic or social value and reduces our ability to spend on our priorities and keep personal and corporate taxes as competitive as possible. The debt burden of interest is merely being passed to future generations.
The foundations of the Government’s approach are our fiscal rules: first, to reduce the cyclically adjusted deficit to below 2% by 2020-21, and secondly to have debt fall as a percentage of GDP in the same year. Sticking to those rules will guide the UK towards a balanced budget by the middle of the next decade. The OBR’s economic and fiscal outlook, which was published in October and was quoted from earlier, shows that the Government are forecast to have met both our near-term fiscal targets in 2017-18, three years earlier than predicted. Sensibly, given uncertainties in the fiscal outlook, the Chancellor took the view that we should retain the £15 billion of headroom against the fiscal mandate in the target year and £73 billion against the target of getting debt to fall. The forecast also shows that borrowing will fall to 0.8% of GDP by 2023-24, its lowest level since 2001.
Peter Dowd
If the Chancellor and his predecessor have been so wonderful at economic management, why have they missed every single target that they have set over the past eight years?
Robert Jenrick
The hon. Gentleman rather makes the point that my hon. Friend the Member for Cheltenham (Alex Chalk) made. He cannot have it both ways. Either the hon. Gentleman supports debt falling—in which case he should support continued fiscal responsibility, which is one of the Government’s guiding missions—or he wishes to spend more and more. His speech argued that we should spend even more, getting us into further debt and making the situation more difficult for future generations.
Robert Jenrick
I will give way one last time, but then I must make progress.
Peter Dowd
First, I did not make the latter point. The Tories can make up their own policies on the hoof—but don’t make up ours. Secondly, the Minister still has not answered the question. It has nothing to do with the outcome; it is about why the Government, if they are so economically capable and confident, have missed all their targets.
Robert Jenrick
I have tried to answer. We are meeting our fiscal rules, as the OBR states—in fact, we are meeting them three years early. That has given us room in the Budget to invest at record levels, with £20.5 billion a year for the NHS, for example—its largest injection—and reserve headroom in the event of fiscal shock. However, the hon. Gentleman is arguing for £500 billion of additional public spending. As my hon. Friend the Member for Cheltenham said, that makes no sense whatever.
In the little time I have left, let me answer the question asked by my hon. Friend the Member for North East Derbyshire about how we can create better architecture to ensure that we and future Governments can be more fiscally responsible. We have done so in a number of ways. Our greatest step was the creation of the OBR, an institution that is now maturing and respected and will be retained on a cross-party basis in the future. It has enabled commentators and Members to have greater confidence in the figures—of course, there may be more that could be done in that respect. This year, we will institute the first zero-based spending review, which will look at all Government spending. We have taken account of the parallel with Chile, which has adopted that model in that past.
On longer-term spending, we have created the National Infrastructure Commission, which was designed to ensure that the Government think about the long-term challenges and invest appropriately within a defined spending envelope, guiding investments in our infrastructure according to a clear economic strategy. We have also taken action to ensure that our public accounts are among the world’s most transparent—they have been certified as such by the International Monetary Fund, for example. Most recently, the Chancellor announced the retirement of the private finance initiative, so that we continue to ensure that when our accounts are scrutinised, they are as clear and transparent as possible and we are always seeking to derive the greatest value for money for the taxpayer.
We have also sought to distinguish clearly between day-to-day consumption—important though such investment is for the future of the economy, whether it is in the police, in education or in the health service—and the long-term economic infrastructure investments that will really drive the economy forward. Over this Parliament, we will make the greatest investment in such economic infrastructure—our roads, our railways, our digital infrastructure—by any Government since the 1970s.
I thank my hon. Friend the Member for North East Derbyshire for his remarks. This is an extremely important and timely debate. He made his case in his usual eloquent way, as one of the great champions in this House of smaller Government, lower taxes and fiscal responsibility. If only there were more colleagues who followed his example.
Lee Rowley
I thank everyone who came to the debate—word clearly got out and everyone came in towards the end to hear its quality. I thank my hon. Friend the Member for Cheltenham (Alex Chalk), the hon. Members for Strangford (Jim Shannon), for Dundee East (Stewart Hosie), for Motherwell and Wishaw (Marion Fellows) and for Bootle (Peter Dowd), and my hon. Friend the Member for Southport (Damien Moore) for their contributions.
I will end with a few points. First, I say to the hon. Member for Bootle, whose constituency I have the greatest affection for, having spent most of the decade before I joined this place working there, that it is possible to conflate austerity with this discussion, but the point was to go one step further and say that, whatever the political decisions we choose to make—we can have a debate about that—we should pay for them at the same time. Some of the people I have respected the most in fiscal and financial terms over the past 30 years have been social democrat and Labour Chancellors, including Roger Douglas in New Zealand and Michelle Bachelet in Chile, which, as I have said, codified a rule.
Secondly, in my view there is nothing ideological to living within one’s own means, over an appropriate cycle and with appropriate stabilisers and appropriate flexibility. The hon. Member for Dundee East is absolutely right to say that there is no absolute answer, but I know what the answer is not. It is not continually increasing debts, running a deficit continually or semi-continually in the long run, with the costs of servicing that debt approaching and about to exceed £50 billion. If that is the passion of youth, I apologise, but perhaps when we meet again to talk about this issue—and I hope we do—and we figure it out, the hon. Gentleman might nominate us all for the Nobel peace prize.
Question put and agreed to.
Resolved,
That this House has considered the balanced budget rule.
Furniture Manufacturers
(5 years, 9 months ago)
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Steve McCabe (in the Chair)
I should explain that we are running 30 minutes or so behind schedule because of votes in the main Chamber earlier. We now move to the debate on furniture manufacturers. I call Maggie Throup to move the motion on the next debate, which will end at two minutes past 5.
Maggie Throup (Erewash) (Con)
I beg to move,
That this House has considered the contribution of furniture manufacturers to the UK economy.
It is a pleasure to serve under your chairmanship, Mr McCabe, and it is also really good to see so many people with an interest in the furniture industry. I move the motion as the chair of the all-party parliamentary furniture industry group, which exists to raise awareness of the UK’s thriving furniture industry and to promote its importance to our economy.
I declare an interest as the Member of Parliament who proudly represents the town of Long Eaton, which is globally recognised as the UK centre of quality upholstery manufacturing. The furniture industry continues to flourish in Erewash, with more than 50 companies, such as Steed Upholstery, Artistic Upholstery, David Gundry and Gascoigne Designs, involved in furniture manufacturing and its supply chain in Long Eaton alone. It employs about 2,700 people with a turnover of more than £250 million each year. On a national basis, Government-verified figures show that the wider furniture and furnishings sector, including specialised retail but excluding general retail, supports some 327,000 jobs across 50,000 registered companies.
Melanie Onn (Great Grimsby) (Lab)
I congratulate the hon. Lady on securing this very important debate. Does she agree that in addition to the larger companies there are some smaller companies, such as Rowlands Upholstery in Great Grimsby, that do a fantastic job—not only employing people, but providing high-quality furniture? They are essential to people’s lives, and to our local economies.
Maggie Throup
I completely agree, because the majority of upholsterers in my constituency are exactly the same type of company—small and medium-sized enterprises that employ people locally, generation after generation.
Consumer expenditure on furniture and furnishings was almost £17.5 billion in 2017 and exceeded all other spend in the household goods sector. That represents a 21% increase from 2014. Year-on-year growth in the sector between 2014 and 2016 rose from 4.8% to 6.9%, with growth between 2016 and 2017 higher still, at 7.9%. The latest data shows that furniture and furnishing sales continued to rise into early 2018, with first and second quarter consumer expenditure 8.5% and 8.3% higher, respectively, than for the equivalent periods in 2017, despite many other retail sectors experiencing an increasingly challenging market.
In addition, trade fairs such as the biannual Long Point exhibition, held in Long Eaton, continue to attract global attention from international buyers looking to stock some of the finest sofas and easy chairs the UK has to offer. That has led to a steady increase in furniture exports since 2012, peaking at £1.19 billion in 2017 and representing a 12.4% increase on 2016 figures.
The good news does not stop there. Provisional estimates for 2018 indicate that exports for last year could be higher still, at £1.27 billion, which would represent a year-on-year increase of 7%. Taken together, these figures clearly demonstrate that the appreciation of and the demand for hand-made British craftsmanship remains high, both nationally and internationally.
It is hard to speak in this place without mentioning Brexit, but I promise the House that I will keep my remarks brief and confined to two main areas—trade and export, and standards and regulations. Like all sectors, the UK furniture industry now just wants clarity and a degree of certainty over Brexit at the earliest opportunity, in order to preserve confidence in the UK as a stable business environment in which to invest, and to assist with business planning.
With specific regard to trade and export, the industry wants to ensure that the Government give serious consideration to the cost of importing materials, both finished and components, during the renegotiation of our relationship with the EU. For example, if the import of fine Italian fabric were to be interrupted, manufacturers in my constituency have voiced concerns that production may be significantly disrupted or even halted while they sourced material from elsewhere. Consequently, that would have a huge knock-on effect on the local workforce and would risk the financial viability of many of these small, often family-run businesses.
Britain is soon to regain its ability to negotiate independent free trade agreements, which I believe presents a fantastic opportunity for all UK businesses to access new markets outside of the UK and Europe—something that the furniture industry already has significant experience in doing. Given that there are 30% more furniture manufacturers that do not currently export but are planning to do so within the next year, I welcome the Government’s new five-year UK export support strategy, which provides manufacturers with further details of the package of support available to help exporters post Brexit. We also have a responsibility, as Members of Parliament with furniture manufacturers in our constituencies and as members of the APPG, to continue to bang the drum for the industry and ensure that they do not lose out to larger sectors during future trade negotiations.
I turn to standards and regulation. The UK already maintains some of the highest standards for furniture safety in the world, but here again clarity is needed on both product safety and the mutual recognition regime that the industry will have to work within post Brexit.
Matt Western (Warwick and Leamington) (Lab)
I thank the hon. Lady for bringing about this debate. Before she moves beyond Brexit, does she agree with me that some of the pressures that some of our small and medium-sized furniture businesses face come from the lack of support and assistance that they are getting from the Department for International Trade with exports and exchange rate facilitation, or even things like intellectual property rights?
Maggie Throup
As I outlined earlier, the Government have produced an export strategy, which I would encourage all SMEs to look at and take part in. That is one of my messages today.
I shall move on from Brexit. As shown across my constituency, furniture manufacturers require a highly skilled workforce to retain their international reputation for quality. The skills of an upholsterer are passed down from generation to generation—often in the form of an apprenticeship, then finely tuned over a number of years, which can span well past the usual age of retirement. The industry therefore needs support from Government to help it to bring new generations of craftsmen and women through the system with the right skills to ensure that this type of art survives throughout the 21st century.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
I thank the hon. Lady for securing this very important debate. She is just about to highlight excellent British craftsmanship. Just as in her constituency, in Slough there is an array of manufacturers, designers and fitters of furniture for bedrooms, kitchens and so forth. We pay tribute to those individuals for their craftsmanship. Does she agree that their high-quality, skilled jobs are an asset to the local and national economy?
Maggie Throup
I completely agree. I would like to invite the hon. Gentleman to be a member of the all-party parliamentary group.
Sir Greg Knight (East Yorkshire) (Con)
Does my hon. Friend agree that when we talk of furniture manufacturers, we are referring not just to large factories in city centres? Many small rural towns and villages have small enterprises making furniture.
Maggie Throup
I completely agree. This is something that I think we underestimate: furniture manufacturing is happening across the country and has a great input into our economy.
Maggie Throup
Sorry, I am going to move on.
I know that the Minister has taken steps to address the issue of skills, which includes helping to ensure that young people understand the benefit of an apprenticeship as compared with remaining in formal education post 16. However, I ask him to review the viability of the apprenticeship levy, which businesses in my constituency have raised concerns about, and to work with the sector to raise awareness on how apprenticeship funding is relevant to SMEs.
I briefly want to mention the environmental role of the furniture industry and the important part it can play in our economy to reduce waste. It is said that the upholstery industry never dies; it always recovers. As we move from a throwaway society back to one that recycles and, thanks to Kirstie Allsopp, upcycles, that sentiment has perhaps never been truer. Once again, people are looking for something that is either bespoke or a quality piece of furniture that stands out from the crowd and lasts forever, or they want to restore a much-loved piece of furniture. The Government should capitalise on this shifting trend and work with the industry to encourage even more people to reuse and recycle a quality British piece of furniture rather than opt for a disposable flat-pack alternative.
It would be remiss of me to make a speech substantively about Long Eaton and not mention HS2. As the House might know, Long Eaton is the town most affected already by HS2, which in turn puts at risk a number of the historical upholstery firms to which I have previously referred and the homes of many of their employees, who will have to be relocated to make way for the rail line. The working draft environmental statements on phase 2b of the line identify that 1,004 jobs could be displaced or lost along the Ratcliffe-on-Soar to Long Eaton section of the route.
I made it clear in my response to the recent public consultation that it is unacceptable for any jobs to be lost because of HS2, but that need not be the case should the process for relocating displaced businesses be managed professionally. Given the unique nature of the upholstery industry in Long Eaton, displaced manufacturers must be relocated in the NG10 postcode area. The highly skilled workforce, many of whom live alongside the current factories in a true working town, must be able to access any new premises with ease. It is incumbent on both HS2 Ltd and the Government to use their discretionary powers of compulsory purchase ahead of Royal Assent to allow manufacturers to account for that in their forward business planning, and to allow for a smooth transition from their current location to a new one.
My personal ask of the Minister is to look seriously at the idea of establishing a cross-departmental taskforce with the Department for Transport to provide businesses being forced to relocate through no fault of their own with the necessary advice and support—including financial support—because this area is severely lacking. I have a meeting with the Minister already pencilled in for the first week of February, and I look forward to having a productive discussion with him, to make further progress on that idea.
I turn to Parliament itself. We will shortly commence a multi-billion-pound programme of refurbishment to restore one of the world’s most historic and iconic buildings. Although the Chamber was, on the orders of Churchill, purposely designed not to seat all 650 Members of Parliament at once, the refurbishment will undoubtedly include the restoration of thousands of pieces of furniture across the estate, including our famous green Benches. I cannot think of a better way for people in the UK furniture industry, including upholsterers from Erewash, to showcase their traditional skills than by contributing to the restoration of this mother of all Parliaments.
Like the art of upholstery, where much of the detailed work goes unseen—covered neatly by a colourful fabric—the UK furniture industry, particularly manufacturing, is so much more than it has perhaps been traditionally given credit for. Yes, it faces its own challenges, some of which I am sure the Minister will address in his remarks. Despite that, the industry remains resilient in the changing and challenging world of retail, and it continues to fly the flag for British manufacturing both at home and abroad.
I am delighted that the House has had the opportunity to consider the contribution to our economy made by UK furniture manufacturers and the wider sector. I thank the British Furniture Confederation for its continued support for the all-party parliamentary group and its tireless efforts to promote the industry. I commend this motion to the House.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
It is always a pleasure to serve under your chairmanship, Mr McCabe, and today is no exception. I am grateful to my hon. Friend the Member for Erewash (Maggie Throup) for securing this debate, and to all hon. Members who have attended just to hear her—or maybe just to hear me. She mentioned much-loved pieces of furniture. I would not like to pick out any particular Members, but there are some who have been here longer than others and who could be referred to as such. I know she is very interested in representing her constituents who work in Long Eaton, and I pay tribute to her for doing so. Her predecessor, Jessica Lee, did exactly the same job, representing the interests of upholstery and furniture manufacturers—maybe she should be the greatly loved piece of furniture to which the hon. Lady referred.
The British manufacturing industry fell into—shall we say—disrepair in the eyes of commentators for a long time. There was the clothing industry in the Leeds of my childhood and that of my parents and grandparents. The Long Eaton lace industry has gone, as have many other industries in our constituencies.
Richard Harrington
I think my hon. Friend wants to talk about the lace industry—I know it is still there, although I believe that it was in the next town rather than in Long Eaton, if my memory is correct.
Maggie Throup
I am delighted that the Minister recognises the importance of the Nottingham lace industry, which was actually mainly in Derbyshire. My constituency has the final remaining Nottingham lace manufacturer in Ilkeston, which is the other town.
Richard Harrington
I actually corrected myself—it is Ilkeston. I know there are two towns in my hon. Friend’s constituency, but for the purpose of the debate, Long Eaton is a centre of upholstery and furniture, which she will know as chair of the APPG for the furniture industry. We all support business in our constituency. I am pleased that the industry we are talking about is doing so well—so much so that people will come to Long Eaton from all over the world for the big annual exhibition that she mentioned. That is wonderful.
Industries are often forgotten about. In my role as Minister for businesses and industry, I spend a lot of time on the automotive industry, the aerospace industry and other huge employers throughout the country, but it is so pleasing when the House debates examples of how well more localised industries are doing. The economic importance of the furniture manufacturing sector is clear: it numbers 15,000 businesses and nearly 100,000 people. The east midlands region alone accounts for about 14% of that total across the country.
Furniture is fundamental to all our lives. The massed ranks of the House of Commons are sitting on nicely upholstered furniture in this Chamber. How many of them would be here if we had only planks to sit on? I am not sure. Obviously, Mr McCabe, you would always have a nice leather-upholstered chair.
Richard Harrington
The hon. Member for Great Grimsby (Melanie Onn) looks very comfortable in her chair, and I am not sure that she would be attracted to something less comfortable. Maybe she sacrifices herself and uses more uncomfortable chairs in Great Grimsby, in which case I would advise her constituents to buy comfortable things made in Long Eaton.
My hon. Friend mentioned three things. First, the current uncertainty around EU exit; secondly, the regulatory framework in which the sector operates; and thirdly, the need to maintain a skilled workforce. I will try to deal with those separately.
On the EU exit, I know that the uncertainty of not knowing the rules of the future is very difficult for business. I have been in business for most of my life and I know that the one thing you need is certainty to plan —not you, Mr McCabe, but one generally. I am sure you would if you were in business, as you may be in the future if you decide to change career; I am sure it would be a brilliant career, whatever you decided to do. One thinks about the certainty of rules and the importance of frictionless trade in goods for supply chains across industry.
That is particularly important for the furniture industry, which relies, as my hon. Friend said, on sourcing the very best materials, from wherever they may come. That could be the EU, with the Italian fabrics that she mentioned, or hardwoods from other parts of the world. The Government will do everything we can to ensure that the movement of goods remains as frictionless as possible to the benefit of industry across the UK.
Secondly, on regulation, the Government understand the importance of clarity on product safety and mutual recognition issues.
Ian C. Lucas (Wrexham) (Lab)
To return to Brexit momentarily, I visited the Silverlining furniture company in Wrexham—a very high-quality business that exports high-spec furniture abroad—and one point it made was that skilled labour from all across Europe works for it at a very high level. We have to focus not only on materials, but on people.
Richard Harrington
The hon. Gentleman makes a brilliant point, which concerns not only the people who come to work in factories such as the one in his constituency, but the free flow and ability of labour to install and maintain many UK-manufactured products in the European Union. Many of the companies that we regard as manufacturing businesses make a lot of their added value from precisely those sorts of services. Although, like most people, I accept that when we leave the European Union we will not exactly have free movement of labour—that is part of being in the European Union—there has to be a system that enables businesses to fill vacancies quickly, without thousands of pounds-worth of bureaucracy and too many rules. I pay tribute to the people from the European Union who contribute so much to the manufacturing industry in this country. Long may that continue.
I just got going on free movement, but I shall return to regulation, which it is also important to get right. We need to maintain the industry’s reputation for excellence in both quality and safety, and to make sure that we have the support of businesses, because they work to the regulations. By and large, they want regulations that are the same here as in the countries to which they sell.
Mike Wood (Dudley South) (Con)
My hon. Friend rightly speaks about our furniture manufacturers’ reputation for high standards, which is one of the many reasons why Boss Design in my constituency has been picked to furnish the new World Trade Centre in New York. Research by the British Furniture Confederation showed that some products that come into the UK with CE approval are not properly flame resistant and can be burnt to a cinder in as little as 10 minutes, whereas a properly compliant product would self-extinguish within 10 to 15 seconds. Is he as concerned about that as I am?
Richard Harrington
I thank my hon. Friend for bringing that to my attention; it is a relevant point. I remind hon. Members who may have temporarily forgotten that the Prime Minister visited Boss Design and was very impressed with what she saw. I will make sure that the relevant officials are aware of the point that my hon. Friend makes.
We share the desire of businesses for consumers to have confidence that the products in their homes are produced to rigorous safety requirements. We have to work with both business and our EU partners to ensure that regulations are effective and fit for the future. That has nothing to do with whether or not we are in the European Union. There is a commonality of interest and desire among people all over the world to have the same standards.
I recognise that the industry’s continued success relies on having the right skills. As my hon. Friend the Member for Erewash mentioned, just one sofa requires a range of skills, from carpentry to the intricate skills of the upholsterer. The Government are keen to ensure that the industry has the skills it needs. We have heard the call for an immigration system based purely on skills and qualifications, and such a system is set out in the immigration White Paper. There has to be an easy and simple route for skilled workers, because it is otherwise difficult for manufacturers and other employers as far as time and money are concerned. When we talk about friction, we mean not only the friction of raw materials coming in, but of all things to do with business, and we are very conscious of that. That is particularly important where there is a skill shortage. The Government will engage businesses and employers on setting salary thresholds and the conditions around them.
In the long term, we want to nurture home-grown talent within companies, which is where apprenticeships come in. We need to develop that. The apprenticeship levy was a good idea, but it must not become a payroll tax that means that companies are unable to spend money that was theirs to begin with. That will require a lot of work. The sector has been very willing to work with Government to make the apprenticeship levy a success. Whether through the British furniture manufacturers’ FIESTA—Furniture and Interiors Education, Skills and Training Alliance—programme, T-levels or the national apprenticeship awards, the furniture industry has outperformed in its contribution to apprenticeships relative to its size. We have to ensure that the future generation of furniture makers succeed.
Finally, my hon. Friend raised the concerns of her constituents in Long Eaton about High Speed 2, as she has done numerous times in the House. The Government’s local growth team—a joint unit between the Department for Business, Energy and Industrial Strategy and the Ministry of Housing, Communities and Local Government —is supporting the Department for Transport in working constructively with places along the HS2 route and taking into account the needs of local businesses. I hope that her constituents were able to engage with the consultations on phase 2b of the route which were undertaken between October and December last year. We are analysing the feedback from that consultation and I would be happy to discuss it with her in our meeting on 5 February, which we arranged following her recent questions to me in the House. I will ensure that the relevant officials from all Departments are there.
The country has a rich history of producing world-class furniture, and my hon Friend’s constituency has a tradition of producing world-class MPs. I thank her for reminding us both of the furniture industry’s great contribution to our country and of the strong position it is in to make a positive contribution to a more sustainable future.
Question put and agreed to.
Town of Culture Award
(5 years, 9 months ago)
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Steve McCabe (in the Chair)
This debate is obviously not very popular! It is scheduled to run until four minutes past 6 and about 15 people have put in to speak, so I guess that is about two minutes each. I will leave you to sort that out. I call David Hanson to move the motion.
David Hanson (Delyn) (Lab)
I beg to move,
That this House has considered the establishment of a town of culture award.
I appreciate the opportunity to serve under your chairmanship, Mr McCabe. I am grateful to my hon. Friends for their turnout, which shows the Minister the strength of feeling and the focus on towns that we all share. I am pleased to see Government Members here, too. The debate has one clear aim: to explore with the Minister the possibility of establishing a specific town of culture award on similar terms to the city of culture award, so the smaller towns we all represent can participate on equal terms and enjoy the benefits of such an award.
Sir Greg Knight (East Yorkshire) (Con)
Is it not the case that towns can apply for the city of culture award but it is very much a David and Goliath competition, because towns often do not have the resources to put in a bid of the necessary quality? For that reason and others, I support the right hon. Gentleman’s initiative.
David Hanson
I am grateful to the right hon. Gentleman for his support. It is true that towns are part of the wider city of culture establishment, but I defy the Minister to name a town that has won that award. I think there is merit in enabling towns to regenerate, promote themselves and participate, because they have a great deal to give.
I hope the Minister focuses on our one demand and establishes a town of culture award, but will he also discuss the idea with the devolved Administration in Scotland and my colleagues in the devolved Administration in Wales, and meet his ministerial colleagues in Northern Ireland and, in due course—I hope—the devolved Administration there, to establish the scheme on a UK-wide basis? We could have winners in Scotland, Northern Ireland, Wales and England, and perhaps an overall town of culture for the whole United Kingdom.
This idea has gained traction over the past few weeks. Although I welcome the support of the right hon. Member for East Yorkshire (Sir Greg Knight), the idea had its genesis in the Labour Towns group, where Labour Members who represent towns have looked at how we can help regenerate our towns and communities through transport, housing, employment and tourism. The Minister will know that my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) has written to the Secretary of State to ask for our central demand—the establishment of a town of culture award—to be considered. It is an idea whose time has come.
Ian C. Lucas (Wrexham) (Lab)
I commend my right hon. Friend for securing the debate. Does he agree that the attendance indicates the real sense of frustration among non-city Members of Parliament that there has been far too little discussion of the beneficial effect of culture on towns up and down the country? That needs to change.
David Hanson
I look forward to hearing my hon. Friends’ contributions in due course. They know that culture is an economic generator for towns. It provides individuals with an opportunity to promote themselves and their skills, it can bring towns together to celebrate their history, and it can be a catalyst for change, confidence and support for economic regeneration.
Gloria De Piero (Ashfield) (Lab)
D. H. Lawrence, the internationally famous writer, was born and raised in the town of Eastwood in my constituency. We have a fantastic birthplace museum there. It is run by the local authority, which is obviously under financial pressure. We could do so much more to celebrate and promote our most famous son. Does my right hon. Friend agree that we could do a lot more to enable our towns to reach their full potential if there were equitable distribution of lottery funding?
David Hanson
Indeed. There is a separate debate, albeit relevant to this one, about whether towns, which contribute to the lottery pot, receive a fair share of lottery funding. In effect, there is a transfer of wealth from poorer towns to cities. That enables the promotion of important cultural projects, but I think my hon. Friends would agree that we should look at how we can invest that money to promote culture in our towns.
Stephanie Peacock (Barnsley East) (Lab)
On that point, as of last March, my constituency had received £13 million of lottery funding since 1995, compared with £64 million for the Prime Minister’s constituency. Barnsley is a fantastic cultural town; in my constituency, we have everything from Elsecar Heritage Centre to Worsbrough mill. I congratulate my right hon. Friend on securing the debate. I totally agree with him, not least because I think Barnsley would win the award.
David Hanson
Well, I think participating in the award would be as important as winning it, because it would energise community groups, local councils and businesses to aspire to meet the objectives that I am sure the Minister will share.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
I thank my right hon. Friend for securing the debate and for being generous with his time. We will hear all sorts of amazing examples of the culture and heritage in towns across the country. Pontefract is the home of a historic castle and a liquorice fair, and Castleford was the home of Henry Moore.
There are amazing examples right across the country that are just not celebrated because we do not have the investment we need. We also need investment in new arts and culture jobs. Given the widening gap in jobs growth between city and town constituencies, does my right hon. Friend agree that the town of culture campaign has to be part of a much wider programme of investment, and that we must ensure we get our fair share of investment and jobs in towns across the country?
David Hanson
Absolutely. My right hon. Friend knows that we are focused on transport, the economy, jobs, businesses and the regeneration of our town centres, but culture and activities celebrating our history and what happens in towns are linked to all those things, because they bring people in to spend.
Two of my favourite cities in the United Kingdom—Hull, where I went to university, and Liverpool, where I was born—have recently been part of the city of culture programme. The city of Hull estimates that that programme generated £60 million in 2017 alone from visitor income and additional drive. It generated 800 new jobs, 5 million visitors and £220 million of additional investment in Hull. After Liverpool was city of culture, 44% of its residents expressed a positive response to the programme. It made them feel proud of where they lived—perhaps even more so than things have in the past. I am very proud of where I was born and I am very proud of where I live now, but the city of culture gave the people of Liverpool an energy that could be translated into action and used to create jobs.
Towns are extremely important. I do not want to take up too much time, because I know many Members want to speak, but I cannot resist mentioning the four towns in my constituency as examples of the potential benefit of a town of culture award. Flint, where I live, has a population of 13,000 people. It was founded around a castle built in 1277. That castle is still there. It is a historical monument that people could and should visit. It was the scene of the deposition of Richard II, who was put on trial in Westminster Hall. The whole second act of Shakespeare’s “Richard II” is set in Flint castle, and that play has been performed in the castle. We have had festivals, we have had choirs—male and female—and we had the Eisteddfod in 1969. Even Tom Cruise’s great-great-grandfather came from Flint, which shows that people can aspire to achieve in the arts. There is a Turner painting of Flint castle, which—believe it or not—has never been to Flint. It is currently in a gallery in London. If Flint won the town of culture award, that painting could be brought to Flint to be seen on a regular basis.
Caroline Flint (Don Valley) (Lab)
I have been to Flint—I had my photo taken in front of the station sign. On my right hon. Friend’s point about national treasures being in galleries and museums in our cities, a cultural award for our towns might not only embolden and encourage our communities to celebrate their creativity, but be part of a much wider debate about the disproportionate amount of funding that goes to our cities. We should share our national treasures and, on occasion, allow them to go back to their home town to be seen by local people.
David Hanson
As I said, a number of things are happening in Flint. They could all be celebrated by the people and that painting could return as part of being a town of culture.
Without revisiting my maiden speech, I should say that another important place in my constituency, when it comes to this debate, is Mold—a town of 10,000 people. The Mold gold cape is an ancient gold object currently in the British Museum: it is not being displayed in Mold. Let me turn to culture. Mold has Theatr Clwyd, the only production company in the United Kingdom owned by a local authority. It produces plays, some of which will shortly be in the west end. We have a food festival and a Novemberfest beer festival, as well as art installations through the town. This summer marks the 150th anniversary of the Mold riots, in which four miners and one bystander were shot dead. We will be having a community play in the town this summer to commemorate that, which will involve people and make them feel part of the history of the town.
We have a blues and soul festival, the eisteddfod, and the Daniel Owen festival, which is a major Welsh language poetry festival, in the town. We have the football. Rhys Ifans, who people will know from “Notting Hill”, came from Mold, as did Jonny Buckland, one of the guitarists in Coldplay. Siân Gibson, who is in “Peter Kay’s Car Share”, is currently resident in Mold. There is a cultural appetite and there are cultural aspirations for people to do things in the future.
In Holywell, in my constituency—where the actor Jonathan Pryce was born—there is the Well Inn music festival, as well as a country music and line-dancing festival and the Cadi Ha Welsh dancing festival. There are also heritage walks and the Greenfield Valley Heritage Park, which has historic buildings on display.
The smallest town in my constituency is Caerwys, with just over 1,500 people, but the eisteddfod held there in 1523 and 1568 led to the first ever legislation to control minstrels and bands, which was passed by Elizabeth I’s Parliament in 1588.
There is a cultural history that people need to understand and celebrate, but it also has an economic impact. Theatr Clwyd, as a major production theatre, employs hundreds of people and produces quality plays. Flintshire County Council invests something like £750,000 into the theatre. For every pound it invests in that theatre, we get an external economic impact within Flintshire of £8 and across north-east Wales, including Wrexham, of over £10. That is because people come to the theatre, but they also go to the shop and the petrol station, stay in a hotel and eat in a restaurant. They support the local economy in that theatre by buying goods for sale in the local theatre, and by spending their wages in the theatre. It has an economic impact.
Flint, Mold, Holywell and Caerwys are all supported by their local councils, which are active and engaged, and invest ratepayers’ resource in supporting activities. Mold, Flint and Holywell happen to be Labour-controlled councils that are investing, supporting and sponsoring activity that is having an economic impact. I hope the Minister will recognise that and look at how we can celebrate and promote it, and be engaged by it. With due respect to those three towns, great as they are, Flint, Mold and Holywell cannot compete with the cities of Hull or Liverpool, in terms of their scale or ambition. What they can do is have great activity in their own world, which the town can celebrate and look to promote in the future.
The central ask today, from all of my right hon. and hon. Friends, is for us to relish the chance for those four towns, and every town that those of us here represent, to be able to say, “We aspire to do better, to increase our economy, to engage with our community and to put culture at the heart of our towns.” All our towns have had that in the past—through miners welfare clubs, social clubs and a whole range of activity. We have to give that back to the community and support that for the future.
There is a city of culture, which is a great thing that we relish, welcome and appreciate, but the challenge for the Minister is that there is scope for a town of culture within that. The Minister has the chance to encourage investment, to reignite county pride, to celebrate history and culture, to encourage diversity, to promote ambition and to nurture talent. I hope that he takes that chance today.
Several hon. Members rose—
Steve McCabe (in the Chair)
Order. I want to start the wind-up speeches at 5.44 pm.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this important debate, about which I am very keen—so keen, in fact, that my recent column in the Slough Express was entirely devoted to a town of culture award.
Slough is on the up: we have moved on from John Betjeman’s poem. We want no friendly bombs, there is grass for cows to graze, we do not just eat tinned food and it is certainly fit for humans now. We are keen to show that we have a lot more than just David Brent and “The Office” to offer. Slough is a fantastic, diverse cultural melting pot and now it has become a major business, creative and cultural powerhouse, with Pinewood Studios right on our doorstep. A lot of people from Slough are working there, contributing to our collective national culture and increasing our collective national pride in our country.
We have the iconic old Adelphi cinema in Slough, where the Beatles performed on more than one occasion. The council and other organisations are doing brilliant work. We have the Slough youth awards, which exemplify the magnificent creativity of our young people. I think our town would do very well if we were competing with other towns up and down the country.
I impress on the Minister that there is so much support for this idea: we would be obliged if he confirmed that an annual town of culture prize rather than just a city of culture prize would be conferred. If it comes to sharing the money more fairly, current statistics show that Arts Council funding is more than four times higher on average in city constituencies than in town constituencies. About 70% of Arts Council national portfolio theatre grants awarded in 2015 to 2018 went to cities, with a pitiful 12% awarded to towns. The current scenario is not good enough; our towns are being left behind.
Many people from working-class backgrounds, residing in towns, are being excluded from arts and culture. Our communities can benefit. I am well aware that there are many different Members wanting to speak, so I will bring my points to a conclusion, but please, please let us have the annual town of culture award.
Jim Shannon (Strangford) (DUP)
I congratulate the right hon. Member for Delyn (David Hanson) on bringing forward the debate. We were proud to be the home nation of the first UK city crowned city of culture in 2013—lovely Londonderry. As the Member for Strangford, I well remember thinking that Newtownards, despite all that we have to offer, could never be considered for that prestigious title because it is not a city. That is why I am pleased to be here and to support the right hon. Gentleman.
The award would enable the tourism industry to point its eyes and minds towards the hidden gems throughout this beautiful United Kingdom of Great Britain and Northern Ireland; it would be worth every penny needed to set the initiative up.
Let me give the example of Newtownards—we are all here for our constituencies, and why not? The little town is 25 minutes from the airport on a great road with enhanced travel links in the form of local bus routes, which are fully modern. Visitors could stay in the local hotel or in one of the many B&Bs that dot the area. The B&Bs have phenomenal views of countryside and the incomparable Strangford lough; I live on the edge of it. Ulster Scots culture, history, verse, poetry and music— it is all there.
People can have an active holiday as well, with water sports, cycling and quad racing parks, sedate walks in our forest parks and country rambles. We have the world-famous Mount Stewart gardens and country home, Scrabo tower and Exploris in Portaferry, which is renowned the world over. Those who want the arts can enjoy choral performances in the old Priory, which dates back to St Patrick, and the independently-owned Lyric theatre, as well as all the other things that come with cinema and nightlife. For those who want to shop—everybody likes to shop, especially the ladies—we have a high street packed with boutique shops to suit anyone’s tastes. For the kids, we have the Ark open farm, which is exactly what we need.
You want a spa weekend? Of course you do. We have a brand new all-singing, all-dancing Ards Blair Mayne Wellbeing and Leisure complex, with clip and climb, crazy golf, soft play and swimming facilities for the children, Swedish saunas, steam rooms, aromatherapy rooms, heated seating, heated relaxation pools and beauty appointments, all in one place—Newtownards. We have fine dining, because once you have got rid of all that extra weight, you can go for Thai, Chinese, Indian, or Italian food, good homemade cooking and even pub grub. It is all there—[Interruption.] The hon. Member for Vale of Clwyd (Chris Ruane) knows it, too.
I know that other MPs can well boast of their towns, and they should, but I will say this: I do not think any of them can really compare to Newtownards. Yet the sad fact is that not enough people know that the £50 flight to Northern Ireland is well worth every penny. This award is something that could highlight Newtownards and other towns like it. I thank the right hon. Member for Delyn and give him my full support. I have my application ready for the first award.
Helen Goodman (Bishop Auckland) (Lab)
I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. In thinking about the decline of towns, we have concentrated a lot on shopping and shops, and I think we have the balance wrong. The idea of a town of culture award is really important, because people want far more in the place they live in than to be able to go shopping.
My constituents have a fantastically rich heritage. Barnard Castle, for example, was the home of Richard III and it is now the home to the greatest collection of European paintings between London and Edinburgh, at the Bowes Museum. Shildon is the birthplace of the railway and at the moment we are limbering up for the celebration of 200 years since 1825, with a heritage action zone. Bishop Auckland itself has been the home of the Bishops of Durham for 900 years.
Perhaps this is the most interesting example of how culture can be used to regenerate: the Church Commissioners had the idea of selling Zurbarán paintings that hung in the palace, and local people completely opposed that. We ran a very successful campaign to keep those works of art in Bishop Auckland and not to let them be taken to a gallery in London or even the west coast of America. Consequently, a philanthropist, Jonathan Ruffer, came and has invested in the castle. We are now seeing an absolute flowering, including a new Spanish art gallery, in partnership with the Museo del Prado in Madrid, a mining art gallery, a summer night show, Kynren, and a museum of the history of religion supported by the Heritage Lottery Fund.
That is all absolutely flourishing and it is giving people a new focus and a new sense of pride. It is great for people who live there, but it is also a reason for tourists to come to the town, and that has economic spin-offs. We have created lots of apprenticeships and are hoping to create 1,000 jobs. If anybody wants to get off the train between York and Edinburgh, I suggest that a long weekend in my constituency would be fantastic.
Susan Elan Jones (Clwyd South) (Lab)
It is a great pleasure to speak in this debate, which was opened so magnificently by my right hon. Friend and near neighbour, the Member for Delyn (David Hanson); I am sure the Minister can feel our enthusiasm.
I do not want to sound biased, but of course the constituency of Clwyd South has the best range of towns and villages, the magnificent Chirk castle, the outstanding Llangollen international eisteddfod and of course Corwen, the great home of Owain Glyndŵr. All those towns have magnificent histories and culture and so much going on, but I also want to put in a word for our villages. As we speak about the importance of developing a town of culture, it is important that we recognise the culture in our villages.
I think of Glyn Ceiriog in my constituency, which so magnificently hosted the Powys eisteddfod a few years ago. I think of the community of Cefn Mawr, which has the wonderful Cefn Mawr and District Museum, entirely run by volunteers. Such is the interest in that museum that local schoolchildren produced a wonderful history set at the time of the first world war armistice. Among the other many magnificent villages in my 240 square mile constituency is my home community of Rhosllanerchrugog. My right hon. Friend spoke earlier about the miners’ institute there—the wonderful Stiwt—with several choirs and so much more. It has a great Welsh nonconformist heritage. Those are just a few of the things in my constituency that I can do justice to in a couple of minutes, but as we speak about the towns, let us speak about the villages too.
Nick Smith (Blaenau Gwent) (Lab)
On the subject of Rhosllanerchrugog, I know it has a fantastic working men’s hall and institute. In Blaenau Gwent we have a world-class brass band, the Tredegar town band, and the estimable Beaufort male choir, who recently performed with Public Service Broadcasting. People may be surprised to know that in the villages above Trefil in Tredegar we now have a growing film industry, which has contributed to Hollywood blockbusters and, of course, “Doctor Who”, which is produced in Cardiff in Wales. Does my hon. Friend agree that this initiative would be brilliant for boosting our cultural pride across our country?
Susan Elan Jones
I agree totally with my hon. Friend. I am aware of so many people still wanting to speak that I will end my speech, but I think the award is a wonderful idea.
Liz McInnes (Heywood and Middleton) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this important debate.
Something happened to me last night that illustrates the importance of this debate. I was talking to a colleague of mine who represents, shall we say, a more prosperous south Manchester seat. I told him I was going to speak about Heywood and Middleton’s rich cultural heritage, and his response was, “What are you going to talk about for the other 59 minutes?” He probably had not envisaged how popular the debate would be—I actually have only two minutes, so in the other minute I have left I will talk about the rich cultural heritage of Heywood and Middleton.
Even the Wetherspoon pub in Heywood is named after the Lancashire dialect poet Edwin Waugh. Steve Coogan was born in Middleton. The Chameleons and the Courteeners are famous bands born and bred in Middleton. Julie Goodyear, also known as Bet Lynch, was born in Heywood and still lives there. We have Middleton Arena, a fantastic cultural hub that is currently rolling out a new programme of National Theatre live broadcasts, making theatre from here in London accessible to residents in my constituency. We have Heywood Civic Centre, a venue providing a programme of live events and community participation, aiming to become a borough-wide hub for community-led cultural participation and creation.
We have my friend, Labour councillor Kallum Nolan, who has made a film about Sam Bamford, the radical who led the march from Middleton to Peterloo—the film is a rival to Mike Leigh’s film, “Peterloo”—and used local people as actors. We have Cartwheel Arts, based in Heywood, and we have the architecture of Edgar Wood, who left Middleton with a fine collection of historical buildings, immortalised in a recent film, “A Painted Veil”, made by Middleton filmmaker Anthony Dolan and which I was proud to host in Parliament last year.
I wish I had more time to talk about the artistic and cultural activities that go on in my wonderful constituency. I will finish by saying that I cannot wait to enter Heywood and Middleton for the newly founded town of culture award.
Tracy Brabin (Batley and Spen) (Lab/Co-op)
It is an honour to speak under your chairmanship, Mr McCabe. I thank my right hon. Friend the Member for Delyn (David Hanson) for securing the debate.
Why do we need a national town of culture award? It is really simple: it is about pride and confidence in where we live, bringing our communities together, enhancing social cohesion and growing economic and social investment in our towns. According to the 2011 census, more than 38 million people live in towns—about 59% of our population. Yet despite being the majority of the population, people in towns frustratingly feel that they are competing with cities for jobs, infrastructure and wider arts and cultural investment, so it is about fairness, too.
Obviously, I will speak about Batley and Spen, which includes the wonderful towns of Birstall, Cleckheaton, Heckmondwike and Batley. We have amazing organisations, such as the Batley festival, the Bagshaw Museum, the Cleckheaton folk festival and the Batley and Spen Youth Theatre Company. I would love to celebrate all those things, but I also need to say to the Minister that we know that the Department for Digital, Culture, Media and Sport understands the impact that winning the city of culture award has. Impacts derived from that award were referenced in the recent cultural development fund announcements, in which funds were awarded to Wakefield, Grimsby, Plymouth, Kent, the Thames estuary and Worcester. Of course I congratulate those communities, but we want to take the impacts of that award much further; we want to bring them to our towns and communities.
Ruth George (High Peak) (Lab)
Buxton, in my constituency, has world-class arts; it has the Buxton festival and the Buxton opera house. It also has fantastic community arts, in which people can get involved to boost their health and wellbeing; that is an amazing treatment for post-traumatic stress disorder. Given that we have less mental health treatment in our towns and rural areas, does my hon. Friend agree that the Government should look at the ongoing benefits of supporting the arts in our towns?
Tracy Brabin
I thank my hon. Friend for that powerful statement about how creativity can affect mental health. Certainly Creative Minds in my constituency works with social prescribing to support mental health.
Other Members want to speak, so I will conclude. I am co-chairing a parliamentary inquiry on social mobility in the performing arts. My personal commitment, in supporting the call for a town of culture award, is to work to ensure that we have diverse participation in both the bidding and the implementation process.
Being a town of culture is a key opportunity to drive better access and social mobility in the arts sector. We cannot continue to see statistics such as 12% to 13% working-class participation in the arts. We must do better, and we can. As they say, “If you don’t see it, you can’t be it.” I ask the Minister to please let us make this happen. Let us celebrate what makes towns great.
Chris Ruane (Vale of Clwyd) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing the debate.
I fully support the call for a town of culture for the UK. Culture plays a huge part in our economy—it is worth £90 billion a year. One in every 11 jobs is in the cultural industries. The percentage of our GDP spent on goods is going down; the percentage spent on experience is going up. The UK is a world leader in music, theatre, film, literature, architecture and design, but that has been too closely focused in cities. We need to expand that to towns. We need to increase the amount spent by central Government on culture, which is 0.4% of GDP, even though it produces 9% of jobs.
I was approached recently by creatives in my home town of Rhyl, who want to use creativity to encourage regeneration. They reminded me of the great people from my town who have been involved in the creative industries: Mike Peters and The Alarm; Lisa Scott-Lee from Steps; Nerys Hughes from “The Liver Birds”; Lee Evans the comedian; Adrian Henri, the beat poet, who worked in a fairground in Rhyl; Carol Vorderman, who was educated in Rhyl; Paul Higginson, my friend, who is chief executive officer of 20th Century Fox in Europe, Africa and the middle east; and Sara Sugarman, the Hollywood film director. We have had a folk club in Rhyl for 55 years, a musical theatre for 100 years, a brass band for 120 years, a classical music group for 70 years, and the first purpose-built children’s theatre in the whole of the United Kingdom.
I ask Members to look at examples of seaside towns. Where arts come, regeneration follows. St Ives was regenerated around the Tate gallery. Margate is regenerating as we speak, as a result of Tracey Emin and her art. Southport is regenerating through the Gormley statues, and the billionaire Roger De Haan has invested his own money—tens of millions of pounds—in art and creativity to regenerate the town of Folkestone.
We should tap into the passion in the Chamber, so that we can be leaders in our towns and communities, and ensure that culture plays its proper part in the regeneration of our towns.
Nic Dakin (Scunthorpe) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. It is already clear that the case for a town of culture award is absolutely irresistible. I am sure the Minister will stand up and tell us that it is nailed on. The competition is so intense that whoever will be on the judging panel will have a difficult job.
As my right hon. Friend said in opening the debate, the award is about aspiration, celebration and pride. It is about identity around people and place, and about culture. Those are all important things. Our towns are in danger of being forgotten a bit. Putting them on the map with a town of culture award would make a real difference.
Let me mention the three towns in my constituency. The town of Bottesford has the magnificent St Peter’s church, and interesting cultural activities around Bottesford Beck, which spawns all sorts of interesting things. The town of Kirton-in-Lindsey celebrated its diamond jubilee town hall by renovating it in the 60th year of this Queen’s reign, although it was first put there in the 60th year of Victoria’s reign. The town of Scunthorpe has its magnificent steel heritage. Only a few weeks ago, thanks to the work of Jim and Christine Pearson, former mayors of Scunthorpe, a steelworkers statue was unveiled. People thronged to see that. That is just one example of how culture lifts people’s spirits. The town of culture award will lift everyone’s spirits.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
As the only south-west Member of Parliament here, I am here to speak up for the west country and our fantastic array of towns. There is so much more competition than just the excellent towns we have heard about from the north and from Wales; there are those in the west country, too. We are about so much more than clotted cream and whether it should be jam first or cream first. We have fantastic towns right across our region. We have the world heritage site in Tavistock; the Tate at St Ives; our Cornish tin mining museum; amazing food in Dartmouth; Fowey and its sailing; and Plymouth, the creator of the pasty, Plymouth Gin and the Mayflower Steps. The Mayflower Steps and the Mayflower story are so powerful.
We have the opportunity to tell stories that connect our towns right across the country, from Scrooby and Babworth in Bassetlaw to Gainsborough, Boston, Immingham, Harwich, Rotherhithe, Southampton, Dartmouth and Plymouth. We need not only to have a towns of culture competition, but to join up our towns, because telling the story of how our towns are connected will create more jobs and more passion. An awful lot of people are proud of their towns in the west country. This competition would be such a boost for that.
Graham P. Jones (Hyndburn) (Lab)
I fully support all those who have spoken. In particular, I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate on a wonderful idea.
The past few years have seen immense success for the UK city of culture, which has created renewed interest in those cities that have had successful bids. The bidding process has been beneficial even for cities that have not been successful. Crucially, it has showcased culture and arts outside London and the big metropolitan hubs. Government figures show that 53% of the population of England live in an urban settlement that is not part of a conurbation, but towns get less than half the Arts Council funding that cities receive.
Towns are the fabric of our nation, and their cultural offer needs to be acknowledged, respected and celebrated. Unfortunately, too often they are the areas that are made to suffer as a result of private and public sector decisions, such as closures, underinvestment and consolidation in cities. When Hull’s year of culture was launched in 2017, there were unprecedented crowds; hundreds of thousands of people came from all over the country to celebrate. It was 12 months of visitors, events and inward investment in the city from tourism.
Many Members have mentioned their towns. I represent six. Like all small towns, there is an element of pride to them. Composers, bands, authors, scriptwriters, “Coronation Street” actors, artists, Dave Pearson, politicians come from the towns I represent. My home town of Accrington has the beautiful Haworth art gallery, with its Tiffany glass collection—the only one outside the United States. We also have the club that would not die, Accrington Stanley.
We have to go beyond arts and look at engineering and textiles in some of these proud towns. Accrington produces the hardest bricks ever produced; they prop up the Empire State building and others. I am trying to save a tower that dates from 1148, which is hard to do in a town where the local authority does not have the funding for that. Some of these towns suffered as a result of globalisation, and they need the resource and the support that cities get. A fraction of the £220 million that Hull received would go a long way.
I will conclude by saying that this is a fantastic initiative. I support this debate and personally congratulate my right hon. Friend the Member for Delyn, who secured it. I hope the Minister listens and takes this initiative forward.
Melanie Onn (Great Grimsby) (Lab)
It is a pleasure to serve under your chairmanship, Mr McCabe, and I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing this debate. Yesterday was Great Grimsby Day. If Members did not know about that, they know about it now. They can put the date in their diary for next year and can expect something spectacular, because my town will be doing something amazing, thanks to a Labour council and Charlotte Bowen of the Culture House; I especially wanted to mention her tireless, assiduous efforts to bring a range of cultural activities to north-east Lincolnshire, and her assistance in securing the £3.2 million of Government funding for culture and arts that was recently announced. Members need to come and get involved in that.
Grimsby is a proud, tough, hard-working town full of committed and enthusiastic people who are keen to improve the area and make it a more desirable place to stay, work and play. On top of the exciting events and installations that we hope to see once this money comes through, we have had our town deal agreed. We have had agreements from the landowner and the port operator, Associated British Ports, that the famous Kasbah area of the Grimsby docks can start to be developed and opened up. It has received money from the Heritage Lottery Fund and has been given a boost by a company called Creative Start Art, which is taking up a tenancy to kick-start regeneration in the heritage action zone.
Culture comes in many different forms. Grimsby has not only a wonderful concert venue, the Grimsby central hall, which more people should go to, but the annual Bradley youth festival, which showcases local acting, musical and spoken word talent. We have an amazing arts section at the local college, which excels in designing for movies, doing makeup and theatre sets. We have the Caxton theatre, the auditorium in which Kevin from Grimsby will star in “Burn the Floor”; the fishing heritage centre; the Time Trap museum; and a range of knitters, sportspeople and dancers. The people of Grimsby know that they are much more than “Skint” and Sacha Baron Cohen’s “Grimsby” film. How wonderful it would be if we had the chance to put all those positive things together and won what will clearly be a much-coveted award.
Caroline Flint (Don Valley) (Lab)
I congratulate my right hon. Friend the Member for Delyn (David Hanson) on securing the debate. Sir Walter Scott sat in the Boat Inn pub in the village where I live and drafted his novel “Ivanhoe”, inspired by Conisbrough castle. Ted Hughes lived in Mexborough, did his newspaper round through Old Denaby, and went on to write his famous poems. Of course there are others, such as Diana Rigg and Lesley Garrett, and let us not forget Brian Blessed—all home-grown in Doncaster.
Today’s debate is about having a showcase to celebrate our heritage and what we have achieved over the centuries in our towns and villages, but I would not like the Minister to think that this is all about the past. It is about the future as well; it is about creating new art, new music, new plays, new novels and new poems, as well as enriching a sense of aspiration within our communities. A person does not have to go to London or our cities to get a job as an actor, musician or artist, or to work in the creative sector. We can grow those sectors in the towns and villages of the UK. I hope the Minister will act quickly to establish the town of culture award.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
It is a pleasure to see you in the Chair, Mr McCabe, and I congratulate my colleague on the Select Committee on Justice, the right hon. Member for Delyn (David Hanson), on securing this debate. I am pleased that this ever-so-slightly oversubscribed debate is taking place, and I fully support the initiative that he set out so eloquently. I am not sure what the record is for the number of contributions in a 60-minute debate, but so far we have heard 19 passionate sales pitches on behalf of constituencies across England and Wales, and we are about to hear one from Scotland.
Gavin Newlands
And from Northern Ireland, with apologies to the persistent hon. Member for Strangford (Jim Shannon). I will come to him. We have heard so many pitches. In a 60-minute debate, we have heard from the right hon. Members for Delyn, and for East Yorkshire (Sir Greg Knight), the hon. Members for Wrexham (Ian C. Lucas), and for Barnsley East (Stephanie Peacock), the right hon. Members for Normanton, Pontefract and Castleford (Yvette Cooper), and for Don Valley (Caroline Flint), and the hon. Members for Slough (Mr Dhesi), for Strangford, for Bishop Auckland (Helen Goodman), for Clwyd South (Susan Elan Jones), for Blaenau Gwent (Nick Smith), for Heywood and Middleton (Liz McInnes), for Batley and Spen (Tracy Brabin), for High Peak (Ruth George), for Vale of Clwyd (Chris Ruane), for Scunthorpe (Nic Dakin), for Plymouth, Sutton and Devonport (Luke Pollard), for Hyndburn (Graham P. Jones), and for Great Grimsby (Melanie Onn). The strength of feeling is pretty clear.
It is vital that we recognise the value of our towns, big or small. They often have bigger personalities than cities many times bigger. I am proud to be an MP for Paisley, the town I was born in. My friend George Adam, the MSP for Paisley, often refers to it as the centre of the universe. In an Adjournment debate in November 2016, I provided evidence to show that, for its size, Paisley is unrivalled in its contribution to the world. It can be said that Paisley is one of the reasons why we are having this debate: as some hon. Members will be aware, the Paisley 2020 campaign for UK city of culture helped raise awareness of Paisley’s spectacular, historical and ongoing cultural contribution to the world. Although we were robbed blind of what was rightfully ours, the bid alone was fantastic for the town and will leave a legacy of its own. The fact that Paisley was the first town to make the shortlist highlights the issue with the city of culture award, as it stands, without an accompanying town award.
A city or town of culture award will provide an excellent opportunity to boost the profile, economy and self-confidence of the winning town or city. The bidding process alone is a huge opportunity and can be cathartic. I can speak only for Paisley’s experience, but at the start of the process, the number of Paisley buddies and those from wider Renfrewshire who were highly cynical about the bid and viewed the town negatively far outweighed the number who supported the bid. However, as the months passed, buddies were reminded of what was and is great about the town, and learned about some of the planned investments and events, and that opinion rapidly shifted.
Despite losing out on the award, some of the investment plans have remained in place; there is a £110 million investment plan for the town centre and venues. To me, the real value and prize of the bid was getting buddies to believe in the town again. Unlike the majority of UK cities, the name Paisley is known worldwide, having given the world the famous pattern of the same name, though we may have borrowed it from somewhere else, as you may well know, Mr McCabe. Paisley’s textile mills—the first of which was built by the Coats company, which at one point was the biggest company in the British empire and the third-largest company in the world—started mass producing shawls with the pattern. The name Paisley is literally woven into history.
Paisley was home to the world’s first constituted Burns club and is also home to the UK’s largest youth theatre, PACE, which has helped produce fantastic performers—this is where Paisley outshines the towns mentioned in the rest of the contributions, I would say—such as James McAvoy, Paolo Nutini and Richard Madden, who recently won a Golden Globe for his role in the BBC drama “The Bodyguard”, which featured a fantastical plot about a UK Government Minister up to no good, which obviously would not happen in real life. Paisley can also boast of calling Gerry Rafferty, David Tennant and Gerard Butler our own.
Paisley is not the only town or village in my constituency with a proud cultural heritage. From Bishopton to Bridge of Weir, and from Elderslie to Erskine, everywhere has something to offer. The historical capital of Renfrewshire, my home town since I was four years old, has a proud history that few can match. Renfrew is known as the cradle of the royal Stuarts, as it was an early home to the final royal family of the Kingdom of Scotland. In 1164 at the battle of Renfrew, King Malcolm IV of Scotland repelled Somerled, the Lord of the Isles.
We all have many towns and cities rich in history and culture, many of which miss out on vital investment. This proposed town of culture award would potentially unlock that investment and bring a sense of pride back to these places. My message to hon. Members across this House is that Renfrewshire stands ready to win any such award. I urge the Minister to take this proposal forward.
Kevin Brennan (Cardiff West) (Lab)
There is not a lot of time left, but I remind the Minister that he will not need long to say, “Yes,” in response to this debate. I endorse the proposal by my right hon. Friend the Member for Delyn (David Hanson) and other hon. Friends. I congratulate the Labour Towns group on turning up en masse and coming up with such compelling arguments, as well as the other hon. Members who spoke. My right hon. Friend rightly said that there was an opportunity to do something on a UK basis and involve the devolved Administrations; I thought his proposals were very good. He also took some very good interventions, including those of my hon. Friends the Members for Barnsley East (Stephanie Peacock) and for Ashfield (Gloria De Piero), who are no longer in their places, and my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper). He mentioned Richard II and Flint castle; as he may know, my brother Patrick is an actor who once played a small part in promoting Flint indirectly—he starred in “Richard II” at the Globe theatre.
My hon. Friend the Member for Slough (Mr Dhesi) spoke passionately about his constituency, putting to bed the reputation that it was perhaps unfairly given by John Betjeman. My hon. Friend quite rightly said that arts funding tends to be higher in cities than in towns—we really need to look at how to redistribute resources much more effectively through the arts budget.
It is always very comforting when the hon. Member for Strangford (Jim Shannon) speaks in a debate—when he turns up, we know that things are normal in the world. He made his constituency sound like the garden of Eden, although I remind him that that is where original sin was invented. I look forward to playing crazy golf with him in Strangford some day.
My hon. Friend the Member for Bishop Auckland (Helen Goodman) referred to Richard III—another king who met a dodgy end. I look forward to a long weekend in Bishop Auckland, which sounds like a wonderful place.
In reply to my hon. Friend the Member for Clwyd South (Susan Elan Jones), may I take the opportunity to mention Rhosllanerchrugog? She took an intervention from my hon. Friend the Member for Blaenau Gwent (Nick Smith), who is no longer in his place. My mother was born in his constituency—in Nantyglo, another town that would really benefit from the sort of initiative we are debating.
As ever, my hon. Friend the Member for Heywood and Middleton (Liz McInnes) spoke passionately about her community. So did my hon. Friend the Member for Batley and Spen (Tracy Brabin), who made the important remark: “If you don’t see it, you can’t be it.” I know that her constituency work is very much based on that idea. She took an intervention by my hon. Friend the Member for High Peak (Ruth George), who mentioned Buxton and the importance of cultural and artistic activities to health and wellbeing.
My hon. Friend the Member for Vale of Clwyd (Chris Ruane) spoke passionately about Rhyl. I remind him of Cerys Matthews’s song “International Velvet”, in which she sang, “Darganfyddais gwir baradwys Rhyl”—“I discovered true paradise in Rhyl.” My hon. Friend reminded us to “tap into the passion”, and his speech certainly did that.
My hon. Friend the Member for Scunthorpe (Nic Dakin) spoke brilliantly, rightly pointing out that the judging panel will have a difficult job. He also pointed out Scunthorpe’s steel heritage, which he knows that I share in my background.
My hon. Friend the Member for Plymouth, Sutton and Devonport (Luke Pollard) mentioned clotted cream and the question whether the jam or the cream should come first. What I say to the Minister is that we do not mind which it is—as long as it is not “jam tomorrow.”
My hon. Friend the Member for Hyndburn (Graham P. Jones) spoke, and my hon. Friend the Member for Great Grimsby (Melanie Onn) spoke brilliantly about the welcome investment in the arts in her community. My right hon. Friend the Member for Don Valley (Caroline Flint) promoted her constituency, as ever, and gave us a remarkable list of people from it who have risen to prominence—they have a very prominent MP as well. The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) spoke for the Scottish National party.
I represent a city seat, but I was born and brought up in Cwmbran, a new town. Every time I drive back to see my 89-year-old mother, a song comes into my head: Simon and Garfunkel’s “My Little Town”. One of the lyrics is:
“And after it rains there’s a rainbow, and all of the colors are black.
It’s not that the colors aren’t there—it’s just imagination they lack.”
If we have the imagination and the investment, we can do wonderful things. We all know what has happened to our towns through the evisceration of local government funding, the removal of services from our high streets and the loss of banks, libraries and museums. Those institutions are very important. Let us have a renaissance in our towns, let us have a town of culture, and let us hear the Minister say yes.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Michael Ellis)
It is a real pleasure to close this debate, Mr McCabe. I thank the right hon. Member for Delyn (David Hanson) for securing it and all hon. Members present for their valuable contributions and advertisements for their towns or localities. I also thank those hon. Members who co-signed the letter to the Secretary of State asking that our Department establish a town of culture award.
I am thrilled with this debate, because it really is recognition of the value of culture generally, which we all know about; as Culture Minister, people would expect me to say that. I have been to 35 locations around the country in the past 12 months and seen the value of culture in towns, villages and cities alike, and how important it is for society as a whole.
I join colleagues in celebrating the rich heritage and culture of towns across the UK. I must confess to being possibly a little biased in favour of this motion, as my own constituency is in a town. Of course that town is the very best of towns—I was born and brought up there and it has its own very generous share of cultural heritage—so I recognise, first and foremost, the value of towns. Creativity, arts and heritage make our towns and all our places—cities included—unique, and our communities better places to live in. A Conservative colleague suggested recently that we should also have a county of culture. Culture goes across the board.
As the right hon. Member for Delyn has highlighted it, I will say something about the UK city of culture award, because it has a powerful social and economic impact on the winning bidders. Hull 2017, which has been alluded to, leveraged truly enormous private investment and generated £300 million through increased tourism alone.
I understand the potential for arts and culture to transform communities, which is why a range of places, including towns, can already enter the UK city of culture competition. Of course I recognise that towns will have a lot to compete against when they come up against cities in the same competition. The bidding process for the title of the 2021 UK city of culture, which was awarded to Coventry, invited bids from cities and towns, and it allowed partnership bids from two or more neighbouring cities or towns, or from a closely linked set of urban areas. That is one way of dealing with this issue.
It is for individual places to weigh the benefits of bidding, in terms of galvanising local partners and raising the profile of the place, compared with the costs of putting together a bid. I am currently reviewing the criteria for any future competitions and will continue to keep under careful consideration the offer to towns, as well as the burden of bidding. This debate has been very influential in that regard, so I again congratulate the right hon. Gentleman on securing it.
Kevin Brennan
It is welcome that the Minister is reviewing the competition criteria. When does he expect to report back on his conclusions?
Michael Ellis
The hon. Gentleman will be among the first to know. Of course, there are already a number of Government-wide initiatives to invest in our towns and high streets. I have only a few minutes left to highlight some of them; indeed, some have already been alluded to by hon. Members.
I am also keeping under careful consideration the effectiveness of different types of support to help towns and other places to prosper. Wider Government support for towns and high streets includes, of course, the future high streets fund, which is worth £675 million. It was announced in the autumn Budget to encourage vibrant town centres where people can live, shop and spend leisure time.
The prospectus for that fund was only published in December. It invites local authorities to submit expressions of interest for capital funding. There is a lot of money available, so I encourage hon. Members to invite their local authorities to take an interest in the fund and submit expressions of interest.
Of course, DCMS-related sectors contribute to successful and healthy high streets, and it is key that they do so. The Royal Society for Public Health report, “Health on the High Street: Running on Empty 2018”, found that residents of towns with healthy high streets live on average two and a half years longer, and that libraries, museums and galleries contribute to the healthiest high streets. Culture has a powerful health as well as wellbeing benefit, and has a positive cultural impact.
The Government’s plan for the high street also includes the creation of a high street taskforce in 2019 to support local leaders. The Government already run the Great British High Street awards, a hotly contested competition to find Britain’s best high street. Crickhowell was announced as the overall UK winner for 2018, and I was delighted to see St Giles Street in my town of Northampton win the category in 2015. Towns can win, and this competition enables towns to raise their profile and celebrate local efforts to create vibrant town centres that are loved by their communities.
David Hanson
Just before the Minister finishes, I want to try to tie him down. My right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper) has written to ask for a meeting with Members of Parliament to discuss this process further. Will he and the Secretary of State agree to attend the meeting?
Michael Ellis
I cannot speak for the Secretary of State, but I will agree to meet. We will set that up, and I am happy to do so.
My Department believes that place-based cultural investment should be a key part of the local growth strategy for all towns and cities in England. The cultural development fund, which has already been mentioned and was launched in 2018, is a £20 million competitive fund to support towns and cities to develop and implement transformative, cultural and creative growth plans. Just last week the Secretary of State announced the winners: Grimsby, Plymouth, the Thames estuary, Wakefield and Worcester.
Grimsby will receive £3.2 million to deliver a new programme of international events and public art to revive the town centre, provide a business support programme for local creative businesses, and create new production facilities in the town’s historic centre. The Thames estuary will receive £4.3 million. The cultural development fund and the UK city of culture projects are exemplars of local enterprise partnerships. We also welcome the innovation of local areas developing their own initiatives to celebrate local culture. For example, the Liverpool borough of culture and the London borough of culture are attempts to broaden the impacts of cultural titles and moments to areas beyond city centres.
I want to stick up for Arts Council England. Some 75% of its funding goes outside London—it is being distributed widely. We of course have to bear in mind that large centres of population are within cities, but my experience of Arts Council England is that it recognises that its role is to spread its resources around the country, which it is doing. Some 9.2 million people saw British Museum exhibitions and objects on show outside the museum in 2017-18, and more than 2,500 objects were loaned to 126 venues around the country.
A lot of work is already being done in this area. I am very happy to meet colleagues and interested partners to discuss the matter further, and I am keeping the situation under review. My Department and the Government recognise the value of culture. It is a precious part of our community life and has multiple assets and benefits. We will continue to support it.
Steve McCabe (in the Chair)
Do you want to make a concluding remark, Mr Hanson?
David Hanson
I thank all Members who have turned up today. I thank the Minister for his positive response, and we will be in touch to make further progress. The time has come to encourage economic development in our towns on a cultural basis.
Question put and agreed to.
Resolved,
That this House has considered the establishment of a town of culture award.
Written Statements
(5 years, 9 months ago)
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Counter-terrorist Asset Freezing Regime
(5 years, 9 months ago)
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The Economic Secretary to the Treasury (John Glen)
Under the Terrorist Asset-Freezing etc. Act 2010 (TAFA 2010), the Treasury is required to prepare a quarterly report regarding its exercise of the powers conferred on it by part 1 of TAFA 2010. This written statement satisfies that requirement for the period 1 July to 30 September 2018.
This report also covers the UK’s implementation of the UN’s ISIL (Daesh) and Al-Qaida asset freezing regime (ISIL-AQ), and the operation of the EU’s asset freezing regime under EU regulation (EC) 2580/2001 concerning external terrorist threats to the EU (also referred to as the CP 931 regime).
Under the UN’s ISIL-AQ asset freezing regime, the UN has responsibility for designations and the Treasury, through the Office of Financial Sanctions Implementation (OFSI), has responsibility for licensing and compliance with the regime in the UK under the ISIL (Daesh) and Al-Qaida (Asset-Freezing) Regulations 2011.
Under EU regulation 2580/2001, the EU has responsibility for designations and OFSI has responsibility for licensing and compliance with the regime in the UK under part 1 of TAFA 2010.
A new EU asset freezing regime under EU regulation (2016/1686) was implemented on 22 September 2016. This permits the EU to make autonomous Al-Qaida and ISIL (Daesh) listings.
The tables available as an online attachment set out the key asset-freezing activity in the UK during the quarter.
The recently passed Sanctions and Anti-Money Laundering Act will help ensure that UK counter-terrorist sanctions powers remain a useful tool for law enforcement and intelligence agencies to consider utilising, while also meeting the UK’s international obligations.
Under the Act, a designation could be made where there are reasonable grounds to suspect that the person or group is or has been involved in a defined terrorist activity and that designation is appropriate. This approach is in line with the UK’s current approach under UN and EU sanctions and would be balanced by procedural protections such as the ability of designated persons to challenge the Government in court.
Attachments can be viewed online at: http://www. parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2019-01-23/HCWS1267/.
[HCWS1267]
Double Taxation Convention (United Kingdom and Israel)
(5 years, 9 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the double taxation convention with Israel was signed on 17 January 2019. The text of the protocol is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS1266]
RAF Aerobatic Team: North American Tour
(5 years, 9 months ago)
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The Minister for the Armed Forces (Mark Lancaster)
On 21 October 2018, the Secretary of State for Defence announced that the Royal Air Force aerobatic team (the Red Arrows) will fly the flag for Britain, both in the skies and on the ground during a tour of North America in summer 2019. This tour will be called Western Hawk 19.
As well as displaying at a range of shows across North America the Red Arrows will also attend engagements promoting the Government’s GREAT campaign, visit local schools, meet with business leaders and showcase the very best of British culture. Western Hawk 19 will showcase our excellence, professionalism and proud heritage in education, engineering and technology to our allies. It will also demonstrate the global reach and capability of the RAF and our continuing support of the United Kingdom’s defence and commerce industries.
The tour of North America will also be an opportunity to celebrate and strengthen our incredible relationship with the US and Canada.
I can now announce the planned tour dates. The Red Arrows will fly at the royal international air tattoo from 19 July to 21 July 2019. After a short period of maintenance and leave for Red Arrows personnel, they will depart the UK at the end of July and will tour North America until after the end of the UK display season. While the Red Arrows will not be displaying in the UK for the latter part of the 2019 UK display season, the RAF’s other display assets including Typhoon, the Battle of Britain memorial flight and the Falcons parachute team will continue to keep the RAF in the public eye during this period. Their air display participation will be carefully prioritised to deliver maximum impact. Local communities will have the opportunity to bid for participation of the Red Arrows in their area in the 2020 display season in the normal manner.
[HCWS1264]
Cyprus: Civil Litigation
(5 years, 9 months ago)
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The Minister for Europe and the Americas (Sir Alan Duncan)
I would like to update Parliament on a legal settlement that the UK Government have reached concerning civil law claims arising from the emergency period in Cyprus from 1955-59 (“the emergency”).
During the emergency, Greek Cypriot paramilitaries fought an armed guerrilla campaign to try to bring to an end British rule in Cyprus and establish a union between Cyprus and Greece. As part of the response to this campaign, the Governor of Cyprus instituted emergency measures which included the deployment of UK military and police personnel.
In July 2015, 35 individuals (since reduced to 33) brought claims against the Secretary of State for Foreign and Commonwealth Affairs and the Secretary of State for Defence regarding their treatment in detention during the emergency.
The Government have now reached an agreement with the claimants, in full and final settlement of those claims. The UK Government have agreed to pay a settlement sum of £1,000,000 in damages with an amount in legal costs to be determined by the court in due course. The settlement does not constitute any admission of liability and is not a precedent in respect of any potential future claims against the Government. Indeed, the Government have maintained throughout proceedings that the passage of time means that it is now no longer possible to establish all of the facts with certainty. However, the Government have settled the case in order to draw a line under this litigation and to avoid the further escalation of costs, which would ultimately be borne by the taxpayer.
In reaching this settlement, the UK Government reaffirm their highest respect for the memory and sacrifice of British and Cypriot service personnel and employees of the Crown who gave their lives, who lost family members or loved ones, or whose lives suffered permanent disruption as a result of the emergency.
The UK Government acknowledge the strongly held views of many Cypriots about the emergency. It is a matter of regret for the UK Government that the transition of Cyprus from British administration to independence should have been preceded by five years of violence and loss of life, affecting all residents of the island.
We must not forget the past—and indeed we must learn from it. But it is most important to look to the future. Today, the bilateral relationship that the UK shares with Cyprus is one of friendship and close partnership; spanning a broad network of security, personal, business, administrative, cultural and educational ties. The Government reaffirm their commitment to building a modern, forward-looking relationship between the UK and Cyprus, built on shared values of mutual respect and full equality.
[HCWS1269]
Social Care
(5 years, 9 months ago)
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The Minister for Care (Caroline Dinenage)
Today I would like to update the House on social care funding following the Opposition day debate of 17 October 2018.
Modern society is in the fortunate position where people are living longer and life expectancy for those living with complex health conditions, including disabilities, has dramatically increased. However, with 1.5 million more people aged over 75 expected in the next 10 years, we recognise the pressures this places on the health and social care system and the Government are taking steps to support the sector in responding to these challenges.
In the short term, the Government have given Councils access to up to £3.6 billion more dedicated funding for adult social care in 2018-19 and up to £3.9 billion for 2019-20. This injection of funding is the biggest that councils have ever received and is helping the NHS and social care to support people to live for longer and more independently.
Despite the fact that the NHS is busier than ever before, the majority of patients are discharged quickly. We know that adult social care capacity can become increasingly pressured over the winter months and this can have a knock-on effect on NHS hospitals. This funding is helping to reduce delays, get patients home quicker and free up hospital beds across England for more urgent and acute cases. This is having a tangible effect with delayed transfers of care accounted for 4,580 occupied beds per day in November 2018—a decrease of 2,081 per day against the February 2017 baseline.
The autumn Budget also announced an additional £650 million of new money for social care in 2019-20. This includes another £240 million for adult social care to alleviate winter pressures on the NHS next year and a further £410 million to improve social care for older people, people with disabilities and children. Councils will also benefit from an additional £55 million increase in the disabled facilities grant in 2018-19. This additional capital funding will provide home aids and adaptations for disabled children and adults on low incomes to help them continue to live independent lives in their own homes.
References to £1.3 billion of cuts are entirely misleading as the figure refers only to the revenue support grant which should not be considered in isolation when councils have access to council tax, business rates and other local income to deliver their local services. In fact, funding for local government will increase in real terms in 2019-20. This means more money for councils to deliver for their local communities.
This Government’s actions mean that funding available for adult social care is set to increase by 9% in real terms from 2015-16 to 2019-20 and the additional funding is allowing councils to support more people and sustain a diverse care market.
All councils have statutory duties to look after the vulnerable, elderly and disabled people in their area. The Care Act established a national threshold that defines the care needs that local authorities must meet which eliminates the postcode lottery of eligibility across England. In addition to providing social care services, last year local authorities in England advised over 500,000 people on how to access other services to meet their care needs. This includes services provided by leisure, housing, transport and care providers as well as voluntary groups.
In the longer term, the NHS’s Long-Term Plan is committed to supporting people to age well. As part of this the Government will increase investment in primary medical and community health services by at least £4.5 billion by 2023-24. This will support people to get joined-up, integrated care closer to home and will increase the capacity and responsiveness of community and intermediate care services to those who will benefit the most. Furthermore, the plan recognises the importance of integration between health and social care and commits to upgrading NHS support to all care home residents who would benefit by 2023-24 through the enhanced health in care homes programme, which embeds healthcare professionals into care homes.
The Government have committed to publishing the Green Paper at the earliest opportunity which will consider the fundamental issues facing the adult social care system and present proposals for reform while the social care funding for future years will be settled in the spending review where the overall approach to funding local government will also be considered.
[HCWS1268]
Tenant Fees Bill
(5 years, 9 months ago)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Mrs Heather Wheeler)
Today I have placed in the Library of the House the Department’s analysis on the application of Standing Order 83O in respect of any motion relating to a Lords amendment, for Commons consideration of Lords amendments stage for the Tenant Fees Bill.
[HCWS1265]
Diffuse Mesothelioma Payment Scheme Levy
(5 years, 9 months ago)
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The Minister for Disabled People, Health and Work (Sarah Newton)
The Diffuse Mesothelioma Payment Scheme (Levy) Regulations 2014 require active employers’ liability insurers to pay an annual levy, based on their relative market share, for the purpose of meeting the costs of the diffuse mesothelioma payment scheme (DMPS). This is in line with the insurance industry’s commitment to fund a scheme of last resort for sufferers of diffuse mesothelioma who have been unable to trace their employer or their employer’s insurer.
Today I can announce that the total amount of the levy to be charged for 2018-19, the fifth year of the DMPS, is £39.8 million. The amount will be payable by active insurers by the end of March 2019.
Individual active insurers will be notified in writing of their share of the levy, together with how the amount was calculated and the payment arrangements. Insurers should be aware that it is a legal requirement to pay the levy within the set timescales.
I am pleased that the DMPS has seen four successful years of operation, assisting many hundreds of sufferers of diffuse mesothelioma. The fourth annual report for the scheme was published on 29 November 2018 and is available on the gov.uk website. I hope that members of both Houses will welcome this announcement and give the DMPS their continued support.
[HCWS1263]
Grand Committee
(5 years, 9 months ago)
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The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
Good afternoon, my Lords, and welcome to the Grand Committee. If there is a Division in the House, the Committee will adjourn for 10 minutes.
Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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Lord Ashton of Hyde
That the Grand Committee do consider the Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019.
The Parliamentary Under-Secretary of State, Department for Digital, Culture, Media and Sport (Lord Ashton of Hyde) (Con)
My Lords, digital infrastructure is central to the future of the UK economy. People now rely on being connected through calls and online services more than ever, whether at home or on the move, while communications networks underpin critical areas of the economy. This dependence will only grow with the deployment of new technologies such as 5G and full fibre, which will support innovative new services across manufacturing, logistics, agriculture and healthcare.
The current regulatory framework has created the right conditions for the improvement of connectivity in the UK. It has brought about regulatory certainty and long-term stability for the sector, creating a balance between robust competition, protection for consumers and innovation. However, that framework derives from an EU regulatory framework consisting principally of a number of directives which have been implemented in domestic law.
The UK’s withdrawal from the EU gives rise to deficiencies in that legislation if we leave the EU without an agreement in place. These regulations address those deficiencies and so provide clarity and certainty for communications providers and for the regulator, Ofcom. That is why this statutory instrument is before the Committee today.
I should make it clear at the outset that this SI is concerned with the core of the regulatory framework, in particular the Communications Act 2003. Other matters of relevance to the sector, such as legislation on cross-border data flows, mobile roaming and spectrum decisions, are addressed by separate instruments.
It is also important to observe that the EU framework has already been implemented in domestic law. We are not concerned here with incorporating swathes of EU legislation into UK law, but with making corrections to ensure that the law continues to function appropriately. Furthermore, the scale of those corrections is limited. While the EU framework aims to establish a harmonised telecoms market, that market is policed by national regulatory authorities in each member state, with the European Commission having only a supervisory role.
This SI is intended to ensure that Ofcom can continue to carry out its existing functions effectively. It does not transfer a plethora of new functions to Ofcom or the Secretary of State.
The Government published a technical notice on 13 September 2018 which set out that,
“irrespective of the outcome of the negotiations between the UK and the EU, we do not expect there to be significant impacts on how businesses operate under the telecoms regulatory framework and how consumers of telecoms services are protected”.
This SI is an important part of ensuring that continuity and certainty.
The domestic telecoms framework establishes key regulatory principles such as: the promotion of competition between operators; the protection of consumers of telecoms services; the efficient use of radio spectrum, and the independence of the regulator and its functions. As I have said, these rules derive from a set of EU directives and regulations which have already been implemented in UK law, predominantly in the Communications Act 2003 and in the Wireless Telegraphy Act 2006.
I have said that this instrument makes mainly minor and technical amendments to ensure the continuation of the regulatory framework. An example of such an amendment is the removal of a duty on Ofcom to ensure that its activities contribute to the development of the European internal market, set out in the Communications Act 2003.
Lord Ashton of Hyde
May I continue, if the noble Lord does not mind? My speech is a tightly woven whole, and it might answer some of the questions he is coming to. Later, I will of course answer as many questions as I can.
I will concentrate in the remainder of this speech on those corrections which I expect to be of the most interest to noble Lords. I turn first to the existing requirements on Ofcom to notify, consult or provide information to the European Commission and to other EU bodies.
Ofcom is required to consult with the Commission, the Body of European Regulators for Electronic Communications—BEREC—and the national regulatory authorities of other member states before imposing certain types of regulatory measures. In the case of certain proposed remedies, if the Commission expresses reservations, there is a “standstill” period during which Ofcom must co-operate with the Commission and BEREC. In certain other cases, the Commission can veto the proposed measures.
The Commission’s role is to ensure compliance with the EU regulatory framework and a harmonisation of the approach taken by EU regulators, in order to develop the single market. After EU exit, a power for the Commission and BEREC to scrutinise Ofcom’s decisions in this way will no longer be appropriate, and so this instrument removes these requirements.
Ofcom will continue to need to comply with procedural statutory requirements, including consultation, before it takes regulatory decisions. Once taken, those decisions remain subject to the same scrutiny as today—in particular, the right for affected parties to appeal to the Competition Appeal Tribunal.
EU law also requires Ofcom to provide information to EU bodies. Again, the information requested by EU bodies is generally provided to enable the European Commission to monitor compliance with the European framework or to ensure the harmonisation of measures across the EU. This will not be required when the UK is no longer part of the EU. However, sharing information with the Commission, EU bodies or other regulators in the EU may remain beneficial to the UK after exit—it can help foster co-operation on regulatory matters. That is why this instrument makes amendments which clarify that Ofcom may notify or share information where it considers it appropriate—for example, regarding network security breaches.
Other amendments have been made to ensure the retention of protections for consumers and to enable the regulatory framework to develop in a way that will bring about consistency for industry. In relation to consumer protection, Ofcom has put in place various rules to protect consumers of telecoms services, some of which implement specific requirements of EU law. This instrument makes provision to ensure that Ofcom is able to maintain consumer protection measures which are currently required under the relevant EU directive.
Turning now to corrections that will bring about consistency for industry, Ofcom has existing powers to regulate communications providers with “significant market power”, or SMP. SMP regulation is based on competition law principles, as set out in EU competition law, and enables Ofcom to impose regulatory remedies on providers with SMP to address competition issues in a particular market. This instrument amends the Communications Act 2003 to ensure that, after exit, references to dominance in a market are to be construed consistently with the concept of market dominance in the Competition Act 1998 rather than EU competition law.
This approach ensures that there is a single concept of market dominance across UK competition law post exit. It ensures consistency with the amendments to the Competition Act 1998 which this House approved on 4 December. In other respects, Ofcom’s powers to identify dominant players in the market and to make remedies will remain the same as pre-exit.
Telecoms legislation also includes certain directly applicable EU regulations, which require correction. This instrument revokes the regulations that provide for financial assistance from the EU’s Connecting Europe Facility to support telecoms, including funding to install wi-fi equipment in public spaces. This recognises that this legislation concerns EU funding mechanisms that cannot be retained simply by converting them into domestic law.
In the event of a no-deal exit, UK organisations will no longer be eligible for such funding. However, even if the EU stops making payments to UK organisations delivering CEF-funded projects after exit, the government guarantee will support UK organisations to meet their obligations—including continued project delivery—until completion. The HMG guarantee will also cover successful applications submitted to the EU before exit day but where the award was made after exit.
This instrument also makes corrections to the eCall legislation so that it continues to operate effectively after exit. eCall is an initiative established by the European Commission as part of the intelligent transport system project. It enables a mobile transmission to be sent to emergency services by a vehicle when it is involved in an accident. The eCall legislation refers in parts to technical standards. This instrument confers a legislative power on the Secretary of State to make provision to replace the standards listed. This will enable the standards to be updated, should this be necessary, to ensure continued public safety and effective operation of the eCall technology.
Finally, this statutory instrument revokes the 2009 EU regulation establishing BEREC, the body of national regulators from EU member states. Ofcom is currently a member. The main purpose of BEREC is to ensure the consistent implementation of the EU regulatory framework. BEREC’s membership is therefore limited to the regulators of EU member states. Ofcom will not be a member after exit, but as the UK will no longer be part of the EU regulatory framework, this will not have significant effects on regulation in the UK.
However, the Government and Ofcom agree that it may well be beneficial to have a continued exchange of regulatory best practice with other regulators and an exchange of information about telecoms matters more generally. The new BEREC regulation provides that BEREC participation should be open to third countries where appropriate agreements are in place. Ofcom intends to seek observer status after the UK has exited the EU, in the way that other regulators of states in the European Economic Area and EU candidate countries currently participate.
We are committed to ensuring that the regulation of telecoms markets continues to function appropriately after exit, providing regulatory certainty and the right conditions for continued investment and development. I commend these regulations to the House.
Lord Adonis
Before the Minister sits down, he said that he would come to my points later but he did not—although I accept that his speech was carefully woven and made a coherent case for the regulations. However, for the purposes of the Grand Committee, by far the most important issues in the Explanatory Memorandum are raised in paragraphs 10.2 and 10.3. These show that there were quite significant differences between the Government and some consultees on the shaping of the regulations and, in particular, whether there should be continuing obligations for consultation and reference in respect of decisions made by Ofcom as regulator, replicating the current powers and role of the European Commission. These look to be significant issues and the Minister did not mention them at all in his remarks. It seems to me to be important for the Grand Committee to understand what the consultation was, why the Government decided not to go with the view that there should be a regime that replicates that of the European Commission and why the Minister believes that we should go with the Government’s view rather than that of the consultees, who, I should say, are not named in paragraphs 10.2 and 10.3 so it is very hard for us to know who they are. Is this a matter on which we should seek further information and debate before we agree this regulation?
Lord Ashton of Hyde
I am very happy to answer that; it is a reasonable question. The Government undertook extensive consultation with the telecoms industry, the regulator and other interested groups such as consumer associations. I shall start with the telecoms industry and come to why we should accept what was said.
The Broadband Stakeholder Group assisted us in organising our consultation, which has continued from summer 2017 until now, so it was over a long period, and it counts all the major providers of telecoms and broadband services in its membership: Arqiva, BT, Cisco, CityFibre, EE, Ericsson, Gigaclear, Openreach, Sky, TalkTalk, 3, Virgin Media, Vodafone and Wireless Infrastructure Group, and also from the sector were included Tech UK, INCA, which is the body representing UK alternative smaller telecoms infrastructure providers, consultancies, law firms, the BBC, Avanti, a satellite company, and the Federation of Communication Services. They were all consulted, and, as the noble Lord said, the main area of interest concerned EU consultation. This was discussed from summer 2017 until October 2018.
The main difference is that the function of EU supervision is really to promote the harmonisation of the EU single market. Obviously, that is not appropriate if indeed we leave the EU. The appeals process to the decision that Ofcom will make continues, so the appeals tribunal will still exist and operate in exactly the same way, and so will the administrative court, which enables the telecoms industry to go to judicial review.
In fact, the European Commission has never once vetoed an Ofcom decision, so we do not think it is of huge significance but, as I said, the main reason for not replicating that is that it affects European harmonisation rather than the national regulatory system.
Lord Adonis
I am very grateful to the Minister, but will he confirm that many members of the stakeholder group disagreed with the line that the Government are taking, which is not to have a continued consultation role with the European Commission? That is an important issue which is not properly brought out in these papers. The reason they did, which I take to be implicit in paragraph 10.2, is that they do not think that Ofcom should have unfettered power to act without consulting appropriate parallel competition regulatory authorities. Specifically mentioned in paragraph 10.2 is the Competition and Markets Authority, but I take it that the European Commission is seen to be a parallel body from that point of view. Will he expand further?
Lord Ashton of Hyde
Yes, the body they would appeal to is part of the Competition and Markets Authority; it obviously has a completely different dynamic to the European Commission, which is there to harmonise the single market. It is true that they expressed those views, and it is probably fair to say that the sector would like as many avenues for appeal as possible—it is regarded as a reasonably litigious sector—but it was felt that because that was for harmonisation, it was not appropriate.
I can say that the industry, including that part of the stakeholder group referred to, is keen that the SI should be taken forward, because it wants clarity and a consistent regulatory framework. To that extent, it is happening.
The Deputy Chairman of Committees (Lord Faulkner of Worcester) (Lab)
The Question is—
Lord Adonis
If the noble Baroness will forgive me, I am still on my feet, so I will not give way to her. Will the Minister agree to publish—
Baroness Goldie
I am sorry. The Minister is not going to make any response, Lord Adonis, until you take your seat and allow me to make an observation.
Lord Adonis
The noble Baroness cannot make an observation unless I give way to her and I am not giving way to her, if she will forgive me.
Will the Minister agree to publish the minutes of the stakeholder group that he has referred to? It seems to me important in our proceedings that we understand what the consultation responses in fact were, as they were clearly at variance with what the Government have done. Will the Government do that before this matter comes before the whole House?
The Deputy Chairman of Committees
It might be helpful if I put the initial Question, which is that the Grand Committee do consider the draft Electronic Communications and Wireless Telegraphy (Amendment etc.) (EU Exit) Regulations 2019.
Lord Ashton of Hyde
In answer to the noble Lord, Lord Adonis, I am informed that I can publish them.
Lord Foster of Bath (LD)
My Lords, following that interesting exchange, I pick up where the noble Lord, Lord Adonis, began, by pointing to what he described as the Minster’s “carefully woven” speech. I confess that I do not quite agree with that definition, as the speech appeared to be a cut-and-paste version of the speech that was given by the Minister in the other place, Margot James, on 7 January. Having gone through that speech, I noticed that odd words were missed out in the noble Lord’s version. In the other place, the Minister thought that there may well be a case for Ofcom remaining involved in BEREC—the word “well” was missing in the noble Lord’s version.
More important, we should recognise that over the last 30 years the industry that we are dealing with, including within it the telecoms industry, has developed from a monopoly situation to a highly competitive market, with annual revenues now in excess of £40 billion. It therefore forms an important part of our economy. Because of the way in which the industry is intrinsically linked to the European Union, there is no doubt in my mind that Brexit will have a significant impact on it, not least because a number of UK providers operate in other member states but have headquarters in the UK. I also believe that Brexit will have a significant impact on the regulatory regime under which those providers operate.
The Minister said, as indeed did Margot James in the other place, that the draft regulations will provide “clarity and certainty” both for the operators and for the regulator. I am somewhat inclined to disagree with that view. Indeed, the technical notice to which the Minister referred, which was issued way back on 13 September last year, explained that, irrespective of the outcome of the negotiations between the UK and the EU, the regulations would not have a significant impact on how businesses operate under the telecoms regulatory framework or on how consumers of telecoms services are protected within the UK. That claim is highly questionable.
Before I turn to those impacts, I want to seek clarification on consultation, the issue that has occupied a few minutes between the noble Lord, Lord Adonis, and the Minister. In the other place, the Minister for Digital and the Creative Industries, Margot James, said:
“All the changes that the draft regulations will make have been considered on a case-by-case basis and discussed with the regulator and stakeholders where possible”.—[Official Report, Commons, First Delegated Legislation Committee, 7/1/19; cols. 3-4.]
One has to assume that she believes that, as the noble Lord said only a few minutes ago, extensive consultation has taken place. The noble Lord told us about consultation with the Broadband Stakeholder Group and listed its membership. Interestingly, he did not mention the other part of the equation, which relates to the telecoms industry. There is a major body—the UK Competitive Telecommunications Association, or UKCTA—which represents very many of the key stakeholders in that field: Virgin Media, Vodafone, AT&T, the Post Office, Sky, TalkTalk; I could go on. If extensive consultation has taken place, one would assume that that key body, UKCTA, has been involved in the discussions. Yet I have received a note from UKCTA—I would be grateful if the Minister could explain whether this is correct—which says:
“UKCTA has not had any advance notice of, or discussions about, the SI despite regular meetings with DCMS, the most recent being on Monday 14th January”.
Can the Minister explain whether what I am told is incorrect, and if it is correct, can he explain why, despite the Government having claimed that there has been extensive consultation, this important body in the industry and the sector has not been consulted? On the impacts of these draft regulations, which the Government say they do not expect to be significantly—
Lord Adonis
The noble Lord has just raised an extremely important point about consultation. As he knows, in the discussions which the Grand Committee has been having on these no-deal regulations, the issue of inadequate consultation has been a running theme. As we probe beneath the regulations, significant issues of substance come to the fore when the Government tell us that the changes that are being made are technical. In fact, the actual change brought about by this regulation is substantial, because it entirely removes the European Commission from the whole process of deciding on competition issues.
The noble Lord is much closer to this sector than I am, and he has clearly had contact with the UK Competitive Telecommunications Association—I have to confess that I was not even aware of the existence of that body until he mentioned it, which is a huge lacuna in my understanding of public affairs. The noble Lord told us that it had not been consulted but that he has been speaking to it. Can he tell the Grand Committee what its view is of these regulations? Clearly, that is a material point, but it will also be a material point when the House itself comes to consider these regulations, also in the light of the further consultation responses which the Minister has kindly agreed to publish after the meeting of the Grand Committee.
Lord Foster of Bath
I am grateful to the noble Lord for his intervention. I assure him that I am more than happy to help to resolve the lacuna he has, and I will go even further and share with him a few thoughts that that association has about the draft regulations before us. I will take one particular one, which is its reaction, and the reactions of many other people, to the Government’s claim that the changes envisaged in these draft regulations will not significantly change the protections that are currently enjoyed by consumers of UK telecoms services. That claim is disputed, and I am keen to hear the Minister’s reaction to that, particularly in relation to the fundamental question of who will now supervise the regulator.
The UK regulator is Ofcom, which is probably the most highly regarded regulator throughout the whole of the European Union. It is a regulator in which most of us have great confidence, but from time to time it can make questionable decisions. Within the EU arrangements there are processes which provide for oversight of decisions of all national regulatory authorities, including Ofcom. These processes are covered under Regulation 7, particularly 7(1). As the Minister knows, they ensure oversight of a regulator’s decision by the Commission, and peer review by other EU regulators—in this case by members of BEREC, which the Minister has already referred to: the Body of European Regulators for Electronic Communications.
Post Brexit, the EU checks and balances against bad regulatory decisions will clearly fall away, yet safeguards to ensure regulatory certainty, and safeguards against bad regulatory decisions, are critical to ensuring that businesses in this sector can have the confidence to make major investments. Can the Minister provide a clear explanation of how, under these draft regulations, Ofcom will be held to account post Brexit? Can he confirm that, for instance, the Digital Economy Act, which went through your Lordships’ House some while ago, has weakened the telecoms appeal regime and that all that appears to be left for those who believe that an Ofcom decision is wrong is the judicial review process? As the Minister said, in certain cases there might also be the opportunity to go to the Competition Appeal Tribunal, but in the majority of cases it would appear that we are left with only judicial review, which, as noble Lords know, has undergone some quite significant and worrying changes in recent times. Therefore, does the Minister agree that this is a significant diminution of the protections against bad decisions by the regulator, however infrequently they are likely to occur?
Lord Adonis
My Lords, the noble Lord is making a very powerful argument about the weakness of consultation and the problems that will be caused by these regulations. Is he suggesting that Ofcom itself said to him that it was not content with these regulations in their current form and that it is worried about the regime that will apply after a no-deal Brexit? That would be a very serious state of affairs if that were the case.
Lord Foster of Bath
That would be taking the interpretation of the conversations and correspondence I have had with Ofcom a step too far. I do not think that Ofcom feels that it is its place to comment on the rightness or otherwise of the regulations. However, it is pointing out very clearly that when these regulations come into force, its ability to do the work to the level that it wishes will undoubtedly be diminished because of its inability to influence future EU legislation which will have a significant bearing on companies that operate in this country. Equally—I shall come on to this in a second—its ability to engage in discussion and debate with fellow regulators in this field across the 27 EU countries will depend on what happens now.
I hope that the Minister will agree to extend his remit just a little in this discussion. It would be enormously helpful to hear from him what he understands the situation will be not only in relation to a no-deal Brexit but, if the Prime Minister is successful in achieving her deal, what it will be during the implementation period and then after it. So there are three possible scenarios in which it would be helpful to learn from the Minister how he thinks the arrangements will operate.
It might help him if I shared with him my own understanding of what the situation is likely to be and possibly made his response much briefer, because he could then say that I have got it right. In the debate on 7 January in the other place, Margot James acknowledged that,
“the Government recognise that Ofcom would benefit from the continued exchange of best practice with other regulators, and from the exchange of information about telecoms matters more generally”.
She went on to say:
“Ofcom intends to seek observer status after the UK has exited the EU”.—[Official Report, Commons, Delegated Legislation Committee, 7/1/19; col. 6.]
Can the Minister confirm that this is a huge oversimplification of the process that now applies in the event of a no-deal Brexit? In the past, it would have been a relatively simple matter for Ofcom to seek observer status. Under the rules that applied until December 2018, just a month ago, BEREC could simply have invited Ofcom to have observer status and that would have been fine, but the BEREC regulations have changed and are now very different. I am sure that the Minister will confirm that, under those regulations, the only possibility of Ofcom having even observer status on BEREC is if the European Union has agreed to it. That would require the UK Government specifically to negotiate such an arrangement with the EU. I would be grateful if the Minister could confirm that that is the case, because it is very different from saying that Ofcom will seek observer status. The Government will have to engage positively in negotiations with the European Union to bring that about.
Can the Minister also confirm his understanding of the position of Switzerland? It is a very good example, because its regulator was an observer member of BEREC. With the change in rules in December 2018, it no longer has observer status and the Swiss Government are currently in extensive negotiations with the European Union to see whether agreement can be reached for that to happen—there is no certainty that it will, any more than there will be certainty, for reasons that I shall come on to in a few minutes, about an agreement on this matter being reached between the UK Government and the European Union.
I accept that the Minister is slightly stretching the issue, but I hope that he will confirm that under transitional arrangements of the withdrawal agreement—if the Prime Minister is successful in getting her deal through—the key provision is Article 128 along, in part, with Article 8, which states clearly the UK has no right to participate in decision-making or governance of any EU bodies and no right to attend meetings. During the transition period, there will no opportunity for Ofcom to be involved—with, however, one caveat.
The caveat comes in two parts. It says that there are exceptions: Ofcom may be allowed to pop along for the odd meeting and to participate in discussions but not have a vote, but only in the very limited case where BEREC is discussing a specific case that relates to the United Kingdom or if, by having Ofcom present, it would be beneficial to the EU as a whole. That is a decision for it to make. I would be grateful if the Minister could clarify the point. My understanding is that if the Prime Minister is successful in getting a deal, during the transition phase, the position of Ofcom will be even worse than it would be if it had observer status. That, I believe, would be significantly detrimental to the UK. Post Brexit, if the Prime Minister is successful with her deal, clearly the situation will be somewhat uncertain because it will depend on the interpretation of and success of the negotiations. However, the draft political declaration covers the issue in paragraphs 33 to 35 and 40 to 42. It would be helpful to hear the Minister’s views on how he thinks that this will work out.
My final point is simply this. All of this is dependent on an agreement. Whether we are in the situation of a no-deal Brexit as regards the regulations before us or even if the Prime Minister achieves her deal and we have a transition period with an exit being subject to whatever arrangements have been made, it will all depend on whether the UK has achieved a data adequacy agreement with the European Union. Nothing can happen unless we have one because it is absolutely crucial. I could read out to noble Lords many learned articles about whether it would be possible for the UK to get a data adequacy agreement easily or even to get one at all. For instance, criticisms are already raging about the impact of the investigatory powers legislation, the GDPR regulations, the e-commerce and e-privacy regulations and so on. Whether those will enable us to get a data adequacy regulation or prevent us doing so is very unclear indeed.
I have raised some important points and I look forward to the Minister’s response. Above all, however, he must give us a clear understanding of the Government’s view about the likelihood of us getting a data adequacy agreement. The Minister in the other place made it absolutely clear that if the Prime Minister gets her deal and we have a transition period of almost two years, it will take the whole of those two years to get agreement on data adequacy. She went on to say that if we have a no-deal Brexit, the chances are that getting such an agreement will take even longer. Does that not mean that all of the claims that there will be no significant impact as regards these regulations on people in the UK, both service providers and the regulator, really do not stack up?
Lord Adonis
The noble Lord has referred to the data adequacy agreement, which is clearly an important issue. What is his understanding of what the impact would be on the United Kingdom if we did not secure such an agreement in the event of a no-deal Brexit? Presumably it will be quite a tall order to get such an agreement in the next eight weeks.
Lord Foster of Bath
Let me give the noble Lord one example. I said earlier that for Ofcom to become a member of BEREC, it is no longer a case of it going to BEREC and saying, “Please can we have observer status?” It will require a negotiated agreement between the UK and the EU. In my view and those I have spoken to about this, the agreement will not be reached unless we have an adequacy agreement. If the adequacy agreement is going to take at least two years and may not be achieved anyway, then during the whole of that period there is no way of Ofcom performing any role whatever within BEREC, for example.
Lord Adonis
Does the Minister want to respond to the noble Lord, Lord Foster, before I and my noble friend speak?
Lord Ashton of Hyde
I do not think that I can stop the noble Lord speaking whenever he wants.
Lord Ashton of Hyde
The noble Lord asked a lot of questions. Underlying it all is the fact that this SI is there in the event of no deal. Of course, it is not surprising that references to and some of the effects of being in the EU are going to change. The essential point of the SI is that telecoms regulation is performed by national regulatory authorities with EU supervision. The issue is whether the supervision element is significant. The whole point of the SI is to make the regulatory system the same after we leave. The noble Lord made a lot of mileage out of whether we would remain a member of BEREC—
Lord Foster of Bath
The issue is not about the regulatory regime staying the same but about who is regulating the regulator. I hope that the Minister will come on to that.
Lord Ashton of Hyde
Yes, absolutely. I will come on to that because nobody regulates the regulator today.
The noble Lord asked me to go beyond no deal to what happens to our membership of BEREC if we have a negotiated deal with an implementation period. During that period, the UK will no longer be a member state of the EU but, as is set out in the terms of the withdrawal agreement, common rules will remain in place. That is why we expect Ofcom to continue to participate in BEREC in line with the terms of the agreement, in the way that the noble Lord, Lord Foster, mentioned.
I point out to noble Lords that there is every reason to suppose that the EU would want that, because Ofcom is one of the leading telecoms regulators in Europe—if not the leading one. The interchange between Ofcom and other European regulators has been extremely beneficial, not only for them but for this country. There is every reason to think that they would wish to continue that—
Lord Foster of Bath
I am sorry. The noble Lord is entitled to assert whatever he likes, but I specifically read out a section from the withdrawal agreement, which says, and I repeat, that the UK has no right to participate in decision-making or governance in any EU body of any type and no right to attend meetings. I have given the two caveats: the first relates to any discussion that,
“concerns individual acts addressed to the UK”,
or persons residing or established in the UK; and the second is that the presence of the United Kingdom is,
“necessary and in the interests of the Union”.
It is all very well for the Minister to say that he hopes that it will be perfectly all right and that the EU will have us for other things, but a specific clause in the withdrawal agreement says the opposite.
Lord Ashton of Hyde
I was going to read out that exact clause to make my point. If it is,
“in the interests of the Union”,
or where the discussion concerns acts addressed to the UK and its citizens, it provides that the UK will continue to participate in EU agencies and bodies. I think that those two things apply and, as I was saying, the reason why I think that is the mutual benefit Ofcom has. It is a world-leading, well-respected regulator. However, I accept that it does not have the right to do these things. That is not surprising, because we are leaving the EU. Why should it have the right? I think that we have come to stalemate on that point.
The noble Lord mentioned the fact that BEREC rules have changed and that it is not just a question of having been invited to be an observer. He is absolutely right: either there has to be an agreement with the EU as part of a future economic partnership or a bilateral agreement can facilitate it. Under that facility, which the EU has deliberately put in the new BEREC regulations, Ofcom can—under a bilateral agreement—be a member of the board of regulators, the working groups and the management board.
I will move on to data adequacy later. The important issue that both noble Lords mentioned is, crudely put, whether the regulator will still be regulated. The European Commission does not regulate Ofcom. It has a supervisory power, which is principally designed to ensure the consistency of regulatory practices across the EU, in order to contribute to the development of the single market. It is quite understandable that the EU should want to harmonise national regulators to facilitate the single market. Of course, if we leave the EU, that will no longer apply. The role of the European Commission in telecoms regulation is unique and should not be compared to EU scrutiny powers over other UK economic regulators. There is sufficient accountability in the domestic system, because Ofcom decisions can be challenged in the courts—of course, the primary area in which they are challenged is in the statutory appeal before the Competition Appeal Tribunal.
In fact, the withdrawal Act is not a vehicle for policy changes, as I am sure the noble Lord, Lord Adonis, will remind us. We think that, under the terms of the Act, recreating a domestic equivalent for the oversight of Ofcom’s decisions will be considered going beyond what is appropriate to correct the deficiency.
Lord Adonis
I am grateful to the Minister, but does he not accept that this could be argued both ways? It is clear from reading the materials available to me that one could say that replicating the status quo means having some consultation and appeal role for a competition body above Ofcom, which is the role currently played by the European Commission, or one could take the Government’s view that there should not be such a role. It appears to me that the reason why this has happened is twofold: first, because the whole government mindset is to have as little Europe as possible—as a matter of prejudice the Government do not want any continued consultation role for the European Commission, even if that might be in the best interests of Ofcom and the robustness of our regime, given how intertwined our companies and industries are—and, secondly, because Ofcom would obviously prefer not to have any oversight. Any regulator in Ofcom’s position would much rather not have somebody else marking its homework. It appears that the Government have been unduly swayed by Ofcom in drawing up these regulations, particularly in the light of the observations from the noble Lord, Lord Foster, that key industry groups have not even been consulted.
Lord Ashton of Hyde
I do not think that you can argue it both ways. Of course we will not be involved in the EU supervision, given that the whole point of the supervision is to affect the European single market, of which we will not be a part. To set up a completely new supervisory authority, with a completely different function from what it had before, would, I think, be beyond the powers of the withdrawal Act—it will obviously be different if we are not talking about EU supervision to maintain regulatory harmony.
I come to both noble Lords’ points about the consultation, because I do not believe that they are true. The noble Lord, Lord Foster, made a reference to the UKCTA—its members, by the way, are also members of the BSG—and read out the names of a number of companies that are part of the group which facilitated the round tables. There may be a disagreement with us, as my information is that it was asked to at least one of the round tables. It has met DCMS and has had the opportunity to raise concerns about the SI—as he said, it met DCMS only very recently—and of course our technical notice explains some of the problems and issues about telecoms regulation when we leave the EU, so it is not as though it did not mention it. Therefore, some of that body’s members have sat round the table with DCMS; they have been asked. There is no requirement to send the draft SI to industry, but it had every opportunity to contact DCMS and every opportunity to raise it at the meetings that the noble Lord referred to. We have ongoing and good relations with all parts of the sector, so there is absolutely no reason why, if there is a problem, it could not be raised with DCMS. I do not accept that in this case the consultation has been insufficient. We have had regular and continued consultation with the industry, not only with the telecoms sector but also with consumers and Ofcom itself.
Lord Foster of Bath
I do not think that it is necessary to pursue this; I am merely making a simple request. Given that this body says that it has not been consulted—I entirely accept the Minister’s point that the draft regulations have been published and so it could have read them and perhaps could have come forward and said, “Can we discuss this?”—can the Minister just give the Grand Committee an assurance that it will now be invited to come and have a discussion about its concerns on these draft regulations? Then we can move on.
Lord Ashton of Hyde
It is of course a bit late to consult it on the regulations, but we will definitely do so in future. I will try to find out where we have a disagreement on fact—whether it was able to be consulted—and will let the noble Lord know about that. I appreciate his allowing me to move on.
There is an important issue about data adequacy, which the noble Lord, Lord Adonis, mentioned. He asked whether it would happen in the next eight weeks. Of course, what he does not realise is that it cannot happen in the next eight weeks, because you cannot have data adequacy until you are a third country. You will never get data adequacy until exit day; when that will be is another matter. Data adequacy is an important issue. We have said that there will be no restriction on personal data flowing from the UK to the EU; the issue is entirely about personal data flowing from the EU to the UK. What are we doing about it? We have spent a lot of time talking to member states, explaining our mutual interest in having data adequacy. We should not forget that we start from the exact same position, because we have implemented the GDPR. We are therefore in a good position.
The EU has indicated—it has not said it formally—that it will be ready to discuss data adequacy as soon as exit day comes. We are ready to do that, but in the meantime there is a possibility that there will be a gap between when we leave the EU and whenever we get data adequacy. To cope with that gap there are mitigations and ways round it—standard contractual conditions for contracts, for example. We are ramping up the speed of publication and are making industry aware of this. There will be a significant amount of progress on that over the next few weeks. It is always frustrating when you spend time talking to trade bodies—we are talking to about 50 companies a week at the moment, and we will double that—and, despite all that work, people still say that they were not aware of it. We saw that with the GDPR. However, we have a publicity campaign; work is going on to try to make people aware and, for example, to encourage them visit the ICO website, which gives examples of ways to mitigate in case of a gap.
Lord Adonis
My Lords, the Minister has done a conscientious job of explaining the regulations and dealing with the concerns raised by the noble Lord, Lord Foster. However, I did not greatly care for the intervention at the beginning by the noble Baroness, Lady Goldie, which sought to prevent me from posing questions to the Minister. I hugely respect the noble Baroness, but it is important to understand what is going on in this Grand Committee. We are making significant changes to the law. It is true that we are doing so in an emergency situation because we have to agree things in the next eight weeks in case the United Kingdom crashes out of the EU without a deal, but we should not minimise the fact that we are making significant changes to the law. Because of the emergency nature of events, we are doing this by means of statutory instruments, but the fact that these are called statutory instruments does not make the changes to the law less substantial.
The changes to the law involved in this one statutory instrument would, in the normal course of events, require primary legislation, with Second Reading, Committee, Report and Third Reading. We would have ample opportunity to engage with the Minister, move amendments and probe issues around consultation and appeal mechanisms and so on, which we have been debating across the Floor. Because of the constraints of the statutory instrument process, all this is being done by means of one statutory instrument, with one debate in Grand Committee and potentially another in the Chamber.
When we went to the Chamber on the venture capital regulations yesterday, I had expected that the Minister, the noble Lord, Lord Bates, would present the regulations to the House in the light of the debate that had taken place in Grand Committee and to reply to that debate. I thought that he would do the same on the interchange regulations; the noble Baroness, Lady Bowles, who is in her place, had raised a lot of significant policy issues on those regulations. But things did not happen at all as I had expected. What happened was that the noble Lord, Lord Bates—
Lord Ashton of Hyde
The noble Lord is kind to let me in. I think he is in danger of making a generic speech here. In this SI, we are retaining the status quo in telecoms legislation. We are trying to maintain EU law, which has been implemented in UK law. I accept that there are changes—for example, the European Commission is mentioned in relation to supervision—but obviously those changes will result from our coming out of the EU. I do not accept that, in this case, we are making substantive changes. I suppose that one area that one could argue we are changing is giving the Secretary of State powers to amend regulations so that the eCall system works. That is clearly to everyone’s benefit who drives or travels in a car. That is one area where we are possibly giving the Secretary of State more powers, but I do not accept that there is a whole swathe of legislation that normally would have required to be made through primary legislation.
Lord Adonis
I am grateful to the Minister for that intervention, but I note that the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum indicate that significant players in the industry do not accept the statements that he has just made. They do not accept that this is the best way of transposing the status quo into a new regime following a no-deal Brexit. On the contrary, as I will explain in a moment, they think that the Competition and Markets Authority should have replicated the existing role of the European Commission, but the Government decided not to do that. I accept that the Minister has said what he said in good faith, but what he said is not the view of a large number of players in the sector.
Lord Ashton of Hyde
The noble Lord is surely not suggesting that every time we have a consultation we should agree on everything with every person who is consulted.
Lord Adonis
My Lords, the problem with this situation is that we do not know what happened in the consultation, because nothing has been published. Let me read out what paragraph 10.1 says, so that it goes on the record. Under the heading “Consultation outcome”, it says:
“Informal consultation has been undertaken with Ofcom, whose views have been taken into consideration in development of the instrument”.
In the case of informal consultation, nothing is published. Indeed, I am anxious to read the letter that Ofcom sent to the noble Lord, Lord Foster, because it will be the only thing that has come out in public saying what Ofcom actually thinks. For the process of making the law, the right course to pursue would have been to have had a formal consultation, with Ofcom’s formal view, but the Government did not do that. At the moment, we are legislating in the dark.
Lord Ashton of Hyde
Ofcom has been consulted all along. It worked with DCMS in drafting the SI. It is keen to retain its independent status. It will not come out and say, “This is a joint DCMS/Ofcom SI”, but it has been consulted all the way along. It was instrumental in the drafting of the SI.
Lord Adonis
I do not for a moment expect that Ofcom should be required to agree. On the contrary, it is the job of the Government and Parliament to decide what the law and the regulations will be. However, it is our responsibility as parliamentarians to be fully informed about what the stakeholders think. Nothing has been published. The consultation with Ofcom has been informal. We have no details of the consultations referred to in paragraph 10.2. The noble Lord, Lord Foster, told us that the UK Competitive Telecommunications Association, which some of us had never heard of before, was not consulted. The Minister says that it was consulted. This issue of what in fact happened is still not resolved across the Grand Committee. The whole situation is unsatisfactory.
To complete the broader point that I was making in respect of the noble Baroness, Lady Goldie, I do not think it reasonable to curb the rights of noble Lords to question Ministers on fundamental changes to the law of the kind that are being proposed simply because it is inconvenient to the Government, but that is what the noble Baroness and other Ministers have sought to do.
Baroness Goldie
I thank the noble Lord for allowing me to intervene. I am interested in his surmise, because he gave me no opportunity to say why I wanted to intervene. In fact, there was a procedural issue to be addressed by the Chairman. I say to the noble Lord that there are rules, practices and courtesies in this House, which are listed in the Standing Orders and detailed in the Companion, whose purpose is to ensure that opportunities exist for full debates on important issues such as this. I would merely have observed earlier that the noble Lord should be careful not to stray into repetition, which Standing Orders do not permit, and be careful not to be accused of speaking on multiple occasions. I think I am not alone in being unclear about whether he is currently making a speech or another intervention. I merely ask him to observe the courtesies which everyone else in the House tries to observe for the mutual benefit of the House and all Members.
Lord Adonis
I am very grateful for the noble Baroness’s explanation but I do not believe that I was in any way infringing the courtesies of the House in seeking to question the Minister. The job of a Grand Committee is to elicit from Ministers information which is relevant to our consideration of these matters. However, we do not have the equivalent of a Committee stage in which we can propose amendments and hear explanations from the Government, which can then be questioned, so the only mechanism that we have in Grand Committee is to ask direct questions before the Minister sits down. Therefore, I do not accept for a moment that I was infringing the courtesies, the Standing Orders or the reasonable procedures of the House.
Unfortunately, it has become a pattern in Grand Committee for Whips to seek to curb proper debate and discussion. They are trying to railroad through these significant changes to the law with the minimum debate and the minimum questioning possible. I absolve the Minister from any intent to refrain from giving information, because he has been very forthcoming.
Lord Ashton of Hyde
Perhaps I may help. There is another way in which the noble Lord could find out the information that he requires. He knows well in advance that these SIs are coming up, so he could always write to me and ask.
Lord Adonis
My Lords, I would be delighted to write to the noble Lord when his next lot of SIs are due to come before the Grand Committee and ask him for more information, but until I have heard the explanation and his account, it is often difficult to know what questions one wants to ask. I should observe that at the moment we are having these statutory instruments at the rate of about 20 to 30 a week, so, although I take my duties as a Member of the House very seriously, it would not be possible for me to correspond with Ministers in advance of each of them in a way that would be productive, given that we are going to debate them in any event.
Lord Ashton of Hyde
The noble Lord would be able to spend less time in Grand Committee, so he would have some more spare time.
Lord Adonis
I am not sure whether the noble Lord meant that as a serious contribution to the debate. I cannot think of anything that I would find more felicitous than engaging in correspondence with the Minister, so I would be happy to do that hereafter.
I sense that we will return to the issues raised in paragraphs 10.2 and 10.3 of the Explanatory Memorandum when the regulations go to the Chamber. The Minister has already undertaken to publish the relevant minutes of the Broadband Stakeholder Group and it is important that we have an opportunity to take account of those before these regulations go to the House. If the Minister does not mind my saying so, we will need to have resolved what consultations have taken place with the UK competitor telecoms authority and its members, and having that information before the House would be useful too. That is important to enable the House to make a judgment on the issues raised in paragraphs 10.2 and 10.3. Perhaps I may read to the Grand Committee what is said there:
“Some stakeholders expressed concerns that removal of the requirement for EU consultation on certain Ofcom proposed regulatory measures (and in particular the Commission’s ability to require Ofcom to withdraw its proposed measure in some circumstances) … amounted to loss of a valuable check on Ofcom’s decision-making. Those stakeholders proposed that an equivalent function be recreated domestically (for example, requiring the Competition and Markets Authority to approve certain of Ofcom’s proposed measures”.
The Minister has just said that doing that would involve a change in the status quo. However, the contention of stakeholders in the sector is that, far from constituting a change in the status quo, it would transpose an equivalent function to the one currently performed by the European Commission once we leave the European Union. To me, the issue set out in paragraph 10.2 is significant, and the noble Lord, Lord Foster, who is much more knowledgeable about the sector than I am, made the concern of the sector a significant part of his remarks.
I entirely agree with the Minister that the Government should not be expected to give a veto to telecoms companies and other stakeholders which is in any way unreasonable. I accept that; as a former telecoms correspondent for the Financial Times, I am only too aware of the market power of those bodies, and it is important to have strong regulators. I am not saying that those telecoms companies and interest groups are necessarily right—the Government might be right not to give further supervisory powers to the Competition and Markets Authority that would lead to further appeals, litigation and huge expense to the public—but my concern, which goes to the whole procedure of dealing with these no-deal regulations, is that this is an important issue. I think that the Minister would accept that it is a pretty significant issue in terms of the construction of the regulatory regime. This decision has been taken on the basis of no formal consultation, and the views of stakeholders have become apparent to your Lordships only during this debate and were brought up particularly by the noble Lord, Lord Foster.
Lord Ashton of Hyde
That is not right. That is why the Explanatory Memorandum specifically mentioned their views. It is not that the noble Lord has found them at the last minute, because he was citing the very Explanatory Memorandum that told him that there were opposite views, which we disregarded for reasons with which I think he agrees.
Lord Adonis
Let me correct myself. The Minister is quite right that the Explanatory Memorandum mentions that at paragraph 10.2. However, all it says is “some stakeholders”, so there is no explanation of who those stakeholders were. The noble Lord, Lord Foster, brought out who they were and why they hold those views. For our next consideration of this measure, we need to know more about which stakeholders expressed the views in paragraph 10.2 and why they did so, so that we can form a view as to whether the Government’s judgment, which is that there should be no role for the Competition and Markets Authority, is correct or whether the right approach would have been to have given some supervisory role to the CMA, as is envisaged by the stakeholders in paragraph 10.2.
Lord Ashton of Hyde
This may help the noble Lord and cut down on the time. I have been told that we will continue to consult the industry on the scrutiny of Ofcom’s draft regulatory decisions, but we do not believe that this SI is the vehicle for such policy changes—because that is what they are. I committed to the noble Lord, Lord Foster, that I would outline the people whom we had consulted. I take his point about a formal consultation; we decided not to do that, but that is not to say that there has not been extensive consultation, which I have agreed to make clear. I hope that the noble Lord will accept that we will continue to consult on that, but will not do it through this SI.
Lord Adonis
I fully accept what the Minister said. He has been very forthcoming in making further information available to noble Lords. It would be very useful to us to have that further information before these regulations go to the House. We need that further information so that we can form a judgment on whether the Government’s decision as to how they will frame the regulatory regime after 29 March, if we crash out of the EU, is correct or whether it would have been appropriate to have in domestic arrangements some function equivalent to that performed by the European Commission; for example, by requiring the CMA to approve certain of Ofcom’s proposed regulatory measures. I hope that the Minister will be able to make that information available to the House so that we can form a judgment when this regulation comes to the House.
Lord Griffiths of Burry Port (Lab)
My Lords, I suspect that all present will be delighted to hear that I do not intend to detain your Lordships for very long. This has been a clash of the Titans, and a lot of material has come out from the noble Lords, Lord Foster and Lord Adonis, and the Minister’s responses. Having read diligently the papers that I had and highlighted the questions which concerned me, I find, alarmingly, that they have all been dealt with. For that reason, and hearing the question about repetition, I shall not go over the ground again.
However, I would make one or two observations, perhaps from a different angle. For example, I note at the beginning of the Explanatory Memorandum the number of Acts of Parliament and other measures that have had to be gone through with a tooth comb to produce 10 pages of minutiae—which in their totality are more than minutiae—affecting legislation in the way that the noble Lord, Lord Adonis, says. I would like to know as a point of information how many hours have been spent on teasing out these details in order to produce this one statutory instrument. On page 2, it deals with minor affairs and states that it must not be confused with other statutory instruments which will soon come through. It beggars belief that all this lies ahead. I read The Pilgrim’s Progress when I was a young man. The slough of despond and the swamp of despair are lurking and waiting for us before we will get to the celestial city.
Lord Adonis
Dante is more appropriate because he talks about the circles of hell.
Lord Griffiths of Burry Port
We will have to have a consultation about that in order to find out who forms which view about Dante’s Inferno.
There are two focal points to my remarks. I wanted to ask about the data adequacy agreement but the Minister has answered that. I also wanted to ask: who regulates the regulator? I was very interested indeed to read about Ofcom. While I in no way have the level of expertise of other noble Lords who have spoken, just reading the text—I know how to do that—what hit me between the eyes begged questions: is this regulation or supervision? Are we talking about harmonisation? I have sat in on several debates to try to gauge what is happening in consideration of these statutory instruments and I am beginning to form the view that between where we are now and where we expect to be if all goes according to plan, in several instances there will be a lessening of the oversight and direction that we have currently through our membership of the European Union.
For example, I listened to the debate on nuclear safeguarding yesterday. I was not convinced by either the debate or the material I read that the concerns being expressed would be adequately met. It was a similar case as regards non-native invasive species. Again, I was left with questions which may be answerable: I am not an expert in these fields. However, simply because we are under pressure to agree to these statutory instruments, we must not go on driving them through in such a way that in the end the accumulation of feeling about what we are achieving is that we are making too much haste and should have a bit less speed. I know that there are just 70-something days and the pressures that we are under, but in the end we will have to live with what we decide now.
All of those Acts of Parliament were carefully gone through. I have just one brief observation to make about Ofcom because the others have been made. Most of my consideration was on paragraph 10, but I will not cover that at all. However, in paragraph 7, I find that again and again what Ofcom is required to do while we are a member of the European Union “may” turn into something later. The indicative mood turns into—what? Is it the optative or is it the subjunctive? The word “may” allows itself to be interpreted either way. The optative reflects the mood of wishful thinking while the subjunctive reflects the mood of doubtful assertion. I am truly interested in knowing whether Ofcom’s different field of endeavour and focal points amount to it having the same quality and weight of oversight that it currently enjoys and whether the subjective element which is being introduced by the verbs I have described allow for a different way for it to operate or a different mood to be generated. I do not know, because the words do not allow me to make a deduction and I have certainly not heard this mentioned or dealt with in our discussion thus far.
I said that I would not detain noble Lords for long and I shall not. I am normally an optimistic person and I end my short interventions by saying that I look forward to the next one. However, I sit down on this occasion in a more desultory manner, not sure that I do.
Lord Ashton of Hyde
I am sorry that the noble Lord is not looking forward to my reply—he would not be the only one. Let me answer some of his points.
He asked how many hours have been put into the production of the SI. I cannot tell him exactly, but we have been working on it for about 18 months to allow for the engagement of stakeholders and other government departments and the appropriate legal checks. The consultation might not be to everyone’s liking in the sense that it was not formal, but it was real and I shall share some more information with the Committee about who turned up. It was real and, for the reasons that the noble Lord, Lord Adonis, gave, we may be vindicated in our decision not to include another regulator on top of Ofcom. I think I have covered that.
When the noble Lord, Lord Griffiths, talks about whether it is regulation or supervision and a lessening in oversight, the point to bear in mind is that telecoms have always been regulated by national regulators. The EU Commission has a very particular role in this connected with EU matters—namely, the single market. It is obvious that if we are no longer in the EU and the single market, not only will that supervisory function not be performed by the EU because we will not be in it but there will not be a harmonisation problem.
Lord Foster of Bath
I said that I would not intervene but I am intervening. The Minister is well aware that the financial consequences of telecoms companies, for example, in the UK, which do not abide by regulations imposed by the European Union will be significant. Even following Brexit, there will be huge impacts, one upon another. Therefore, to suggest that Ofcom does not have to have regard to that is just wrong.
Lord Ashton of Hyde
I may have missed the noble Lord’s point. The regulatory framework set up through EU directives and regulations has been implemented in UK law and is administered and regulated by the UK. It will change, so in certain cases we have provided that Ofcom, the regulator, will bear in mind the current status of EU directives but in future will have the liberty to move away from them, which is only to be expected because we will not be in the EU. Therefore, we have taken account of EU law as we are trying to maintain the existing regulatory framework, although I accept that in future we might move away from it. The noble Lord, Lord Foster, says that it is changing. It is, and the basis of this SI is that we are leaving the EU, so there is change.
The noble Lord, Lord Griffiths, asked about paragraph 7 of the Explanatory Memorandum: why Ofcom may exchange information with the EU Commission or BEREC. The reason is that it will be given the option to do so if it is in the best interests of this country. It would be perverse to deny it the option to do that, so we are giving it that power. Both noble Lords rightly made the point that it will not, ex officio, be a member of BEREC. We expect it to be either an observer or a member of the various groups that I mentioned, and we hope that it will be. Whether it is or is not, we think it would often be in the regulatory interests of this country to exchange information. I think it is extremely likely that it would do so and I am sure that regulatory information will flow the other way. It is the subjunctive, I feel, in answer to the noble Lord’s question.
I am grateful for the consideration of the instrument and expect a very brief further discussion—consultation, possibly—later; I have made commitments on that. We think that the amendments contained in the SI are essential to ensure legal clarity, to reduce litigation risk and to protect consumers. Beyond that, we have agreed on the necessity for the regime to exist to correct deficiencies in retained EU law. On that basis, I hope that noble Lords will be able to approve the consideration of the regulation.
The Deputy Chairman of Committees (Baroness Garden of Frognal) (LD)
The Question is that the Motion be agreed to. As many as are of that opinion will say “Content”; to the contrary “Not-content”.
The Deputy Chairman of Committees
I must remind the Grand Committee that a single call of Not-Content has the effect of negativing the Motion.
Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018
(5 years, 9 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
That the Grand Committee do consider the Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018.
Lord Young of Cookham (Con)
My Lords, this statutory instrument, laid under the EU withdrawal Act 2018, is part of the legislative programme that the Treasury is undertaking to ensure that there continues to be a functioning legislative and regulatory regime for financial services in the EU. The statutory instrument has been debated and approved by the House of Commons. The SI will fix deficiencies in UK anti-money laundering law to ensure it continues to operate effectively post exit. The approach taken in this legislation aligns with that of other SIs being laid under the Act, providing continuity by maintaining existing legislation at the point of exit.
Turning to the substance of the SI, many noble Lords will be familiar with existing anti-money laundering legislation. The money laundering regulations set out the requirements on regulated firms to combat money laundering and terrorist financing. Further, the EU Funds Transfer Regulation specifies what information must accompany electronic transfers of funds. Finally, the Oversight of Professional Body Anti-Money Laundering and Counter Terrorist Financing Supervision Regulations established the Office of Professional Body Anti-Money Laundering Supervision within the Financial Conduct Authority in early 2018. Anti-money laundering legislation is designed to combat illicit finance, while minimising the burden on legitimate businesses.
In a no-deal scenario, the UK would be outside the EEA, and outside the EU’s legal, supervisory and financial regulatory framework. Therefore, these three pieces of anti-money laundering legislation would need to be updated to reflect the new position of the UK, and to ensure that the provisions work properly in a no-deal scenario. The changes primarily affect the financial services sector, but the impact will be minimal and we have engaged with industry extensively to ensure that affected firms are aware of the changes that we are making. These draft regulations will make the following changes to the UK’s anti-money laundering regime.
First, this SI will equalise the regulatory treatment of European Economic Area member states and “third countries” for correspondent banking relationships—that is, when one bank provides banking services on behalf of another bank. Currently, UK financial institutions apply enhanced due diligence measures to correspondent banking relationships with financial institutions outside the EEA. However, these measures are not required for intra-EEA relationships.
This SI will equalise the regulatory treatment, meaning that enhanced due diligence will be required for all correspondent banking relationships. This change better aligns with the Financial Action Task Force standards on the issue, and the existing practice of many UK institutions, which already apply enhanced due diligence because of the risks associated with correspondent banking relationships. The SI will also equalise regulatory requirements on the information about the payer and payee accompanying electronic transfers of funds. Therefore, UK payment service providers will be required to provide higher volumes of information accompanying transfers into EEA member states and other countries. These changes are being made to reflect the UK’s new position outside of the EU’s regulatory framework.
Secondly, this SI will transfer from the Commission the responsibility to make technical standards, which specify the additional measures required to be taken by credit and financial institutions with branches or subsidiaries abroad, to the Financial Conduct Authority. These standards are of a type similar to those currently made by the FCA, in an area where they have technical expertise. Therefore, the FCA is the appropriate body to take on this responsibility. The transfer of this power is necessary because the relevant standards are currently made by the European Commission.
Thirdly, this SI removes the obligation for certain UK persons to have regard to guidelines published by the European supervisory authorities. The UK will be outside the EU’s regulatory framework, so it would be inappropriate for UK persons to be legally required to have regard to these guidelines. Firms will continue to be required to have regard to guidance developed by UK supervisory authorities and industry bodies, thereby maintaining the same strong standards to counter money laundering and terrorist financing.
Finally, the current money laundering regulations require certain information to be communicated to EU institutions. These provisions will be removed, as they would no longer be appropriate once the UK is no longer a member of the EU. The House of Lords Secondary Legislation Scrutiny Committee queried the change in requirements to transmit information to EU institutions, and whether the FCA would be co-operating with its counterparts in other countries to combat illicit finance. However, the changes to information-submission requirements made by this SI relate to specific duties to provide information directly to EU institutions, such as the national risk assessment of money laundering and terrorist financing.
Legal obligations to submit this information would be inappropriate once the UK leaves the EU. It is important to emphasise that UK supervisory authorities, including the FCA, will continue to co-operate extensively and make information available to overseas anti-money laundering authorities in relation to firms which have offices within the UK. Therefore, UK authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering.
The Treasury has been working very closely with the FCA in the drafting of this instrument. It has also engaged extensively with the financial services industry on this SI, including UK Finance and relevant trade associations, and will continue to do so in relation to other SIs within the onshoring programme. Last November, the Treasury published the instrument in draft, along with an explanatory policy note to maximise transparency to Parliament and industry. The Treasury considers the net impact of business to be less than £5 million, so a full impact assessment has not been carried out.
In summary, this Government believe that the proposed legislation is necessary to ensure that the UK’s anti-money laundering and counterterrorist financing regime operates effectively, and that the legislation will continue to function appropriately if the UK leaves the EU without a deal or an implementation period. I hope noble Lords will join me in supporting these regulations.
Lord Kirkhope of Harrogate (Con)
My Lords, I hope it will be all right for me to intervene in this matter. As a former Member of the European Parliament, I had something to do with the fourth anti-money laundering directive and the high standards required by it and I would like to ask my noble friend one or two questions.
First, we have been obliged to operate enhanced due diligence only to countries outside the EEA, and post-Brexit we will find ourselves required to deal with all countries equally—in other words, with enhanced due diligence in all cases. I know my noble friend has just referred to the fact that many UK institutions apply this enhanced approach already and that the Financial Action Task Force recommends those standards but I would like to inquire of him as to the position regarding others. He said “most institutions” but I believe quite a considerable number do not wish to apply enhanced due diligence in countries where we are satisfied that the standards are common in the EEA and, of course, in the EU. I am rather worried about this and the obligations that it will now put on institutions which they did not have before. I think it is quite a significant change.
Secondly, I am interested in the issue of information. When payment service providers transfer funds outside the EU, there is a need for higher levels of information. I am concerned that, once again, post-Brexit we will require of UK PSPs a much greater volume of information accompanying the transfer of funds into all the EU states as well as those outside. Again, I wonder about the extent of those obligations and the amount of information. Is my noble friend aware of how that extra information should be obtained and what it would consist of? Can he advise me now or write to me if he cannot?
Thirdly, although it is not mentioned in this measure at all, I am quite curious as to whether any of these things will affect the status of so-called politically exposed persons. Currently, as noble Lords know, the term covers quite a large number of people, particularly those who have had a connection overseas—as they put it from this country—with receipts of moneys or involvement in business affairs. I wonder whether by bringing this back into this country and no longer being obliged to apply the rules that applied before, this will then recategorise or decategorise large numbers of people currently designated as PEPs and therefore subject to a very much higher level of scrutiny by our financial institutions.
I know that this is not a policy change as such but clearly this measure is a big change to obligations and procedures. There must be some costs attached and quite a lot of organisations may not be ready to carry out these new responsibilities in terms of the due diligence or, indeed, provision of information. Is my noble friend satisfied that, in the consultations and discussions that have taken place so far, our institutions are satisfied that they will be able to cope with this in the timescale we have?
Baroness Bowles of Berkhamsted (LD)
My Lords, I have a lot of common thought with the questions that the noble Lord, Lord Kirkhope, has raised, so I do not need to go into detail. I have no problem with, if you like, the way the handle has been turned on the routine adaptation but, again, the question comes of whether it was right to follow the symmetrical approach, so that immediately the EEA is in the third-country pot, or whether there could perhaps have been a transition that made it a little easier. This is not to say that in the longer term that is not the right destination, but I am not sure about a “big-bang” switchover. I, too, wonder what will happen under the Part 3 heading, “Customer Due Diligence”. Will this be another excuse for banks to extract life histories from an awful lot of people, quite a few of whom reside in this House?
Those of us who are former Members of the European Parliament ought, I suppose, to declare an interest; we tend still to have residual bank accounts and such things there. I should talk about this because the same rules apply to those bank accounts as apply to UK bank accounts. Whereas from the UK banks I get 20 pages to fill in, including, as I said, a life history and everything since the year dot, I seem to get one page from a bank in Belgium, which is under the same ruling. I would quite like to know how many of these rules are consequences of the legislation and how many are consequences of gold-plating or uncertainty among our banks. It is, in a sense, an identity thief’s charter when you have to fill in all this information, along with copies of your passport and everything else, and upload it while unsure of where it is going; or you can take it into your branch. Anything that helps with regard to that would be useful to know.
In this case, there would have been an argument for being asymmetrical for at least a little while. I regret that that opportunity was not taken, but I do not believe anything has been done that offends, as such, against what one is supposed to do under the EU withdrawal Act.
Lord Tunnicliffe (Lab)
My Lords, perhaps I should say a couple of words about where we find ourselves with these SIs. As Her Majesty’s loyal Opposition, I do not want our participation in this process to be misinterpreted in any way as an endorsement of a no-deal exit from the EU; I cannot think of a worse outcome than no deal to the chaos that we find ourselves in. However, we have to accept that, given this chaos, which has to be laid at the Government’s door, there is a real possibility that we will stumble out of the EU without a deal. While the Government seek to make contingency plans for this, by bringing in front of us what one might call no-deal instruments, we will do our duty of scrutinising them as best we can.
So far, the Government seem to have played by the rules. In my view, the rules are set out first in the European Union (Withdrawal) Act 2018, but also in paragraphs 7.1 through to 7.9—which are identical in all Explanatory Memoranda that come from the Treasury. I believe they say that there will be no new policy introduced except where necessary to achieve the transition.
I diligently read through the Explanatory Memoranda. I fear that I did not read the instruments with as much care, because, frankly, I would not know how to start. A lot of them relate to other documents and getting up-to-date, amended copies of them is difficult, so I have to judge an instrument on the basis of the Explanatory Memorandum. All it basically does is say that EEA countries become third countries. It then goes on to make the consequential changes, which involve transferring various responsibilities. In relation to this instrument in particular, it also defines high-risk countries, which I can see is important.
I have only two questions. The problem with these memoranda is that the authors know what they are talking about, whereas the reader does not know what they are reading about. Having staggered through the document, when I got to paragraph 2.12, I became exhausted. I shall read what I think is the offending passage:
“The standards are to specify what additional measures are required to be taken by credit institutions and financial institutions with branches or subsidiaries abroad, when national law outside the UK does not permit group-wide policies and procedures to be implemented that are at least as strong as those that are required by the MLRs”.
I hope that the noble Lord can make some sense of that.
My only other comment is on the tone of the memorandum—this is true of other memoranda, but I shall centre on this one for the moment. The obligation to report to EU institutions is removed, and one can see why that is perfectly logical. However, money laundering is an international crime with an enormous impact on ordinary citizens, relating particularly to terrorism and to their wealth, because of the crimes committed and their impact on the economy. It is crucial that, even if we are daft enough to leave the EU without a deal, international co-operation continues. It is not just about taking the law where it is now; it is about the law needing to develop as criminals become cleverer and do different things, and we understand more about what they are doing and what action and international co-operation are necessary.
These regulations are brought before us as no-deal SIs and will be commenced on exit day. It is clear what role they will have if it is a no-deal exit, but if a deal is done and we enter a transition period and then come to the end of it, what will happen to this statutory instrument? Will it be repealed or will it be paused? The answer to that makes a big difference to its impact. If the instrument is merely paused, we are making law for the future. If it is repealed and we essentially start from scratch as part of the negotiation in the transition period, and if sanity then reigns and we complete a deal, this SI will not matter; we will be looking at longer-term ways of managing the problems to which it relates.
Lord Young of Cookham
My Lords, I am grateful to all noble Lords who have taken part in this debate, particularly my noble friend, with his background as a Member of the European Parliament.
I agree with the noble Lord, Lord Tunnicliffe; in so far as the Government do not want no deal, we do not expect no deal, and we accept entirely that it will be much better to make progress. He also asked what would happen to this SI if, as I hope, there is a deal. The answer is that the withdrawal Act would switch it off, and it could subsequently be either reintroduced or possibly amended in the light of whatever agreement we came to during the transitional period.
Lord Tunnicliffe
Could the noble Lord define “switching off” slightly better? Is the law taken out or repealed? The term I have used is “paused”, which is rather different from “deleted”.
Lord Young of Cookham
I will read out the exact words in my brief: “Are these SIs for a no-deal scenario only? This legislation would not come into effect in March 2019 in the event of an implementation period, which will be delivered through a separate piece of legislation”—as I think I said—“through the EU (Withdrawal) Bill. It could be amended to reflect an eventual deal on the future relationship or to deal with a no-deal scenario at the end of the implementation period”. I hope that that is not too far from what I initially said. Alternatively, it could be delayed until the end of the implementation period with the possibility of repeal or amendment, depending what happens. The answer to the noble Lord’s direct question is that if there was a deal, it would be, in my words, switched off, or, in the words that I have just read out, it would not come into effect, and the withdrawal Act would be the vehicle through which that happened.
My noble friend Lord Kirkhope mentioned the burdens on banks. It is important to focus on the fact that we are talking about relationships with correspondent banks with regard to the standards he referred to. As I understand it, at the moment there are two standards: one for inter-EEA banks and the higher one for outside. In future, there will be one standard, so to some extent it will be slightly easier for the banks. As I said at the outset, in many cases, the banks already provide the higher standards—the enhanced due diligence—even where they do not have to.
In response to the points my noble friend made, which were also made by the noble Baroness, Lady Bowles, we plan to have some transitional arrangements. I hope that they will help both my noble friend and the noble Baroness. We have announced plans to grant the regulators a temporary power to phase in these new requirements that would apply to firms in a no-deal exit. This power must be exercised by the regulators in accordance with their statutory objectives, as set by FiSMA. This is a sensible measure to ensure that the firms have the time they need to adjust in an orderly way to the changes brought about by Brexit. The regulators will be seeking industry views on where it would be appropriate to phase in new requirements. However, the short answer to my noble friend is that it is no longer appropriate to treat the EEA differently, so we must either reduce all the standards or enhance them. We have chosen to enhance the standards, which, as I said, meets the higher standards that I think we would expect in any case.
So far as politically exposed persons are concerned, this statutory instrument will not affect the regime for them following exit. My noble friend was rightly concerned about the effect on business and the financial services sector. We believe that the SI will have a minimal effect on businesses across the sector. As I said when I spoke at the beginning of the debate, we consider that the net impact on businesses will be less than £5 million a year. Picking up again on the point made by my noble friend, we understand from the FCA and industry that in practice this already takes place because of the risk that firms associate with correspondent banking relationships. As such, this will lead to minimal increased costs to businesses beyond the status quo.
I turn now to payment services providers which again were mentioned by my noble friend. They will also be legally required to provide a greater volume of information to their EEA counterparts in connection with the cross-border transfer of funds than is currently the case, thus equalising the requirement across third countries. We understand from the industry that this takes place already and any changes will require firms to expand their existing IT systems to firms with which they transact.
On the information requirements concerning the electronic transfer of funds, which was a point I made earlier, HM Treasury has communicated that it will bring forward measures to give the FCA some flexibility to phase in changes to the regulatory requirements on firms under the EU withdrawal Act. They will use the powers to waive or modify some requirements to allow for a smooth transition to the post-exit regulatory regime.
Baroness Bowles of Berkhamsted
When there is a change, will there be any kind of notification for businesses and others? One of the biggest problems that, if you like, completely innocent people can experience when they are transferring money is that it gets suspended somewhere while further checks are made. That is more likely once we have gone into a third-country regime than being in the EEA. If you are transferring money for the purchase of a property or something significant for your business with a contract attached, to suddenly find that your money has been delayed by several days or a week can mean that you are in breach of the contract. Because of the particular way in which the money laundering rules operate, we are not allowed to warn people because of the risk of warning the potential money launderer. People should at least be aware that the rules are switching because that would be useful to know in order to build in some certainty. I am thinking in particular of businesses. They will have to realise that they must send money with time to spare.
Lord Young of Cookham
I am grateful to the noble Baroness. The last thing we want is to have any turbulence at the point of transition or to have legitimate transactions held up. The FCA will be consulting with the banks and payment services providers concerned, particularly in the light of the transitional arrangements that I mentioned earlier. Of course they have known for some time that these changes are on the way so that they have been able to prepare for them. However, one of the consequences of what I have just said is that there does not have to be a sudden switchover on 30 March or 1 April because the Treasury and the FCA will be introducing transitional arrangements. There will be due warning before any change takes place.
Lord Kirkhope of Harrogate
The concern of those of us who have been involved over the years with these anti-money laundering directives is the way they have been implemented in different member states. This country has always been more than diligent about making sure that any directive we have prepared in Brussels has been implemented to the nth degree over here. In doing so, the FCA has been used in a way that I believe has meant that a lot of financial institutions have gone further than was necessary not only for their own economic convenience as much as anything else but also because we in Britain have been more draconian in terms of implementation as the anti-money laundering directives have been developed, in particular this fourth one. The whole point is proportionality; in other words, it is important that we have now introduced more balance to the way in which we hope that the fourth directive will be implemented in member states. However, yet again in this country the FCA and our own financial institutions have been more than zealous in their activities.
My noble friend suggests that we should always look for higher standards, but standards should not always be equated with obligations. The obligations we have placed upon our consumers and others in this country are very strong indeed. I hope that the FCA will not use the proposed flexibility and more room to manoeuvre to go in the wrong direction because that would put us at a massive disadvantage economically.
Lord Young of Cookham
My noble friend will know that when we leave the EU, the obligation that we already have will be transferred. Thereafter, looking to the future, we will no longer be bound by EU regulation, so the opportunity for gold-plating them will not exist; we will be in control of our destiny. I am sure that my noble friend would not want in any way to water down the robust regime we have in this country to deal with money laundering, terrorist financing and the rest. We must get the balance right, which is what I think my noble friend was saying.
Lord Tunnicliffe
I intervene on that point because there is surely a contradiction. Surely when we leave the EU, the opportunity for the state to gold-plate—take present regulations and make them progressively more difficult—will be unfettered. The Minister has to convince us that, given that freedom, it will not be misused.
Lord Young of Cookham
The noble Lord has repeated what I meant to say: at the point of transfer, the existing EU regime is on our statute book. We will no longer be bound by future directives so there will not be the opportunity to gold-plate: we will be master of our own house. Having said that, I am sure that the noble Lord and my noble friend would not want in any way to water down the tough regime we have against money laundering and terrorist finance, but we will be in control of our destiny rather than having to implement directives.
Reverting to the point that the noble Baroness made, the FCA does not expect firms or regulated entities providing services within the UK’s regulatory remit and other stakeholders to prepare now to implement the changes from exit day. The FCA is engaging with the industry extensively to ensure smooth and effective implementation of the changes.
The noble Lord, Lord Tunnicliffe, asked me about paragraph 2.12 of the Explanatory Memorandum. The SI confers power on the FCA to make certain technical standards in an area in which it has technical expertise. The transfer of power is necessary because the relevant standards are currently made by the European Commission. The technical standards specify what additional anti-money laundering measures are required to be taken by banks with branches or subsidiaries abroad. These measures include policies and procedures to counter money laundering and terrorist financing, and must be at least as strong as those required by the UK money-laundering regulations.
For example, if a UK bank has a branch abroad in a country that does not have anti-money laundering and terrorist financial requirements as strict as ours, the parent bank must ensure that the branch applies measures equivalent to the UK regulations. If the law of the country in question does not permit such measures, the UK parent bank must take additional measures to handle the risk of money laundering and terrorist financing effectively. The FCA will be able to make technical standards specifying what additional measures such a parent bank may take and the minimum action needed to handle those risks.
The noble Lord also asked about high-risk third countries and how the list will be updated. On exit day, the EU high-risk country list will be onshored and form part of retained EU law. Subsequently, references to the list will be static rather than dynamic, meaning that updates that the EU makes to the list will not flow through into UK law. The list will evolve only as amended by UK law. The Sanctions and Anti-Money Laundering Act 2018 gives the UK power to maintain a list of high-risk jurisdictions in connection with which enhanced due diligence needs to be performed. Updates to the list will be made through the affirmative procedure. Therefore, they can come into force before parliamentary approval but will then cease to have effect if both Houses do not approve them within 28 days of their being made. Parliament will have scrutiny on updates, while allowing updates to be made quickly to reflect changing circumstances in third countries. There will be a significant increase on current levels of scrutiny as Parliament has no direct influence over updates to the list at the moment.
Finally, the noble Lord asked how we would co-operate with the EU on anti-money laundering efforts once the UK leaves. National anti-money laundering authorities will continue to make use of international co-operation to detect, prevent and investigate money laundering. There is a legal gateway in the regulations that provides that UK supervisory authorities must take such steps as they consider appropriate to co-operate with overseas AML authorities. Moreover, the political declaration agreed with the European Union contains a statement of mutual intent that the future relationship should cover money laundering and terrorist financing. This includes commitments to put in place arrangements for effective and swift data sharing, allowances to support law enforcement, measures for practical co-operation between law enforcement authorities and agreements to support international efforts to prevent, and fight against, money laundering and terrorist financing.
I hope that I have answered the points that noble Lords have made.
Market Abuse (Amendment) (EU Exit) Regulations 2018
(5 years, 9 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Young of Cookham
That the Grand Committee do consider the Market Abuse (Amendment) (EU Exit) Regulations 2018.
Lord Young of Cookham (Con)
My Lords, as this instrument has been grouped I will speak also to the Credit Rating Agencies (Amendment) (EU Exit) Regulations 2019.
The Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. The Treasury is laying SIs under the EU withdrawal Act to deliver this and a number of debates on these SIs have already been undertaken in both Houses. The SIs being debated today are part of this programme.
These SIs will fix deficiencies in UK law relating to market abuse and credit rating agencies to ensure that they continue to operate effectively post exit. Both SIs will be critical to ensure good market conduct practices to protect market integrity. The approach taken in this legislation aligns with that of other SIs being laid under the EU withdrawal Act, providing continuity by maintaining existing legislation at the point of exit, but amending where necessary to ensure that it works effectively in a no-deal context.
Market abuse involves numerous illegal practices in relation to financial markets. Such practices include insider dealing, market manipulation and the unlawful disclosure of inside information. In 2016, the EU implemented the Market Abuse Regulation which empowered EU regulators and the Financial Conduct Authority in the UK, to prevent and detect market abuse. MAR aims to increase investor protection and market integrity, thereby enhancing the attractiveness of EU securities markets for capital raising.
The regulation applies to financial instruments traded on EU trading venues and worldwide market abuse that concerns these instruments. In a no-deal scenario, the UK would be outside the EEA and outside the EU’s legal, supervisory and financial regulatory framework. The MAR therefore needs to be updated to reflect this and to ensure that the provisions work properly in a no-deal scenario. These draft regulations will amend the MAR to ensure that the UK sustains an ability to prohibit market abuse and to enforce against it effectively post exit.
Firstly, the EU-wide scope of MAR will be retained by this SI, so it will continue to capture financial instruments traded on both UK and EU trading venues and global conduct that impacts these instruments. A UK and EU scope accounts for the deeply integrated relationship between the financial markets in each jurisdiction due to current arrangements in the EU. This is necessary so that the FCA can continue to investigate, prohibit and pursue cases of market abuse that relate to financial instruments in EU markets that impact on UK markets if EU regulators are unable or unwilling to do so. If this provision were not in place, the FCA would not be able to enforce against market abuse on EU trading venues, and would subsequently not be able to protect the integrity and reputation of UK markets.
Lord Deben (Con)
When my noble friend says that the FCA has the necessary resource capacity, does that mean that it could do it if it had the money and resources to do it—in other words, if it were intellectually able to do it—or does he mean that it already has the financial and staffing capacity to do it?
Lord Young of Cookham
The FCA has been consulted about these regulations. If there were a no-deal scenario, I am advised that it has the necessary resource capacity to effectively carry out its new function. Perhaps I can deal in more detail with my noble friend’s question now.
As I hope I said, the FCA has dedicated the necessary resources to account for the additional work through its 2018-19 business plan, and it will ensure that its considerable experience and technical expertise in regulating the financial services sector is reflected in its new supervisory role in relation to the CRAs.
Lord Deben
I am sorry to trouble my noble friend again but who will pay for this? The resources of the FCA are, to a large extent, raised through various kinds of costings. I declare an interest, as set out in the register, as the chairman of PIMFA. Who will pay this bit of its budget?
Lord Young of Cookham
My Lords, the chief executive of the FCA, Andrew Bailey, has said that he expects to hold FCA fees steady for a year or so, assuming that there is an implementation period. However, the FCA is able to increase its fees should it need to increase its income in the event of no deal.
Baroness Bowles of Berkhamsted (LD)
As we have got on to the subject of fees, when the credit rating agencies want to get approval from ESMA, they have to pay a fee. Therefore, will we not have a comparable fee or is it just all part of the steady-state budget?
Lord Young of Cookham
They will continue to have to pay a fee, so to that extent there will be no change, but instead of it going to ESMA, it will go to the FCA.
Furthermore, the SI will require firms to establish a legal entity in the UK to register with the FCA, in accordance with the current policy under CRAR. The SI provides the FCA with pre-exit powers so that it is able to begin registering firms, and the instrument will also establish three regimes to allow for FCA registration to smooth the transition from ESMA supervision to FCA supervision. First, UK-established CRAs will be able to convert their ESMA registration into one with the FCA through the conversion regime. Secondly, newly UK-established legal entities that are part of a group of CRAs that have a registration with ESMA will enter a temporary registration regime if they have submitted an advance application to the FCA which has not yet been processed. Thirdly, certified CRAs established outside the EU will, through the automatic certification process, be able to notify the FCA of their intention to extend certification to the UK.
The SI will also enable credit ratings issued by a CRA established in the UK, with an FCA registration, to be used for regulatory purposes in the UK. The instrument will also enable credit ratings issued before exit day by EU firms that register, or apply for registration, with the FCA to be eligible for regulatory purposes in the UK for up to a year.
In addition, in relation to appeal rights, given the new enforcement rules provided to the FCA, references to EU institutions will be replaced with the appropriate UK bodies. The Upper Tribunal will now be responsible for appeal requests that have been made as a result of an FCA decision, and the FCA’s warning and decision notice will apply to this SI also.
The Treasury has been working closely with the FCA in the drafting of these instruments. Both bodies have continuously engaged with CRAs and taken on board their views where possible when deciding on the direction of the instrument to ensure that the market is informed of its policy intention. The Treasury published the instruments in draft, along with an Explanatory Note for each, to maximise transparency to Parliament, industry and the public ahead of laying.
In summary, we believe that the proposed legislation is necessary to ensure that market abuse is effectively prohibited and credit rating agencies are appropriately supervised, and that the relevant legislation will continue to function appropriately if the UK leaves the EU without a deal or implementation period. I hope that noble Lords will join me in supporting these regulations.
Baroness Bowles of Berkhamsted
My Lords, the first thing that I noticed on page one of the draft instrument is that it says this is done not just under the EU (Withdrawal) Act but under the European Communities Act, but it does not tell us which bits are which. If you are trying to go through and ask whether this corresponds to the rules laid down in the EU (Withdrawal) Act, you do not know, because the rules under the European Communities Act are not exactly the same. I do not find any difficulty in what has been done here, and I have come across this before in other statutory instruments. But I think it would be good practice when you are doing it with powers in lots of different places if the relevant bit of the instrument were to say which the enabling power was instead of putting it in an anonymous way. But then, I am still learning about how these things are done in the UK.
I accept the points made by the Minister about what I call the symmetry point: that some bits here need to be retained, extending into EU territory, if I can put it that way, so that we know what is going on. Emissions trading is one example of that. Perhaps I should declare an interest on the register—the usual London Stock Exchange Group plc issue. How will we get information back into the UK from, for instance, the trading of UK instruments on exchanges in the EU? This is the other side of the trading obligation. If the EU says that you can trade only on recognised exchanges—there are exchanges that, for example, trade UK-listed shares—that means that, unless there is some kind of deal done, people will theoretically want to trade in the EU rather than the UK, or they will want to cut off trading in the EU so that they own the trade in the UK. We have concentrated on that when talking about trading obligations; we have not talked about what happens to the information from the trading venues that remain in the EU.
I am sorry that I had not thought this out previously; it just occurred to me while the Minister was speaking. This is something for the regulators and, probably, the Government to look at as we move forward and work out what the EU is going to do in respect of exchanging information with us. The exchanges provide data to the FCA so you can see whether there is any funny business going on; it is one of the methods of detection, as you can see spikes and so forth that might indicate something strange.
Another question on symmetry is that I wonder why we have bothered, in new paragraphs 5 and 5A on page 11 of the regulation, to list all the European organisations that still have exemptions. One of the things I did from time to time in the EU, perhaps a little mischievously, was to take out the list of all the bodies that did not have to come under market abuse regulations. As I have said more than once, central banks can do things that, if anybody else did them, would be called market abuse. Generally speaking, we allow central banks to do that.
There is a general provision for certain public bodies and central banks of third countries. If the EU is now a third country, why bother to state that the Treasury can make particular exemptions for member states, the ESCB, members of a federal state, the Commission, the European Investment Bank, the European Financial Stability Facility and the European Stability Mechanism? Why not just treat them as generic public bodies? This gives the EU special treatment. Yes, one might want to prepare a list, but was this just a short cut? If we were going to compact these things down for the long term and if we were going to treat the EU as a third country, why list all EU bodies but not other third-country bodies? I am not sure that I would have put them on the face of the regulations, just for the sake of it. Those are all the issues that I wish to raise at this point.
Lord Deben
My Lords, I want to make a couple of fundamental points. First, my noble friend uses the word “equivalent”, but of course this is not equivalent. It is equivalent only in the sense that it applies to Britain; therefore, immediately, it is not the same thing. He may say that this is chopping logic, but I think that it is important for us to underline that when you take into British law what has been up to now European law, you assert your control over what happens here but you deny the fact that you had some control over what happens over the whole area. That, therefore, is not equivalent. It may be what people want, but I doubt that people who voted to leave understood the details. Indeed, none of us did until we started to go through it—what I say is not in any way insulting to either side. The fact is that this is much more complex than we thought.
The effect, which I think is important, is that we say of many of the things that we are talking about, “These institutions are international. We are still part of Europe, in the sense that we are working in this space. Therefore, we are going to try, even if we leave the European Union and even if we do so without a deal, to have arrangements that will overcome these problems”. Then my noble friend says, “We will do these things on a discretionary basis”. The problem with a discretionary basis is that it is exactly that. There will be occasions when the British Government—or the FCA—do some of these things and occasions when they do not. My concern is that, by translating where we are now into a national position and not an international position, as far as the financial services industry is concerned—I have declared my interest—we introduce a degree of randomness that we do not have at the moment. At the moment, we know when these things happen. Under the regulations, we will not know, because it will be at the discretion of the British Government to decide what things they will do in common and what things they will not.
The second thing to say is that this is entirely one-sided. We are saying that we will take these powers over the things that we have control of, but we have no deal under which we can get the information and no deal on things over which we have partial control. The noble Baroness who just spoke is absolutely right. There is a real issue about information. How will we know some of these things? If we leave the European Union and do not have information in common, there will be things that affect us which we will not know unless we have a deal which allows—and not only allows but makes—the European authorities to be in a position to tell the Government or the FCA the information that they have.
The third important thing is the whole question of who pays the bill. I am very much relieved by the Minister’s assertion that, for example, credit agencies will pay a fee, as they do at the moment, and that that fee will come to the FCA rather than to the European authorities. But it is important for him to recognise that there is already considerable unhappiness about the unaccountability of the FCA for the charges that it makes. There is no way of monitoring the charges which the FCA makes—no superior court to go to. There is a constant problem with the FCA because many of its charges seem, to those of us who represent people who have to pay them, to be unconnected either with the rise in the cost of living or indeed with the services that are provided. The difficulty with bringing everything back into this country is that there is nowhere to appeal to. The FCA is entirely under its own decision-making process, and says, “We have got enough money, but if we don’t have enough money, we’ll just raise the tariff”. I want to know from the Minister when we will have a situation in which even a group of people with whom I have no very close relationship—namely, the credit rating agencies; indeed, I have some pretty serious complaints about them—ought to have some opportunity to complain about the price that they are charged. I do not see any reference to that, nor indeed has the Minister mentioned it altogether.
My last point is, simply, that of course everything therefore comes into the hands of the Treasury. That is what happens when you nationalise what was and should be an international effort. Everything is decided by the Treasury. When people talked about “taking back control”, what that actually means here is that the Treasury takes back control. I see no opportunity for anybody outside the Treasury to be able to oversee the decisions that are made here. I say to the Minister that I am not at all sure that that is a very cheerful future. It seems that there was a great deal to be said for the much more open way in which the European Union deals with these matters. It is a much more transparent system than the system that we have in this country. One of the pieces of truth which I am afraid has been lost in the debates about Brexit is that in many areas, the European Union has been much more willing to discuss, much more open and much more transparent. We are going to lose all that, and I do not see anything in the Minister’s speech—admirable though it was—that indicates that the Treasury will open itself up to a more transparent system and provide opportunities for people to complain, argue and to know what the details are, and I see no sign that the same will happen with the FCA. This is therefore a further closure of the mechanisms of the financial world, and less transparency and openness. I am sorry that the Government have not taken this opportunity to say, “When the time comes, if we leave the European Union, we will start on a process of opening these things up”. I realise it cannot be part of this SI because it would change the nature of the legislation but I would like to hear something of the willingness of the Treasury to mimic, to some extent, the openness of the European Union, which we are now going to lose.
Lord Tunnicliffe (Lab)
My Lords, perhaps I can start by posing the same question on these two SIs as I did before. Are they no-deal only SIs or ones that will be switched off? I am entirely happy for the Minister to reference his previous reply, if that is, in fact, the reply he will give. I have tested these SIs as best I can on the basis of paragraphs 7.1 to 7.9 of the Explanatory Memorandum. Noble Lords will have read these points before as they are the same in every Explanatory Memorandum. They basically say that new policy will not be introduced except where necessary.
Largely speaking, I have found nothing to complain about. However, there were one or two areas I did not understand. I start with the Explanatory Memorandum on the first SI, on market abuse. In paragraphs 2.7 and 2.8 once again I think the problem is that the author knew what they were talking about and I do not. The first sentence of paragraph 2.8 says:
“The decision to keep instruments admitted to trading or traded on EU venues, rather than amending to a UK only scope, was taken because of the close relationship between UK and EU markets”.
I hope that the Minister might expand on that because I find the language of that paragraph, in particular, extraordinarily difficult to understand.
On international co-operation, we have had one reply. I want to press the noble Lord further. We hope that the outcome of this—no matter how badly we do it—is that we are still in this international market and therefore working together not just with the EU but with the rest of the world. As I understand it at the moment, we effectively work with the rest of the world keeping abuse regulations, in particular, up to date through the channels of the EU. How will that be replaced? The abuse regulations, in particular, clearly have to be kept up to date.
The remaining thing to say about the first SI is that it should not be in front of us because of the absurd paragraph 12.5 in the Explanatory Memorandum that says we are going to have an impact assessment but not until we have agreed the instrument. As we know, the noble Lord, Lord Bates, took some stick on that—I think that would be the right term—and your Lordships might moderate that stick by some useful comments. I do not know.
Moving on to credit rating agencies, I have a couple of questions. One is, once again, due to my failure to understand. I did get O-level English—I am not that bad, I hope. My understanding of the three bullet points in paragraph 7.12 of the Explanatory Memorandum diminished as I read through them. In particular, I have no idea what this means:
“The Automatic Certification Process will enable Certified CRAs established outside the EU to notify the FCA of their intention to extend certification to the UK. Like the Conversion Regime, these notifications must be made before exit day”.
I do not know what a “Certified CRA” is.
Finally, paragraph 7.15 covers enforcement and makes reference to criminal actions. It also makes reference to sections in FSMA, which would be a joy if I had an up-to-date copy to check them against. What I would like to be reassured about—or not if it is not true—is whether credit rating agencies are subject to the requirement to have a senior management regime where the clarity of roles is such that if a criminal prosecution was to take place, as referred to in this paragraph, that prosecution could be directed at an individual.
Lord Young of Cookham
My Lords, I am grateful to all noble Lords who have taken part in this debate and I notice that neither the noble Baroness, Lady Bowles, nor the noble Lord, Lord Tunnicliffe, have any fundamental objections to the detail of the SIs before us. I shall try to deal with the points they have made, along with those made by my noble friend. I was asked why the European Communities Act is mentioned. The answer is that the ECA powers are used to make consequential amendments to the Criminal Justice Act 1993 and the UK Market Abuse Regulation 2016. The European Communities Act is mentioned because it is the parent rather than the withdrawal Act.
My noble friend raised a number of points that go slightly wider of the mark. I would just say to him that it is a consequence of leaving the EU—like him, I campaigned to remain—that we can no longer influence what he described as “over there”. I used the word “equivalence” because what we are trying to do is make sure that if and when we do leave, the regime in this country is as equivalent as it can be to the regime when we were in the EU. Likewise, he talked about discretion. Indeed, we will not have the discretion that we have at the moment to influence what happens in the EU as a direct consequence of us having left.
Both my noble friend and the noble Baroness, Lady Bowles, raised the question of how we get information from the EU. In terms of ESMA and EU regulators co-operating and sharing information with the FCA, it will look to make use of the existing arrangements in the Financial Services and Markets Act 2000 to co-operate and share information which should be in the interests of both parties. We hope that that will continue. I was asked why we have bothered to keep paragraph 5 in the MAR SI, which is the list of EU institutions. We have omitted these exemptions from the UK MAR to achieve symmetry with the EU, but we recognise that after exit we may achieve or negotiate closer links, in which case it would be desirable to reinstate the current position if it was reciprocated or desired. I was also asked why we have exempted EU bodies under MAR. The UK and the EU markets are highly integrated, a point made by the noble Lord, Lord Tunnicliffe, and the relationship between them means that the exemptions may also be necessary for EU institutions interacting in the UK market.
My noble friend raised the issue of FCA fees. He will understand that those are not within the scope of the EU withdrawal Act powers or indeed within this statutory instrument. However, I hope that he was reassured by what I quoted from the chief executive, Andrew Bailey. He expects FCA fees to remain steady for a year or two, assuming that there is an implementation period.
The noble Lord, Lord Tunnicliffe, asked why the scope of this SI covers financial instruments in both UK and EU trading venues. I think the answer is that there is a very close relationship between the UK and EU markets and the scope provided by this SI ensures that the FCA will continue to have the ability to investigate and pursue cases of market abuse related to financial instruments which affect UK markets. UK companies may have instruments that are quoted not in London, but in Europe. If there were abuse there, it could affect the integrity of the UK market. This means that the FCA could take action where activity in a financial instrument, which was traded on an EU venue, impacted on UK markets. We want to maintain the current levels of integrity and confidence that UK markets currently hold. The impact assessment—
Lord Tunnicliffe
There seems to be an extraterritorial competence here, which is pretty unusual in English law.
Lord Young of Cookham
We would expect the EU regulators to intervene and investigate market abuse in an EU trading venue of a UK-related instrument. We would expect it to take the lead. The provision in the SI is for what I hope is the unlikely event that they decide for whatever reason not to intervene, but that we feel there is a need to investigate market abuse because it is having an impact on UK markets. That is why that particular power is as I have said.
To return to the lack of an impact assessment, we did ship a bit of water yesterday. We recognise the importance of having impact assessments available to inform these debates. Treasury Ministers are doing everything they can to make these available as soon as possible. They are in discussions with the Regulatory Policy Committee to improve the impact assessments and enable them to complete their review of them. We hope to publish the relevant impact assessment next week.
Lord Tunnicliffe
I omitted to congratulate the noble Lord on getting out an impact assessment on the final SI—the credit rating business. Because it came out, I was foolish enough to read it; it is interesting that the numbers showed a cost to the industry of £11.4 million. I did not really understand what that meant—whether the figure was big or little. It is obviously £11.4 million, but do these people make hundreds and thousands of millions of pounds such that it is nothing or will it be a significant cost to them?
Lord Young of Cookham
It is a very good question, and the answer is that we do not have the exact information as to the exact turnover or number of people employed in the CRAs. I will make further inquiries and see if I can shed some light on that. I might get some in-flight refuelling.
Lord Deben
When my noble friend sheds some light on that, would he be kind enough to explain something which is often hidden in this? I do not quite understand why there is an additional cost if we are to do the same thing, only locally, because they must have been paying somewhere else. Could my noble friend make sure that we have an answer that shows which bits are, if you like, real additions and which are a replacement for somewhere else? That is all I want to know.
Lord Young of Cookham
Seeing whether one can net it off is a very good question, and I will see whether we can do that—I probably cannot do it on my feet.
To revert to the point made by the noble Lord, Lord Tunnicliffe, about how the £11.4 million cost to the credit rating agencies relates to the size of the industry, we expect credit rating agencies to incur an estimated £10,000 per firm for changes to IT systems and £60,000 per firm for reporting requirements. This is for the five firms that the FCA expects to enter the regime. On top of that, there are familiarisation costs. Perhaps I could write to the noble Lord with more information, seeing whether we can net it off, as my noble friend has just said, by looking at what they have to pay at the moment.
The answer to the noble Lord, Lord Tunnicliffe, about the status of this SI, if there is an agreement, is the same as in the last debate. The SIs would be delayed and may then be repealed or amended as appropriate, depending on what deal we actually do.
The noble Lord asked for an explanation of the third option of paragraph 7.12 of the Explanatory Memorandum. This relates to credit rating agencies’ pre-exit applications to the FCA. All credit rating agencies will need to register with the FCA in order to establish legal entities in the UK following exit. Firms can complete this registration through the automatic certification process. Basically, if you have a credit rating agency which is located outside the EU but which has registered with an EU credit rating agency, it can apply to have that certification extended to the UK in a sort of passporting arrangement.
The noble Lord, Lord Tunnicliffe, asked about the senior management structure of credit rating agencies and whether individuals could be held responsible. It is a good question. The senior managers and certification regime does not currently apply to credit rating agencies; I think that one of the reasons is that they do not actually handle customers’ money, which of course banks and other agencies do. Regulation 22 of the SI applies Section 400 of the FiSMA, which provides that if an offence committed was with the consent or connivance of an officer of the body corporate, or due to neglect on its part, the individual as well as the corporate is guilty of an offence.
Finally, on international co-operation, the MAR SI amends Part 8 of the FiSMA to facilitate international co-operation between EU and non-EU regulators and the FCA. There are existing co-operation provisions for cases of market abuse that we will seek to rely on. Related to that, both the Treasury and the FCA will continue to co-operate internationally with the EU to facilitate identification and enforcement of market abuse, and we are confident that the FCA and HMT can continue this co-operation despite no longer being part of the EU.
Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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Lord Young of Cookham
That the Grand Committee do consider the Credit Rating Agencies (Amendment, etc.) (EU Exit) Regulations 2019.
Relevant document: 11th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee A)
Merchant Shipping (Recognised Organisations) (Amendment) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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Baroness Sugg
That the Grand Committee do consider the Merchant Shipping (Recognised Organisations) (Amendment) (EU Exit) Regulations 2019.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, the draft regulations that we are considering will be made under powers in the European Union (Withdrawal) Act and are needed if we leave the EU in March without a deal.
Recognised organisations, or ROs, play an important role in ensuring that ships are built and maintained to operate in compliance with standards on safety and the prevention of marine pollution. They carry out these functions on behalf of maritime nations. In the UK, the Maritime and Coastguard Agency delegates about 85% of its survey work to ROs.
Globally, the International Maritime Organization develops rules on ROs. The IMO’s Recognized Organizations Code entered into force in 2015. The code contains criteria against which ROs are approved, authorised and assessed, and gives guidance on how flag states should monitor ROs.
The EU has adopted legislation to harmonise the way in which member states implement those IMO requirements. Under EU legislation, member states may delegate the inspection and survey of ships to EU-recognised ship inspection and survey organisations, or EU ROs, by authorising them to act on their behalf. At present there are 12 EU ROs. Six of them have been authorised to act on behalf of the UK. The Maritime and Coastguard Agency intends that these six ROs would remain authorised by the UK and be recognised as UK ROs following our exit from the EU.
The MCA regularly meets UK-authorised ROs and has kept them informed of these proposals. They have raised no objection and understand why the changes are needed to ensure that the UK continues to have a functioning statue book for the approval of ROs.
EU Regulation 391/2009 and related legislation established a system for approving ROs; criteria for assessing RO performance, which is based on IMO criteria; monitoring measures and remedial measures if ROs are underperforming, including fees and penalties and, finally, the removal of RO status.
The European Union (Withdrawal) Act retains in UK law EU directly applicable legislation, such as that on ROs. It makes provision in Section 8 to correct deficiencies in such EU legislation as arises from the UK leaving the European Union. We need to amend that retained EU legislation on ROs for the legislation to function correctly in the future. The regulations will therefore amend EU Regulation 391/2009 and subsidiary EU legislation, and they will make the changes needed to adapt an EU system for ROs to one that can function as a UK system after exit. The regulations will change references to “Member State” and “the Commission” to “Secretary of State” or “the United Kingdom” where appropriate, and they will change definitions and other wording to reflect the UK’s position outside the EU. Redundant reporting requirements have been removed.
Powers have been transferred from the European Commission to the Secretary of State in relation to standards for RO performance and to keep up with changes in the minimum performance criteria for ROs, especially in the light of IMO changes. In addition, the powers of the Commission to regulate in Article 14 of Regulation 391/2009 have been transferred to the Secretary of State. This will enable the Secretary of State to legislate in order to establish criteria to measure the effectiveness of the rules, performance and procedures of ROs and criteria to determine whether an RO’s performance is an unacceptable threat to safety and the environment. The Secretary of State will also be able to legislate to make and amend rules for imposing fines and penalties and ultimately for withdrawing recognition, and rules for interpreting the minimum criteria for ROs.
The regulations include provision to ensure that ROs that are, immediately before exit day, both recognised by the EU and authorised by the UK continue to be recognised after we leave. These ROs will become recognised directly by the UK and will continue to be authorised by the UK through new agreements to be put in place with the ROs before exit day. That will help provide ROs with certainty and clarity. Another transitional provision will ensure that ROs continue to maintain an independent quality assessment certification entity.
Commission Decision 2009/491 relates to using data from port state control inspections of ships to assess the work that ROs do. The regulations make changes to the decision to replace an EU procedure with powers to amend criteria for using port state control data. Article 8(1) of Regulation 391/2009 provides for assessment of ROs every two years by the Commission and the member state that put forward an RO for approval. The regulations retain the two-yearly assessment but transfer responsibility for it to the Secretary of State.
The regulations also transfer powers to review fines and penalties from the European Court to the UK courts by way of a statutory appeals procedure. Finally, they remove provisions relating to derogation from certain provisions of international law in Article 13(2) of Regulation 391/2009 and Commission Implementing Regulation 1355/2014. In the case of the latter, this has been revoked. The EU introduced these derogations on the basis that they appeared to be incompatible with EU law. We do not regard the provisions as incompatible with UK law and, as the UK did not lodge objections to them in the IMO, any attempt to derogate from them would be in breach of the UK’s international law obligations.
These regulations will be accompanied by Merchant Shipping Notice 1672. This provides information to the industry on the standards that ROs apply and on requirements for recognising, authorising and monitoring ROs. This shipping notice has been drafted and will be issued once the SI has been passed.
I should also mention Directive 2009/15, which governs the relationship between flag states and ROs. The UK implemented the directive administratively through formal agreements between the MCA and each RO. The directive will not be saved in UK law after exit. However, the MCA will put in place new arrangements with each RO when the regulations come into force. These will be very similar to the current arrangements between the MCA and the ROs but will reflect the changes made in these regulations.
The changes made in these regulations are needed to ensure that the law on recognising, authorising and monitoring ROs continues to function after the UK’s withdrawal from the European Union. This will enable the UK to continue to comply with its international obligations to ensure the safety of ships and the prevention of pollution. I beg to move.
Baroness Randerson (LD)
My Lords, these regulations involve ship inspections. The four sets of regulations this afternoon will lead me to repeat myself on a couple of occasions because the same themes come through in each one. All of them have safety issues at their core. The current EU-based system will be replaced with a UK-only system. As I understand it, it will continue to work within a system of international standards and the new legislation will retain existing criteria for the recognition, authorisation and monitoring of ROs: so far, so good. But ships move about and currently we have obligations to report to the EU to share information. How will this sharing happen effectively in future? Most of our ships will be sailing through EU waters at some point in their journey and many of the ships that visit our shores are EU ships. We need to know how that information is going to be shared in the future because of the safety implications.
The inspection of ships, both UK and foreign ones, is a key issue for the safety of ports. Therefore, I was quite surprised to read that there has been no formal consultation. Reasons were given on each of these SIs why there was no formal consultation. If you take the SIs together they are a pretty significant bundle of legislation and would be worth consultation in the round, if not as individual pieces of legislation.
It states in the Explanatory Memorandum that the Secretary of State will be given power to make subordinate legislation. Can the Minister clarify whether this will be an affirmative or a negative procedure?
Finally, the list of ROs we have been provided with makes for interesting reading. I do not in any way pretend to be an expert in these issues. Can the Minister enlighten me as to how this list is drawn up? How is this rather disparate list of organisations there and how do we change it? What are the criteria for changing it if we want to? I would be grateful for some information on that.
Lord Tunnicliffe (Lab)
I thank the Minister for presenting this instrument. I have no great problem with it but I lack a little bit of understanding. The first thing I would like to be clear on is whether this is a no-deal instrument, that is, something that needs to be processed quickly because it is necessary if we fall out of the EU without a deal—which in my view and that of my party would be the least satisfactory outcome. I can see that the instrument does its work in the event of a no deal; I am not so clear about what happens to it if there is a deal. Will it be repealed or will it be paused? Will it continue to exist? The Minister may find it efficient to answer that question referring to all four statutory instruments if it is the same answer.
Baroness Sugg
I thank noble Lords for their consideration of these regulations. As I said, they will ensure continuity for ROs and the shipping companies which rely on their services and make no changes to the way in which ROs operate or to their relationship with the MCA.
The noble Baroness, Lady Randerson, raised safety, which is of course a priority. We are currently a member of the European Maritime Safety Agency. We want to continue our close working with the EMSA after we leave the EU. The political declaration recognised that the EMSA and the MCA should continue to share data in a future relationship. In the event of no deal, we still hope to continue that relationship, but it will be subject to negotiations. Where the MCA may need to cover a role currently played by the EMSA, it has contingency plans for doing so.
No formal consultation on this statutory instrument was done, as the noble Baroness pointed out. The MCA has a close working relationship with the ROs. It authorises them, meets them regularly and has discussed with them the content of the instrument. As I said, they recognise that the aim of the regulations is to maintain the status quo as far as possible. The regulations will have no impact on the working of ports. We have had no specific discussion with ports on the regulations, but obviously we do that as part of our wider work on EU exit.
On the Secretary of State’s powers, secondary legislation that amends the criteria that ROs must meet to continue to enjoy recognition, the system of fines and periodic penalty payments or any withdrawal of recognition is subject to the affirmative procedure. Secondary legislation on interpreting the criteria for assessing RO performance and the effectiveness of their rules or amending the criteria for use of port state control inspection data for assessing unacceptable levels of performance by ROs is subject to the negative resolution procedure.
On how we approve ROs, the list is slightly disparate, as the noble Baroness pointed out—I had not seen it myself before getting to know these regulations. There is an EU list and, from it, the UK recognises six ROs. The MCA enters a formal agreement with each RO acting on behalf of the UK and assesses those ROs periodically. It is a long-standing list, but it is possible to change it and if people wish to apply, we will certainly consider that.
In response to the points made by the noble Lord, Lord Tunnicliffe, this applies to all the regulations we will be discussing today and perhaps tomorrow. It is a no-deal SI. During an implementation period, the SI will not be needed because the withdrawal agreement provides that EU law should continue to have the same effect in the UK as in the EU during that period. The EU withdrawal agreement Bill will be introduced as soon as possible and, as we set out in the White Paper, we will make provision to defer, revoke or amend any SIs that are made but then not needed during an implementation period if a deal is secured. The same applies to the rest of the SIs that we will be discussing.
On the relationship between recognised organisations, the EU and the IMO, we have authorised six ROs which are recognised by the EU. The relationship between the UK and the ROs will not change and there will be no change in the relationship between the UK and the IMO. The ROs will carry out the same inspections and surveys on UK ships as they do now. The only changes are to reflect the UK’s status outside the EU; for example, the EU will take over responsibility for monitoring and assessing its authorised ROs.
The IMO sets the global framework for maritime safety and security and the prevention of marine and atmospheric pollution by ships. Its recognised organisation code contains those criteria and the UK is a signatory to the IMO convention that implemented the RO code. The difference, I suppose, is that, while the relationship between the UK and IMO will stay the same, there will not be that relationship with the EU; at the moment, ROs are approved or recognised at EU level. Since the IMO conventions came in, the EU has harmonised them; we will be removing ourselves from that harmonisation and recognising ROs ourselves. After exit, decisions on recognition of new ROs and evaluations of the performance of existing ROs, which were previously made by the EU, will now be made by the Secretary of State. There will be no change in our relationship with the IMO.
I hope that I have answered all the questions; if not, I will follow up in writing.
Ship and Port Security (Amendment etc.) (EU Exit) Regulations 2018
(5 years, 9 months ago)
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Baroness Sugg
That the Grand Committee do consider the Ship and Port Security (Amendment etc.) (EU Exit) Regulations 2018.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, these draft regulations will be made under the powers conferred by the European Union (Withdrawal) Act 2018. The regulations make appropriate amendments to ship and port security legislation following the conversion of EU Regulation 725/2004 into domestic law on exit day.
The UK maritime sector is thriving. We are one of the largest flag states, have one of the largest ports industries and attract significant investment. We lead the world in many areas of maritime business services, education and research. These regulations will make necessary and appropriate amendments to existing ship and port security legislation so that the current regime of protective security on board ships and at UK ports continues to operate effectively following the United Kingdom’s withdrawal from the European Union.
International agreements and European legislation form the bedrock of the well-established regime of ship and port security which currently exists in the UK. The UK is a contracting party to the IMO’s Safety of Life at Sea (SOLAS) Convention. In response to the perceived threats to ships and port facilities following 9/11, the International Ship and Port Facility Security (ISPS) code was adopted under SOLAS. This code established a range of protective security measures which are required to be put into practice on ships and at ports, to protect vital infrastructure and people from acts of terrorism or violence.
The code is set out in two parts. Part A includes a number of mandatory provisions for signature states. Part B contains measures which were intended as guidance for states to consider implementing, aimed at enhancing the security of ships and port facilities. In 2004 the convention and code were given a basis in EU law by Regulation (EC) 725/2004. This regulation provided for the harmonised implementation of the convention and ISPS code both within and across EU member states. It made the provisions of Part A and certain specific elements of Part B of the ISPS code mandatory for implementation within all EU member states. That EU regulation is directly applicable in UK law but was further implemented, in so far as it was necessary to do so, in domestic legislation by the Ship and Port Facility (Security) Regulations 2004.
The 2005 ports security directive further complements the security measures introduced by the EU regulation by expanding the area of a port which is subject to a protective security regime. The directive was transposed into UK law by the Port Security Regulations 2009 and 33 separate designation orders which define the boundaries of ports across the UK. The existing legislative regime ensures that proportionate security measures are in place on board ships and at the UK’s maritime ports.
On withdrawal day, the regulation will be converted into UK legislation. To ensure that the retained EU law functions effectively, a number of changes are required to the text of Regulation (EC) 725/2004, the Ship and Port Facility (Security) Regulations 2004 and the Port Security Regulations 2009. The changes are being made to ensure that the existing regulatory framework of ship and port security continues to operate. The policy behind these changes is that in the UK there should be no practical change to, or noticeable impact on, how the industry operates an effective protective security regime on a day-to-day basis.
Most of the changes which are being made are relatively minor. Some involve the restatement of retained EU law in a clearer or more accessible way to make it fit for purpose within domestic legislation. These draft regulations remove from the legislation inappropriate language or phrases, such as “Member State” or “the Commission”, which will no longer be appropriate, and they also remove obligations placed on the UK by virtue of it being a member of the EU—for example, to provide particular information to the Commission.
The draft regulations also revoke Regulation (EC) 324/2008 which established procedures across the EU for the Commission to conduct inspections of UK ships and ports. Inspections of UK ships and ports by Commission inspectors will be neither required nor appropriate following EU withdrawal, when the Department for Transport and the Maritime and Coastguard Agency will continue to deliver the well-established programme of ship and port inspections to ensure that the required security standards are being met.
The draft regulations also include provision for three more detailed but equally necessary corrections to the existing legislation. First, they amend Article 3 of Regulation (EC) 725/2004 in relation to domestic vessels. The amendment remedies a deficiency and makes the law more accessible by including a specific reference to the categories of domestic vessel that fall within the scope of the EU regulation. This does not alter or impact on current administrative practice or the categories of domestic vessel to which the legislation currently applies or on how the vessels are required to comply with this legislation.
Secondly, the draft SI includes a provision to enable the direct application of future amendments made to the ISPS code. That will allow the legislation to keep in step with future changes and ensure that the UK meets its international obligations. The current text of Regulation (EC) 725/2004 already allows for the legislation to remain in step with any changes that are made at the international level to SOLAS and the ISPS code. The purpose of the amendments made by this draft SI is to allow the retained EU legislation to continue to remain in step with the UK legal framework.
However, as part of this provision, the Secretary of State will have the power to exclude any such change relating to international shipping by the making of regulations—something that is currently done by the Commission—if it is determined that there is a manifest risk that implementation would lower the standards of the UK’s maritime security regime. Any future regulations made in this regard by the Secretary of State would be subject to the negative parliamentary procedure.
Finally, the Port Security Regulations 2009 contain references to Section 2(2) of the European Communities Act 1972, which will no longer be in force on exit day. To fix this deficiency in the legislation and to ensure that the Secretary of State can continue under that legislation to define or amend the boundaries of particular ports, these draft regulations rely on powers within the European Union (Withdrawal) Act to confer on the Secretary of State powers to continue to update or amend that existing suite of legislation. This power would be used, for example, when a port boundary changed or new ports came into existence.
The amendments made to the Port Security Regulations 2009 will ensure that the Secretary of State can continue to discharge all his statutory duties. Not conferring this power on the Secretary of State would effectively create a situation where the existing legislative regime would be frozen in time and any required updates could not be made because the current legislation only provides for this to be done through an order made under Section 2(2) of the 1972 Act.
The power to make regulations conferred on the Secretary of State in the draft regulation will maintain the effectiveness and operability of the current ship and port security legislation following EU withdrawal. The power will ensure the continued discharge of the Secretary of State’s existing obligations as set out in the Port Security Regulations 2009, and will be exercisable in the same manner and subject to the same conditions as prior to EU withdrawal.
Changes which are made to this legislation will be subject to the negative parliamentary procedure as they were before when the changes were made under Section 2(2) of the European Communities Act 1972. The consequence of not having this power is that the existing port security regime will cease to operate effectively following EU withdrawal, which could present risks to security.
In conclusion, the draft regulations are intended to make changes which will ensure that the current legislative regime for ships and ports is able to operate effectively and continues to meet the UK’s maritime security requirements following EU withdrawal. I beg to move.
Baroness Randerson (LD)
I thank the Minister for her explanation. The EU regulations behind this provide a standardised regime of protective security for port facilities and the surrounding area, and this SI also covers inspections. It replaces the EU system with a UK system that mirrors the EU one, and in doing so, there is one crucial change: it removes the obligation to provide information to the European Commission. I am sorry to ask again: how will we co-ordinate and share information with the Commission in the future?
The SI says that the MCA will continue to carry out inspections to ensure that ships and ports meet required security standards. Can the Minister say who will set down those standards and require them in the future and how we will align them internationally so that our standards are as good as those of the rest of the world? Since this is an attempt to mirror the EU, how will the Government adapt to changes that the EU makes so that we do not put ourselves at a disadvantage with our current EU partners?
Can the Minister also say what liaison there has been with the devolved Administrations on this? It is not clear from the Explanatory Memorandum. The devolved Administrations have an important role in port administration. We do not want to confuse people totally; the idea that you would have a very different set of standards if you put into the port of Holyhead rather than the port of Liverpool would be deeply unsatisfactory and confusing. The SI gives the Secretary of State power to amend port security regulations by the negative procedure, and the Minister drew attention to that. However, perhaps I did not hear correctly or fully; could she say why the affirmative procedure is not being considered?
The EU can block amendments to the ISPS code if they might lower maritime security standards. This power is now given, in this SI, to the Secretary of State, once again by the negative procedure. We do not want to see lower standards. I am concerned about the danger that we might get out of step with the EU on the highest standards which are set by it and that we might do so simply by default. That is because the Secretary of State would exercise the power through the negative procedure and we would not be given the opportunity to scrutinise it.
This is a serious issue as regards safety and it is important that we are given the opportunity to scrutinise it. I personally would prefer the affirmative procedure, but I will listen carefully to what the Minister has to say.
Lord Tunnicliffe (Lab)
My Lords, once again I thank the noble Baroness for introducing this instrument. I have subjected it to my standard test: is it the minimum policy change required? I also have to admit that I did not understand the overall framework, but that is my fault. I know about aeroplanes and trains, but the sea is a mystery to me. What I have picked up from the instrument is that SOLAS with its ISPS code is an international convention. Is it the case that the international body hands down specifications and requirements that it has previously put through the EU and in the future will make directly to the UK? Are such directions and recommendations mandatory for the UK except as excepted by this instrument?
Baroness Sugg
My Lords, I thank noble Lords once again for their consideration. As with all of these SIs, our EU exit is not going to mean that co-operation with EU member states on matters of national security will cease. We will continue to work with the EU and our international partners where appropriate on all matters relating to maritime security.
As regards the devolved Administrations, port and ship security is not a devolved matter, but as the noble Baroness has pointed out, there are ports across the United Kingdom so we have engaged with the devolved authorities in Scotland, Wales and Northern Ireland on the proposals in this draft SI and they have been supportive of them.
I turn now to SOLAS and the ISPS code. The UK is a contracting party to the Safety of Life at Sea convention, which is an international convention. The International Ship and Port Facility Security code was adopted under SOLAS. That code has established a range of protective security measures which should be put into practice at ports. Following that, the EU regulation made the provisions in Part A and specific elements in Part B mandatory for all member states, which I went through in my opening speech. Following the conversion of EU law into UK law, they will be directly applicable.
Lord Tunnicliffe
Perhaps I may ask a question as a point of clarity. I have some trouble in seeing what the role of the EU is now if SOLAS hands down a set of rules and we are a contracting state. Are we not required to do that by virtue of being a contracting state whether the EU is there or not? The only role that emerges from this is the ability to reject a rule if it comes under the conditions set out. That was previously exercised by the EU but in future it will be exercised by the Secretary of State. I do not see, other than in a role of co-operation, what the EU’s role is now. I do not see what “taking it away” actually means.
Baroness Sugg
I suppose the role of the EU is that we currently implement the requirements under EU law. Following the withdrawal Act we will implement them under UK law rather than EU regulation. The standards will stay the same: the international standards will automatically go through legislation. We will accept the standards apart from the exception that the noble Lord pointed out.
The noble Baroness asked about negative and affirmative procedures. The negative one is appropriate because the regulations can be made only to prevent standards of security being lowered by the international amendment.
The existing legislative regime for the security of ships in ports, as I said, was based on UK regulation and the EU regulation-implemented parts of ISPS and the SOLAS convention. After withdrawal, all existing European legislation that is currently applicable will become part of the UK statute book.
I hope that I have managed to address the points made by noble Lords but if have failed to do so I will follow up in writing. Perhaps I will follow up in writing just to set out more clearly the exact relationship between the SOLAS convention and the UK and further to clarify the negative procedure point.
The current legislative and protective security regimes operate effectively and the draft regulations will simply make appropriate changes that will become the retained suite of protective ship and port security legislation when the UK exits the European Union. I hope that noble Lords will join me in supporting these regulations. I beg to move.
Merchant Shipping and Other Transport (Environmental Protection) (Amendment) (EU Exit) Regulations 2018
(5 years, 9 months ago)
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Baroness Sugg
That the Grand Committee do consider the Merchant Shipping and Other Transport (Environmental Protection) (Amendment) (EU Exit) Regulations 2018.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, as well as speaking to these regulations, if it is convenient I will speak also to the draft Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019. The regulations are made, for the most part, under the EU withdrawal Act. The Act retains EU-derived legislation in UK law. It also makes provision in Section 8 to correct deficiencies in such EU-derived legislation that arise from the UK leaving the EU.
There are some changes made under Section 2(2) of the European Communities Act. These update references to an EU directive on sulphur emissions from ships and correct an out-of-date reference to the EEA agreement in the Transport and Works Act 1992.
Turning to the regulations themselves, both make changes to ensure that legislation on environmental pollution continues to work after we leave the European Union. The environmental protection regulation makes changes in three areas of legislation on transport and the environment—specifically to legislation on air pollution controlling sulphur dioxide emissions from ships; legislation on substances used to prevent the fouling of ships’ hulls, and transport and works legislation in relation to environmental impact assessment.
The amendments in these regulations are technical. There are no policy changes, and there is no reduction in the environmental standards or, indeed, the obligations to which the UK is currently subject. The regulations will change references to “Member State” and “the Commission” to “Secretary of State” or “the United Kingdom” where appropriate. The regulations change definitions and other wording to reflect the UK’s position outside the EU.
I turn to the control of sulphur emissions from ships. Noble Lords will be aware of the importance of action on air pollution. The UK supports the IMO’s new global limit for sulphur emissions from ships, which comes into force on 1 January 2020. The UK has recently published a clean air strategy, which aims to cut pollutant emissions in half by 2030 and my department has also established the Clean Maritime Council, where key stakeholders are encouraging the development of green technology. We are planning to publish a clean maritime plan this spring, which aims to reduce both pollutant and greenhouse gases from shipping.
These regulations make changes to The Merchant Shipping (Prevention of Air Pollution from Ships) Regulations 2008 and Commission Implementing Decision 2015/253. The changes are made only to ensure that the legislation remains operable, and the regulations will ensure that the UK continues to recognise methods of abating emissions of airborne pollutants that are approved by EU member states. They also ensure that recreational and pleasure craft will continue to benefit from certain exemptions in respect of diesel engines.
Baroness Randerson (LD)
My Lords, we have been getting on rather swimmingly with these SIs, but I regret to say that I have rather more to say about these two, particularly the ship recycling regulations.
I start with the environmental protection SI. This is a very important piece of regulation because of the extremely high levels of air pollution from shipping. It deals with the sulphur content of fuels and anti-fouling systems, which can also be seriously environmentally damaging. It also deals with the frequency of sampling and the reporting procedures.
There is a complex description of the legal application of these powers. I am concerned that there might be a danger of the constituent Administrations of the UK getting out of step and of ship operators getting confused if the requirements vary between the UK countries in a way that they do not at the moment because of the streamlined EU system. Therefore, there is a concern that, once we leave the EU, the legislation will diverge.
Paragraph 7.3 of the Explanatory Memorandum says that where a UK project might have a significant environmental effect on an EU member state, we will continue to consult that country before granting permission. Can I please have clarification from the Minister that the consultation will be with the individual EU country and not with the European Commission?
Paragraph 7.6 refers to removing redundant references to EU databases and, specifically, SafeSeaNet, which we will no longer have access to, while ensuring that its role is replicated in the UK. How do we replicate it if we do not have access to it? How can you replicate it when we do not have access to the database? What are we replacing it with and what are the resource implications of doing that work ourselves and simply repeating what the EU is already doing? The Explanatory Memorandum states that the Welsh Government were consulted, but what about the other devolved Administrations, because some, but not all, of the provisions in the SI apply to them?
Underlying all this is the fact that we are leaving the world-leading standards set by the EU and a new limit will come into force in 2020—the Minister referred to that. It will apply to ships using the North Sea and the Channel. Will that still apply to us after we leave the EU—do the Government intend that it should apply to us? Crucially, what will happen about the Irish Sea? As I understand it, it does not apply at the moment in the Irish Sea. Will the Irish Sea be subject to the new limits? Obviously, it is a sensitive area where ships from Northern Ireland and the Republic of Ireland are sailing in effectively the same waters. Will they be subject to a different regulatory regime?
Turning to ship recycling, the EU regulation that the SI deals with is the basis for improving environmental and safety standards for recycling EU-flagged ships and has led to the creation of an approved European list. This is a very important SI, because the facilities on the list can be anywhere in the world. There are seriously environmentally damaging ship-recycling facilities in some parts of the world. The procedures they use are unsafe, with a major impact on human health. Inspecting and approving them to create a European list is an onerous and complex business with a massive cost. Are the Government seriously saying that we will repeat that inspection process, with all the onerous and costly implications?
The EU regulation also restricts what hazardous materials—for example, asbestos and PCBs—can be installed on ships and ensures that they have an inventory of such materials. The UK’s MCA, Health and Safety Executive and the Environmental Protection Agency deal with the country concerned about this. As usual in this legislation, the status quo will continue to apply at first, but this SI is different from the others we have considered this afternoon. This is not just the usual expensive mirroring of what already exists in the EU. It will be very expensive, but it is not a mirroring.
This is more than just establishing a procedure for updating, although that it is important, because this is an area where standards change and, fortunately, standards have been rising. Paragraph 7.3 of the Explanatory Memorandum specifically says that, although:
“Initially, the UK list will be similar”,
in the name of giving,
“UK flagged ships the widest choice … It establishes a new procedure allowing ship recycling facilities worldwide to apply for inclusion”.
So it is clear; there is planned divergence here and absolutely no guarantee on maintenance of standards. This is one of the first glimmers of what some hardline Brexiteers have been urging: a new world where standards are lower, and costs are lower as a result.
Lord Tunnicliffe (Lab)
My Lords, I thank the Minister for presenting these two SIs. I also thank the noble Baroness, Lady Randerson, for her points. She has stolen most of my best lines and, in light of the hour, I will try not to be too repetitive. I hasten to add that I am very happy to hear all her questions answered but please disassociate me from anything to do with Northern Ireland.
We seem to be in a rather different position here. On virtually everything we have discussed today there has been a pretty sound EU position that we are just trying to transfer across. My sense is that we do not have a pretty sound EU position when it comes to these instruments. Therefore, how we manage the future and how these instruments impact on the future are extremely important.
I will be brief. The first instrument covers sulphur standards, anti-fouling and environmental impact standards. The overwhelming, important one is the issue of sulphur dioxide pollution. I hope the noble Baroness can give some response. It seems to me that it has to be international. When the gas is released, it will go where it goes. Therefore, we need to understand how decisions about the concentration of sulphur in fuels are managed, the areas of the world that are covered and the testing techniques—particularly the position about the Irish Sea, which seems to be an anomaly. There is also the matter of agreeing standardisations for abatement technologies for sulphur dioxide. Once again, those sorts of issues really need international agreement. Can the Minister give me some feel of the situation we will be left in if we leave the EU without an agreement and this instrument becomes applicable?
In passing, I would also like to mention SafeSeaNet. It seemed a wacky sort of title so I googled it. It is clearly a very important facility and without it it is difficult to see how we can discharge the responsibilities we take over, particularly in sulphur standards.
The anti-fouling part of this seems relatively straightforward and I do not have any questions on it. I am not entirely convinced that the environmental impact assessment is a consequence of leaving the EU. It seems to me that the Government are tidying up pieces of domestic legislation and perhaps smuggling it through. I am sure I have misunderstood that but I feel a duty to ask the question.
Finally, the points raised by the noble Baroness, Lady Randerson, on ship recycling are very important. In the past this has been a dreadful area of activity in the world. The EU initiative is a commendable step forward in tidying it up. It is very important to understand how we will be involved in the future. I hope the Minister will be able to assure us that we will go into this new era—if we are forced into it—on the front foot to get these standards improved and, what is more, to continue to participate with other countries to make sure they are international standards so the whole world can share the benefits of proper controls.
Baroness Sugg
I thank noble Lords for considering these draft regulations. I will attempt to answer as many questions as I am able to and will follow up in writing if I do not get to any. I absolutely agree with the noble Lord’s point that these environmental measures are needed across international boundaries. That is why we are seeing international action through the IMO, such as the higher global sulphur standard, which comes into force next year. We will continue to play a leading role in the IMO in the development of those environmental measures and also continue to co-operate with other countries on the enforcement of such measures through our membership of the Paris MoU on port state control.
We support the new global limit on the sulphur content of fuel of 0.5% on 1 January 2020. The UK, along with other states, is assisting the IMO to develop best-practice guidelines for ship owners and operators and all suppliers. Since 2015, ships inside the emissions control area—the North Sea and including the English Channel but not the Irish Sea—have been limited to 0.1% sulphur unless they use an exhaust gas cleaning system or alternative fuel. Under our recent clean air strategy, we are considering options for extending that current emission control area in the North Sea to other UK waters such as the Irish Sea. The UK’s position on sulphur standards, and the inspection regime, will not be changed by EU exit. We have committed to taking further action on that in the clean air strategy.
The standards and testing regimes for the future are agreed at the IMO—again, that will not change after we leave the EU. Other organisations such as fuel suppliers and the International Organization for Standardization will be involved in those discussions—as will the UK. There are separate EU targets for the number of ship inspections and fuel samples which member states need to take annually, and which we have retained.
The instrument provides for the continued recognition of the emission abatement methods approved by EU member states, and most equipment is approved at the IMO level. Member states are allowed to trial new and innovative technology which does not have the formal approval of the IMO; in practice, we expect most systems of emission abatement technology to be built to meet the IMO type requirements, which we would follow.
I note the question from the noble Baroness, Lady Randerson, about whether the consultation would be with member states or the Commission. The consultation mentioned in paragraph 7.3 relates to the consultation on the environmental impact of projects being consented under the Transport and Works Act, and I confirm that the requirement, where a project could impact another member state, is to consult with the appropriate authorities and bodies of the individual countries concerned, not the Commission.
On SafeSeaNet, which both the noble Lord and the noble Baroness referred to, we will continue to share data. Through the Paris MoU THETIS system, countries share data from port inspections. Currently, we send data to THETIS through the EMSA SafeSeaNet system. In a no-deal scenario, the MCA will simply send the data directly to the THETIS system. That is why we have removed references to SafeSeaNet from the regulations. We will absolutely continue to share IMO compliance information through THETIS.
The noble Lord referred to environmental impact assessments, which are outside the EU withdrawal Act. I will say a few more words about that in an effort to explain our actions. The two minor amendments being made under powers other than the EU withdrawal Act are under Section 2(2) of the European Communities Act, and the amendment to Section 6(A) of the Transport and Works Act 1992. That updates an out-of-date reference to the EEA agreement, and we need to make that correction now using the power under the ECA Act before it is repealed under the EU withdrawal Act, so these are consequential amendments.
Consultation is slightly different with the Welsh and other devolved Governments. That is because some of the regulations in the environmental protection regulations amend the transport and works legislation. That was originally made in 1992 and is applicable to England and Wales only and operates in areas which are now devolved. As such, we have been required to consult with the Welsh Government. The rest of the instrument is UK-wide but, as I said before, we are in regular contact with the Scottish Government on all SIs, including this one.
On the new UK list for recycling facilities, both the European and the UK list have the same standards on accepting new facilities and have the same criteria for approval. We expect the two lists to remain closely aligned on that. It is possible that new ship recycling standards, if the EU brought them about and the UK wanted to mirror them, could be replicated through the pollution powers in the Merchant Shipping Act.
On the question of Northern Ireland, the legislation does not make any changes in relation to cross-border requirements after we leave the EU and therefore, in a backstop scenario, there would be a UK list rather than the EU list. I believe that the backstop would apply only to the land border in this situation and there would be no impact on operations there.
We think that UK shipyards will continue to be on the European list of ship recycling facilities after we leave the EU. The noble Baroness pointed out that there were other non-EU member states facilities on the list. Turkish and US yards are listed as non-EU recycling facilities.
I think that I have covered most of the points but I will go through my response and the questions raised carefully to make sure that I have covered them all. This SI is intended essentially to ensure that the legislation on environmental protection and ship recycling continues to work effectively from day one of exit, and I hope that it will receive noble Lords’ support.
Baroness Randerson
I thank the noble Baroness for her comments. I will read what she has said very carefully but I remain concerned and I think I should warn her that I might raise these issues again when the regulations go before the House for approval.
Baroness Sugg
I thank the noble Baroness for her comments. As I said, I will go through the points raised in more detail and will write to her in an attempt to provide reassurance.
Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019
(5 years, 9 months ago)
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Baroness Sugg
That the Grand Committee do consider the Ship Recycling (Facilities and Requirements for Hazardous Materials on Ships) (Amendment) (EU Exit) Regulations 2019.
House of Lords
(5 years, 9 months ago)
Lords ChamberRead Full debate Read Hansard Text
Shop Workers: Protection
(5 years, 9 months ago)
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Baroness Kennedy of Cradley
To ask Her Majesty’s Government what assessment they have made of the protections in place to prevent shop workers from being verbally abused, threatened with violence, or attacked.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, everyone has the right to feel safe at work. I have enormous sympathy for shop workers, who can face intimidation, threats and in some cases violence. I can confirm that, to understand this issue in more detail, the Government will take forward a call for evidence on violence and abuse towards shop workers. This is intended to help us fully understand the problem and look at all options for addressing it.
Baroness Kennedy of Cradley (Lab)
My Lords, it is a depressing fact that too many shop workers suffer physical assault. USDAW, the shop workers’ union, says that shop workers are on the receiving end of 230 assaults each day. The recent measures announced by the honourable Member for Louth and Horncastle, such as the call for evidence, are a step in the right direction. However, they fall short in failing to recognise the need for specific legislation to make it an offence to assault a worker enforcing the new age-related restrictions on acid and knives, which are set to come into force as a result of the Offensive Weapons Bill. Will the Minister explain why the Government will not accept that new legislation is needed, in spite of the concerns expressed by many organisations and on all sides of this House? Will she agree to meet USDAW and other organisations representing the retail sector, ahead of Report on the Offensive Weapons Bill in this House, to discuss the issue in detail?
Baroness Williams of Trafford
My Lords, I am very happy to meet USDAW, which I fully expected might be one of the things I would do during the passage of the Offensive Weapons Bill. The noble Baroness will know that attacking a person serving the public is already an aggravating factor in sentencing guidelines. The Minister for Crime, Safeguarding and Vulnerability will be discussing the way forward on the call for evidence with the national retail crime steering group. We do not have a closed mind on a way forward and I look forward to meeting USDAW and hearing its concerns about this serious matter.
Lord Paddick (LD)
My Lords, when shop workers enforce the law—for example, on the sale of age-restricted items—they are acting as law-enforcement officers. Does the Minister think that when shop workers perform these duties, they should have similar legal protections to those afforded to other law enforcers?
Baroness Williams of Trafford
I do not agree that they are acting as law-enforcement officers. One could take that to its ultimate conclusion and say that everyone who upholds the law is acting as a law-enforcement officer. They are simply saying that, for example, the sale of alcohol, tobacco and, in future, corrosive substances, to underage people is against the law. As I said to the noble Baroness, Lady Kennedy of Cradley, the call for evidence will bottom out exactly what is needed in the future. Nobody wants to see shop workers or any workers who deal with the public being abused in any way. I look forward to a constructive way forward on this.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, the Offensive Weapons Bill would rightly ban the sale of knives, bladed items and acids to under-18s, with penalties for those who break the law and sell those items. In addition to USDAW, the British Retail Consortium, the Co-op, the Association of Convenience Stores and others are supporting calls to protect shop workers who uphold the law via a specific offence for those who threaten shop workers who are doing their job and upholding the law by not selling the items in question. Why is it too much to ask the Government to protect shop workers at the same time as creating new laws and offences for selling such items?
Baroness Williams of Trafford
My Lords, I fully support what the noble Lord says about protecting shop workers. A number of laws to protect them are already in place; we need to explore this issue more to see what we can add to that. We are funding targeted communications going forward and refreshing the national retail crime steering group, which the Minister got up and running in December. As I said, there is no excuse for shop workers or anyone working with and serving the public being abused in any way.
The Earl of Listowel (CB)
My Lords, while I recognise the very real concerns of shop workers and their calls for stronger sanctions against those who attack them, does the Minister recognise that placing more children and young people in prison is not an effective response? If there must be a strengthening of sanctions, community sentences will protect more shop workers in the long run because they are much more effective in preventing reoffending.
Baroness Williams of Trafford
I agree with the noble Earl that putting young people in custody is not the answer every time. Obviously, magistrates have a range of sentencing powers open to them but I believe that our current work on prevention and early intervention—all the things the noble Earl talks about—is the most effective way to tackle this problem.
Baroness McIntosh of Pickering (Con)
My Lords, my noble friend will be aware that under the Licensing Act, the Home Office is consulting on a call for evidence to stop abuse against coffee shop workers and those working in other outlets at airports. Can she give a date on which the Licensing Act will apply in order to stop such abuse and disruptive passengers boarding planes, sometimes causing huge economic expense through diversions? This is a very serious matter, and we want that law to come into force before the summer season.
Baroness Williams of Trafford
As my noble friend said, the call for evidence is open; therefore, we must go through that process. I do not disagree with her about the behaviour that goes on in airports when people are intoxicated. I look forward to the results of the call for evidence.
Lord Mackenzie of Framwellgate (Non-Afl)
My Lords, I recall the outcry from certain parts of the community about the attack on civil liberties when street cameras were introduced a few years ago. Does this Question not prove the value of using modern technology in the prevention and detection of crime?
Baroness Williams of Trafford
The noble Lord is absolutely right. As legislators, we must be consistent in protecting the public from the harms of crime and other things that take place on our streets. There is a balance to be struck between civil liberties, and protecting the public and keeping criminals off our streets.
Domestic Infrastructure: Chinese Ownership
(5 years, 9 months ago)
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Baroness Anelay of St Johns
To ask Her Majesty’s Government what assessment they have made of the risks arising from Chinese ownership of technologies and platforms critical to the domestic infrastructure of the United Kingdom.
Lord Young of Cookham (Con)
My Lords, the Government take seriously any national security risks arising from the ownership of infrastructure assets and systems, and assess those risks on a case-by-case basis, irrespective of their origin. On 24 July 2018, the Government published the National Security and Investment White Paper, which consulted on reforms to powers to scrutinise investment for the purposes of protecting national security. The Government are now considering carefully the response to that consultation and will respond in due course.
Baroness Anelay of St Johns (Con)
My Lords, while thanking my noble friend for his considered Answer, I point out that superfast 5G has great potential for our economy. It could be worth £200 billion over the next decade. The world leader in 5G is Huawei, but our closest security allies—Australia, New Zealand and the US—have already taken steps to restrict access to Huawei technology on the grounds of national security. Will we follow suit speedily? If not, why not?
Lord Young of Cookham
I am grateful to my noble friend, who has drawn attention to the need to get the balance right. America has banned Huawei from federal networks. We do not plan to go as far as that. I think America has a different approach from this country to international trade and inward investment, particularly under its “America first” policy. Of course, it has particular difficulties with China at the moment. We want to get the balance right and to have the best digital infrastructure we can, with up-to-date equipment to promote growth and inward investment, but we do not want to compromise national security. Huawei is precluded from taking part in certain sensitive parts of our infrastructure—lawful intercept, for example—and in other cases its equipment is interposed between equipment from other firms to mitigate risks. We keep the balance under review, but I think we have it about right.
Lord Cunningham of Felling (Lab)
My Lords, the Government have the laudable objective of procuring for the United Kingdom the latest 5G high-speed technology communications system. We should all support that. We should also all support the idea that we need adequate protection against some people’s technologies. Since, in this case, the most advanced optical fibre technology is from either Huawei or ZTE—both Chinese-owned and controlled—how will the Government achieve their objective if we are not to deal with them? There is no other way to do it at that level of technology. As I said some time ago in this House, if we are not willing to trust the Chinese with our communications system, is it not a bit perverse to suggest that we trust them with our civil nuclear power?
Lord Young of Cookham
In the case of Huawei, we have set up unparalleled arrangements in this country. As the noble Lord will know, we have set up at Banbury a centre to evaluate Huawei’s strategy and the equipment it is developing. That board is overseen by the chief executive of the National Cyber Security Centre, so we have a deep insight into what Huawei is up to and can take mitigating action in certain circumstances. As I have said, in certain circumstances we can ban it from taking part. But we want to make use of the latest technology and, as my noble friend said, Huawei is a world beater and it would not be in the national interest to ban it totally. We are looking at whether we have the legal structure right for the future in protecting national security, but I think we have the balance about right.
Lord Broers (CB)
My Lords, a word of caution on nuclear power—the noble Lord, Lord Cunningham, mentioned it. Does the Minister agree with me that we need to collaborate with the Chinese in building our nuclear plants? The Chinese are now world leaders. They have been the first to build an EPR, such as we are building at Hinkley Point, and they have also been the first to build the American AP1000. Specifically, collaboration with China General Nuclear, CGN, will be key to our success at Hinkley Point, Sizewell and Bradwell and in qualifying CGN’s own HPR1000, especially in the light of the withdrawal of the Japanese. I declare my interest as a member of the parliamentary group led by Ian Liddell-Grainger MP that visited the EPR reactor in Taishan in November. I would like to say—
Lord Broers
CGN has a remarkable safety record in nuclear power. We should run our plants ourselves but let it help us build them.
Lord Young of Cookham
My Lords, we welcome Chinese inward investment into the civil nuclear projects in the UK, as the noble Lord mentions, subject to our robust legal, regulatory and national security requirements. We have the most robust and stringent requirements. My advice is that the project at Hinkley so far meets all the necessary requirements that the noble Lord referred to.
Lord Wallace of Saltaire (LD)
My Lords, are we working on our own in responding to the Chinese threat, or are we working with others? Would it not be sensible not only to work with our other Five Eyes colleagues but also to work with our European partners? If we have to find and develop alternative technology for some of these critical projects, clearly it might be much more sensible to work closely with other friendly governments.
Lord Young of Cookham
Of course we should work closely with our allies, but it is just worth pointing out that some of our allies have a different legal framework. Australia, for example, has a law saying that telecom operators cannot procure equipment from a company that has extraterritorial jurisdiction. That rules out Chinese companies and many others. We do not have quite that same approach, but, of course, we learn from experience, from Australia, New Zealand, the United States and our other allies.
Lord Livingston of Parkhead (Con)
My Lords, does the Minister agree that the UK has had a much more sophisticated approach to Chinese companies for many years, both in setting up the cyber centre that looks at Huawei source code to understand it, and in recognising that in certain parts of UK networks, such as BT’s core network, it was not appropriate to put it in? It also recognises that much equipment from other countries actually has Chinese components in it, so the position is actually far more sophisticated and nuanced than perhaps were some of the headline statements made in many other countries.
Railways: Reliability
(5 years, 9 months ago)
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Lord Teverson
To ask Her Majesty’s Government what steps they are taking to improve rail service reliability in 2019.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Sugg) (Con)
My Lords, the Government will continue the current record level of funding in our railways, with around £48 billion to be spent on the network from now until 2024. This will support more maintenance and a huge uplift in renewals to increase reliability and punctuality for passengers. We are delivering the biggest rail modernisation programme for more than a century. The department, working alongside Network Rail and other industry partners, is committed to investing in the railways so that we can have a modern, reliable and punctual railway system, fit for the future.
Lord Teverson (LD)
Hmm. I accept absolutely that we have put billions into the rail network and rail services, and yet last year we had the worst service over the year for 13 years and the worst summer for 20 years. Will the Minister answer this very simple question: who is responsible for those improvements and who is in charge?
Baroness Sugg
My Lords, I certainly agree with the noble Lord that we had a difficult year in rail last year. Things are improving: punctuality has improved since this time last year; cancellations and significant lateness have improved as well. Previous investment focused on capacity improvements, which was much needed, given the doubling of the number of passengers. For the next control period, however, the main purpose of our investment is to improve reliability, and that involves repairing and replacing worn-out parts of the network to increase reliability. The Department for Transport is working very closely with Network Rail and train operating companies to deliver that.
Lord Cormack (Con)
My Lords, I thank my noble friend for all that she has done to try to ensure that we have the promised more reliable service between London and Lincoln. In particular, I thank her for attending the meeting with the chief executive of LNER and the Member of Parliament for Lincoln shortly before Christmas. Can she give the House any further comfort than she gave last week? LNER has said that it wishes to introduce this service in September, but I believe that we are now dependent on Network Rail. Can she put—I will not say a bomb—a boot behind Network Rail to ensure that it enables LNER to deliver on its promise?
Baroness Sugg
As my noble friend said, LNER is hoping to introduce new services to Lincoln from September. As he also said, this is dependent on Network Rail approving its timetable bid. The lesson we learned from the introduction of the May timetables last year, which caused such significant disruption, was that the industry needs to ensure that it is positively able to deliver the services to which it is committed. I know that Network Rail is working hard on that, and I thank my noble friend and the people of Lincoln for their patience in this matter.
Lord Clark of Windermere (Lab)
My Lords, what is the Government’s response to Network Rail’s proposal to close the trans-Pennine line from Manchester for 39 weeks each year for the next four years? How will that help reliability?
Baroness Sugg
My Lords, we are working on proposals for the upgrade to the trans-Pennine route. It is a significant project worth nearly £3 billion and it will bring alternative routes. We are working through that and will publish details shortly.
The Lord Bishop of Newcastle
My Lords, the latest quarterly statistics released from the Office of Rail and Road show that the London North Eastern Railway has suffered its worst punctuality levels in over a decade and came second—not an honour—on the list of the 10 worst train services for punctuality. As my noble friend Lord Cormack said, we had hopes for the new Azuma trains, but there is a lack of investment in infrastructure in the north—the signalling systems north of York are over 30 years old. Will the Minister tell us when the necessary infrastructure works will take place in order for these trains to run as they should to serve the people of the north-east and Scotland?
Baroness Sugg
My Lords, we hope that the introduction of the trains will happen soon. There remain challenges relating to electromagnetic compatibility, ORR approvals and train design. Obviously, the delay is disappointing for everybody involved, but we should not lose sight of the benefits of this £2.7 billion investment. Each train will have around 15% greater capacity and, once the full fleet is in service, the upgraded timetable will deliver a 28% increase in capacity, so we look forward to their introduction.
Lord Tunnicliffe (Lab)
My Lords, the Minister seemed to have some trouble with the question of whose responsibility this is. Can I help her on that matter? The railway is run by Network Rail and the train operating companies. The Secretary of State owns Network Rail—I know he probably does not want to but he does—and is personally responsible for its performance. The train operating companies work to a structure that is devised by the Government and supervised by the Government, and that does not work because the two halves have incompatible objectives. Does she agree that the sooner the train operating companies are brought into public ownership and a properly focused railway is created the better?
Baroness Sugg
It will not surprise the noble Lord to hear that I do not agree with him on that point, but I acknowledge that the rail system as it stands is not perfect. We have an ageing railway, which is at capacity. We need to look at how we run things and that is what we are doing through the rail review. It has been well over a decade since the last big change in the rail network. While we have seen record private investment and many more services, the system has of course had its challenges. We think that the time is right for a comprehensive review to ensure that our railways are run in the best way that they can be.
Baroness Randerson (LD)
My Lords, this is a specific example, but one of many that have been brought to my notice. In the three months leading up to Christmas, Southern Rail cancelled the Wallington to Victoria service 205 times and it was delayed 896 times. That is 1,101 times that passengers on that route faced disruption and misery. How can the Government justify a 3.2% fare hike on that route in the light of such appalling service—or are the Government not responsible for the fare hike either?
Baroness Sugg
My Lords, we have frozen fares in line with inflation, but I understand the frustration that people must feel when they have seen such significant disruption. We do of course have a compensation scheme that actually amounts to more than the rail fare freeze would be. On the particular line that the noble Baroness mentioned, London Victoria has 240,000 passengers a day. Over the Christmas and new year period, we did some work to improve reliability and make space for new services, and 99% of those engineering projects were completed on time. We installed new tracks, points, signalling and overhead structures to help improve the reliability of services at London Victoria.
Open Doors 2019 World Watch List
(5 years, 9 months ago)
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Lord Harries of Pentregarth
To ask Her Majesty’s Government what steps they are taking in response to Open Doors’ 2019 World Watch List of the 50 countries where Christians face the greatest persecution.
The Minister of State, Foreign and Commonwealth Office (Lord Ahmad of Wimbledon) (Con)
My Lords, the Government are deeply concerned about the severity of violations of the freedom of religion or belief in many parts of the world. We regularly raise our concerns at ministerial and senior levels. To ensure that the United Kingdom is supporting Christians in the best possible way, my right honourable friend the Foreign Secretary has commissioned an independent global review into additional practical steps the Government can take to support persecuted Christians. The aim is for this review to make an initial report by Easter.
Lord Harries of Pentregarth (CB)
I thank the Minister for his reply and I very much welcome what the Government are doing, particularly through the Foreign Secretary. The right of people to freedom of religion or belief is absolutely fundamental, whether they are Muslim, Hindu or atheist, but does the Minister not agree that there is a particular crisis affecting Christians at the moment, with the number of countries in which Christians are suffering persecution at a very high level, having doubled in the past year? Does he not agree that it is particularly dismaying that India should now appear at number 10 on this list, just below Iran and above Syria? India has a very good constitution and sound laws, but because of the rise of nationalism, these laws are simply not being enforced. Will he convey to the Indian Government our deep dismay that India should appear on this list at all, let alone at number 10?
Lord Ahmad of Wimbledon
My Lords, I agree with the noble and right reverend Lord on the issue of persecuted Christians. Around the world today 245 million Christians in 50 countries have been identified as suffering persecution of varying levels. As the noble and right reverend Lord said, that has doubled over the last four or five years. Clearly, action is needed. This does not preclude the fact that we will continue our efforts, and it is right that we stand up for all persecuted communities around the world, including those of no faith. He mentioned India specifically. India is the largest democracy and has an inherent, vibrant and strong rule of law. I assure noble Lords that we will continue to make representations to all countries, including India, to ensure that equality and justice for all citizens in India are upheld according to its own constitution.
Baroness Berridge (Con)
My Lords, I too welcome the inquiry and the acknowledgment of the scale of the persecution. One practical step that the Government took was to create the Syrian vulnerable persons resettlement scheme to enable people to come to this country. However, the recent figures released show that in the second quarter of last year, only 0.08% of the people who came to the UK from Syria were Christians, despite over 11% of that population pre-civil war being Christians and being targeted by IS. Will my noble friend the Minister please meet with his colleagues at the Home Office to investigate the reason for this apparent disparity in the figures? Will he then communicate the reason clearly to the UK Christian community, who are left with reports from NGOs and even the Times saying that the Government are operating a discriminatory policy against Christians?
Lord Ahmad of Wimbledon
First, I assure my noble friend that there is no discrimination against Christians or indeed anyone of any faith. However, she does bring to light an important issue about the situation in Syria. I am acutely aware of the challenges being faced by Christians in Syria and which continue to be faced in Iraq. We have seen appalling crimes committed against the Christian communities, as well as others. The major challenge that remains for Syrian Christians is the exodus of anyone from Syria who is of the Christian faith. My noble friend raises an important point about the Home Office scheme. I will certainly raise that with Home Office colleagues. But I assure my noble friend, and, indeed, all noble Lords, that we remain absolutely committed to ensuring that we stand up for the rights of people of all faiths and none, be it domestically or internationally.
Baroness Brinton (LD)
My Lords, in order to develop an appropriate policy to help persecuted Christians and other religious or belief groups, it is vital to have accurate data about them. Can the Minister say whether Her Majesty’s Government have made any progress in developing a database across government that tracks violations of freedom of religion and belief, and other important data about religion or belief minorities?
Lord Ahmad of Wimbledon
My Lords, the noble Baroness raises a very important point. It is certainly something that I have been looking at very closely since my appointment last summer as the Prime Minister’s Special Envoy on Freedom of Religion or Belief. There are many sources that we currently utilise to determine the level of persecution of different communities around the world. Equally, we have strong partnerships with representatives and leaders of different communities around the world. But her case for having a comprehensive database is a valid one, and certainly we will be looking to see how we can validate data that is provided by communities and organisations such as Open Doors, to ensure that it is verifiable and that we can share it with key partners to ensure that the issues of persecution can be addressed.
Baroness Nye (Lab)
The Minister will know that the Burmese army responsible for the Rohingya genocide is also targeting other ethnic communities, including the 1.6 million Christians in Kachin State, as outlined in the watch list. The International Development Select Committee report stated that,
“there may be a fundamental problem with the peace process that the UK is supporting”.
Will the Minister say how government support for UK-Burma trade takes into account these deeply held concerns about the Burmese military’s involvement in these human rights abuses, which surely amount to crimes against humanity?
Lord Ahmad of Wimbledon
My Lords, we are all acutely aware of the tragic plight of the Rohingya community, and the noble Baroness rightly points out other persecuted minorities in Burma. I assure her that not just bilaterally but with key partners and most clearly through international co-operation at the United Nations, we have raised this issue consistently. I believe we have seen progress, at least in the framework of MoUs which have now been signed between the Burmese Government, the Bangladeshi Government and organisations including the United Nations. On the specific actions that have been taken, the noble Baroness will be aware that the United Kingdom, working with European partners, has raised the issue of targeted sanctions against leaders of the military, and they have been extended to other members of the Burmese military. We continue to look at this. Ultimately, we hope for the safe, secure and voluntary return of the Rohingya community and other persecuted minorities, but we are a long way from that being a reality.
Hereditary Peers By-election
(5 years, 9 months ago)
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Lord Grocott
That was a necessarily and traditionally short report from the acting returning officer on the by-election. I would like to add a couple of details that might be helpful. There were indeed 16 candidates. It should be added that, as with previous hereditary Peer by-elections, this was a men-only shortlist. It was also, of course, the first by-election of 2019. As the House will know, 2019 is a particularly significant year because it marks the 20th anniversary of the by-election procedure, which was introduced in 1999 as a temporary, short-term measure. We do not rush things in the House of Lords. It is also the 36th by-election held under this procedure. The by-elections are coming along with increasing frequency—there is another one pending to look forward to—and inevitably it will be the case as Father Time takes his toll.
I have one final point, and I ask that we all listen to this carefully as the detail is not simple. This particular by-election, in which the whole House was the electorate, was one of 15 established under the 1999 Act to enable those hereditary Peers who were Deputy Speakers at the time to remain in the House. But after 20 years many of the original 15 are no longer Deputy Speakers, and the person who wins the by-election is not expected to become a Deputy Speaker. So, to summarise, in these Deputy Speaker by-elections the departing Member does not have to be a Deputy Speaker and the person replacing him does not have to be a Deputy Speaker either. You know it makes sense.
Baroness Smith of Basildon (Lab)
Notwithstanding my noble friend Lord Grocott’s comment, I welcome the new Member of the House of Lords, Lord Reay, and we look forward to him playing his full part in our affairs. As much as we welcome an individual Lord, the system has had its day, as my noble friend said. It is increasingly difficult to defend a temporary measure that has gone on beyond its time. While we do not criticise anyone who stands or any noble Lords who vote in such a by-election—or the result—we think a change in the system is long overdue. I know the government programme is very challenging at the moment but debating this tiny little Bill in government time to remove the hereditary Peer by-elections would be very welcome and have overwhelming support in your Lordships’ House.
Lord Taylor of Holbeach (Con)
My Lords, we have given a lot of time to this Bill. I have been in discussion with the noble Lord, Lord Grocott, for some time. He knows that, when appropriate, we will try to find time for his Bill to be debated on Report before it can leave this House. I will be in touch with him in due course.
Arrangement of Business
(5 years, 9 months ago)
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Lord Taylor of Holbeach (Con)
My Lords, noble Lords who have been assiduous in looking at the Forthcoming Business will see that there are some dates regarding the Easter Recess. In the first sitting week after Christmas, I gave an undertaking to come back to the House at the earliest opportunity to make an announcement about forthcoming recess dates.
Noble Lords will not need me to remind them that we continue to be in uncharted waters—a point made by the Leader of the Opposition. Therefore, what I say today is highly provisional. Nevertheless, I have been listening to those on all sides of the House who have made it clear that they would welcome some dates, if only on the basis of best intentions. I am happy to be open with the House about these intentions, but the usual caveat about dates being subject to the progress of business has never been so strong.
Eagle-eyed Lords will already have seen from this morning’s edition of the Forthcoming Business that it is my intention that the House should rise for the Easter Recess at the conclusion of business on Thursday 4 April and return on Tuesday 23 April. These dates match the provisional dates indicated for the House of Commons. If possible, I intend to provide for a long weekend in February. I have spoken of this several times, but I continue to anticipate that, next month, the House will need to sit on days when the Commons is not. I will let noble Lords have details of any long weekend very soon, but I hope it is helpful in the meantime to give such notice as I can for the Easter Recess.
Baroness Smith of Basildon (Lab)
My Lords, I am grateful to the noble Lord the Chief Whip. It is helpful for noble Lords who are trying to plan to ensure that they can play their full part in the work of your Lordships’ House—which we all want to do—to have the dates for the Easter Recess. Can I press him on the February long weekend? We understand that the Government have set themselves a rather challenging timetable, partly—I have to say—through their own incompetence in not bringing legislation forward sooner. If noble Lords wish to take part in the business of your Lordships’ House as much as they can, they need some certainty as to when they need to be here. I find it incredible that we are coming towards the end of January and we are not able to have dates for February. The noble Lord has said “in due course”. If he wishes noble Lords to play a full part in the work of this House, they need some greater certainty about what is happening in the next few weeks.
Lord Taylor of Holbeach
I appreciate that question. I understand why the noble Baroness has asked it, but I need to be certain of government business in the middle of February. If you read what I said, you will have a pretty good clue as to when I am telling you it might be. If you will allow me a week to see how business runs, I will come back to the House. The noble Lord, Lord Foulkes, is not here today. He is in Strasbourg. I have no doubt he would be very keen to make sure that we have some time in February for our families.
Central Courts IT System
(5 years, 9 months ago)
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The Advocate-General for Scotland (Lord Keen of Elie) (Con)
My Lords, with the leave of the House I shall repeat in the form of a Statement an Answer given in the other place by my honourable friend the Parliamentary Under-Secretary at the Ministry of Justice. The Statement is as follows:
“I am grateful for the opportunity to update the House on the IT issues facing the Ministry of Justice over recent days. I start by apologising to those who have been affected by the intermittent disruption, which was caused by an infrastructure failure in our supplier’s data centre. While services have continued to operate and court hearings have continued, we know how frustrating this is for everyone.
The issue has been that some of our staff in courts and tribunals, the Legal Aid Agency, probation and the Ministry of Justice headquarters have been unable to log on to their computers, but we have contingency plans in place to make sure that trials can go ahead as planned. The Prison Service has not been impacted and—to clarify incorrect reporting—criminals have not gone free as a result. We have been working very closely with our suppliers, Atos and Microsoft, to get all our systems working again, and yesterday had restored services to 180 court sites, including the largest sites.
Today, 90% of staff have working computer systems. Work continues to restore services, and we expect the remainder of court sites to be fully operational by the time that they open tomorrow morning. We are very disappointed that our suppliers have not yet been able to resolve the network problems in full. This afternoon the Permanent Secretary, Sir Richard Heaton, will meet the chief executive of Atos and write personally to all members of the judiciary.
I am very grateful to the staff who have been working tirelessly and around the clock, alongside our suppliers, to resolve these issues”.
Lord Beecham (Lab)
My Lords, last May the National Audit Office published a damning report on the Ministry of Justice’s four year-old £280 million IT programme. In the light of the latest fiascos affecting the probation service and the entire criminal justice email system, would the Minister rank the department’s performance in these areas as better or worse than that of Chris Grayling’s recent award of a ferry contract to a company with no ships, or the shameful record of the Home Office over the Windrush debacle?
Lord Keen of Elie
I rather fear that the noble Lord’s inquiry has taken sail. The position is that the issue that arose recently had nothing whatever to do with the development of the common platform system for the Ministry of Justice, which is still in its testing phase. It was entirely unaffected by the issue that arose, which was in fact attributable to the corruption of a routing server that has now been replaced.
Lord Marks of Henley-on-Thames (LD)
My Lords, the Answer repeated by the Minister is welcome, but expressions of frustration and an apology are, frankly, not enough. The reported consequences of this IT failure include: the adjournment and collapse of criminal trials; lawyers and litigants unable to access court documents; probation workers unable to provide courts with pre-sentence information; and even the farce of courts asking driving offenders to check their own DVLA records for past offences. The chair of the Criminal Bar Association, Chris Henley QC, describes the system as being “on its knees”.
We appreciate that the MoJ needs time to understand these failures, but they come at a time when the department is rightly further digitalising courts and tribunals to increase efficiency and save time and money. Will the Minister promise us an urgent, full and detailed inquiry to cover what has gone wrong, any failures of contract management within the MoJ, other weaknesses in the IT system, what updating and replacement is necessary and what it will all cost?
Lord Keen of Elie
My Lords, the reported effects narrated by the noble Lord are not accurate; let us be clear about that. There is no evidence of any cases being adjourned in either courts or tribunals with respect to this issue. In addition, it is not true that defendants have had to do their own DVLA checks. Furthermore, the probation service was affected by the outage but no offender appointments were missed, and the service reverted to paper processes where necessary. The IT systems are back up and working as of this morning with respect to the probation service. There was no impact on the Prison Service, which is in fact dependent on entirely separate computer system.
The cause of the outage was identified as a routing server that had become corrupted, and that has been replaced. It fell within one of our contractors’ systems and, as I indicated earlier, we are going to be speaking to our contractors with regard to that matter. At this stage we do not intend to institute the sort of inquiry that the noble Lord alluded to.
Lord Morris of Aberavon (Lab)
My Lords, is it correct that thousands of criminal cases in the courts have been disrupted? The National Audit Office criticised the delay in the IT system installation and said that the objectives would not be reached on time and on budget. Given this warning, are there any penalties in the contractual arrangements between the company and HMG?
Lord Keen of Elie
With respect to the noble and learned Lord, it is important to distinguish between two entirely separate systems: the existing system, which suffered the corruption of the routing server, and the proposed new common platform system which is in its testing phase. That is entirely unrelated to the existing system, but is of course connected to the modernisation of the courts system and the case management system, which has been allocated considerable funding at the present time.
With regard to the existing contracts, we are engaging with the provider over this issue. We regret the outage that occurred. Back-up systems did operate. Certainly, I am not aware of thousands of criminal cases being disrupted. I am advised that there is no evidence of cases being adjourned due to the IT issue.
Lord McNally (LD)
My Lords, it a fairly easy strike to suggest, as the Labour Front Bench did, that this was all the fault of Chris Grayling. I was also the Minister of State in the Ministry of Justice when we set out to reform court IT. Throughout my political life we have had, periodically, Ministers coming to explain some disaster in an IT system. What I wonder is: what happens next? As he rightly said, the comprehensive view of reform is not affected by this particular malfunction, but I do remember visiting courts and asking, “Have you got any problems with your IT system?” and they would say, “Well, our fax system doesn’t work”. This was long after the rest of the world had sent their fax systems to museums. The original idea is still valid: to invest in technology to make our court systems efficient. Where does the buck stop? I understood that the Cabinet Office also has responsibility for oversight of the efficiency of bringing in these new systems. Who is overseeing this? Who is keeping their eye on it? Or will we wait for another few years, and somebody coming along to explain why that system has not worked.
Lord Keen of Elie
I am obliged to the noble Lord for his observations, drawing upon his own experiences in the ministry when we began the introduction of the common platform system. Clearly, we want to move on to that platform fully and as soon as possible. We have already seen some success in the digital approach that has been taken to some forms of casework—such as debt actions and undefended divorce actions—and we want to roll that out further. With regard to the existing system: it is not perfect. If it was perfect, we would not be seeking to replace it. There are back-ups, but they are of limited operability because of the availability of wi-fi in courts in circumstances where it has not been possible for those working there to access their desktop computers. That has been the case in some courts recently, and in the ministry itself, because of this particular problem.
At the end of the day, the Ministry of Justice must consider the effectiveness and efficiency of the computer system that it relies upon, not only as a ministry but also for its attendant agencies and arm’s-length bodies. We accept that we have a responsibility in that matter.
Lord Judd (Lab)
My Lords, yesterday, in his evidence to the Justice Sub-Committee, the Home Secretary was emphatic that the registration of EU people living in Britain will be dependent entirely on IT and that there are no plans whatever to give people documentary evidence of what has been granted. With the vulnerability of IT again being illustrated today, I wonder whether we could have an undertaking that Ministers will look again at this approach.
Lord Keen of Elie
I thank the noble Lord for his question. I do not believe that it is for me to gainsay the Home Secretary’s evidence before the Justice Sub-Committee, so I am afraid I am not in a position to commit to any alternative approach on the matter at present.
Lord Pannick (CB)
My Lords, in preparing this Statement, have Ministers and their officials spoken to judges and lawyers, or only to IT consultants?
Lord Keen of Elie
My Lords, I was not involved directly in the preparation of this Statement. I was invited to repeat it in this House on the basis of information given to me. I cannot directly answer the question of who was consulted in the preparation of the Statement itself. If the noble Lord wishes I will write to him on the point—but if he has no desire for me to do so I will not.
Lord Scriven (LD)
My Lords, less than three years ago there was a whole-Whitehall review of the £500 million contracts given to Atos for government IT systems. This is another potential catastrophe with an IT system that Atos has implemented in government. In the light of that, what government-wide review will now be done of Atos’s ability to provide IT services for government on such a scale?
Lord Keen of Elie
My Lords, this issue arose in the context not of the implementation of an IT system but of an existing system, in particular the corruption of part of the hardware, namely a routing server, which has now been replaced. Given that that has been identified and rectified, we would not contemplate launching the form of inquiry indicated by the noble Lord.
Trade Bill
Wednesday 23rd January 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“Regulations under section 2: state aid
(1) If regulations under section 2(1) make provision in relation to the issue of state aid for the purpose of implementing a free trade agreement, then a statutory instrument containing those regulations may not be made unless a draft of the instrument has been laid before, and approved by a resolution of, each House of Parliament.(2) The Secretary of State may not lay a draft of the instrument containing regulations under this section until—(a) he or she has consulted—(i) each devolved authority,(ii) public bodies, businesses, consumer groups, trade unions and non-governmental organisations which, in the opinion of the Secretary of State, have a relevant interest, and(iii) the public, and(b) he or she has laid a report of the consultation under paragraph (a) before both Houses of Parliament.”
Lord Stevenson of Balmacara (Lab)
My Lords, Amendment 16 in my name deals with state aid and whether it will continue under any new arrangements brought forward by the Government. It is essentially a probing amendment. I welcome the Minister to the Dispatch Box for his first response on the Bill. I look forward to working with him on this and related topics.
The reason for proposing the amendment is because we have very little information about what the Government’s intentions are on state aid, which is arguably a key component of all trading activity and can materially affect how and in what ways individual companies can operate and be successful within the home market and abroad. It has been operating since we joined the Common Market in 1972 and is a very strict and well-observed rule. It relates primarily to whether goods can circulate freely in the EU area, or the EEA, although there are some quite interesting exceptions, mainly on a cultural level, where changes are made relating to support for indigenous and widely spread cultures. Indeed, this country has benefited considerably from support for the arts, particularly film, theatre and television. State aid has also extended to fringe areas such as horseracing. For example, in France, it has been ruled that the support of a horserace betting levy system not unlike our own is a cultural exception to single market rules. That rule has been applied for the last couple of years, and is now being followed within the United Kingdom. It is an interesting area.
It appears that the Government have already decided that the existing rules will continue. Why was that decision made and on what statutory basis? Is there any opportunity for parliamentary procedure and process to be involved? It has also been announced that the Competition and Markets Authority will be responsible for ensuring trade rules within the state aid area. This was decided without any debate, discussion or consideration of alternative bodies. Again I ask: what was the statutory basis for that and is there an opportunity for parliamentary scrutiny, now or at some future stage?
Viscount Trenchard (Con)
My Lords, this amendment is rather strange in the context of this Bill. It seems intended to restrict the Government’s ability to make changes to the state aid rules unless they have consulted a long list of bodies—and even the public. But as the noble Lord, Lord Stevenson, said, the Government do not intend to use this Bill to provide themselves with a device for making such changes. One of the benefits of Brexit is that we will be able to apply our own state aid rules, either based on an equitable free trade area with the EU or consistent with WTO principles. The present EU rules need to be much improved and made proportionate; on occasion, they discriminate against British business and have a negative effect on the economy and jobs.
The UK is, quite properly, a very restrained user of state aid compared with our continental neighbours, spending approximately €90 per capita against a range of €170 to €240 per capita in Germany, France and Belgium. The point is that in cases such as that of Sheffield Forgemasters, the UK Government should be free, with the agreement of another place and your Lordships’ House, to grant state aid under what will rightly be very narrow criteria. Another case in point might be the Horizon Nuclear Power plant, which has been suspended by Hitachi because of a failure to agree the financing structure. Does the Minister agree that Her Majesty’s Government should look again at the extent to which they might commit public funds to ensure the successful completion of a hugely important contributor to our future energy mix—especially against a background where the only other major new nuclear power station, Hinkley Point, is to be financed by the French state and the Chinese state? Does the Minister agree also that this amendment is in any event completely unnecessary, because the Government have no need or intention to implement state aid commitments in rolling over existing free trade agreements?
Lord Fox (LD)
My Lords, had we debated this amendment during the last session, the night before last, we would not have had the benefit of yesterday’s report from the IPPR think tank on the subject of state aid. It reinforces the point made by the noble Viscount, Lord Trenchard, that the United Kingdom is a restrained user of state aid when compared to other countries in the European Union. That gives the lie to some of those who believed that the European Union was restricting the UK Government’s decision on the scale of state aid in this country—and that message might be conveyed to some members of other parties in the other place who are alleged to believe that the European Union would continue to restrict industrial support activities.
I was surprised to hear the huge shopping list that the noble Viscount, Lord Trenchard, presented for further state aid—his is not a voice that I had imagined would be making that point. That highlights the need for a state aid strategy. If we have an industrial strategy—which we do, whether some Members opposite like it or not—the purpose of state aid is to find strategic ways of delivering it in the best possible way for the best possible good of this country and its trading environment with the rest of the world.
Whether we trade as an EU nation, through FTAs or, as some people dream of, on WTO terms—which would be a nightmare for the rest of the world—there will still, sensibly, be restrictions and rules affecting what aid we can give and what restraints we have to apply. In spirit, therefore, I support the amendment, and I am interested to hear the Minister’s response.
I have a query that will probably reveal my ignorance of the process of legislation. Paragraph 4(1) of Schedule 2 contains a more general injunction around statutory instruments and consultation. I wonder whether that part of the Bill may pick up, to a large extent, what the noble Lord, Lord Stevenson, seeks to achieve. I would be happy to be wrong about that, but it would be helpful if the Minister, either now or later, would fill us in on that.
Lord Lansley (Con)
My Lords, I understand the point the noble Lord is making and exploring on this issue, and when we explore that point, it is worth saying that much depends on our future relationship with the European Union, and how we incorporate state aid into that. If we were in the European Economic Area, we would apply EU state aid rules; that is what EEA members now do. If we were in a free trade agreement with the European Union—as Canada and South Korea, for example, are—we would do something different. State aid provisions are built into those agreements, but they are based not on EU state aid rules but on the WTO Agreement on Subsidies and Countervailing Measures. That will all entirely depend on what the future relationship looks like.
The point has correctly been made that we use state aid proportionately less—about half as much, as a proportion of GDP, as the French do, and a quarter as much as the Germans. So state aid rules themselves have not necessarily restrained us from doing things. The noble Lord will be aware of the report on competition and state aids by the committee of which I have the privilege to be a member—the Internal Market Sub-Committee of the European Union Committee. The Government’s approach is, essentially, that we will replicate EU state aid rules in UK law, but we will, of course, be repatriating them so that they are exercised by our authorities rather than by the European Commission. In that context, it will be the Competition and Markets Authority, rather than any other body, which does that in this country—and it will do so independently.
If I remember rightly from the evidence that we received—I stand to be corrected if not—the Government’s intention is for this to be done by the CMA on a UK-wide basis, and not to be disaggregated to individual nations or regions. Clearly, the state aid rules themselves may have geographical parameters, as ERDF and other EU funding has done in the past, but that is a different matter. The rules on the application of state aid would be applied in this country. So we will have something considerably beyond the WTO requirements. For example—this is probably the best example and the most important for businesses—EU state aid rules would require us to have processes of notification and prior approval whereas, where WTO rules are concerned, if the Government engage in subsidy then they do so at the risk of post-hoc challenge and complaint. That is quite a different structure.
I say all that simply because, while this is an interesting issue, I am not sure whether the amendment does the job. However, I put it to the noble Lord that he might suggest that if future trade agreements of this kind, which are generally with third-party countries, were to apply state aid rules in a UK and third-party country agreement which differentiated from the WTO subsidies and countervailing measures provisions, that should be the subject of consultation and approval in this House. I cannot see why we would want to approve an arrangement for a WTO agreement on subsidies, which would simply be applied in the normal course of events. I hope that those few remarks are helpful.
Lord Lea of Crondall (Lab)
My Lords, a couple of the points made in the short debate on this amendment have been very wide and not actually to do with the amendment as such. Perhaps I may add a corrective: we discussed the mergers of railway companies, nuclear power companies and so on earlier today. The fact is that we look at one Chinese company against not one European company but sometimes more than one. Regarding the comment about the EEA, I am sure that the EEA will evolve while recognising that we often need one European company. It could be dressed up as something to do with either the nature of policy on mergers, competition and monopolies or with state aid policy. I put down that cautionary note because, when people say that this amendment does not do those jobs, it is clearly not intended to. However, many such wider commercial questions will have to be faced up to in the future.
Baroness McIntosh of Pickering (Con)
My Lords, following the comments of the noble Lord, Lord Stevenson, in moving this amendment, I would like to put a specific question to the Minister. In doing so, I declare that I am a member of the all-party parliamentary group on racing and have enjoyed the occasional day at the races as a result.
For 18 years, I represented a number of racehorse owners, trainers and stable lads and lasses in North Yorkshire, where racing is extremely important. My specific question relates not just to Amendment 16 but to Amendment 48, and looks ahead to the tripartite agreement on the movement of horses. I know that my noble friend the Minister is keen to talk in terms of continuity so, in those terms, what is the specific status of the tripartite agreement as of 30 March? Will it be rolled over automatically if there is no deal, or will it become part of a separate free trade agreement?
On the comments made by the noble Lord, Lord Stevenson, state aid was deemed to be almost a barrier to the form of instrument used in replacing the racehorse levy which, as your Lordships will know, is the means by which most of racing is financed. The levy puts it on a sound financial footing, but it was prayed in aid that it would be deemed state aid. However, as the noble Lord said, that was specifically excluded for a similar levy that has been allowed in France, which is pertinent to the debate on this amendment. What is good for the goose has to be good for the gander, so if the French racing industry was allowed to be supported then we should be allowed to continue to support the British racing industry. This goes to the heart of the tripartite agreement, so what is the status of state aid, as raised by the noble Lord, Lord Stevenson? What is the position of the tripartite agreement going forward from 29 March this year?
Baroness Jones of Moulsecoomb (GP)
My Lords, I support Amendment 16, which is a crucial amendment to debate within the Trade Bill. The general principle of state aid rules, which is that the Government do not go around doling out money to big business in ways that are unfair or anti-competitive, is a good one. At the same time, there are concerns about state aid rules being used as a vehicle for predatory capitalism to dismantle the state and override democratic control of quite important parts of our economy. This is particularly important for Greens, because Greens are not as concerned with the electoral cycle as with the future of humanity and this planet. If we are going to listen to the IPCC report, which says we have 12 years before we have to face dramatic climate emergencies, then we need to transform our economy and make it fit for the future.
And that is the role of this House. The other place deals very much with the day-to-day—what happens on Monday or Thursday mornings. We here have a responsibility to the future. A green new deal is one of the answers. It would create 1 million well-paying climate jobs and set us on a sustainable footing for future generations. It would require active fiscal and monetary measures that would favour more sustainable production and consumption over more ecologically destructive options. Sometimes the state would have to pick winners and losers—that would be part of it—particularly in relation to natural monopolies such as railways and the energy system. Even the Government are recognising that the market is failing on some of these important issues, and that state intervention is required. Much of this could be called state aid, depending on what definition is used.
For these reasons, it is absolutely essential that our hands are not tied in any way which might interfere with our ability to tackle the climate emergency that we are facing, as well as all the other big issues facing our economy.
Lord Purvis of Tweed (LD)
My Lords, I seek some clarifications when the Minister responds, broadly in response to the constructive contribution from the noble Lord, Lord Lansley. With the withdrawal Bill, there was much debate in Committee and this House regarding how existing EU law will be migrated into UK law. There were 12 competences the UK Government believed were reserved and would therefore be fully within the competence of the UK Government, but that the devolved Administrations believed were either devolved or had a direct impact on devolved powers.
State aid was one of those areas where there was no agreement. That means that if there continues to be no agreement, then the amendment in the name of the noble Lord, Lord Stevenson, is absolutely critical. It means that for regulations brought for the continuity agreements, there needs to be far more enhanced consultation with Administrations that believe this is touching on their direct competences. If there has been agreement, then perhaps the amendment is less necessary for the continuity agreements; but as we come to further amendments, this sets the tone for what will be necessary for future agreements. When the Minister responds to this group, I hope he will be able to provide clarification on where the discussions are, regarding whether there is agreement on where state aid lies within this area of competences.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, I join others in thanking the noble Lord, Lord Stevenson, for moving this amendment. In response to my noble friends Lord Trenchard and Lord Lansley, I think that the noble Lord intended this as a probing amendment, as he said, to give the Government the opportunity to put some issues on the record. It has been very timely, not least because under the EU withdrawal Act, mentioned by the noble Lord, Lord Purvis, on Monday we laid the regulations on state aid before the House. That 77-page document will now make its way through the rigorous scrutiny of the Joint Committee on Statutory Instruments and then the Secondary Legislation Scrutiny Committee. Then, of course, it will be subject—because it is by the affirmative procedure—to scrutiny later in this House. For that reason some of the specific issues referred to by my noble friend Lord Lansley and the noble Lords, Lord Purvis and Lord Lea, might be usefully dealt with in that area.
Clause 2 is not about making changes to existing agreements, and the regulations cannot be used for future free trade agreements, as my noble friend Lord Lansley rightly identified. In answer to the noble Lord, Lord Stevenson, we also need to recall that the Competition and Markets Authority has been given this responsibility domestically, across the UK jurisdiction. When it comes to free trade agreements and the EU, the Trade Remedies Authority would undertake that responsibility.
To provide further reassurance that we do not expect to need to use these powers to set up a domestic state aid regime, I can inform the Committee that we have laid the instrument I referred to. This instrument, the State Aid (EU Exit) Regulations 2019, will be made under the European Union (Withdrawal) Act 2018 and establish a domestic state aid regime that will work for the whole of the UK at the point that this is required. No doubt Noble Lords will be offered an opportunity to scrutinise this in detail.
Subsection (2) of the proposed new clause requires the Government to consult relevant stakeholders prior to laying implementing regulations under Clause 2 which make provision on state aid. We have been clear that proportional consultation is of the utmost importance to us. We have engaged with a large number of stakeholders through our programme of trade continuity. The Government will always consult stakeholders as appropriate, so to set out specific provisions concerning consultation on state aid is not needed at this stage. The Bill already requires the Government to lay reports before Parliament in which we will provide detail of any real-world changes to free trade agreements. These will be laid before the agreement is ratified or regulations are laid under the Clause 2 power in relation to that agreement, whichever comes first.
Any significant differences in agreements that are relevant to state aid would be identified in these reports and Parliament would then be in a position to take an informed decision in relation to the making of the regulations or the conduct of the ratification process. I say again that we do not expect to need to make regulations under this power in order to implement state aid commitments in existing free trade agreements.
I turn to some of the specific points that were raised. My noble friend Lady McIntosh raised the horserace betting levy and the tripartite agreement. This is something we will come to in Amendment 48 in a later group, so perhaps I can leave it to the lead Minister, my noble friend Lady Fairhead, to respond, but the relevant provisions of the horserace betting levy were notified to the Commission and approved by the Commission under state aid rules. I confirm that the TRA—the Trade Remedies Authority—will not be responsible for state aid prioritisations in FTAs. It will be a matter for individual free trade agreements to establish a dispute mechanism.
Lord Stevenson of Balmacara
I was going to ask the Minister about the TRA—I am glad that he tried to clarify what he had said, because he did raise a doubt about what was arranged. Have I got it right? I would be grateful if he could confirm that we are proceeding on a continuity basis and using the withdrawal Act to ensure that, under the statutory instrument he mentioned, the existing set of rules that currently apply, because of EU directives and regulation, will be applied under UK law after exit day. Therefore, that process does not require any further discussion or debate, because of the reasons he has given, and he is not saying that in future trade agreements there will be a specific role for state aid rulings by the TRA—that will remain with the CMA—but there will be an opportunity to discuss that broadly when we get to the point at which we are, post continuity, talking about the real world and what is actually going to happen in trade. Is that right?
Lord Bates
That is correct. I am grateful to the noble Lord for setting that out. My noble friend Lord Trenchard mentioned the Government’s commitment to the state aid system. That point is contained in Command Paper 9593, The Future Relationship between the United Kingdom and the European Union, which says in section 1.6.1:
“The UK has long been a proponent of a rigorous state aid system—this is good for taxpayers and consumers, and ensures an efficient allocation of resources”.
Moreover, the political declaration which accompanies the withdrawal agreement points out in section XIV, paragraph 79:
“The future relationship must ensure open and fair competition. Provisions to ensure this should cover state aid, competition, social and employment standards”.
That will all be fleshed out as the future economic agreement is worked on. Again, I thank the noble Lord for the opportunity to clarify some points on the record.
Lord Purvis of Tweed
Will the Minister clarify that since the Sewel convention continues to apply, the UK would not legislate ordinarily on devolved matters if the Government have brought forward this regulation? Last year, during the withdrawal Bill process, the devolved Administrations believed that this touched on their competences with state aid. Has there been agreement with the devolved Administrations that this is a fully reserved issue?
Lord Bates
Perhaps I could write to the noble Lord on that to make sure that I get that absolutely correct. I will write to him. Does the noble Lord want to come back on that?
Lord Purvis of Tweed
I wonder if the Minister is able to write before we get to the next grouping because this is going to be relevant. Whenever the Minister can provide clarification, it will be welcome to the Committee.
Lord Bates
I have a sneaking feeling that some clarification may be coming via my noble friend Lord Younger by the time we reach the next grouping. I am sure the noble Lord will have an opportunity to respond to that. Failing that, I will be very happy to write before Report. I thank the noble Lord and ask him to consider withdrawing his amendment at this stage.
Lord Stevenson of Balmacara
I am grateful to all those who have contributed to this debate. It was indeed a probing amendment and an attempt to elicit a series of responses from the Minister. We have those on record and I am grateful to him. Having said that, we have raised one or two issues that need consideration in the non-continuity mode, if we ever get to that point, about exactly why we are doing what we are doing, how it might be modified in future, and what the appropriate regulation would be. The point made by the noble Lord, Lord Purvis, is absolutely right. We have to avoid getting ourselves into the wrong side of the argument that relates to engaging those who have trade responsibilities. There will be significant and important trade responsibilities when they eventually end up with Scotland, Wales and Northern Ireland, and they should not be excluded from proper consideration and debate. With that, I beg leave to withdraw the amendment.
“Regulations under section 2: Joint Ministerial Committee
(1) In making regulations under section 2, the appropriate authority must have regard to, and take into account, the views expressed by a Joint Ministerial Committee appointed by the Prime Minister.(2) The Prime Minister may, for the purposes of this Act, determine that the Joint Ministerial Committee shall consist of representatives of the governing authorities of the United Kingdom, Scotland, Wales and Northern Ireland.”
Lord Stevenson of Balmacara
My Lords, we are moving to a point that has already been raised and given a small trailer by the noble Lord, Lord Purvis. We need a system in place, although I am sure that the response from the Government at this stage will be that this is not necessary for continuity issues. However, we have already seen that there will be issues around trade and related matters for which we need to be sure that structures are in place that will allow for those resolutions.
Amendment 17 seeks to place a duty on the Government to consider a formal structure under the joint ministerial committee system that would allow debates on trade—particularly future trade arrangements, but I think other issues as well—to be dealt with in a systematic, transparent and trustworthy way. In that sense, I do not think that we differ from where the Government would like to be. What we lack is any understanding of where the Government are on this matter and what negotiations are coming forward. This is a probing amendment to try to make sure that we have some sense of that as we go forward.
In an attempt to help the Government, the noble Lord, Lord Purvis, and I have also put down Amendment 76 as a way of expressing in the Bill what the different agencies involved in this can and cannot do. Currently this is dealt with by a convention known commonly as the Sewel convention, although it has been overtaken by other legislative approaches. It attempts to set out, in this Bill at least—although it may apply to other areas—a set of rules allowing certainty on under what conditions and with what powers the UK, in operating its reserve powers, may or may not legislate on devolved matters where it is agreed that responsibility lies with the devolved areas.
I understand fully that the Minister will feel that many of these issues are subject to discussions elsewhere that are probably way above his pay grade. I do not seek to diminish him in any respect with that, but we want to flag up the importance of this matter to our trading relationships, not just because trade is important but because we are moving into an era where, irrespective of how and under what conditions we move from our current position with the EU, trading responsibilities will be applied in Scotland, Wales and Northern Ireland in a manner that has not been seen before. Issues that are specific and germane to those countries will be raised. We do not have a robust structure under which this can be resolved, and it is time for us to move forward on that. I beg to move.
Lord Purvis of Tweed
My Lords, I am grateful to the noble Lord, Lord Stevenson, for outlining the amendments so clearly. I want to add something in only a couple of areas. In doing so, I welcome the fact that the noble and learned Lord, Lord Mackay of Clashfern, is in his place. He and other colleagues will recall discussing—in debates on the withdrawal Bill—translating EU retained law into domestic law in a number of areas that either impinge on or link directly to what are currently devolved competences. At that stage, the Government made a number of concessions and changed their position so that the presumption was to devolve powers—and that was welcome.
Therefore, the sticking points, to some extent, were issues in what the Government termed the “framework agreements” with the devolved Administrations, where there had been no agreement with the devolved Administrations on what was in the reserved or devolved competences basket. In the previous group, state aid was one such major issue. Of the 157 areas, there was no issue with 49 of them; in 82 of them, the Government and the devolved Administrations agreed that the common framework would be needed; 24 areas required further discussion; and in 12 areas, the UK Government believed that the competences were reserved but the devolved Administrations believed them to be devolved. That is relevant to discussions about how the regulations for the continuity agreements will take place and will give an indicator for the future, as the noble Lord, Lord Stevenson, said. I seek further clarification on the other areas.
These issues are not esoteric. The 12 areas are: equal design and energy labelling, which is an important part of trade agreements now, as we discussed in Committee on Monday; product safety and standards relating to explosive atmospheres; elements of the network and information security directive; environmental quality in the timber trade, which is of considerable significance to the Scottish economy; data sharing; food geographical indications and protected food names, which are core parts of trading relationships; medical devices; migrant access to benefits; data protection; radioactive source notifications; state aid, as mentioned; and vehicle standards, including the various types of approvals and directives for roads.
Those 12 areas are part of existing trade agreements and will be key elements of future trade agreements, but in 2018 no agreement was reached with the devolved Administrations on them. It would be helpful if the Minister could update us on whether agreement has been reached on them, so that our concerns can be allayed, or whether discussions are continuing on them. This is important for both continuity and the future, because—as the International Trade Committee in the Commons has discussed and as the Scottish and Welsh Governments have published—there are proposals for how future trading arrangements would need to be put in place.
One of the options—as the Scottish Government have called for and as the UK Trade Policy Transparency and Scrutiny report called for—was a joint ministerial committee or intergovernmental trade committee to complement the advisory committee that the Government have established. The Commons committee made a very constructive set of proposals that it would be a mechanism through the devolved Administrations as part of the consultation process. There would be a formal advisory role through the mandate process and another formal advisory role throughout negotiations. No doubt there will be further discussions about any dispute resolution mechanisms and whether such measures have to be approved by the devolved legislatures in addition to consultation with the Administrations.
The noble and learned Lord, Lord Mackay, put forward very constructive suggestions about how intergovernmental relations could operate. These are both necessary for the continuity agreements and vital for any future agreements. I am grateful that the noble Lord, Lord Stevenson, highlighted this area, and I hope that the Government will be able to give clarification on where we are with the understanding of where these competences lie and the role of the necessary consultation.
Lord Hain (Lab)
My Lords, in speaking in support of both these amendments, in a way I am dealing with the points I raised with the noble Baroness, Lady Fairhead, which she did not respond to—inadvertently, I am sure. Maybe both she and the noble Viscount, Lord Younger, could consider writing to me about this. As I described at the last sitting, it gives rise to concern that we will see an action replay of the power grab that Whitehall tried to pull on the devolved Administrations in the course of the withdrawal process. There was an attempt by Whitehall to repatriate to London those policy areas—for example, the environment and many others—that were devolved but held at a European level because of our membership of the European Union. That caused great aggravation with the devolved authorities, particularly—in the absence of Northern Ireland’s Government—with Wales and Scotland, which in the case of Scotland is festering on. An agreement was belatedly reached with Wales.
In this process, particularly when making regulations, we will potentially see these same issues arising. There is therefore a strong argument for the proposal put forward by my noble friend Lord Stevenson in Amendment 17 for the joint ministerial committee or some equivalent body to be given the overall supervising authority here. Having been a member of the JMC at various times in government, I was never very impressed with it. It was a bit of a talking shop. Since 2010, under the coalition Government and now, I hear from successive First Ministers of Wales and individual Ministers for Wales, with whom I am in direct and regular contact, that nothing has changed.
Yet the issues over Brexit are even more serious and of even more constitutional and policy importance than prior to this whole sorry horror show unfolding. The Government need to consider putting in place, preferably in this Bill and in the form specified by these amendments or some equivalent form, procedures that are recognised and have to be abided by, before we run into the same kind of problems that arose earlier in this whole Brexit saga.
Viscount Trenchard
My Lords, surely it is not necessary to set up a joint ministerial committee for this purpose. Insofar as the novation of FTAs affects devolved powers, the Government will in any event be bound to consult. Surely a joint ministerial committee, such as the amendment proposes, would make the process of rolling over the EU’s FTAs much more cumbersome and time-consuming, especially if the EU persists in refusing to enter into a reasonable, equitable agreement without a backstop.
On Monday, in the debate on the GPA, the noble Lord, Lord Hain, referred to this matter, and has just spoken again in similar vein. He referred to a power grab by Westminster but actually, if the powers being returned to the UK from the EU relating to devolved matters were all to go immediately to the devolved Administrations, that would represent a power grab by the devolved Administrations. Surely the powers that were devolved relating to matters that are partly or wholly EU competencies preserve the need in many areas to maintain a UK-wide market; while we have been in the EU that has meant an EU-wide market. We are shortly to recover our sovereignty over our own UK market, I trust, but that in no way obviates the need to maintain the UK-wide market in many sectors. Furthermore, as the noble Lord, Lord Hain, also pointed out, the amendment requires membership of the joint ministerial committee by a representative of the Northern Ireland Executive, which suggests that they might not be operational for some time.
Lord Hain
May I clarify a number of points? First, the original Bill, over which there was the power-grab tussle, was actually amended by the Government in response to the Welsh and Scottish Governments’ complaints. They recognised that the original procedure, which the noble Viscount seems to want to wave through again, was the wrong procedure and that it was not right to set out on the course on which they originally set out. I hope that he will accept that point, because I was rather worried about the tone and the content of what he said.
Secondly, since the joint ministerial committee exists already, and its machinery is in place and operates already, the amendment is saying that these regulations under the umbrella of the Trade Bill would formally have to go through the JMC. It need not be a complete convening of a meeting which, I accept, is time-consuming and resource-consuming, but I recall well from my days in government that cabinet committees sometimes operated by a process of written consent and amendment between the different Whitehall departments. I am sure that the noble Lord, Lord Kerr, and many others will remember that operating in that way. It could operate in that way for the purposes of these regulations, but there would be a statutory obligation to process these regulations in that fashion. As I understand it, that is the point that my noble friend Lord Stevenson is seeking to get cemented in.
Viscount Trenchard
I thank the noble Lord for correcting my ignorance about the joint ministerial committee already being in existence, although there is obviously no Northern Irish representative on it at present. On the other matter, I still do not understand why it can be sensible in the case of powers that are EU competencies today but which are also devolved. If those powers are repatriated to the UK, it is still necessary to maintain a UK-wide market because, by virtue of being members of the EU market, we have had a UK-wide market within the EU. Therefore, if the entire powers are delegated to the devolved Administrations, we effectively break up our single UK market.
Lord Mackay of Clashfern (Con)
My Lords, this is redolent of what we discussed much earlier. The powers that the EU has in the United Kingdom are of different types. Where they go when they are brought back to the UK, as we hope will come to pass—on my present appreciation of what is going on, that is rather a hope—does not just depend on the subject matter. It does not just depend on whether it is agriculture or whatever; it depends on the nature of the power that is devolved. A power that operates only in Scotland would be devolved to Scotland because in the constitutional arrangements there are two restrictions. The reserved powers are one type of restriction, but the other is the geographical restriction. You cannot make laws in Scotland for the rest of the UK. Therefore, if common market policy for the whole of the UK is in question, and that is the power in question, it has to stay with the Parliament in Westminster. But if it is a power related to agriculture, which is restricted only to Scotland, or Northern Ireland or Wales, it is remitted to the legislatures operating there—if a legislator is operating there.
Lord Hain
I apologise for prolonging this discussion. I urge the Government to reflect on this: given the trouble that we have already run into in this process with the devolved Administrations, if there were a process where these regulations automatically had to come under the umbrella—as the noble and learned Lord, Lord Mackay of Clashfern, implies and which I agree with—that would impose a discipline on all the parties concerned to use that process to resolve any common issues that are outstanding. It is an established process, but it has not really been used. In the post-Brexit situation, which I think will be a nightmare, these procedures will be needed even more to ensure the constitutional stability, success and indeed viability, given what is going on in Scotland and Northern Ireland over Brexit, of the whole of the union.
Viscount Younger of Leckie (Con)
My Lords, the Committee will notice that we have another change of driver—or perhaps a navigator having temporary control of the wheel. If I read the noble Lords, Lord Stevenson and Lord Purvis, correctly, the intention behind the amendments is to ensure that the voices of the devolved Governments are heard in relation to trade agreements. That is something that the UK Government entirely support. Indeed, the Department for International Trade is in discussion with the devolved Administrations on their role in future trade agreements.
To give a little more information to the noble Lord, Lord Purvis, the UK Government are committed to working closely with the devolved Administrations to deliver a future trade policy that works for the whole of the UK. But it is important that we do this within the context of the current constitutional make-up of the UK, while acknowledging that international trade policy is a reserved matter. To go further, we are currently having detailed discussions with the devolved Administrations at official level on their role in future trade arrangements, with the aim of agreeing new working arrangements before EU exit. In fact, we are continuing this engagement later this week.
I am happy to provide assurance to the House that our clear intention is that there will be a formal and regular intergovernmental ministerial forum to consider future trade agreements. The devolved Administrations already participate in other ministerial forums, such as those for EU negotiations. Frequency and any terms of reference are subject to further discussions and agreement with the devolved Administrations. However, we expect the forum to include our Minister for Trade Policy and his or her counterparts in the devolved Administrations.
The noble Lord, Lord Purvis, asked some questions on this point. The UK Government view securing an agreement with all the devolved Administrations as the best possible scenario, and it is the one that we will continue to work towards. We are committed to securing LCMs for the Trade Bill and have worked closely with the devolved Administrations to understand and respond to their concerns. As a result, we have made amendments to the Bill that answer many of those concerns.
The requirement for Ministers of devolved Administrations to seek the consent of the UK Government when making regulations that come into effect before exit day, or that relate to quota arrangements, has changed to a requirement to consult, of which I suspect the noble Lord will be aware. We will continue to respect the devolution settlements as they relate to trade agreement continuity and future FTAs. We will not normally legislate in areas of devolved competence without the consent of the devolved Administrations, and certainly not without first consulting them.
The amendment, however, would apply to existing trade agreements only and is, in this context, not proportionate. Clause 2 will be used only to ensure the continuity of existing trade agreements that are already in force. It will not be used for future trade agreements. Therefore, Amendment 17 would add risk to the swift and timely rollover of existing trade agreements. Given that these agreements are or will be already in force and that the purpose is to ensure continuity, the amendment is, at best, disproportionate and could mean that we were unable to deliver crucial continuity for businesses and consumers throughout the United Kingdom. For that reason, the Government cannot support Amendment 17. I hope that I have provided sufficient assurances on our intentions for engagement with the devolved Administrations in trade agreements.
Lord Purvis of Tweed
On the first point, it is very helpful to hear about discussions taking place through ministerial forums. This would be, I think, outwith the memorandum of understanding process in the joint ministerial committees, which have now been well established for 20 years as the intergovernmental framework between the devolved Administrations and the UK Government. I am sure the Minister is always very careful and specific with his language: I heard him say “forum” but I did not hear him say “joint ministerial committee” or “intergovernmental committee”. A little more information about that would be helpful.
Viscount Younger of Leckie
I can help the noble Lord. I was very careful to use the word “forum”—but perhaps I should have used “fora”, which of course is the plural. The reason for that is that the process is designed to mirror what has worked with the EU up to now. We want to replicate the terms that are used for EU negotiations by not calling it a joint ministerial committee. But I understand the intention behind the noble Lord, Lord Stevenson, using that term.
Lord Stevenson of Balmacara
I am on the same page as the noble Lord, Lord Purvis. Why is it so complicated? The joint ministerial committee system has, as he said, worked well for more than 20 years. It provides an opportunity for those who are required to be present around the table to sit down, discuss and arrive at conclusions. In a debate on an earlier Bill, the noble and learned Lord, Lord Mackay of Clashfern, suggested a way of developing that into a formal structure within which there would be appointed chairs or elected chairs and rotating responsibilities. We seemed to be heading down that route, but now we are talking about this rather curious IGMF, which I had not heard of before. It is nice to know that it does indeed exist and may be working on EU matters. But I have always understood the relationship around EU matters as being—as the noble and learned Lord, Lord Mackay, picked up rather cleverly—around a settled set of responsibilities, where there is not the problem of geography meeting functionalism. That is the problem here, because as soon as we have a situation where the responsibility is devolved because it is not reserved, and there is a need to arbitrate and barter out the various competing interests across the nations of the United Kingdom, there has to be some formal structure. I do not think a forum provides that.
Viscount Younger of Leckie
We may be dealing with semantics here, but I will certainly write to the noble Lord, Lord Stevenson, and the noble Lord, Lord Purvis. My understanding is that there is a reason, but it is not a particularly big reason, which is that the difference between a joint ministerial committee—the expression that the noble Lord, Lord Stevenson, has just used—and a forum is that for a forum the devolved Administrations are seeking and are getting more regular and frequent conversations with us in the UK Government. I think a letter should clarify that.
Lord Purvis of Tweed
I am grateful that the Minister will be providing a letter. As the Commons committee and others have said, such a forum, which will include other groups, including representatives from the Administrations, should not be seen as an alternative to the mechanism of joint ministerial intergovernmental committees, which, as the noble Lord, Lord Stevenson, said, are more about the discussions that take place about legislative competences. As the noble and learned Lord, Lord Mackay of Clashfern, indicated, this is important now. The Minister said it is important that the continuity agreements are done swiftly. These continuity agreements may be in place for three years at the least, but they can be extended time and again. The agreements currently in place with the EU are permanent agreements, therefore we would be bringing into UK legislation what could well become permanent agreements. It is therefore important that if there are outstanding issues about where those competences lie, they are cleared through some form of intergovernmental process. If those points could be addressed in the Minister’s letter, I would be most grateful.
Viscount Younger of Leckie
I will certainly address the extra points that the noble Lord has made. The point I want to emphasise to the Committee today is that this forum is being regarded as particularly serious in the times that we are in. I have mentioned some names to be included as part of that forum, but this is work in progress.
On Amendment 76, the UK Government recognise the important role each devolved Administration will play in the implementation of the Trade Bill. The Government are also committed to ensuring that withdrawal from the EU is a successful and smooth process for the whole of the UK. The use of concurrent powers is in keeping with existing devolution arrangements. It allows for regulations to be made once for the whole of the UK where it makes practical sense to do so. The intention behind this is legislative efficiency.
The noble Lord, Lord Purvis of Tweed, asked about the implications for the Trade Bill of the freezing power in the EU withdrawal Act. We have been clear that the regulations to freeze competence to preserve our existing frameworks are not a mechanism for avoiding seeking legislative consent when creating our future frameworks. Without wishing to labour the point, I reiterate my earlier commitment that the UK Government will not normally use these powers to amend legislation in devolved areas without the consent of the relevant devolved Administrations and certainly not without first consulting them.
I acknowledge the mini-debate started by the noble Lord, Lord Hain. In essence, he asked whether the concurrent powers amount to a power grab—I think that is the expression he used. Under the Trade Bill, every decision that the devolved Administrations can make before exit they will be able to make after exit. The augmentation powers in the Trade Bill will be held by both the UK Government and the devolved Administrations. This approach will provide greater flexibility in how transition agreements are implemented, manage legal risks where competence boundaries are unclear, and allow for a reduced volume of legislation. The noble Lord invited me to write, and if he is not satisfied with that answer, I will certainly follow up with a letter should he wish.
Lord Stevenson of Balmacara
I am grateful to the Minister for that full reply. I am looking forward to the letters, which I will read very carefully.
It is sufficient to leave the position on Amendment 17 as it is at the moment. It is more complicated than can be dealt with within the confines of the Trade Bill. It needs a much wider conspectus of views and to be informed by other debates elsewhere. The principles that we have been articulating are important. I hope the Minister recognises how valuable they will be within what appears to be the Government’s view that rolling forward existing trade arrangements on the continuity model will be uncomplicated and not difficult. I have my doubts—“I hae ma doots”, as I would normally say. Hansard will not necessarily pick this up.
The key is: how does it work in practice? It is really important to use our words carefully, as the Minister has done, to assure ourselves that we are not getting into exactly the same position as we did on the withdrawal Bill. In effect, he said that the Government will not normally legislate in areas that are devolved. Of course, the key is: what does “normally”’ mean? How exceptional does it have to be before we see an extraordinarily difficult situation leading to contests between the two agencies? He went on to say that they would not do so without the consent of the devolved Administrations. Consent is a crucial word. The noble Viscount, Lord Trenchard, used the word “consult” as if that took both meanings, but it does not. Consult is one thing; consent is so different. We have to be sure exactly where we are. The discussion and debate around this would then result in an agreed position between both Parliaments as to how it would operate in practice. That is the Sewel convention.
If we accept everything that has been said in this debate—and we will get contributions on other Bills and issues of policy as they come forward—why do the Government not look very carefully at the wording of Amendment 76? It was provided to us by the Welsh Government as a proposal for reaching a point of unanimity on this issue. Why is it not appropriate to put it in this Bill, or, if not, in some future Bill very closely aligned to this? I think it will be required. My guess is that we will need it quite soon. It is not legally unenforceable. It is what we do. So let us get it right. I beg leave to withdraw the amendment.
Lord Purvis of Tweed
“Status of the United Kingdom
Before exit day, a Minister of the Crown must lay before Parliament a report specifying which countries and organisations must amend their own domestic legislation in order to ensure that the United Kingdom is treated by that country or organisation as if it were a member of the European Union for the purpose of free trade agreements or other international trade agreements during the period between 30 March 2019 and 31 December 2020.”
Lord Purvis of Tweed
My Lords, I will also speak to Amendment 19 in this group. At Second Reading of this Bill, the Minister, the noble Baroness, Lady Fairhead, said that this process was about transparency. Amendment 18, which is a probing amendment, and Amendment 19 seek some transparency in a rather opaque set of situations—I listened to the Secretary of State for International Trade this morning from Davos adding even more confusion to the current position on the continuity agreement discussions.
On Monday, I referenced the fact that, through our membership of the EU, the UK has a trading relationship in place with 35 countries; 47 are partly in place, and there are 22 pending country agreements. These represent 66% of UK trade. Some are extremely complex. Some have been split into trading arrangements and investor dispute mechanisms, and some are of critical importance to certain sectors of the British economy. It is incredibly important that, between now and 29 March, we have a much greater understanding not only about what they are and how they will be translated into British law but also about the relationships that we have with other countries.
One of the reasons that Dr Fox has given for why we have not been presented with the trade agreements to roll over into our legislation is the reluctance of other countries. He has given a number of reasons why they are reluctant, which I will come to later, but one of the areas that Amendment 18 seeks to clarify is our Government’s understanding of what our partner Governments need to do. On a visit last year to a country in north Africa, I met with its foreign affairs and trade representatives and MPs. A representative of the British Government who was present asked them explicitly whether they needed to change any of their domestic legislation purposes if they were then going to respond to what the EU was going to ask them to do, which was to consider the UK as a member of the EU for the purposes of international agreements during the implementation period—that is, on the basis that we have an agreement—and they were not able to answer. I suspected that this was now a routine set of requests from British government representatives of our partner countries.
My amendment asks for a report on what our understanding is of the domestic processes that those countries need to go through. If we know that, we are able to take Dr Fox’s statement at face value: they are simply not carrying the weight or working hard. Or, if we know that their own domestic processes are more complex than one may have thought, then we may have greater sympathy with the Government that this may be a more complex process than we had been led to believe.
In 2017 and 2018, we seemed to be living in a much easier world, because Dr Fox suggested at the Conservative Party conference, reportedly to cheers from activists, that it would be a breeze to get all the existing trade agreements in place before March. I remind colleagues that he said:
“believe me, we'll have up to 40 ready for one second after midnight in March 2019”.
He added:
“All these faint hearts saying we cannot do it—it’s absolute rubbish”.
That was endorsed on Twitter by the Minister’s predecessor, the noble Lord, Lord Price. When challenged on the basis that it might not be as easy as what Dr Fox had said, the noble Lord said on 24 October 2017, in response to someone saying that we would be out only on WTO rules:
“Ed we won’t only have WTO in event of no EU Trade deal. We will roll over the 60 odd other deals we are party to currently”.
Someone then responded that it would be difficult to do that. He then replied,
“All have agreed roll over”.
I just do not think that is correct. We now need absolute clarity because the clock is ticking.
When we debated this four months ago at Second Reading, I specifically asked the noble Lord, Lord Callanan, if the position of Dr Fox and the Government—that at the second after midnight next March they will all be ready—still stood. He replied:
“The Government’s position is exactly what the Secretary of State for International Trade said”.—[Official Report, 11/9/18; col. 2201.]
We need to know what the domestic processes are in those other countries and we need to know now very clearly, through a report, where we currently stand. That report should give the number, type, scope and extent of those agreements.
The agreements that we currently have in place are a mixture: free trade agreements; deep and comprehensive free trade agreements; economic partnership agreements; association agreements; stabilisation and association agreements; customs union arrangements—with Turkey and Andorra, which we will be discussing later on; interim economic partnerships; stepping-stone agreements; and modernisation agreements. We are also in the process, although they are not yet inked, of investor dispute mechanism agreements.
We have heard nothing at all from the Government about how we intend to roll over these different—in some respects, significantly different—types of agreements, and the consequences that that could potentially have on UK law. Dr Fox, in a slight moment of reality, said to the Commons committee that a simple rollover may not be as easy as previously stated. That is the only time—that I could find—where there was a degree of reality from the Government.
As I have said previously, the clock is now ticking. The Government still hold the position—if the noble Lord, Lord Callanan, is to be believed—that we are to transfer all of these agreements into UK law. They have not deviated from that position; indeed, Dr Fox did not even deviate from it this morning when he was asked, which is the latest information. So this report under Amendment 19 is necessary.
Because of the complexity of these arrangements and because some of them are very large—the totality represents 66% of UK trade—it is necessary, in subsection (2)(d) of the proposed new clause, for us to specify the consequences for the United Kingdom. In failing to replicate the terms of the existing agreements, it is necessary that we have a report which indicates the impact on the UK economy. Subsection (2)(a)(i) to (iii) in Amendment 19 means that there will be a much greater degree of clarity on what our partners need to do.
Finally, why is this even more important? At a lunchtime meeting that I had with colleagues in the House with a delegation from the Canadian Parliament, the Prime Minister’s trade envoy to Canada had a very interesting row with another Conservative MP. As a Liberal Democrat, the only good thing I could do was be an observer. The trade envoy said that one of the opportunities of rolling over the CETA agreement was to change it. That was immediately slapped down by the other Conservative MP who said, “No, we just need to get this through”. Our very close Canadian colleagues were bamboozled by this. They were also bamboozled when I asked them the same question that I am asking the Minister: what is necessary for Canada to implement this into their domestic legislation? So far, the Canadian Government have not indicated to their parliament that this is in the pipeline or that this is to be ready. Therefore, all I am asking is for the Government to tell us.
Now is the time for clarity—absolute clarity—not only for Parliament but also for businesses that rely on this trading relationship. I remind the Minister of the resolution of this House on Monday: that if this clarity is not provided then this Bill will not proceed.
Baroness Jones of Moulsecoomb
My Lords, when I first came to your Lordships’ House just over five years ago, I found some of the procedures absolutely incomprehensible. It has taken me a little time to find my feet. Quite honestly, a lot of those procedures lack common sense.
I do not understand why it was ever necessary to draft Amendment 19, let alone for it to be moved. It is common sense: of course we need this sort of information. It is asking for such basic information which, in any sensible universe, would be published as a matter of course. This is transparency which helps all of our businesses and our economy. We are now only weeks away from Brexit day, and we are still completely in the dark about all these things. There are many supply chains which depend on this sort of information. They depend on our existing trade arrangements. Businesses do not have the slightest clue whether they will be able to continue on existing terms in just two months’ time.
I would have thought that, if the Government had everything lined up ready to roll over these trade deals—which I very much doubt—then Ministers would be telling us about it and about what a great job they have done. The Minister would do a great service to the Committee, and to the country, by giving us a full account of where the Government are in these negotiations. It should not have to be an amendment to the Bill—it is so basic—but if the Government will not tell us then we have to compel them.
Lord Patten of Barnes (Con)
Could I just add to the points made by noble Lords? All this has been said before, when we discussed these matters a year ago. We were assured that everything was hunky-dory and that this process of rolling over existing trade agreements was going very smoothly. I recall one occasion when, after we had discussed it here, I was invited to a briefing by Trade and DExEU Ministers. They explained how easy it would be and took as an example one particular trade deal that I happened to know about because I had negotiated it as European Commissioner. I remembered how difficult the issues we had had to deal with were about rules of origin and surges in agricultural imports. Here I was being told that something that had taken us five or six years to negotiate would be negotiated, along with everything else, by the Department for International Trade.
Maybe between now and the end of March the department will get its socks on and go like the clappers, but somehow I do not think it will. I think that what will happen is it will redefine what the objective is, as Dr Fox was doing this morning. Dr Fox presumably knows the difference between a mutual recognition agreement and a free trade agreement, but this morning he was talking as though they were the same thing. I greatly sympathise with the Minister, because I do not think she will be able to enlighten us very much on the particular progress that has been made over recent weeks and months by our ubiquitous International Trade Secretary.
Baroness Hooper (Con)
My Lords, your Lordships’ House has the privilege of having as Members a number of former European Union Trade Commissioners. I am very happy that a least one of them is here and able to contribute from his specialised knowledge to our debate.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, I will address Amendment 18 first. I thank the noble Lord, Lord Purvis of Tweed, and all who have spoken in the debate. The themes from the noble Baroness, Lady Jones, the noble Lord, Lord Fox, and my noble friends Lord Patten and Lady Hooper are similar points. I will try to address them as much as I can. I also recognise the assertion from the noble Lord, Lord Purvis, that this is a probing amendment.
This is an important issue and I fully understand the need to provide some reassurance. I will try, as much as I can, to do so. I start by reiterating that we value and benefit from our international agreements, and we want to continue to co-operate with our global partners across a range of issues—not just trade but air services, climate change, international development and nuclear co-operation. As such, we are working with countries and multilateral organisations worldwide to put in place arrangements to ensure continuity of those international agreements.
We have agreed with the EU that it will notify treaty partners that, during the implementation period, the United Kingdom is to be treated as a member state for the purposes of these agreements. We think that this approach is the best platform for continuity during the implementation period across all agreements, but it would be for those individual third countries and multilateral bodies to determine whether any domestic action, including amendments to domestic legislation, is required. We do not expect that such actions will be required in every instance, but we understand that some parties, as the noble Lord, Lord Purvis, said, will choose and be required to take some internal steps where they think that to be necessary.
Baroness Kramer (LD)
My Lords, could I ask the Minister for clarification? Has she just said that she believes that, 10 weeks away from leaving, potentially under a no-deal scenario, the UK Government still do not absolutely know what steps are necessary in each of those countries with which we expect to roll over those continuity agreements, do not have them timetabled and are not tracking them in detail but have basically just stepped away and said, “We just hope, generally”? I would have hoped our diplomats were on the telephone daily to get these steps in place if they were necessary. But from listening to her, it sounds as though no such action, no such monitoring or pursuit, is taking place.
Baroness Fairhead
I thank the noble Baroness, Lady Kramer, for the further question, and will try to reassure her. The Government have been engaging actively with those third parties on that approach since it was outlined as part of the implementation period arrangements at the European Council of March 2018. But we must consider that a decision for those third parties, those countries themselves. Any action or internal measure taken is for them to consider based on their own domestic legislation and practice. Indeed—this is a critical point—some internal measures, given their very nature, may not even be public knowledge. For this reason, let me assure the noble Baroness that we agree it is right that we engage actively both with third parties and with multilateral organisations and encourage them to consider the steps needed for their own domestic legislation. This enables the continuity that, as the noble Lord, Lord Price, said, in principle they all fundamentally agree with, because it is in their mutual interest.
Moving into the future and the next 10 weeks, if we go to a new deal, this will have to be even more revved up, because we are hoping and planning for an implementation period. But as the noble Baroness will be aware, that would require an agreement, and therefore we must also have plans in place for no deal. We do not think it appropriate for the UK Government to essentially monitor a list of the actions over sovereign countries and hold them accountable. It would also be practically challenging for the reasons I have set out.
Lord Fox
I do not think anyone on these Benches has said that the UK Government should be holding the other Governments to account for these actions. We are asking whether you understand what the necessary actions are. Are you tracking them? Do we really know the critical path each agreement has to take in order to reach the golden point of Dr Fox’s magic moment when they all become reality? I think you are saying that you do not know what the path is, that you are not mapping that critical path and that therefore you cannot say how long it is going to take because you just do not know.
Baroness Fairhead
I say to the noble Lord that we are actively working and engaging with them. It is for them to decide. They have discussed with us what they currently believe. Some they are actively working through, some the third countries and bodies do not choose to make public—to us or anyone else. That is what I am trying to explain. I do not want this House to be in any doubt or to give the sense that we were just asking them and walking away. We are actively engaging with all the parties I referred to.
I now turn to Amendments 19 and 97. I will take those together, as they both—
Lord Hannay of Chiswick (CB)
Before the noble Baroness goes on to the next amendment, could she answer a question that I asked in the preliminary debate? In the event of us leaving without a deal, what tariff rates will the United Kingdom apply on 30 March to countries with which the European Union has a preferential trading agreement? That agreement will have lapsed as a result of our departure, so we will not be able to keep those tariffs at zero, as they are at now. The MFN rules of the World Trade Organization will say that we are not in a free trade area, a customs union or a preferential agreement with those countries. Have you told these countries what tariffs we are going to apply, and if so, could you tell us?
Baroness Fairhead
My Lords, I will try to do a little better than that. I can write to clarify, but my understanding is that in the Taxation (Cross-border Trade) Act arrangements were put in place for the GSP, the GSP+ and the Everything But Arms preference terms. As I keep saying, obviously our aim is to have an agreement and then an implementation period. Should there be no deal—which is not the desired outcome—the UK will need to determine what its policy is. That is not something that I am at liberty to discuss, as it has not been disclosed. Clearly it is not a place we want to go, but we will have to take that into account if we reach that point.
Baroness Kramer
I am sorry, but I must repeat a point that has been made by the noble Baroness, Lady Jones, and others. There are companies doing business that need to be signing contracts today, or fulfilling contracts on their books: they need to make financial provision, to put loans in place if suddenly they face unexpected costs, or to find alternative suppliers. There is a whole range of actions that those companies need to take. We cannot wait until we have gone over the precipice and then start to think about what we are going to do. We will have to have a regime in place at one second past Brexit. I do not understand the thinking behind all this. I do not know whether the Government have made a decision to keep this information from Parliament, for reasons that I do not understand but which may reflect some internal attitude towards secrecy and the way they want to handle Parliament, or whether they actually have not done the work and got any of the elements in place. Either is awful.
Baroness Fairhead
I believe that the noble Baroness has misinterpreted what I said. I did not say that we would wait until the end and that people would go into a chasm of not knowing. I said—I hope that I said it clearly—that our aim is to have an agreement and an implementation period. In the event of no deal, which clearly is not the preferred outcome, speed is of critical importance in trying to roll over the effects of the agreements that we have, to give that certainty and continuity to businesses.
The noble Baroness asked what would happen a second after midnight. We have published technical notices on the programme, we have attended multiple oral evidence sessions with the International Trade Committee, we have exchanged letters with that committee, which are in the Library, we have responded to all parliamentary Questions and we have made Statements in the House.
Lord McNicol of West Kilbride (Lab)
May I try asking the question asked by the noble Lord, Lord Fox, another way round? Are the Government concerned that any of the countries with which we want to roll over agreements cannot complete, or have concerns about completing, the rollover agreements, through their own Governments and Parliaments, within the next 10 weeks? If so, we should take the point made by the noble Baroness, Lady Kramer, about the businesses and industries working across and with those countries. They will be put in jeopardy if there is no agreement in place by one minute past midnight on 30 March.
Baroness Fairhead
My Lords, I can confirm that that is why we want to have an agreement with an implementation period. That is why it is definitely the Government’s plan A, while a no-deal scenario will bring real challenges. I hope that your Lordships would not accuse me of saying that there are not complications or that we do not need to go through many agreements. As I said in this House at Second Reading, it would be extraordinarily challenging to get everything done by 29 March—and I do not resile from what I said.
The noble Baroness referred to the future tariff policy and what happens if we get to no deal at one second past midnight. We are working to develop an independent tariff policy, but no decision has yet been taken on what the applied tariff rates will be post an EU exit, notably also in the case of no deal. We are looking at a full spectrum of options and will consider carefully all the evidence available before making a final decision in the interests of British industry and consumers.
Lord Purvis of Tweed
I wish to have one final go on Amendment 18. It is predicated on what the Government are working to, which is to have an agreement. That agreement will come with a request from the European Union to those third countries to treat us as a continuing member of the international trading agreements. The Minister has told the Committee that the Government know of countries where that poses no difficulty but also of countries which have said they do have difficulties. This means that, even in the event of leaving with a deal, some of our trading arrangements will not be in place after exit because those countries cannot put them in place. Which countries have indicated to the Government that that poses no difficulty and they will treat us as a continuing member of the international treaty, as the EU has asked? Which countries have said that it poses difficulties, and which have said that they do not wish to make it public?
Baroness Fairhead
My Lords, if I may address the point made by the noble Lord, Lord Purvis, if we leave with a deal there is an implementation period until the end of 2020. There is much greater confidence, as I believe this House would accept and appreciate, about getting all the arrangements fully continued and rolled over within that time period.
There are two issues here. The first is the notification by the EU that the UK is to be treated as part of the EU during the implementation period. The second is what third countries need to do to enter into continuity agreements. The first is a matter of third countries accepting that they will treat us in that way; on the second, we are engaged in detailed discussions with individual third countries to try to help them ensure that they are in a position to enter into the agreements on time. I stress, as noble Lords have highlighted, the difficulty of the timing if there were no deal.
Lord Purvis of Tweed
I apologise, but can the Minister then confirm whether my understanding is wrong? I understand that they will be asked to consider us as being in an agreement during the implementation period—to carry on treating us as if we were a continuing member of that organisation—but the Minister has said that the Government do not know whether all countries will do that. So, even if there is an agreement with the EU and an implementation period, there may be countries where the international relationships that we will have will not be in effect after exit day because the third country will not be in a position to treat us as a continuing member. The Minister has said that to the House. So all we want to know is which countries they are, because it is very significant if, even in the context of leaving with an agreement, those relationships might not carry on.
Baroness Fairhead
My Lords, what I can say is that all the countries we have spoken to have agreed with the principle of continuity. Therefore, one could expect that if they agree with the principle of continuity, they would see that that was a key part of making sure that their businesses and UK businesses—their people and our people—are protected.
Amendments 19 and 97 both concern the publication of a trade agreement progress register, so I will take them together. As agreed in the other place, the Government have already committed to lay reports in Parliament to explain any changes made to continuity agreements. These reports are intended to aid Members of both Houses to understand our continuity agreements. It is critical—as the previous discussion has just highlighted—that we do not delay the ratification of the agreements and unintentionally create a cliff edge for our businesses through a process addition. There will simply not be time, particularly with no deal, to create a detailed progress register in advance of bringing the majority of provisions in the Trade Bill into effect. That would be the effect of Amendment 97. As I stressed, we want to keep Parliament informed. Although we are committed to transparency and clarity in what I have laid out regarding our process reports, we are also mindful that we need to deliver the programme to time, and this additional reporting requirement risks delaying it.
Our Clause 3 reports are proportionate and will provide Parliament the transparency it requires. I take fully the comments made by the noble Lord, Lord Purvis, about the number of agreements—FTAs, EPAs, MRAs and association agreements. I have also laid out to the Committee some of the more technical aspects that we will cover, such as what happens with tariff rate quotas and rules of origin. I believe we will discuss those later today. Extensive work has been undertaken to ensure the continuity of our agreements for more than two years. We are engaged with our international partners to deliver this in the event of no deal. We have been working to deliver successor bilateral agreements with third countries and treaty partners, which in the event of no deal we would seek to bring into force from exit day or as soon as possible thereafter. Progress has been encouraging. Ministers and officials are engaging regularly with those partner countries to support and complete the work. As I said in the previous discussion, all have supported the principle of rolling over, because it is in their mutual interest.
I reiterate that we are aiming not to have any significant changes. As such, we believe there is little benefit in having a report analysing our continued participation in the EU FTAs. The vast majority of the elements are already being implemented, and our businesses are already benefiting.
The amendment in the name of the noble Lord, Lord Purvis, would require us to provide detailed progress on private Government-to-Government discussions. To provide such updates would create a considerable handling risk with our partner countries. As the noble Lord will appreciate, there are commercial sensitivities, and regulations and procedures in third countries, and we would not be able to commit to providing those updates without first seeking the agreement of the relevant partner countries. Again, this could end only in slowing down the negotiations. We believe these amendments are inappropriate and I ask the noble Lord to withdraw Amendment 18.
Lord Hannay of Chiswick
Is the Minister familiar with the practice in the European Parliament which currently applies? The committees of the European Parliament are briefed in detail about negotiations being conducted by the Commission. During the negotiations, how do you think they overcome these insuperable problems which the Government seem to see about doing that here? Nobody is saying that it has to be done on the Floor in a plenary session of this Parliament, but surely there has to be some way in which the Government account to a committee, as they go along, as to how negotiations are going. That is what happens in the European Parliament.
Baroness Fairhead
My Lords, I know the European process in outline; I cannot say that I understand it in the depth that the noble Lord, Lord Hannay, does, given his experience in that area. I want to differentiate between the continuity agreements and future trade agreements. Because we are talking about rolling over existing agreements, we expect to replicate the effects as closely as we can, so as not to disrupt trading patterns, so this is a different type of progress report. The noble Lord makes an important and valid point about the scrutiny of future trade agreements and we will discuss that later in the debate.
Lord Stevenson of Balmacara
I go back to an earlier question asked by the noble Lord, about whether or not the Government are in a position to notify those who are directly involved in this in a no-deal situation, which we all hope does not happen but in which we are out of the EU at 11.01 pm on 29 March, to be accurate. What conditions need to be satisfied before those who are directly involved in trade on that day and at that time get access to information about the proposed tariff arrangements? Absent that, we are talking about a very short period for those who have businesses to organise, decisions to make and loans to raise, as has been said. The other half of this is that if we are talking about continuity arrangements at that stage, when will we be in a position to know exactly how many countries are ready to do a deal with us at 11.01 pm on 29 March, how many are not and how many will take time to get their own arrangements sorted? Without that information we are not really in a position to judge whether or not the Government are making a good fist of this.
Baroness Fairhead
My Lords, on the 11.01 pm—or one minute past midnight—point, technical notices have already been sent out and no-deal planning has been ramped up, as the noble Lord will have seen in the Prime Minister’s announcement. Communications are planned for businesses and there are training programmes to make sure that the Civil Service and various departments are ready with information as required. Clearly, our primary focus is on achieving plan A and a deal, and therefore this is contingency planning, but that planning has been ramped up in the event—that we do not want—that there is no deal. I cannot say the exact moment that those notices will come out but I understand the noble Lord’s concern, and businesses’ concern, about what will happen in the following hour. Obviously, that will be taken into account.
As for third countries and where they are, I do not think I can add to what I said, which is that we are actively engaged and if there is a deal followed by an implementation period, we will be an awful lot more comfortable about the process.
Lord Purvis of Tweed
My Lords, I am grateful to the Minister and to noble Lords who have taken part. The Minister said that the Government will keep Parliament informed. Parliament has not been informed until now. We have no idea, because nothing has been presented to Parliament, about notification of the status of the potential agreements. We were not informed in advance about Switzerland, which is the only one so far; we have been asked simply to ratify it and to consider whether or not we accept what comes with it.
I tried to probe the Minister’s comments on Amendment 18. She told us that in discussions with third countries, if there is an agreement and the EU asks them to consider the UK as a continuing member of the European Union for the purposes of international treaties and trading agreements, the Government will not provide the information to Parliament on which countries that poses no difficulties for, which countries have indicated that that may require them to change domestic law, and which countries are refusing to make the discussions public.
Baroness Fairhead
My Lords, I have to rebut the statement made by the noble Lord that it would enhance relations with third countries if we reveal the status of the discussions and negotiations with them. It would be against the nature of most discussions with third countries. Many third countries have policies in which they do not permit disclosure of the discussions that are taking place. I just do not think that is a correct assertion. As for Switzerland and other—
Baroness Kramer
All these countries have negotiated deals with the EU. In the process of those negotiations, there was full transparency and exposure. It is not a case of reporting to the European Parliament; it can be read on the website. In relation to these exact trade deals, they are used to providing full disclosure every step of the way. They are not being asked to do something that is out of the norm. The secrecy is out of the norm, not disclosure.
Baroness Fairhead
Again, when countries are in the middle of negotiations, blow-by-blow accounts or reporting stages are highly irregular. I hear and understand this House’s concerns and I will see what more information can be given.
With Switzerland, it will not just be a case of ratification, then all done. As we committed to, parliamentary reports will be laid before the House so that it can see whether any changes have been made and, if so, what their impact is. Today, it was announced that a free trade agreement has been reached in principle with Israel. I say this not because two out of 40 is the vast majority but because I want to provide reassurance that progress is being made. As noble Lords will be aware, the agreement with Switzerland is one of our most important FTAs with the EU—in fact, it is the most important.
I hear the concerns and challenges from noble Lords across the House. We have provided information and I cannot say that there has not been transparency; we have been reporting to the ITC and through ministerial Statements. I will seek to find out what further information can be provided before or during Report.
Lord Purvis of Tweed
One element that concerns us is when Ministers move seamlessly from saying that this is merely a technical exercise to roll over existing agreements to, in the next sentence, saying that they are engaged in confidential negotiations—but what are they negotiating? If this is simply a technical legal exercise to ensure the translation of legal competences into UK law, what are the Government negotiating? As soon as Ministers say that confidential negotiation is needed, that should trigger the existing, proper processes of transparency. As the Government said, these agreements are existing agreements with the European Union. They could not have been made without regular updates to democratically elected bodies. That is what we are asking for; it is a modest request.
The Government’s response is concerning and has not provided the degree of clarity sought, especially since the public justification for why these agreements have not been brought forward to Parliament by the Secretary of State is to blame other countries. If we get to the next stage of the Bill, much more information must be provided by the Government because this issue is significant for our trading relationships. Until that point, we on these Benches will reserve our position. At this stage, I beg leave to withdraw the amendment.
Baroness Henig
“( ) A report under subsection (3) must be drawn up by an organisation independent of Her Majesty’s Government and must include an economic analysis of the impact of the changed agreement.”
Baroness Henig (Lab)
My Lords, I rise to move Amendment 20 and speak to Amendment 21. Both amendments touch on the important issue of transparency, which has already been raised.
According to subsections (7) and (8) of Clause 2, the powers to be taken by the Secretary of State to implement replacement UK trade agreements for existing ones covered by our EU membership may last for up to six years after exit day. At present, as we have heard, the Government are not obliged to provide any indication of progress on the implementation of trade agreements covered by Clause 2. Businesses great and small have rightly complained that they have been given insufficient information about which agreements will be in place on exit day and beyond. The Minister has told me that there has been consultation between the Department for International Trade, trade organisations and businesses, but I am not sure that it has been on a sufficient scale to allay businesses’ concerns.
I acknowledge that the Department for International Trade has been working hard to ensure that no agreements are lost on Brexit day, whether we leave with a deal or not. But the fact remains, as we have already heard at great length, that there has been a failure to provide this House and the other place with information on the progress of the rollover of trade agreements. Surely we should not have had to learn from the Financial Times that there is a possibility that many, if not most, existing trade agreements will not be carried over after 29 March in a no-deal scenario. The previous amendment, moved by the noble Lord, Lord Purvis, suggested the establishment of a one-off register of trade agreements to be covered by the Bill. Surely that would benefit us greatly in terms of both our scrutiny role and our ability to act on behalf of businesses seeking to know the state of play on trade negotiations.
However—again as we have heard—there can be no doubt that best practice requires the provision of regular progress reports. We heard on Monday, and have heard already this afternoon, about the information provided by the EU on its website, covering the progress of trade negotiations. For example, I have here a one-paragraph report on the 19th round of negotiations, held in October 2018, on an EU-China investment agreement, along with an expectation that the next round of talks will be held early in 2019. That is the sort of information being put out by the EU. I appreciate the issue of commercial confidentiality, but surely if the EU can provide such information on a regular basis, the United Kingdom should commit itself to doing the same, particularly given the concerns of businesses and the commercial sector, and the powers requested by the Department for International Trade in the Bill. That is the purpose of Amendment 21.
The second part of the amendment would ensure that the Government keep us up to date during each parliamentary Session by means of a fairly simple report. We are not talking about just this Session; this could go on for some years, so we are talking about every parliamentary Session. We should all be aware of plans and the likelihood of agreements being laid at particular times. We need early notice of issues that may prove controversial. I would have thought that any responsible Government would feel that this was a basic requirement for those who are tasked with scrutiny functions, such as this House, and for businesses wanting to know about progress.
The first part of the amendment is similarly based on the good practice we have seen in the European Commission. I am pleased that the Government propose to lay before us a report on the trade agreements they intend to implement, including the difference between existing and proposed agreements—but that does not go far enough in providing information to businesses and this House on the nature of the agreement. From what the Minister has told me I gather that, in the Department for International Trade, agreements will be scrutinised thoroughly by internal economic assessors. That is very good—but could the Government therefore be seen as marking their own homework? Might the Government not bring to our attention all matters of importance?
That brings me to Amendment 20. I would like to see the scrutiny also done externally. We should be provided with a full, independent report of the sort that would be typically be provided by, for example, the LSE or Sussex University, both of which have well-established trade policy expertise. That would detail the precise differences between existing and new treaties, if any, and—importantly—the expected economic impact of any changes. Without this information, it will be very difficult to judge whether an agreement is worth pursuing.
The Minister keeps saying that the treaties will be rolled over and will all be very similar, with no variation. I will give an example to illustrate my point. Let us say that a country covered by one of these agreements is prepared to sign a rollover only on the condition of a change in a regulation to allow a certain type of food to enter this country with reduced checks. This could have an impact on health, on United Kingdom domestic providers and, potentially, on other countries’ exports, including those of developing countries. In this situation, surely Parliament deserves to know the impact of the change and should be able to scrutinise its effects. The best way to do that, as far as I can see, is through the provision of an independent report.
Lord Stevenson of Balmacara
My Lords, my noble friend has done us a great service in introducing this amendment with considerable verve and in such detail that nobody feels it necessary to pick it up. I put on record that we support what she is saying. There must be an advantage in having a proper external scrutiny system. These things should be done with independence and a wider concern for the issues than can be done from internally within the department. My noble friend makes the point—others have made it before—that we have a long way to go if we are to emulate the EU in its current practices, let alone try to get best practice going. I hope the Government, if they cannot accept the wording here, will at least take the sentiment behind the amendment and think about how that can be brought forward, both in the narrow work required in the department and its relations with Parliament but also in trying to improve the way this information is made available to the wider world.
Also in this group, I have given notice of my intention to oppose Clause 3 stand part. The reason is not directly related to the amendment tabled by my noble friend Lady Henig, because the substance of what she proposes is very much in line with the work done in the Commons to try to improve the reporting requirements, and I do not dissent from that. My reason for giving notice of my intention to oppose Clause 3 stand part is that later in the Bill we will discuss the broader question of what happens when we are talking not about continuity but about free trade agreements more generally. At that stage I have Amendment 33, which gives in some detail a possible way of doing this. It is certainly not in any sense meant to be the prescriptive answer, but it does raise all the issues raised within the terms of the current procedures under Clause 3. When it comes to later amendments, I will also talk about Clauses 4 and 5.
Baroness Jones of Moulsecoomb
My Lords, I should have stood up earlier, but I was being polite. It seems the system set out in this Bill has been rendered obsolete by the passage of time and the sheer urgency with which the Government now have to act. The amendments from the noble Baroness, Lady Henig, do a good job of trying to plug some of the gaps, but I really think the Government have to go back to the drawing board on all of this. A government amendment is needed on Report that proposes a realistic set of procedures that can be used without undue delay while ensuring proper safeguards and accountability. This should not be a battle but something we can all work on together. This Bill has dragged on for so long that we all have the benefit of hindsight. A quite prescient question has emerged: where will the Government ever find time to use the procedure set out in Clause 3? I really think we need a lot more drafting on this Bill so that at some point we might get it on to the statute book.
Baroness Fairhead
My Lords, I begin by addressing Amendment 20, tabled by the noble Baroness, Lady Henig. The Government agreed in the other place to lay reports in Parliament to explain the changes made to continuity agreements in advance of any continuity agreement being ratified or in advance of the Clause 2 power being used. This amendment, which requires an independent body—albeit one with the stature the noble Baroness refers to—would place a considerable time constraint on the delivery of these reports, which would in turn have a really serious impact on our ability to bring those continuity agreements into force. The reporting requirement placed on the Government is intended to be an aid to Members of both Houses to understand the continuity agreements as the agreement text is also laid in Parliament for ratification.
The noble Baroness also raised the issue of standards and the potential to lower standards. We had a very long, detailed and comprehensive debate on standards on the first day in Committee on this Bill, and I want to reassure noble Lords again. EU standards come directly into UK law. We will remain party to international standards bodies under international law, as we are today. This Government have reiterated their commitment to high standards, which are both demanded by our consumers and the right policy for our country.
I turn to the idea of an independent report. Noble Lords with experience of trade matters will appreciate that these agreement texts are lengthy. The CETA text with Canada, including annexes, is about 1,600 pages long. The reality of the situation is that it is simply not feasible, in the time available, to generate independent reports before our agreement needs to be ratified. I again refer to what we have said: continuity is what businesses and our consumers are asking for. I appreciate the points that the noble Baroness, Lady Henig, makes. Our reports will provide relevant analysis on the impact of any changes made to those agreements. I hope these reports are helpful, both to the noble Baroness and to this House.
Lord Purvis of Tweed
I wonder if the Minister might just be able to clarify what may be my misreading of the legislation. The Minister said “any changes”. My reading of the legislation is that it is “any significant differences”. I wonder if the Minister might be able to say, because they are not the same.
Baroness Fairhead
My Lords, if the change is literally a cut and paste, I am not sure it would help your Lordships to have a report saying “‘EU’ changed to ‘UK’”. It would be changes seen to be of any significance. If there were any economic impact, that would be included in the report. The reports are designed not to take time in an exercise of proofing but to identify the significant changes and those of value for the House to be aware of. As the noble Lord correctly says, it does refer to “any significant differences” in “trade-related provisions”.
The continuity agreements will be subject to the procedure under the Constitutional Reform and Governance Act. This House will be able to use the contents of these reports to inform their engagement with that process.
I turn to Amendment 21, which requires the Government to provide updates to Parliament on the status of negotiations. I stress again that we do not expect significant changes. I have referred on many occasions to the technical changes on TRQs, rules of origin and other such changes that we will need to cover later. That, together with this very tight timetable—as I think we all agree—would mean that the level of reporting is unnecessary in relation to that programme.
The continuity programme is separate from our programme to develop a future trade policy. On that, there has been very active engagement with businesses and trade associations. We meet on a very regular basis because it is trade policy for them and therefore it is absolutely critical. For example, we launched four consultations on possible future trade agreements. The window for consultations has recently closed and we are currently considering stakeholders’ views, so there is active consultation both in person and through that. Any future trade agreements with new partners will follow a separate scrutiny procedure. It was set out in outline by the Secretary of State for International Trade on 16 July 2018, but I ask for the House’s indulgence because in group 19, later today, we will be discussing exactly the scrutiny of future trade agreements.
I understand that the Committee is keen to know what progress we are making on transitioning the continuity agreements. The noble Baroness, Lady Henig, referred to the ISDS update that was given by Europe. On the DIT website, we provide updates of the meetings that have taken place and of any working groups. I have a list here of all of the working groups and, where we can, we say what was discussed there. We are able to provide that level of transparency. I do not want to go back to the discussion that we just had about the private Government-to-Government discussions. I stand by the commitment that I made to the Committee on that last measure to say that I will look to see what further can be done. My understanding is that it could create a considerable handling risk for those countries.
I have listened with interest to the arguments and points raised by the noble Lord, Lord Stevenson, concerning Clause 3. As has been set out in great detail and discussed over the course of these debates, the Government are seeking to roll over the effects of the EU’s trade agreements as much as is practically possible. This is particularly important in relation to pre-ratification reporting requirements, as any potential delay could risk a cliff edge in those trading relationships. In supporting this process, we are producing reports which will explain any significant changes—as I said to the noble Lord, Lord Purvis—from the effects of our existing agreements to the new ones. We believe that this provides the transparency that Parliament has called for while also being proportionate. These reports will help Members of the House, businesses and the general public to better understand the impact of the programme.
I trust that the Committee will accept that this provides balance, but I repeat my commitment to see what further information we can give. Our amendment to produce these reports received support in the other place as a proportionate approach to providing transparency to Parliament. I hope that this reassures the Committee, and I ask the noble Baroness to withdraw her amendment. Additionally, I hope that noble Lords will agree that Clause 3 should stand part of the bill.
Baroness Henig
My Lords, I have listened very carefully to what the Minister has said. I take the point about speed, but at the same time the department is seeking powers for up to six years. Therefore, on the one hand we are talking about speed and on the other the Government are saying that they might need these powers for some years. That is my concern. If we are talking about longer than a few months, we need a proper communication strategy and a proper strategy for scrutiny. In a sense, the department cannot have it both ways: if it is seeking powers over a period of years, then it is only reasonable for us then to be able to say, “Well, what are the arrangements for scrutiny?” If we are talking weeks, that is fine, but since the Bill is seeking these powers for this length of time, I do not think it is unreasonable for us then to say, “So what are going to be the arrangements for scrutiny and discussion?”
On the matter of scrutiny, it is quite obvious from everything that has been said by a whole number of people, on both this and previous amendments, that so far the scrutiny arrangements are by no means adequate. They really are not: we have to look at this and return to this. I hope that the department itself will come up with something on Report. Clearly, it is something that we will have to look at.
On communication, I take the point about the website, but the fact is that if you talk to businesses outside this House, if you talk to people who are trying to prepare for 29 March, they do not feel well informed and do not know what is going on. Businesses do not feel confident; the Minister might want them to, but they do not. This is a very serious matter because all of these businesses, great and small—it is a particular problem for smaller businesses, of course—do not feel at the moment that they understand what they should be preparing for. It is undermining their profitability and we are causing huge problems with this. Therefore, I am really not happy with where we are at the moment.
I am not going to labour the points this afternoon, as we have already heard about them at great length before. We will have to return to this whole area on Report, but meanwhile I beg leave to withdraw the amendment.
Baroness Henig
Baroness Henig
My Lords, I will be extremely brief—I am sure that noble Lords will be happy about that—in moving Amendment 22 and speaking to Amendment 23. They are two very short probing amendments for the particular circumstances when Ministers do not feel the need to lay a report before the House. Once again, given the importance of trade agreements and the need for scrutiny, this is something that the Government need to consider carefully. Can it really be right for the Government to lay regulations before Parliament without informing us what they are and what impact they might have?
We can deal with the matter fairly straightforwardly. The Government will know in advance of the proposed changes to an agreement, not just at the point of laying it. There is therefore no reason whatever why we cannot be told what the change is at the time, as part of whatever reporting system there is. That is the purpose of Amendment 22.
In relation to Amendment 23, I say that the phrase “as soon as possible” is far too vague. I appreciate that the Government have many issues to consider and to juggle, but they should have the means to tell us what is being proposed. We need to know within a clear timeframe so that we can scrutinise the Government effectively. I have to hear a convincing reason from the Government as to why they need the wide-ranging powers under this clause. I therefore propose these amendments to seek further information from Ministers, and to signal the kind of openness and levels of scrutiny that I am sure Parliament will demand in terms of both these rollover agreements and the new trade agreements. I beg to move.
Lord Stevenson of Balmacara
My Lords, once again I support the amendments of my noble friend Lady Henig; I will also speak against Clauses 4 and 5 standing part of the Bill. Counterintuitively, I will deal with Clause 5 stand part first, simply because it follows exactly in the same vein as the reasons I gave for suggesting that Clause 3 should not stand part. Clause 5 deals with reports to be laid with regulations under Section 2(1). In an expanded, more amplified and better and more rounded policy dealing with both the continuity of free trade agreements and the new free trade agreements, we would have a completely different system sitting in place, so Clause 5 would be otiose, which is why I put this forward. I will not press this and I do not need much response from the Minister because we will return to this issue later in group 13.
However, I wonder about Clause 4. It seems at a superficial level to give the Government a “get out of jail free” card in relation to any reports that they might feel obliged to make, particularly if they are expanded in terms of my noble friend Lady Henig’s original proposal under Clause 3. Clause 3 states:
“Before the United Kingdom ratifies the proposed agreement, a Minister … must lay before Parliament a report which gives details of, and explains the reasons for, any significant differences between—
(a) the trade-related provisions of the proposed agreement, and
(b) the trade-related provisions of the existing free trade agreement”.
But Clause 4 states:
“Section 3 does not apply to a free trade agreement if a Minister of the Crown is of the opinion that, exceptionally, the agreement needs to be ratified without laying before Parliament a report which meets the requirements”.
I stress that phrase,
“a Minister of the Crown is of the opinion that”,
and the use of “exceptionally”, which is an interesting word. In other words, you do not have to do it if you have sufficient gravitas and the ability to convince Parliament that you are not of that opinion and that it is exceptional, so you can get away with it. That is not satisfactory drafting.
This is not a good clause to be in a Bill of this nature. It certainly does not meet the questions that we have been raising about proper transparency, accounting and independence of reporting. When the Minister comes to reply, I hope that she will consider taking this away. If she cannot bring herself to agree that this needs redrafting, perhaps she can write to me explaining why it does not.
Baroness Fairhead
My Lords, I too will try to give a short response to the amendments before us, and first on Amendment 22 tabled by the noble Baroness, Lady Henig. Clause 4 creates an exemption from the reporting requirement so that, in exceptional circumstances, the Government may seek to ratify an agreement without having first published the associated report on changes made to it. Let me categorically reassure noble Lords that we intend to draw on the reporting exemption provided for in the Bill only if we are in exceptional circumstances.
I am sure the Committee will agree that we may find ourselves in exceptional times. We cannot predict the speed with which continuity agreements will be ready for signature. Moreover, the exemption is narrow. It does not remove the requirement for a report to be laid. It simply provides a little leeway to enable a trade agreement to progress to avoid a cliff edge. The Government would still be required to lay a report as soon as possible following ratification. I hear the noble Lord, and will reflect on the drafting, but in a sense it was because of the uncertainty about the speed.
Amendment 23 would ensure that, if this exemption is invoked, the report would have to be laid no later than 10 days after ratification. Again, to be clear, we have drafted this exemption for use in only the most urgent of circumstances. If we were to need to rely on this, it would be necessary to ensure that we could continue to operate in the most uncertain of contexts, and avoid that cliff edge.
Clause 5 will ensure that the Government lay their report 10 days in advance of using the Clause 2 power to implement any obligations of a continuity agreement. That will ensure that Parliament is wholly informed about how we intend to deliver continuity for an agreement before it is required to consider implementing legislation. If we removed Clause 5, as the noble Lord, Lord Stevenson, suggested, the Government would not be bound in any way to report, so we should set that aside.
Before I conclude on this point, I would like to inform the Committee about an amendment that the Government will bring forward on Report. As the Committee is aware, the purpose of the Government’s trade continuity programme is to seek continuity of the effects of existing EU free trade agreements as far as possible as we leave the EU. The vast majority of these existing trade agreements, which we are part of as an EU member state, are already in operation and have been scrutinised by Parliament. Let me make it clear to the Committee that we do not expect to need to change existing domestic equalities legislation as part of this programme. In the unlikely event that we choose to make minor or consequential changes to this legislation, we will aim to ensure that this does not result in reduced protection against unlawful discrimination or diminution of equality rights.
However, to ensure suitable transparency and accountability on this particularly important issue, we intend to provide that a ministerial Statement is made alongside any draft statutory instrument laid under the Clause 2 power. The Statement would outline whether the statutory instrument repealed, revoked or amended any provision of the Equality Acts 2006 and 2010 or any subordinate legislation made under them. In addition, I am happy to confirm that the reports under Clause 3 will explain any changes that would be required to equalities legislation as a result of our shift from an EU to a UK agreement if, and I stress if, any changes are needed. My officials have agreed to work together with the Equality and Human Rights Commission—and I put on record our thanks for its efforts in helping us to design the process so far—on designing the content and templates for these reports.
I hope that that reassures the Committee and I ask the noble Baroness to withdraw her amendment. Additionally, I commend that Clauses 4 and 5 stand part of the Bill.
Baroness Henig
I thank the Minister for her response, and particularly for the additional information that she has just given us, which I am sure we welcome. As I said, they were probing amendments on my part and I was trying to get some more detailed information about the Government’s thinking, which I think we have had. On that basis, I am happy to withdraw my amendment.
“Customs union
It shall be the objective of Her Majesty’s Government to take all necessary steps to implement an international trade agreement which enables the United Kingdom to participate after exit day in a customs union with the European Union.”
Lord Stevenson of Balmacara
My Lords, this amendment, for which I am grateful for the support of the noble Lords, Lord Patten of Barnes, Lord Purvis of Tweed and Lord Kerr of Kinlochard, has a long and distinguished history in that it has been discussed over a number of years. In moving it today, I first apologise for the drafting. It was devised by committee, which of course is never the right way to go about these things; it was a very good and small committee, but nevertheless the drafting reflects some of the tinkering involved. It probably does not stand the test of time and, if we were to return to this at a later stage—and we might want to do that—slightly different wording might emerge. But in proposing it I am in no sense worried about the central principle. I hope to spend a little time introducing the amendment and will then listen to the debate that comes forward.
The question of whether the UK should remain in a customs union has become an issue around which many people can agree. It does not involve them all, but includes many MPs, businesses, trade unions and the wider public. The reason is not hard to find. It would provide the certainty that we need to protect UK jobs, secure opportunities for our industries and create prosperity at home. It would also give us a voice, front and centre, at the world’s most powerful trade negotiations and help to ensure that global goals on development, climate change and the natural environment are met and continue to be met. On Northern Ireland, Ministers are bending over backwards to explain how exactly the backstop they have agreed to and have been supporting will actually work in practice. But at a stroke, a customs union would properly guarantee the peaceful legacy of the Good Friday agreement. That alone must make it a most important issue.
At present, the Government are steadfastly ruling out a new customs union. However, the trade unions, the CBI and other business interests are highly supportive of the idea, saying that a new customs union will protect jobs. The Scottish and Welsh Governments are also on board, as are a growing number of members of the Cabinet. At a time of seemingly insurmountable division in our country, the opportunity to unite in common purpose should be grasped with both hands. I beg to move.
Lord Kerr of Kinlochard (CB)
My Lords, I can be very brief in supporting this amendment, which has my name on it. Saying that is a very ominous start; it usually means the exact opposite, like the phrase “with the greatest respect”. But I can indeed be very brief because, on 18 April, I proposed and the House approved, by a majority of 123, a very similar amendment on the European Union (Withdrawal) Bill. With the greatest respect, I have to say to the Government that we would not be in the present predicament if they had listened to what the House said on 18 April.
The economic case for a customs union if we leave the European Union is pretty well understood now. Business is explaining ever more volubly how damaging supply chain disruption would be. With the greatest respect for No. 10, I do not believe that the red line against a customs union would have been drawn in the 2016 party conference speech had there been any consultation with business, Parliament or the Cabinet beforehand. The political case for a customs union has become even more familiar as we think about the concept of a customs frontier across the island of Ireland and a backstop with a frontier down the Irish Sea. With great respect, I have to say that it was unfortunate that the 2016 announcement of the red line on a customs union, interpreted in Dublin as a declaration of intent to abrogate the Belfast treaty, was made without any advance consultation with or notification to the other parties to the treaty, and with no consultation with this Parliament or with the Northern Ireland Assembly, which at the time still existed.
Taken together, the economic and political case for a customs union, if we leave the European Union, looks pretty overwhelming—but I see no reason to labour the point now. I recognise that the Minister cannot accept the amendment, and we all know that much may have changed before the House considers this Bill again on Report. I simply urge the Minister, with the greatest respect, to ensure that her colleagues remember how this House voted on 18 April.
Lord Patten of Barnes
I am happy to support this amendment—although I realise that happiness is a relative concept. We find ourselves going round and round these arguments, again and again, banging our heads against the same walls of confusion and obfuscation, and barely managing to avoid Brexit derangement syndrome as we make this tiresome journey. As the noble Lord, Lord Kerr, said, we have of course been here before—several times. The most notable is the debate we had, as he said, in April last year, when all of us were younger. Indeed, one or two of my noble friends are no longer here—permanently—since that debate. On that occasion, we won the amendment to the withdrawal Bill by 123—not 230, the sort of figure that we are used to these days, but by a pretty comfortable margin. As the noble Lord said just now, if our advice on that occasion had been taken, we would not be in the shambles that we are in today. One reason for discussing this issue again is that it is quite possible that a customs union, among other things, will be part of a way out of the shambles that we are currently in.
In an article in the Times a couple of days ago, the admirable commentator Rachel Sylvester reminded us that Einstein defined insanity as continuing to make the same decision on the assumption that it will get the result you want and therefore continuing to be disappointed. I suppose that, by that definition, one of the steps you take towards insanity is that you start quoting your own speeches, and most of us have made these arguments again and again.
I want to make four very brief points in the hope that we do not have to spend the rest of our lives talking about customs unions. My first point is this. The argument that we have to do this because of the referendum result—that this is a red line that cannot be painted any other colour—is an assertion. As the noble Lord, Lord Kerr, said, it was an assertion made in a party conference speech, where it is not always the case that objective truth or consensus is looked for. The party conference speech then became an item of sacerdotal interest. It was put into the manifesto before the 2017 election—in which our party did not do conspicuously well. We are told that we have to implement a proposal to get rid of any customs union because of that party manifesto.
I had a great deal of pleasure rereading that manifesto. Right at the beginning is the sentence:
“People are rightly sceptical of politicians who claim to have easy answers to deeply complex problems”.
I would certainly settle for that. There were one or two notable items in the manifesto, and my noble friend Lord Lansley and I have written more manifestos than most people have had hot dinners. I seem to remember that pledges were made that were dropped even before the election, including a very good proposal, which I supported, about funding healthcare for the elderly—a subject in which I am sure I will soon be much more interested than I am now. The idea that this is a tablet of stone, engraved with the absolute commitment, whatever happens, to deny the country a way out using a customs union, is ridiculous and risible.
My second point is about the belief that, somehow, we can manage everything as we go forward without any deal, and certainly without being part of a customs union. It is part of the Catch-22 situation that we find ourselves in now. If you say that there are problems in leaving the EU and the customs union without a deal, you are told that there are no problems. If you do not say that there are problems, you are told that there are no problems. It is rather difficult for us to find a way through this Catch-22 situation. The notion that we can manage in the future simply on WTO terms is, of course, ridiculous. No developed country in the world manages solely on WTO terms. We talk about Europe’s agreements with America being on WTO terms; they are not. There are 100 sectoral agreements with the United States, which go well beyond WTO terms. The truth is that, in addition to the WTO terms, other things are necessary to secure the best possible advantages for your exports and for your industry. That is why, since the WTO was established, 243 different trade agreements—substantial ones—have been made by countries to secure their economic interests. Crashing out and pretending that we can manage simply on WTO terms is, again, a ridiculous proposition.
The third thing one should recognise is the difficulty of putting together a trade policy at the speed that we are trying to now. That became apparent in a debate we had earlier this afternoon. I say without, I hope, being remotely patronising to the Minister that she has the impossible job of marking Dr Fox’s homework. On the basis of what we know so far, the House would not have given him a pass: he would not even have got into the margin of error.
The issue is so difficult. From the European point of view, it involves a great deal of transparency. If the noble Lord, Lord Mandelson, was in his place, he would be able to confirm that. I used to do the political side of trade agreements. We would go back, again and again, to the European Parliament and to parliamentary committees to be quizzed about what exactly we were negotiating. Quite rightly, one of the most pressing invigilators every time was the British Minister: we were pressed on the details of the negotiations as we went along.
When we were told by Dr Fox, in between flights, that there would be 40 trade agreements ready for lift-off within seconds of leaving the European Union at the end of March this year, some of us were a little cautious in taking his word for gospel truth because we had seen what had happened with his previous prediction that negotiating with the European Union was going to be incredibly straightforward. Now, however, we know what the score is. It is not 40, not 39, not 29 and not 19 and a half—we have hardly made any agreements.
If we crash out of the European Union on 29 March, it will be extremely painful for British business and industry. There are all sorts of issues. The Minister said quite properly that these are very big agreements. She said that the Canada agreement is 1,600 pages long and the South Korea agreement is 1,400 pages long. As we have said before, you cannot simply go through them Snopaking “European Union” and inserting “United Kingdom”. All sorts of really complicated issues have to be dealt with and that will take a very long time.
If we look beyond just rolling over those trade agreements, what else are we talking about? We are talking about capturing a huge share of the big markets: China, India and the United States. At the moment, China is not the easiest place to do business. The indebtedness is now 300% of GPD, which may look even more difficult in the future, and there are, alas, increasing security and political issues that we have to cope with. Then there is India. If he was in his place, the noble Lord, Lord Bilimoria, would tell us, as he has done with great authority in the past, that what the Indians are interested in is visas, not concessional trade deals with the UK. Then we have the United States. If my noble friend Lord Deben was in his place he would give us a speech on American chickens that would make any sentient human being become vegan. He has done it two or three times, and it is a very moving piece of rhetoric, as one would expect from my noble friend. The idea that we can build a tower on the sand of President Trump’s meretricious and mercantilist policies is an absurdity. An independent trade policy was why we said we had to reject a customs union, so where is it? It remains an aspiration of our ubiquitous International Trade Secretary and one which, alas, we are not going to see consummated in the foreseeable future.
My final point is on Northern Ireland, which we have talked about again and again. Both previous speakers pointed out that the problems of the Northern Ireland border would not exist if we were in a customs union. In the referendum campaign, the Prime Minister, to her credit, made absolutely clear what she thought of the Northern Ireland border issue and how important it was for the future and integrity of the Good Friday agreement. She was right. The other day, my noble and learned friend Lord McKay explained with spectacular clarity why there would have to be a hard border between the Republic of Ireland and Northern Ireland. Guess what: if you have one set of trade and customs arrangements in one country and a different set in the country next door, you have a hard border. It is the case everywhere. Search parties have been sent out to find an example of where it is not true and to find a technological solution—and answer came there none.
The Lord Bishop of Chester
My Lords, it is always a pleasure to listen to the noble Lord, Lord Patten of Barnes, especially when religious imagery creeps into his speech with gospel truth and sacerdotal approaches. His opening remark reminded me of Trollope’s definition of hell: an eternity of listening to one’s own sermons. I do not know whether the noble Lord, Lord Patten of Barnes, has similar feelings about his speeches, but they are always wonderful to hear.
I wonder what this amendment really means. The noble Lord, Lord Patten of Barnes, said that happiness is a relative concept, but it seems to me that the term “customs union” can mean more than one thing. The very fact that the amendment refers not to “the customs union” but “a customs union” prompts me to ask what it means precisely. If one looks, as I just have, at the WTO website and how it defines a customs union, it is not a hard-and-fast term and allows for exceptions, up to a point, to be made in an agreement. It refers to “substantial agreement” on issues of trade.
When one comes to the political declaration, what is the real difference between the following aspiration in the political declaration and a customs union?
“The Parties will put in place ambitious customs arrangements, in pursuit of their overall objectives … making use of all available facilitative arrangements … ensure no tariffs, fees, charges or”,
so on in the trading arrangements. It seems to me that that is not far from describing what might be called a customs union. No doubt the devil will be in the detail as to precisely what is included or excluded, but it seems to me that the Government’s intentions, and the agreement’s intentions in the joint political declaration, are not far off what one might describe as a customs union.
Lord Purvis of Tweed
My Lords, I hope that the Government will listen to what the noble Lord, Lord Patten, said in his contribution. The difficulty is that, even those in Government who listen to such a sensible case, find themselves locked into a situation where even sensible ways of maintaining a relationship with the European Union outside the European Union have been defined by many as “not leaving”. So the scope for leaving the European Union has become narrower and narrower.
One of the slight advantages of the delay to this legislation and the opportunity to debate a customs union now is that many of the prior assertions have been utterly debunked. Many of the valid concerns raised about leaving the European Union and its customs union have now emerged in reality. The then proposed “max fac” solution has been laid bare as simply unworkable. The Chequers agreement would not pass any definition of a sensible way forward. The White Paper which was then published had major deficiencies, and we saw the result of the Commons vote on the agreement. So we are left with a number of differing perspectives on the future trading relationship and customs arrangements on which we will need to find some form of common ground.
In previous discussions, we have heard from the Government that all these concerns can be set aside because of our positive relations with our trading partners—Dr Fox said that on the radio today. Canada has often been cited as a country which finds it very straightforward to have a positive trading relationship with one of our closest possible allies, especially as CETA has already been agreed by this Parliament. No doubt, there will be good will on both sides in these discussions. This is beyond question. We will trade with our close allies. However, Canada has prevented our schedules application at the WTO from progressing. It has lodged an objection. It is looking after the interests of Canadian farmers and industry—the United Kingdom would do exactly the same.
If we leave without any agreement, and if Canada, New Zealand and Australia do not withdraw their objections to our goods schedules at the WTO, then not only will we leave the European Union without an agreement, we will leave without any certified WTO schedules. We will not only be trading on WTO rules, but we will not have certified rules with which to trade with the rest of the WTO. The same has happened this past week over our services schedule—services are two-thirds of the UK economy—because Taiwan has lodged an objection. So the dawning reality must be that a change of course is necessary.
It is of no surprise to anyone that Liberal Democrat policy continues to be, as it always has been, to retain membership of “the customs union”. It is Labour policy currently to negotiate “a customs union” with “the customs union”, such as Andorra and Turkey have. It is the Government’s policy, or at least the Prime Minister’s though not necessarily the whole Cabinet’s—it is difficult to determine, between the Chancellor and Dr Fox, who speaks for trade now; it is significant that, at Davos, in one week, you have two Cabinet Ministers from one Government saying two different things at a critical time in our country’s history—that we negotiate a deep and comprehensive free trade agreement with a customs arrangement as part of it.
We propose that, ultimately, the people will have to decide on our preferred option. Under Labour, Article 50 would need to be revoked and a new negotiating mandate would have to be agreed at EU level, as the Prime Minister’s letter activating Article 50 is not competent—it states that withdrawal would be supplemented by a free trade agreement, not a customs union. The Commission’s negotiating mandate has not been on that basis. The Government’s position was defeated by the biggest majority in Commons history.
The Government’s position is predicated on making agreements with all other countries with which the EU has a trading relationship but without them knowing what our trading and customs arrangements will be. Reflecting on the previous debate in Committee, perhaps the biggest reason why those agreements will not be brought forward before exit day is the very sensible position that third countries are taking. They will not enter into agreements with us, even if we say they are simply a rollover, because these could well become permanent without them knowing what our relationship with the European Union is. Who can blame them? Perhaps Dr Fox can, but who really can blame them?
We know that the withdrawal agreement and the political declaration state that the future relationship will be based on the Northern Ireland backstop, which means that we would not deviate from the EU in our trading. It seems that the Prime Minister’s course of action now, in order to get an agreement through, is to remove the very thing that would offer reassurance to countries with which we have a third-party trading arrangement. The backstop would clearly break the “taking back control” mantra, so to some extent it is not surprising that many on the government side, in the Conservative Party, have said that this is actually not leaving the European Union at all. So it is hard to see how they move forward now.
Labour’s position is based on Turkey, where agriculture is excluded and where the country is obliged to use EU rules and abide by the European court’s interpretation of them. To some extent, this also means having the European court’s remit over our future relationship. Turkey’s agreement with the European Union explicitly excludes Turkey deviating from the EU’s internal regulations; it is bound by them. If negotiating “a customs union” with the European Union were to have any preferential terms over participation in decision-making, the European Union would then be bound to offer them to Turkey and Andorra, which it will not do. This is one of the difficulties about which we have to be open.
Labour’s position of being aligned with the single market but not part of it means that with the movement of goods comes the movement of capital, which also means some form of people movement. It has not said this so far, but I think we now have to be in a period of openness and honesty. This is clearly within the scope of the European Court of Justice—which Jeremy Corbyn has ruled out. Many people also say that this is not leaving the European Union. It does not remove the need for border checks. Some of the longest delays in border checks in Europe have happened between Turkey and Bulgaria—two countries which are part of a customs union. So, if we want British representation in a customs union, with British oversight and decision-making, and a seamless trading relationship with 49% of our trading partners and a further 17% of other countries with which we have trading relationships without tariffs, we have to retain membership of the customs union.
If the impossible government position is termed “not leaving”, and if Labour’s position is termed “not leaving”, then I think not leaving would be better done after the people have agreed it. Now the reality that we are embarking on is clear. For the first time in history, a country is seeking a trading arrangement with new barriers, additional regulations and enhanced restrictions. It is the first arrangement ever knowingly entered into that would reduce prosperity. This is the Government’s course of action outside the EU’s customs union.
Lord Lea of Crondall
I have been listening to this brilliant speech, and I am just wondering whether I can believe my ears. We are talking about an amendment to a Trade Bill in the context that the Government are trying to put through a withdrawal agreement. Given the complexity of the question of “the customs union” and “a customs union”—there is an element of angels on the end of a pin—if we in Parliament are having difficulty in thinking through its various intricacies, how does he think it is going to be easier for the people to do so? Is that what he has just said?
Lord Purvis of Tweed
It is. Ultimately, I believe that the choice is going to be that we either stay in the customs union and the single market of the EU or we leave, either with no agreement at all, which I hope is ruled out in short order very quickly, or with some form of government agreement, which did not secure majority support in the other place, where one-third of those voting against it did not believe that it was leaving the EU at all. I think where the people will now be informed in the decision is as I started: many of the issues are now laid bare about the consequences of leaving.
I am very happy to be a co-signatory to this amendment. I am very pleased that we in this Chamber are debating what the consequences of the actions will be. We are also clear that we want to do the least damage to the British economy and to secure for the future all the relationships that we have at the moment without the extra burdens of regulatory addition.
My final point, which the OBR report in October made very clear, is that if we went down the Government’s course and left, then there would be at least five years of adjustment to a worse scenario for GDP, even on the basis of the agreement. I am seeking to avoid that. I hope there will be consensus, at least in the first instance, that a customs union is necessary. There is no doubt of our position on these Benches that the customs union is preferable to all of those. I hope that will ultimately be the future of our country, and I believe that that is up to the people, who ultimately will have to decide this.
Lord Lansley
My Lords, I do not want to go on at length about this issue, not least because I agree so wholeheartedly with what my noble friend Lord Patten of Barnes has already said. I am always loath to do it and I hope to make it a very rare event, but I voted for the amendment to the withdrawal Bill last April. To that extent, I think this House has made its view perfectly clear: it thinks, in the context of leaving the EU, that to retain membership of a customs union with the EU would substantially mitigate what would otherwise be the damaging economic effects of withdrawal.
I do not want to get into a debate about “the” customs union or “a” customs union but, on the face of it, if we are negotiating to leave but we are negotiating to have a customs union relationship with the EU, it behoves us to negotiate without necessarily subscribing to the customs union because the customs union is a product of the treaty. We would no longer be bound by the treaty, so we have the flexibility to think otherwise. That does not turn us into Turkey, because we might choose to do things quite differently. The EU has chosen not to have agriculture within the customs union with Turkey because it is in its own interests not to do so. We have very different interests and we might choose to pursue them differently. Indeed, as one can see from the structure of the backstop, we might choose to have an arrangement with the EU that was, as Ministers are fond of saying, a “bespoke arrangement” for the management of a customs union. And why not? If we could have such a thing under the backstop, surely we could have it without the backstop.
I do not want to go on at length. I hope that those in this House and beyond who are thinking next week about what is needed to make progress from the impasse that we appear to be in at present will read this short debate. While it exposes some of the difficulties in negotiating a future customs relationship with the EU, two things should become immediately apparent. First, many of the negative consequences of leaving the EU—most especially, leaving without a comprehensive agreement in place—will be dramatically mitigated by being in a customs union. When I talk to businesses, that is absolutely at the top of their wish list, and it is true for manufacturers as well. Secondly, I hope people will realise that this does not preclude us having a trade policy of our own. What are trade policies nowadays? They are generally called comprehensive economic partnership agreements because by and large they are not about tariffs; they are about broader relationships. Especially for the UK, given that we are predominantly a services economy, for the future those agreements should be about services. We should be negotiating trade agreements about services, the movement of capital and investment, and indeed we should have a negotiation with India that includes a discussion about the mobility of workers between India and other countries. That is happening in a very powerful way: the Indians are exporting skilled young people all over the world very successfully, and we should have that in mind as part of an economic partnership agreement with other major economies. If that is true and it also gets us out of having a hard border between the Republic of Ireland and Northern Ireland, but without creating a new border between Northern Ireland and Great Britain, why would we not want to do this? That is what everyone is trying to arrive at.
For the purposes of next week’s debate there are, therefore, essentially two questions. First: does offering to be party to a customs union with the European Union, as part of the future political declaration, enable us and the European Union to agree in a way that would—as they say in Brussels—have legal force? Would it enable us to put into the political declaration, and have agreed by the European Council, the kind of language and commitments that would allow it to be said that we will not enter into the backstop, if we go down that path in the future treaty? That is what it is all about: not going into the backstop in the first place. We need some reassurance that that will happen. That will automatically solve the essence of the problem associated with the backstop. If we do not have to go into it, we will have solved that issue. We will also have solved the question of unilateral withdrawal or otherwise. If we are in a customs union, we have a right to leave it. If we go into the backstop, we have no right to leave it—as it is currently constructed— and that is a very unhappy place for many who are against the withdrawal agreement at the moment.
The second question is: can we avoid the Turkey situation? It is a bit like when people talk about entering the Norway situation: we do not want to be in a position where we are simply rule-takers. With a customs union, at least we are not rule-takers on financial services and our service industry, but we are none the less rule-takers. We do not want to be in that position. Can we arrive at a customs union where we genuinely have a shared responsibility? I hope we can.
The trouble is, I entirely agree with my noble friend Lord Patten. Nearly a year ago, if only the Government had listened and put into the negotiation—at the time that led up to the White Paper and after it—a discussion about a customs union. Instead they put into the White Paper the suggestion that we could have a customs union, without calling it that, where the rules of origins are effectively waived so that anything that originates in the United Kingdom is treated as if it is European, and anything that originates in Europe is treated as if it is British. This, of course, is a nonsense; the European Union would never accept it. It would never accept that it would raise the money—
Baroness Kramer
I am trying to understand the noble Lord. Obviously, the definition of a customs union is quite difficult and I was trying to follow his definition. Does he intend only the narrow definition of a customs union, where it essentially just deals with issues such as tariffs and excise duties, or does he intend it to include the regulatory alignment, as it often does because the terminology gets stretched? If there is not regulatory alignment there still have to be checks, which means we are back to the border problem. Would he explain what he sees as the content of “a customs union” because, if we are not removing the border problem, I struggle to understand his point?
Lord Lansley
When I talk about a customs union, I mean—as the WTO would interpret it—where we share a customs territory and an external tariff arrangement, and our tariffs are the same as the European Union’s. A customs union, in my book, does not necessarily imply having the same rules, regulations and standards. If we are in a customs union with the European Union, it does not mean that we do not have a comprehensive partnership agreement with them. I hope we would do and that would embrace everything from data adequacy to having the same standards. Therefore, we would have to work on the basis that we start with and maintain standards at least as good as those inside the European Union, enabling the European Union and ourselves to operate on the basis of open borders. The most important part of that is the absence of a requirement to establish rules of origin, because one is in a single customs territory that allows goods to pass across borders in that way.
I will finish my point. I am losing quite where I was; I think I was just beyond talking about Turkey. We have got to know that we are going to be in a position to be able to negotiate a customs union, that we will be able to withdraw from it in future, and that it will obviate the need for us to have a hard border with the Republic of Ireland. That is a really important position. We need to know these things and we should have had months to negotiate them. As it is, we have to arrive at something in the political declaration in weeks rather than months.
Lord Hannay of Chiswick
My Lords, I will not go into the matter of the definite or the indefinite article, which I think is getting a little abstruse. The right reverend Prelate asked why there was a focus on the words “customs union”. It is because that is one of the two ways under Article 24 of the World Trade Organization’s rules—a free trade area, or a customs union covering substantially all the trade—which permits a member of the WTO in good standing to derogate from the most favoured nation provisions. It is as simple as that. All that waffle in the political declaration, which had to be put in because “customs union” would have frightened too many horses, is quite meaningless. “Customs union” is totally meaningful.
The Lord Bishop of Chester
Could I check with the noble Lord: is he agreeing with me that the political declaration actually describes what might equally be described as a customs union?
Lord Hannay of Chiswick
That question should perhaps be addressed to the Prime Minster, who might find some difficulty answering it because it would cause such ructions on the Back Benches of her own party. I do not think it is a question for me: I would have no problem putting “customs union” in. That is why I am standing here now, suggesting that this legislation should contain that phrase. If we leave the EU—if—on 29 March or at a later date, then the option of staying in a customs union is a compelling one, and it ought to figure in this legislation.
Why? First, because that option preserves, to the greatest extent possible, the frictionless trade—or something pretty close to it—which was originally the Government’s objective, but has not figured a great deal in government statements because it is not consistent with what the Government are now trying to do. There would be no rules of origin procedures, no VAT checks, no tariff or other problems which would arise. Investors in this country found this enormously attractive when they saw us as a gateway to the rest of Europe. I fear they will not see us as terribly attractive when we cease to be a gateway, with these friction-causing factors.
Secondly, I do not think that a customs union would solve the backstop, because the regulatory issues are extremely important there, but—as other noble Lords have said—it would make a substantial contribution towards resolving that problem even if it does not totally remove it. Thirdly, it would be likely to ensure us access to the EU’s already hugely substantial amount of preferential trade agreements—both free trade agreements and, in the case of Turkey, a customs union—in a way that would probably be much better than anything we could negotiate separately. The EU not only has this huge panoply of free trade agreements and a customs union with Turkey, but is negotiating now with Australia, New Zealand, Brazil, Argentina and Mercosur, and there are reasonably recent agreements with South Korea and Japan. The one with Japan has not yet been brought into force. The one with South Korea has, I think, brought a quadrupling of our exports to that market. We would get all these advantages if we were in a customs union, without having to do anything about it at all.
What is there not to like about joining a customs union? The noble Lord, Lord Patten of Barnes, quite rightly referred to the problems that might arise and the difficulties we would have negotiating new trade agreements with an independent trade policy. Those are very real, as those who have cited the size of these agreements have demonstrated rather clearly. But what do we have to show for all the rhetoric about the brilliant future that lies ahead of us from Dr Fox’s rather considerable travels, taking him this week to Davos, which is not noticeably a place for negotiating trade deals? Still, no doubt it is quite pleasant to be there. This idea that an independent trade policy is an instant answer to all our problems is simply a mirage that will float before our eyes for years ahead as we trudge through these extremely complex negotiations.
Who are the biggest fish in that pool? There is the United States. President Trump has already said that if we go ahead with the Prime Minister’s deal, which of course the House of Commons did not seem terribly inclined to do, he does not think that there would be much to negotiate with us about anyway. Do we really think China will be more interested in negotiating concessions to get access to our market than it would to get access to the much larger European Union market? India has been pointed out. That will put the whole issue of visas and access for people from India to this country on the table in the negotiations. That will drive another great coach and horses through that very odd immigration White Paper, which we will discuss in about half an hour’s time.
I really do not think that the objections to having a customs union stack up very well. The amendment should be given serious consideration and should figure in the Bill when we send it back to the Commons.
Baroness Neville-Rolfe (Con)
My Lords, I am not convinced of the merit of this amendment. Actually, I have taken comfort from the words of the noble Lord, Lord Purvis of Tweed, on the detailed arguments. I know from my experience of operating in Turkey—both with retail outlets and as a source of agricultural, clothing and electronic goods for shops in other member states and in the UK—that it is not an entirely happy situation to be in a customs union and not in the European Union or a single market.
Turkey was at the time keen to get into the European Union properly, partly because of the problems that the arrangements caused. It is very frustrating not to have influence over the tariffs and rules at the border of your country. Essentially, you are a rule-taker, as the noble Lord, Lord Purvis of Tweed, acknowledged. I also recall the lorry delays that he mentioned—so not very frictionless. My recollection is that the rules on the common external tariff also restricted Turkey’s ability to renegotiate independent trade agreements with third countries. That is something that the noble Lord, Lord Hannay, acknowledged. If we go down the road proposed in the amendment, we could be caught up in the EU system of protectionism—which, sadly, I expect to increase without the UK at the table.
On a brighter note, I was glad to see this afternoon that Dr Fox, the International Trade Secretary, had agreed in principle to a UK-Israel agreement—so he has been busy in Switzerland. Rather than going down the road of the amendment, I would prefer one last push to negotiate a good deal with the EU. There is more to do, but we should keep trying, especially on the backstop. Some parts of the Government have clearly not given up, as we heard in the EU Committee today from the Secretary of State, Steve Barclay, which is why, of course, I am afraid I missed some of today’s proceedings.
Viscount Ridley (Con)
My Lords, to be brief, as some others have put it, and with the greatest of respect, as the noble Lord, Lord Kerr, would put it, perhaps I might probe the Labour Party’s position on this. I used to hear members of the Labour Party, including many of those on the Front Bench in another place, make the argument that the problem with a customs union was that it hurt developing countries because of the external tariff. I would like to know what has happened to the argument and why we do not hear it from the Labour Party any more.
Lord Liddle (Lab)
My Lords, I will briefly express my support for the amendment. It is very important in the present political situation that we in the House of Lords demonstrate that, on a cross-party basis, there is some way forward out of the impasse we are in. For that reason alone, I support it.
The amendment obviously is not a complete solution to the Irish border problem. We would also have to have some arrangement of regulatory alignment. That, of course, is why the withdrawal agreement contains about 60 pages’ worth of EU rules that will apply in Northern Ireland but not in Great Britain, and why there would have to be some regulatory checks between Great Britain and Northern Ireland to make sure that rules on technical standards, health and safety, sanitation and that kind of thing would be adhered to. For there to be no border on the island of Ireland, that issue would have to be addressed, as well as the customs union. But the customs union is a large part, once you have made that step—and I do not think it is too far a step—of going on to deal with the regulatory questions.
On Labour’s position, it depends who you listen to. I am a great supporter of Keir Starmer, who talks about it in a very practical and common-sense way. But the truth is that sometimes people talk about a customs union as though it would be a relationship of equality between the United Kingdom and the EU 27 —which would, in effect, be trying to give the United Kingdom a veto over the Union’s autonomous trade policy. That will not work. It is not a runner. We could, as a big economy, negotiate very strong consultative arrangements, but I do not think that we would be granted a veto under any circumstances. Since we are in a position where we have to clarify these things in the next week—that is why have spoken frankly about this—it is important to acknowledge that that aspect is a non-starter.
So let us agree this amendment, refine it if we can on Report, and show that there is a spirit of co-operation in this House, which unfortunately there is not elsewhere.
Lord Bates
My Lords, this has been a fascinating debate. The noble Lord, Lord Stevenson, was very brief and succinct in introducing it. I will try to be pretty much the same in winding up. With the right reverend Prelate’s presence here and his questioning of a customs union, this is one of those debates where, after the past two years, I am not expecting to create many converts. Positions have been stated with great eloquence by my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Kerr and Lord Hannay, but they are not ones that have differed, because of the veracity of the arguments and beliefs that they hold.
The noble Lord, Lord Liddle, came up with a great line which I scribbled down. I hope I have got it correct, because of course I do not have Hansard. He said that “on Labour’s position”—which of course my noble friend Lord Ridley asked about—“I suppose it depends who you are talking to”. I think I am right; I do not want to quote him incorrectly. It was an interesting point, because it would be fair to say that the Opposition’s position has differed between a customs union, a permanent customs union and a comprehensive customs union. It has oscillated between the crucial words “a” and “the”.
The noble Lord, Lord Purvis, applied a great deal of forensic scrutiny to this. His conclusion, and that of his party, is that they would be in favour of staying in the customs union, which makes it interesting that he has put his name to this amendment, which talks about “a” customs union. I cannot believe that there is now confusion even in the Liberal Democrats about what might be meant by this.
Lord Purvis of Tweed
The Government’s position, already stated, is that they intend the future customs arrangement to be based on those aspects of the Northern Ireland protocol which require agricultural and goods regulatory alignment with the European Union.
Lord Bates
We have been very clear about this; we want a deep and special facilitated trading arrangement with the European Union which allows all the benefits of free trade while allowing us to take advantage of the new opportunities which are emerging. According to the EU’s figures, 90% of growth over the next 10 to 15 years will be outside the EU—in India, China and the United States. That is what we need to tap into. That is what we need to be focusing on. We need to have the freedom to negotiate those independent trade agreements. If you go for a customs union, you are going to surrender that opportunity, and we are not prepared to do that. You would also surrender the right to shape the rules that you are going to have to implement.
Lord Kerr of Kinlochard
A brilliant description of the disadvantages of being stuck in a backstop.
Lord Liddle
Surely the best alternative way of benefiting from the growth outside the mature economies of western Europe—remember, this is catch-up growth; it is not a criticism of the European Union—is to be participants in the EU and its extensive trade deals with the emerging economies of the world. Why would we have a stronger negotiating position as 60 or 70 million than as an economy of 350 million or 400 million?
Lord Bates
Because 17.4 million people decided that they wanted to leave, and that is what the Government are committed to doing. I want to be careful not to be flippant about the subject we are dealing with; it is very serious, and the positions have been well argued. Nor do I want to be disrespectful to people for whom I have huge admiration, such as my noble friends Lord Patten and Lord Lansley, and the noble Lords, Lord Hannay and Lord Kerr, whose expertise I respect. But the position of Her Majesty’s Government is very clear. We have a deal. We should take advantage of that deal. A customs union would have all the disadvantages with few of the benefits. That is the reason we do not accept the amendment.
Lord Purvis of Tweed
Before the Minister sits down, I wonder whether he could advance this clarity. The noble Baroness, Lady Neville-Rolfe, states that we have now agreed with Israel to roll over our existing trading relationship with Israel. Israel does not have a free trade agreement with the European Union, or with us now. It has an association agreement, which has been in force since 2000. That is part of the pan-Euro-Mediterranean cumulation on rules of origin. This means that if we are replicating our existing relationship with Israel, we are replicating the rules of origin relationship that Israel has with the European Union. It also has common rules of origin procedures with Turkey, so if the Government’s position is that we are simply rolling over all of our current trading relationships through an association agreement with Israel, it means that we are now going to be bound by common rules of origin procedures with the western Balkans, the Faroe Islands and Turkey in the pan-Euro arrangement.
I am not sure why the Faroe Islands is part of that, but the reality is—and this is the point I was trying to make in my contribution—that we have to be open. If you want complete independence of trading relationships in the way the world trades now, that is impossible, so the Government have to have some limitations on it. If it is replicating the Israeli agreement, it is replicating exactly the same rules of origin alignment that we currently have with Turkey, and Turkey is part of a customs union with the European Union. That is quite simple, too.
Lord Bates
The Committee will come to rules of origin shortly, but on that point, that is the reason why, in the agreement that we are proposing—the deal that is on the table—we propose that to ensure that trading goods between the UK and the EU remains frictionless in the UK, there will be no routing requirements for rules of origin on trading goods between the UK and the EU. What we are talking about with Israel is consistent with that.
Lord Stevenson of Balmacara
My Lords, it is impossible to summarise what has been a very wide-ranging discussion. It certainly ended up in a rather more heated and fetid atmosphere than I expected when we set off. I have to say to the Minister, for whom I have the greatest respect, that it is fine to listen to what he is saying about what we ought to be doing and how we should do it, but he should point behind him when he is talking, because we do not get the arguments in the same way.
We started off with a description of hell, and what it might be to be listening to the same debates and discussions. I think we have justified the argument that we have moved on. The interesting thing that I took from this debate was how positions are being nuanced and changed as we move forward. There is an attempt from all sides to try to find common ground, and I wish that had reached all of our speakers. We are in a place that might be redolent of hell, with the colours that surround us and the flames leaping around, but I actually quite enjoyed being here. I am bound to go to hell anyway because of my previous life, so if this is what it is like, I quite like the prospect. But not yet—not yet. I call on the aid of the right reverent Prelate at this moment.
So what have we got out of this? We have got a sense around the Committee that there is something here that needs to be pushed to the next stage, and the Government should take away from this that this is a matter that will not go away, irrespective of what happens next week. By the time we get to Report, I am sure this will still be bumping around. I hope that by that stage we will have picked up on some of the points made by the noble Lord, Lord Lansley. We are getting hung up on what we mean by “customs union”, when we should be thinking behind the name—thinking about the process. It may be that we are likely to be close to, if not necessarily aligned with, EU current practice—and we ought to be, because, as my noble friend Lord Liddle said, size matters in these negotiations. Size matters, and always will, in any trading arrangement.
We are not really talking about tariffs. Tariffs are probably the 20th-century problem. The 21st-century problem is the regulatory barriers, and working on services to try to ensure that there is proper and fair trading, and that the issues at the heart of negotiations are rights and responsibilities, and the opportunities for providing benefits all round—a sort of development agenda meets trade, and coming together for the benefit of both.
The short, sharp intervention by the noble Viscount, Lord Ridley, was the most difficult to answer. I hope that, if he has the time, he will come back for the next group, when we will talk about some of these issues in more detail, and I will be able to give him a response. However, the truth is that I am quite happy with where the EU has got to with some of these trade deals. They are very good, and they would not be achieved by any smaller country on its own. We must not lose them, whatever arrangement we finally come to.
Viscount Ridley
The noble Lord has mentioned size twice. Can he explain why Chile, which is a smaller country than the European Union, has more trade deals with bigger countries than the European Union has?
Lord Stevenson of Balmacara
Maybe Dr Fox has an analogue that we do not know about, hopping around. “I do not know” is the answer.
Lord Patten of Barnes
Perhaps I can help the noble Lord. One reason why Chile has such good agreements around the world is that the agreement between it and the European Union—which is a very good agreement—was negotiated by your humble servant, as well as by others.
Lord Stevenson of Balmacara
In a spirit of mutual congratulation, I think it best to say that on this occasion we will withdraw the amendment—but we will probably want to look at the debate carefully and think about the wording of a future amendment. The subject will come back.
Brexit: Foreign Language Teaching and Public Service Interpreting
(5 years, 9 months ago)
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Baroness Coussins
To ask Her Majesty’s Government how immigration policy post-Brexit will take account of the recruitment of European Union and other foreign nationals to jobs in teaching modern foreign languages and public service interpreting.
Baroness Coussins (CB)
My Lords, first, I declare my interests as co-chair of the All-Party Group on Modern Languages and vice-president of the Chartered Institute of Linguists. We have a small but expert group of speakers this evening, and I would like to put it on record that many others have contacted me to say that they would have liked to take part but could not—notably the right reverend Prelate the Bishop of Leeds, who used to work as an interpreter and a GCHQ linguist.
In this short debate I will focus solely on how a future immigration regime must be finely tuned so that would-be immigrants to the UK, or people who are being specifically targeted for recruitment here to work as teachers of modern languages or as public service interpreters in our courts, police stations and health service, are not denied entry because of a salary threshold they cannot possibly meet, or because they are not regarded as sufficiently highly skilled to qualify.
We need to get this right for three big reasons. First, modern languages—already precarious throughout our education system—will suffer a body blow if schools and universities cannot recruit foreign nationals. An estimated 35% of MFL school teachers are non-UK EU nationals, with a similar proportion in the HE sector. Until we have a long-term strategy to produce enough linguists who will go into teaching, we need to be sure of the supply chain from abroad—mainly from France, Germany and Spain.
A salary threshold of £30,000, as proposed by the Migration Advisory Committee, would be a devastating barrier. The MAC acknowledged this in relation to education in general, but the problem is particularly acute for linguists. The National Association of Head Teachers said earlier this month that modern languages were among the subjects already most at risk from the drop in applications by EU nationals. The shortfall will only get worse with a salary threshold of £30,000. Government figures show that only 88% of the target number of MFL teachers were recruited in 2018, yet the demand is set to rise further, not least because of the Government’s own admirable policy that 90% of pupils should be achieving the EBacc by 2025. To do that requires them to do a language GCSE. This policy is doomed to failure unless the crisis of MFL teacher supply is urgently addressed. In the short to medium term, that cannot be done without overseas recruitment.
The salary range outside London for the first four years after qualification is £26,700 to £29,800. In the HE sector, staff need to be at spine point 28—more than half way up their pay scale—before they break the £30,000 barrier.
Classroom language assistants are also crucial for MFL in schools, and no fewer than 85% of them are currently from the EU. Many of them—the British Council estimates about 10%—are keenly recruited by their schools to convert from classroom assistant to trained teacher status. This is hugely beneficial to the MFL teacher supply chain, and would be threatened if the individuals could not meet new immigration conditions with which they would then have to comply. So I ask the Minister to give specific consideration to this point when formulating the new rules.
The second reason we must get this right is that the administration of justice and the quality of healthcare will suffer if the shortage of public service interpreters—PSIs—gets any worse. These are the people who are called out every day to police stations, courts, GP surgeries and hospitals to translate and interpret for defendants, witnesses, patients and their families. A few days ago, in answer to a Written Question I was told that the Government have “no plan currently” to alter the provisions of the EU directive which gave the right to interpretation and translation in criminal proceedings, which was transposed into UK law in 2013. But I am slightly suspicious about that word “currently”, so I ask the Minister to state categorically tonight that after Brexit the Government will not remove or water down those rights.
Around one-third of PSIs are EU nationals and, as with teachers, we need to continue to recruit them, not just look after the ones who are already here. A salary threshold of £30,000 would be even more of a barrier for them than for teachers because most are freelance, on an average hourly rate of around £15. An interpreter working solely on jobs paying the highest rate of £20 an hour, paid for six hours a day of face-to-face interpreting and working for 48 weeks a year, would still be earning only £28,000. Many are earning far less than that. Yet their work is highly skilled, often requiring technical and specialist vocabulary, and knowledge of the justice or healthcare system. Without enough properly qualified PSIs, we would undoubtedly see more of the kinds of cases reported in the Times last week, in which unqualified so-called interpreters were used by one agency for police interviews, resulting in such unprofessional behaviour that a criminal trial collapsed. This not only affects people’s rights but results in unnecessary public expenditure if a retrial or further detention is involved.
The All-Party Group on Modern Languages heard evidence recently from police and researchers working on transnational crime. They told us that terrorism and trafficking in people, drugs and firearms are becoming ever more sophisticated and complex across borders and languages, and that without linguists the police simply cannot do their job. Languages commonly required include Farsi, Kurdish and Nepalese, as well as EU languages such as Polish and Portuguese.
The current Immigration Rules include a shortage occupations list, which has a category for secondary school teachers of maths, physics, computer science and Mandarin. I ask the Minister to amend this to cover teachers of all modern languages. We need competence in Mandarin, of course, but we also need traditional European languages more than ever. Schools have just as much trouble finding teachers for these. Will the Minister add to the shortage occupations list a new category for the professionally qualified translators and interpreters who will be working either in public services, as I mentioned, or in the private sector, where their language skills will help build export growth and competitiveness?
That brings me to the third reason for making sure that we get this right: it is in the national interest, by which I mean the economy and our capacity to play our part on the world stage through soft power, international organisations and diplomacy—in other words, everything that is often rather crudely summed up as “global Britain”. We need dramatically to boost the numbers of school leavers and graduates who can speak more than one language proficiently, yet since 2000 more than 50 universities have scrapped some or all of their modern language degrees. We must not add to this erosion by depriving the sector of the foreign nationals who make up around a third of its language staff. Lack of language skills is a serious constraint on employability; the UK loses 3.5% of GDP every year in missed contracts because of a lack of language skills in the workforce.
Language education, as I hope I have shown this evening, is currently heavily dependent on the body of teachers we are able to recruit from overseas. A strategy which could, over time, produce enough homegrown linguists must be the subject of another debate. My key message tonight is that in the short to medium term, we would be shooting ourselves in the foot as a nation if we allowed language skills to suffer by knowingly placing unnecessary obstacles in the way of some of the very people who we need most to attract to the UK to help us redefine our place in the world. Will the Minister take the opportunity to state explicitly that MFL teachers, translators and interpreters are highly skilled people who will not be screened out by any new Immigration Rules on the basis of income or a blinkered definition of what constitutes skill?
Lord Thurlow (CB)
My Lords, I thank the noble Baroness, Lady Coussins, for securing this debate. It is a great pleasure to follow her impressive and convincing speech. I will put a slightly different spin on the debate and hope that I do not overlap too much with what we have heard. This debate goes right to the heart of our education process, as well. We need to improve the teaching of languages and need foreign nationals to teach them, but why do foreign language skills matter?
It is easy for us to be lazy—and we are criticised for this—when others often speak English. I read in the excellent Library briefing that under the Erasmus programme, twice as many students choose to come to the UK to study than to go to Germany or France, which are the next two preferred destinations. Our MFL learning is consistently poor compared with other countries, as we have heard, and there are regular calls from industry and educational bodies to raise attainment levels. Both for soft reasons of intellectual development and for hard reasons of commercial heft, we should not allow our schoolchildren to miss out on foreign languages.
Looking at the softer side, an organisation called Bilingualism Matters is based in Edinburgh and forms part of Edinburgh University. It provides research-based study on the benefits of language learning. I have read some of its work and spoken to one of its directors. Both indicated that research confirms the great benefits of language teaching. It gives students much more than an additional language. It is beneficial for children’s development more generally: they become aware of other cultures and other points of view. They also become better at multitasking and focusing their attention. Many become precocious readers. These are all powerful learning benefits, which put them at an advantage to their peers. It certainly gives them much more than two languages.
The harder aspects are visible in the professional and commercial worlds. I add to the comments of the previous speaker. Having worked in the global property market for 30 or 40 years, I understand the important role that languages play in business. The wheels of commerce benefit from these skills. Yes, English is considered the language of international business and banking and, yes, the majority of the deals we see done occur in our language. But we must take into account the rise of Mandarin, Spanish and Arabic in the business arena and the importance of being able to speak another’s tongue when it comes to developing co-operation and trust—the grounds on which good business is done. In the Brexit context, as we consider potential trade deals and reassess our place in the global economy, we must equip our young to make the most of the business opportunities that we will make available to them when we get through this confusion.
To support my views on commerce, I refer to an article I saw in the Times yesterday. It said that Highlands and Islands Enterprise in Scotland is encouraging the learning of Mandarin for the hospitality industry there. I could not believe it but it is even organising China-ready workshops, while expecting an influx of Chinese visitors following the introduction of a direct Beijing-Edinburgh flight. It is not a joke; it is really doing it.
I understand that a combined universities report of May 2016 on the value of modern languages said that business is lost to UK companies due to the lack of language skills. The UK’s soft power and effectiveness in conflict and matters of national security are limited by the shortage of strategically important languages. The UK is under-represented at internationally important institutions such as the EU’s civil service and the United Nations’ translation services.
Considering the importance of foreign language skills across intellectual development and in the professional and commercial world, it should go without saying that we need good-quality foreign language teaching staff. As an interesting indicator of the need for foreign language teachers, in Scotland two languages have been taught at primary level since 2014; this will be extended to all schools in two years’ time. It does not take one long to find evidence of language teacher shortages, as we have heard, across British schools. TES, the online hub for the teaching community, tells us that there is a shortage of some 31% in MFL teaching. While we may agree on the importance of promoting language learning, we cannot meet demand in language teaching, let alone hope to increase that demand.
The answer must be to attract foreign nationals as teachers and classroom assistants. Currently, an estimated one-third of foreign language teachers are European nationals. I believe that legislation is being put in place to secure their jobs here in the UK, but we need to do more. We need to positively attract more foreign teaching staff. The Migration Advisory Committee has recommended that the shortage occupation list of professions, which we have heard about, be fully reviewed. While Mandarin is on the list, as we have heard, that is not nearly enough. Let us not forget that these foreign teachers earn much less than the £30,000 visa threshold. Furthermore, they will put most of they earn back into the economy.
As an outward-looking global nation in which we pride ourselves on educational excellence, and as a nation looking at possibly a decade’s worth of re-establishing our global trade position, we must support language learning through ensuring that post-Brexit immigration policy encourages the recruitment of foreign nationals. My request to the Minister is to convince her colleagues to offer special treatment to these teachers from the EU in the related immigration Bill. The UK will be better off as a result.
Lord Dykes (CB)
My Lords, it is a great pleasure to follow the first two speakers, and I thank my noble friend Lady Coussins for launching this debate. This is a subject that is seemingly not big on the horizon, but actually it is crucial. I thank her also for the marvellous work she has done over the years as a chairman of our All-Party Group on Modern Languages, which has achieved great things. The emotional, marginal nature of foreign languages in Britain—which is really a curse—might suggest that we would not have very frequent meetings, but we do. We have interesting and varied meetings, full of content, with lots of outside participants, such as members of the Institute of Linguists. It is a very inspiring group. I am therefore grateful that today’s debate has been led by my noble friend Lady Coussins, and for what she said to raise the alarm on this issue.
We are dealing here with yet another miserable piece of Brexit legislation, and what a sad time this is for the country. One has to speak broadly about Brexit, because it is the background to all these matters. Today, in Committee on the Trade Bill, things were dealt with that would not have been necessary if the Government had handled the events subsequent to the election on 8 June 2017 more intelligently, in a way that would have led us to a different and more constructive channel of recovery and a rethinking of the nightmare that is affecting this country. It has made people thoroughly miserable. Youngsters feel fed up and have lost their morale as a result of what the senior citizens in the Government and politics have done, seemingly on their behalf but potentially causing only damage and destruction. This may seem a small segment of the Brexit background, but it is a very important one.
In recent years, the language background in Britain has been depressing. It is good to see the expansion of Spanish and Mandarin in British state schools and others, particularly for younger children, and to see how well and intelligently they deal with it and what they achieve. Learning Chinese is very difficult for older people, but children can cope with it. Other languages, however, are now in decline in universities and schools—German is a good example of this—but there is absolutely sacred evidence of their importance.
Years ago, I went to Dusseldorf to speak to the 50 officials at the British trade office who were promoting UK exports. Their first grumble—a familiar one in this country, which is spoiled by English being the dominant international language—was that so many British companies would not produce their pamphlets in German because of the extra expense, saying, “Why bother? Aren’t the Germans good at speaking English?” Many years after that visit, specific research showed that 9% net of business was lost by British exporters in Germany because we would not put our documents into German. German has really faded now in this country, and I hope that will not be so in the future.
I am spoiled by providence and my origins of birth. For some reason, I have always found languages very easy: I enjoy speaking and reading European languages, as well as Russian, but that is rusty because I have not used it in recent years. Due to finding it easy, I have a natural enthusiasm for language learning and teaching, which does not affect the ordinary citizen. I quite understand that. I am not criticising the ordinary citizen in this country for not feeling that way or for supporting the idea that they do not need to bother because “they all speak English”.
If it is unfair I will apologise to him immediately, but I was told on good authority that the previous Prime Minister, David Cameron, could just about manage to say “bonjour” and nothing else when he was at the Council of Ministers. But look at what our foreign friends in the EU can do. Some years ago, I had the great privilege of visiting the European Parliament, which has become increasingly important now. I heard the then President Barroso make a speech in five different languages, with several paragraphs in each. We could do that as well. There is no reason that British people should not be intrinsically just as good at foreign languages as anybody else, if they put their minds to it. I have spoken on this at great length because I wanted to focus on the background and on how this curmudgeonly attitude in Britain about languages has affected government policy.
On the Immigration Act, I was very impressed with the two documents, by Nicola Newson and James Goddard, that we in the House of Lords were given. They were very helpful in giving us the background on this. The second paragraph on page 72 of the first one deals with how this all started. It says:
“The shortage of teachers is not limited to a few subject-specialisms as in the past. The ASCL survey of January 2016 asked about the subjects found to be difficult. As might be expected the existing shortage subjects of maths and science head the list, but they are now joined by significant numbers of schools having problems recruiting teachers of English, modern foreign languages”—
which is the subject of this debate today—
“geography, history and other subjects”.
Later in the same document we get a Written Answer from the Minister, then Nick Gibb. He said in September 2018:
“The Government has commissioned the Migration Advisory Committee … to provide independent advice … to help develop a future immigration system. The Department welcomed their interim report in March and the contribution it makes to the immigration debate. Their analysis is incomplete and it would be wrong to pre-empt their final report. The Government will take account of the MAC’s advice when making decisions about the future immigration system”.
As my noble friend Lady Coussins quite rightly mentioned, the salary figures are usually below the threshold anyway, so the problem is intrinsic and it has to be tackled. I hope that will be so, because the Immigration Act is only a part of this. Regulations will follow later when the second stage of this exercise gathers momentum, and I am very sceptical about the Government getting it right.
I will refer briefly to the second document, Foreign Language Skills: Trends and Developments. I mentioned earlier the damage that is done, particularly to younger members of our society, if these things are closed down, reduced, not properly funded and so on. On page 9, paragraph 4, I was struck with the definition of “multilingualism” in the EU. Let me remind everybody of the idea that all 27 sovereign countries in the EU are happy with sovereignty and happy working together as a club in a succession of treaties. Why cannot Britain be the same? The definition states:
“Under the subsidiarity principle, member states of the EU are responsible for language rights and education. However, the EU is empowered to promote language learning and linguistic diversity among its members”.
That is one of the great attractions of the EU and another reason why we should stay in.
Lord Hannay of Chiswick (CB)
My Lords, it is a splendid initiative of my noble friend Lady Coussins to have this on our Order Paper. It is a little bit sad that not one single person on the Back Benches of the three main party groups in this House is present for this debate. The immigration White Paper, which is the focus of this debate, seems just about the greenest White Paper I have ever seen. I draw some hope from that because I really hope it is not set in concrete, particularly not that figure clutched out of the air of £30,000, which we have already heard from my noble friend presents serious problems in the two sectors that she has identified. I hope the Minister will confirm that there is plenty of scope for further consultation and change.
On interpreters, the extremely welcome statement by the Government a couple of days ago that they were going to waive the charge on EU citizens who wish to have settled status simply underlines the fact that we in this country are going to have 3 million or more EU citizens for the foreseeable future and, although a lot of them speak such good English that they put some of us to shame, many of them do not. Some of them will find themselves within the courts system or dealing with other forms of law enforcement or inquiry. It really is essential, if we believe in the rule of law in this country, that they should be given the services of interpreters who are genuinely able to help them explain how they got into the position they got into. The point about interpreters being able to come here is very important, because it is wider than a purely European one.
On language teaching, it is a cause of some despair, I think, to those of us who have lived much of our lives abroad and who understand that it is not any good believing that just because English is the lingua franca of the world of the 21st century we can just ignore other people’s languages and do business around the world without bothering to understand their culture or their languages and it will be all right if we just speak a bit louder—it will not. The journey on which we are setting out, or which the Government would like to see us setting out on, outside the European Union is going to be pretty rough and it will be a lot rougher if we are not able to educate businessmen, the military, diplomats—anything you like—to speak other people’s languages. It is quite clear from the figures that my noble friend has given that if the rules suggested in the White Paper are put in place, there will be an even greater shortage of language teachers, since such a high proportion of them are from the European Union. That is another extremely serious matter and I look forward to hearing the Minister’s response.
Baroness Garden of Frognal (LD)
My Lords, I join in thanking the noble Baroness, Lady Coussins, for introducing this debate. She is a tireless supporter of modern foreign languages and has campaigned for the public sector interpreters in their attempts not to be undercut by cheaper but far less qualified people. I thank those who have sent us briefings for this debate. The noble Lord, Lord Dykes, mentioned the Library briefing, and we also heard from the All-Party Parliamentary Group on Modern Languages about its views. It is a great pleasure to follow the noble Lord, Lord Hannay, who speaks with such expertise on these matters. I agree with absolutely everything he said.
We know that translation can increasingly be done online—sometimes with some rather bizarre results, I have to say, but nevertheless it can be done. But the very specialist task of interpreting, particularly for such people as court interpreters, cannot be so easily mechanised. They need to have a knowledge of legal procedures as well as language skills. We shall continue to need skilled interpreters, in very many diverse languages, to ensure that people who do not speak English are fairly represented. But we have not sent out messages of welcome for these specialist professionals and many have returned or are returning to home countries. People have a right to interpretation and translation in criminal proceedings; their very freedom may depend on fully understanding court procedures and their case being fairly put.
As we have already heard, as transnational organised crime becomes ever more sophisticated and complex across borders and languages, the police need interpreters and translators—not all thugs are British. So does the NHS, where communication issues can have consequences for health outcomes and fundamental rights such as patient confidentiality and consent. We certainly cannot rely on foreign nurses being there to help with translation, because the latest figures from the Nursing and Midwifery Council have shown that the number of new nurses coming from the EU to work in the UK has dropped by 87%, from 6,382 in 2016-17 to a mere 805 in 2017-18. This poses a real dilemma for the NHS and British citizens are unlikely to fill the gap.
I declare an interest as an honorary fellow of the Chartered Institute of Linguists. I read French and Spanish at university, lived in France as a child, in Spain as a student and taught in a Gymnasium while living in Germany with my RAF husband. That required a rather speedy learning curve to make sure I could understand at least enough German to know what the students were saying about me in class. I have always considered myself European, I am distraught by Brexit and I have always had a fascination with languages. Like the noble Lord, Lord Dykes, I enjoy learning them and do not find it too difficult, although when I became a member of the UK-Japan group I went into Waterstones to buy Teach Yourself Japanese in Three Weeks and the man selling it looked at me and said, “You won’t, you know”, and he was dead right: I have found that Japanese is a challenge too far.
It is deeply disturbing that the numbers studying modern languages have declined dramatically in recent years. In 2002 76% of students took a language. This was down to 47% in 2017 and, as we have heard, universities are closing their language departments. In both schools and universities, we are increasingly dependent on foreign nationals, particularly those from the EU, filling teaching posts. We have heard from the noble Baroness, Lady Coussins, and others that we have a recruitment crisis in modern foreign language teaching. As the noble Lord, Lord Thurlow, said, we need to attract native speakers of languages to come and fill those posts in our schools. How can young people be enthused by languages if there are not enough enthusiastic linguists to inspire them? We will end up in a vicious circle: there are not enthusiastic teachers, so the children do not get enthusiastic and do not go on to learn languages, and so the decline happens. This is really not helped by the perception that it is more difficult to get a good grade in languages than in other subjects.
As the noble Lord, Lord Thurlow, said, young people’s horizons can be broadened by learning languages. In doing so, they learn about other cultures and communities. The EU has stated that foreign language skills are important for citizens’ social cohesion and employability, and for the continent’s competitiveness and economic growth. If that is true for the EU, it is certainly also true for the UK. The education sector is extremely concerned about barriers to recruiting from abroad. Higher education institutions are particularly concerned about the risks to international mobility and co-operation for teaching and research. Of course, they derive immense benefit from EU funding and collaboration.
Foreign nationals contribute to the UK economy and help create the UK’s vibrant and world-leading research and innovation system. In universities and colleges, it is not just in the language departments: we read that in economics alone 64% of academic staff are non-UK nationals. There are real concerns that, post Brexit, there will need to be a significant increase in the number of visas to be issued, bringing increased cost and administration. There are currently just under 50,000 EU academic and non-academic staff employed by universities. Not all may need visas; certainly not all will be earning the threshold salary of £30,000, already referred to, which the Government are proposing; but all are doing jobs which may not be easily filled by native British people. There are many laboratory technicians and language assistants, for instance, whose work is invaluable. What plans do the Government have to issue visas and what guidance will be given to those who have not needed visas hitherto but who may in the future? Speed and simplicity will be of the essence. What about the threshold salary, which will be an enormous barrier to so many in the education world?
If we do leave the EU, it will be more important than ever that we can speak the languages of the neighbours we have turned our backs on. Why should they bother to speak English if we are no longer in the club? If or when the UK leaves the EU, only 1% of the EU population will speak English as a first language—little incentive for it to keep its dominance. French and German are waiting in the wings to resume their rightful place. As Willy Brandt was reported to have said: “If I am selling to you, I will speak your language, but if I am buying, dann müssen Sie Deutsch sprechen”. I will not insult the House by translating that. How will our trade deals look if we insist on speaking English loudly?
The Government’s ambiguity about the status of EU nationals has added to uncertainties and encouraged more of them to return to their countries of origin. A head teacher recently told me that a brilliant Polish physics teacher had decided to return to Poland so that her job could be given to a British teacher. Some hope! Physics teachers are like gold dust and the prospect of a replacement was a dim one.
Moving slightly away from teaching and interpreting, another sector which would be profoundly affected is the hospitality sector, which would be lost without foreign workers. British people, it seems, are not prepared to work in industries which require late hours, weekend working and hard physical work. I was talking to the owner of a West End restaurant recently who said he could not find any British people to come and work there because they did not like the hours. We enjoy eating in restaurants and staying in hotels but our choices will be severely limited if there are no foreign nationals to staff them.
We have wasted precious time in leaving EU citizens in uncertainty. The Government are now trying to make up for lost time, but for some it will be too little and too late. What is the Government’s long-term plan? What steps are they taking to ensure that EU citizens and other foreign nationals who are such a crucial part of the workforce and the community will be warmly encouraged to stay, with any administration as simple, friendly and cheap as possible? We have very real concerns about the future of our country without the very many foreign nationals who contribute so greatly. I look forward to the Minister’s reply.
Lord Watson of Invergowrie (Lab)
My Lords, I too congratulate the noble Baroness, Lady Coussins, on initiating this debate on a subject of some urgency. For that reason, I share the dismay of the noble Lord, Lord Hannay, that so few speakers have been motivated to participate.
For the UK to succeed outwith the EU, international awareness and skills, such as the ability to connect with people globally beyond English, are more vital than ever. However, the UK is currently facing a languages deficit, as other noble Lords have said. At the end of 2017, the British Council published a report on modern foreign language teaching in our schools and universities which listed Spanish, Mandarin, French, Arabic and German as the languages the UK will need most once we depart the EU. But recent research has shown that the percentage of 18 to 34 year-olds who can hold a basic conversation in those languages is 14% in French, 8% in German, 7% in Spanish and just 2% each in Mandarin and Arabic. This comes at a time when language learning in UK schools is facing what the British Council rather kindly described as a “difficult climate”, as the noble Baroness, Lady Coussins, said.
That is despite the introduction of the English baccalaureate which was, in part, designed to promote greater take-up of French and German, but does not seem to have made any meaningful impact. In part, that is due to a lack of suitably qualified teachers of languages for schools, and cuts to school budgets mean that there are fewer teacher education opportunities, especially in the lesser-taught languages.
The decline in the number of young people studying languages is hardly likely to have been lessened by much of the Government’s rhetoric since the referendum, fostering negative impressions of people who are “not like us” and hence of their languages. Such hostility has caused foreign nationals to leave the UK while deterring others from coming here. That policy is particularly demonstrated by the Government’s senseless determination to include overseas students in the immigration figures, when in fact they make a decisive net contribution to this country.
There is already a shortage of modern foreign language teachers, yet the Government seemingly ignore the fact that currently around one-third of those in post are non-UK EU nationals. We need more of them, particularly from France, Spain and Germany, as the noble Baroness, Lady Coussins, said, to plug the gap, but the generally inhospitable atmosphere—perceived or real—since the referendum makes that much more difficult.
The effect is also serious concerning the ability of young people to prepare themselves for the fast-changing demands of the economy in the years ahead. At a time when global connections matter more than ever, it is worrying that the UK is facing a languages deficit, because that restricts access by young people to overseas work experience, which is a vital part of preparation for them to develop a career in international business.
The threat to the ability of UK students to access the Erasmus+ programme after we leave the EU is an issue that the Government claimed that they would resolve through negotiation. We know all too well how those negotiations worked out, and now the country faces hurtling over a cliff edge in only nine weeks.
Failure to reach agreement with our EU neighbours can only lead to a reduction in the demand for undergraduate language courses at UK universities. What do the Government intend to do to ensure the supply of modern language teachers in our schools and universities? Although it is not within the ministerial remit of the noble Baroness, Lady Williams, I imagine she will have had advice from DfE officials for this debate.
The Government finally published their much-delayed immigration White Paper last month, and we know that free movement of EU nationals will end on 29 March. That will leave us with a single immigration system for all nationalities, with no cap on the number of skilled migrants. But what is a skilled migrant? It is a positive step that the Government have not followed the Migration Advisory Committee’s recommendation to retain the £30,000 salary threshold. But with the matter out to consultation, it seems that a salary threshold at some level is inevitable.
A threshold of £30,000 will not help to fill many of the skills gaps in the UK economy, not least the need for essential workers such as health and social care staff. The noble Baroness, Lady Garden, has just added several other skills, particularly hospitality. Newly qualified teachers can expect to earn around £23,000 outside London and around £26,000 in inner London—so, without doubt, language teaching and interpretation can be added to the list.
Highly skilled people from around the world contribute to the UK economy and help to create the UK’s vibrant and world-leading research and innovation system. As the noble Baroness, Lady Garden, said, currently almost 50,000 academic and non-academic staff from other EU countries are employed by universities. A supply of native speaker language assistants is crucial to the quality of higher education provision in modern foreign languages—a subject that is increasingly strategically important to national needs as the UK looks to engage more closely with the rest of the world.
Of disciplines which have the largest proportion of academic staff from the EU, modern languages, with 35%, is second only to economics with 36%. This raises the crucial question of salaries and how these people will be affected by the Government’s new immigration regime when it is introduced in 2021. According to the Higher Education Statistics Agency, 42% of all staff at universities earn less than £33,000 and 38% of academic staff earning below that figure are not UK nationals.
Analysis by the University and College Employers Association estimates that around 42% of technician roles in total fell below the tier 2 experienced worker threshold salary of £30,000 in 2016-17 and that the median basic pay of a language assistant in higher education is £26,000.
These figures lay bare the extent of the damage that the Government’s new immigration rules could have unless the arbitrary £30,000 threshold is lowered significantly. A supply of native speaker language assistants is crucial to the quality of higher education provision in modern foreign languages—a subject which is important to national needs as the UK looks to engage more closely with the rest of the world. Such native speakers inevitably come from outside the UK and are often on termtime-only contracts, which makes it even more likely that their salary will fall below the threshold as currently proposed.
The translation industry will also be forced to make some major changes to its recruitment process post EU. In the past, translation companies, many of which supply the public sector, have been able to take advantage of the mobility of workers between EU states to employ highly skilled staff from these countries. Freedom of movement is of particular importance to the language sector, as many services require their translation staff to be native speakers, which means that many current translators are not UK citizens. The result will be that the British language industry will have limited access to a skilled workforce. Despite the difficulties, those that do still wish to work here may well be deterred or prevented from doing so by the bureaucracy that will accompany visa and work permit applications.
In closing, I want to put some questions to the Minister. What is the position of EU nationals who want to come to the UK between 30 March 2019 and 1 January 2021? Are teachers of modern languages to be included in occupations that would qualify as tier 2 general visa applications? Otherwise, the salaries paid to newly qualified teachers will prove an insurmountable barrier. If they would not be regarded as being in suitable tier 2 general visa occupations, what will be the process for recruiting modern language teachers?
As in so much of the fraught debate around our departure from the European Union, it is a case of so many questions, so little time. I hope that the Minister will be able to answer at least some of them—but, if not, perhaps she will write to me.
The Minister of State, Home Office (Baroness Williams of Trafford) (Con)
My Lords, I congratulate the noble Baroness, Lady Coussins, on securing this debate and thank all noble Lords who have spoken in what has been my second non-fractious debate of the week. It seems that your Lordships have again taken a very measured and thoughtful approach.
First, the Government are in no doubt of the extremely valuable and positive contribution that our close European neighbours and other international workers have made—and, I hope, will continue to make—to support and contribute to the well-being of this country. International workers have enriched communities, brought new perspectives, expertise and knowledge, stimulated growth and made us the tolerant, outward-looking nation that we are today. Of course, teachers play a very important role in this by inspiring our young people and preparing them for the future—as do public service interpreters, as noble Lords mentioned, who ensure that otherwise vulnerable members of this society are able to access services. The noble Lord, Lord Hannay, mentioned the courts, which are a very good example of that.
In the post-Brexit landscape, we recognise that the focus on languages will naturally increase rather than lessen. We are clear that all children, regardless of background, should have a broad and balanced education that prepares them for adult life and success in the modern economy. Noble Lords have shared their examples of the various deficiencies in their multilingual abilities. My language skills amount to poor French and poor Italian, whereas my brother’s children, at the age of two, speak several languages and can change between them depending on who they are speaking to. I agree with the noble Lords, Lord Dykes and Lord Hannay, that we fall behind our European neighbours in our multilingual abilities. As they said, it is no good just shouting louder and hoping that they will understand us.
The Government are committed to ensuring that schools can recruit appropriately to fill their vacancies and that key front-line public services are supported by interpreters for all our diverse communities. We support organisations accessing the international talent they need through the immigration system, and we make special provision for certain occupations recognised as being in national shortage by the independent Migration Advisory Committee. In 2016, as noble Lords will know, the Government commissioned the MAC to undertake a review of the shortage occupation list to assess all teaching professionals in primary and secondary education, with a view to concluding whether they ought to be recognised on the list.
In 2017 the MAC published its findings. It identified that there was a case for modern foreign language teachers to be recognised as a shortage. However, it found no evidence to indicate that most foreign language teachers were recruited from outside the EU. Given that the immigration system currently applies only to non-EU nationals, the MAC considered, and the Government agreed, that it would not be sensible for most modern foreign language teaching occupations to be included on the shortage occupation list. However, the MAC considered that there was a clear case for Mandarin teachers to be added to the list, given the upward pressure on demand for Mandarin in schools—and they were duly added. Mandarin teachers also receive an exemption from the usual salary thresholds for tier 2, meaning that experienced Mandarin teachers can be recruited earning a salary of £20,800 instead of the usual £30,000.
The Government recognise that two years have gone by since that last review. We want to make sure that our immigration system keeps pace with the rate and scale of changes in the labour market. That is why last June we commissioned the MAC to undertake a review of the shortage occupation list. This time we asked it to look at the entire composition of the list, which comprises occupations across the economy; noble Lords mentioned various occupations, which I will include. The review is currently under way. The call for evidence, which I understand has elicited many responses, closed only last week. It is right that the Government await the outcome of that review before making any changes to the list. The review, which is intended to report in the spring, will include full consideration of modern foreign language teaching occupations within its scope. I am sure that the MAC will take due account of the fact that we are considerably closer to the UK’s departure from the EU and will be moving to a single immigration system in which EU citizens no longer receive automatic preference.
As noble Lords pointed out, on 19 December 2018 the Government published a White Paper setting out our proposals for the United Kingdom’s future skills-based immigration system, which will be implemented after the UK’s exit from the EU, following the planned implementation period. As part of those proposals, we proposed a new route for skilled workers. In line with the MAC recommendations, we will lower the current skills threshold to medium-skilled occupations at A-level and above; we will not cap this route and there will be no requirement for employers to carry out a resident labour market test for highly skilled roles. Teachers and public service interpreters, like other skilled occupations, will naturally benefit from these changes. To answer the question of the noble Lord, Lord Hannay, and a similar question from the noble Baroness, Lady Garden, although the MAC recommended a minimum salary threshold of £30,000 for skilled workers to enter via this route, the Government have been clear that we want to engage with business before taking final decisions on that.
As my right honourable friend the Immigration Minister said recently, this is the start of the conversation as opposed to the end. We have also been clear that businesses and organisations will need time to digest the proposals, which is why we have launched a year-long programme of engagement with a wide range of stakeholders across the UK. We are clear, however, that immigration must be considered alongside investment to improve the productivity and skills of the UK workforce, including innovation, automation and technology. Accordingly, we are working to grow a strong domestic pipeline of teachers and have a package of measures in place to support both the recruitment of trainees and retention. We have set aside funding to develop our domestic pipeline of modern foreign languages teachers, including offering scholarships and tax-free bursaries typically worth up to £26,000 for trainees in modern foreign language initial teacher training. We are complementing national initiatives by working in partnership with the Spanish Government to recruit visiting teachers from Spain through Spain’s visiting teachers programme to teach modern foreign languages in England.
The noble Baronesses, Lady Coussins and Lady Garden of Frognal, and the noble Lord, Lord Dykes, talked about wanting the Government to confirm that teachers, interpreters, et cetera, will not be screened out of the future immigration system through skill level or salary. I can confirm that language teachers, nurses and interpreters will meet the skills definition within the future immigration system. Posts on the shortage occupation list can benefit from this lower salary threshold, as I have said, and we will await the advice of the MAC on the composition of the list.
The noble Baroness, Lady Garden of Frognal, asked what plans the Government had to simplify the visa system and what advice we could give to EU citizens in the UK who had not previously needed visas. The immigration White Paper makes absolutely clear our intention to speed up and simplify the visa system through the greater use of technology. We have made it clear that we want EU citizens who are here already to stay. We have put in place a simple-to-operate settlement scheme, not a visa requirement, and this week we announced that they could use the scheme free of charge.
The noble Baroness, Lady Coussins, asked about the operation of the EU directive on access to interpreters. I do not know the answer to that and I will have to write to her, because I am not sure whether that has been transposed into UK law. I shall respond to noble Lords in writing on any questions that I have not answered. I again thank all noble Lords for their commitment to this, in particular the noble Baroness, Lady Coussins, and everyone who contributes to our world-leading institutions, whether they are schools, universities or the workplace.
Trade Bill
Wednesday 23rd January 2019
(5 years, 9 months ago)
Lords ChamberRead Full debate Trade Bill 2017-19 View all Trade Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 127-II(Rev)(a) Amendment for Committee, supplementary to the revised second marshalled list (PDF) - (23 Jan 2019)
“UK participation in EU’s Generalised Scheme of Preferences
It shall be the objective of an appropriate authority to take all necessary steps to implement international trade agreements which enable the United Kingdom, after exit day, to fully participate in, or replicate the objectives of, the European Union’s Generalised Scheme of Preferences (GSP) for low-income and lower-middle-income countries.”
Lord Stevenson of Balmacara (Lab)
My Lords, I sense there has been a bit of a change in the composition of the House—I cannot imagine why, because we have reached some of the more interesting elements of the Bill. Had the noble Viscount, Lord Ridley, who is absent, been present, he might have learned quite a lot. That will help me avoid the more sharply put questions.
Amendment 27 is a probing amendment in the sense that it is there to invite the Government to set out their plans, should they be necessary, in relation to GSP, the EU’s generalised scheme of preference. It is open to a wider range of issues, and in his dual capacity as Minister responsible for development, the noble Lord, Lord Bates, might well have a view that will add to our overall understanding of where we are. The noble Lord, Lord Lansley, has a similar amendment, although it is much more detailed and sharply drafted than mine is, and I look forward to hearing his comments.
It can be said in very few words that one of the things that one gets by being part of the EU is participation in schemes of the type that is being discussed here, which is an attempt to try to bring some sort of structure and order to the way in which trading relationships can sometimes impact on development activity and vice versa, by recognising that very often a good trading opportunity in a developing country is perhaps going to do more than any amount of aid, however well delivered and whatever focus it has. On the other hand, the impact of either favourable tariffs, reduced costs or support for various aspects of work on the trading side of that relationship can have quite a devastating effect.
It is to the credit of the EU—and I am sure that Ministers have been heavily involved in the shaping of the way this goes—that the GSP arrangement is being set up so that it is constantly monitored. We have recently seen the interim relationship of that. In short, the results are broadly supportive of the way the EU has taken forward this programme, with some reservations in the sense that it is probably too soon to say quite what some of the outcomes will be. It is recognising that there are longer-term benefits that will not be picked up by short-term measuring techniques, and of course there are dangers that come in relation to trying to focus too narrowly on some of the econometric figures without thinking about some of the wider social issues.
The GSP relationship, combined with Everything But Arms arrangements, is a way of seeing development happen in a constructive and progressive way, which is something that we support. In moving this amendment, I invite the Government to respond to the thoughts behind it. I beg to move.
Lord Lansley (Con)
My Lords, in following the noble Lord, Lord Stevenson, I am grateful for his kind remarks about my amendment. I was not required to produce any amendments and I produce relatively few but, by virtue of his responsibilities, he has to produce quite a lot of them so I think we will forgive him for the sighting shot that, in a sense, many of these amendments are at this stage.
The generalised scheme of preferences, for those who are reading our debate afterwards—I am sure that many will do so—is about giving preferential tariff reductions to developing countries to stimulate their economies and their exports to the European Union, as one of the world’s largest potential markets. It can be fairly said that it is something that we subscribe to and that we encourage. For that reason, in the Taxation (Cross-border Trade) Act 2018, the Government and Parliament have already legislated for a preference scheme in the future. Therefore, that is not the issue, which is why my amendment is structured in the way that it is. The issue is: how do we go about this? That is the point of Amendment 27. How far should the United Kingdom’s preference scheme—that is, the unilateral preferential tariff rates that we offer to developing countries—be structured in such a way as to correspond directly to what is presently the generalised scheme of preferences as reflected in EU regulations?
The starting point for this is that the EU regulations will last until the end of 2023. For the purposes of this debate, I am going to assume that we are not in a customs union with the European Union, because if we were that would automatically solve this problem. Therefore, we are outside the customs union and we have to make our own decisions about to whom we give a preferential tariff rate and when we vary from it. We did not have a debate here on the Taxation (Cross-border Trade) Act because it attracted financial privilege, so we are getting the benefit of that now. Quite a lot of the debate on the relationship with developing countries focuses on tariff reduction. That is important but, for the least developing countries, the objective is nil tariffs on—as it is expressed—everything but arms and ammunition. That is reflected in Schedule 3 to the Taxation (Cross-border Trade) Act. For the other developing countries—the eligible developing countries, as they are known—there is an objective to try to reduce tariffs to the fullest extent possible. That is already in there.
But of course the issue then is: under what circumstances do we depart from that? The fact that the GSP says nil tariffs does not mean that in all circumstances that is maintained. The European Union has not done this, but the regulation would permit the European Union to suspend the nil tariff, or indeed to withdraw the preferential rate, in respect of transgressions on the part of other states. That is a possibility where a country has flagrantly been abusing human rights. If a country chose to produce large numbers of goods for export to other countries on the basis of a flagrant disregard for child labour laws, for example, should one continue to offer a preferential rate? Many of us would say that we should not necessarily do that. We should then suspend the preferential rate in some circumstances where human rights abuses and the rule of law have ceased. The European Union has not permitted countries to be in the Everything But Arms GSP, so we have to make those judgments under those circumstances.
The point of my Amendment 65 is to say, as we proceed, that we should start with a scheme that conforms to the structure of the EU regulation, because everything is starting from the position of continuity—that happy word—but we would have the ability to move on. We may make our own judgments about the circumstances in which we would suspend or withdraw the preferential rate. It might apply in the circumstances I described. It might equally apply if we had to safeguard the industry of the United Kingdom. The same would be true in the EU, but we might choose to do it in different circumstances. For example, last week the EU applied a safeguard measure in relation to imports of rice from Cambodia and Myanmar. That may not be something that we in the United Kingdom would choose to do because we do not take the same view about rice production in this country as, for example, they do in southern European states. There will be differences and we will have industries to protect, but we do not necessarily have to follow the same approach as the European Union.
As a way of proceeding, my amendment would insert into the Taxation (Cross-border Trade) Act, under those circumstances, that the Government should come forward to Parliament, make a report and seek views before proceeding down the path of suspending or withdrawing this preferential rate, because we should be participants in that discussion.
There should also be an intention before January 2024—when the EU regulation expires—to look independently from the European Union at what our future structure on preferential rates should be. In my amendment I suggest that the Government should report to Parliament by the end of 2022 on their proposals, with a view to legislation being passed by the end of 2023 for introduction from 1 January 2024. Of course, EU competence has dominated this area of policy, but the time will come for Parliament to think about what our trade policy looks like in terms of unilateral preference rates for developing countries.
It is quite difficult even to work out the relationship between our structure of preferential rates and the EU’s. Simply to say continuity is probably misleading because I cannot actually find absolute correspondence between the benefiting countries under the EU’s standard generalised scheme of preferences, or what it calls its GSP+, which is for eight vulnerable countries. I cannot even find that we can correspond between that and what is set out in Schedule 3 to the Act. For Everything But Arms, the list is the same, so we know where we are with that. I think I found 28 EU countries that benefited from the standard GSP or the GSP+, but 43 countries that are intended to benefit from what is referred to in Schedule 3 to the Act as “other eligible developing countries”. The difference is obvious: the EU does not include formally the GSP countries which, by virtue of other agreements, have access to tariff reductions that are at least as good as would be available under the GSP—for example, it has association agreements with Egypt, Tunisia, Morocco and so on.
For us to replicate the EU’s GSP would mean significantly fewer countries having access to the GSP and to those preferential rates than would be the case in the European Union. I just say gently to the noble Lord, Lord Stevenson, that that is another reason why he and I will have to go away and think about our amendments again. It is not about reproducing the GSP regulation or the EU’s list. It is about ourselves arriving at a full list of the developing countries, particularly those which are not the least developing but countries eligible for the GSP that should get preferential rates but at the moment get them through other EU agreements. Those are not necessarily free trade agreements that will get rolled over. I am not aware that this is necessarily the case for all these association agreements; it may be for some, but not necessarily for all of them.
Therefore, I commend Amendment 65 to the extent that it raises the issue of having our own scheme, consulting on it and asking Parliament when we have to change the preferential rates. I do not commend it to the extent that I think it can be adopted at this stage, but I think we should come back to it. I hope Ministers will be willing to look at that and how they would go about managing the preferential scheme in the future.
Lord Fox (LD)
My Lords, I thank the noble Lords, Lord Stevenson and Lord Lansley, for bringing this issue to your Lordships’ House. We support greatly the spirit on these Benches. The noble Lord, Lord Lansley, used a contemporary example of rice. In another life a long time ago, I worked in the sugar industry for seven years. Of course, sugar is wrapped into this so deep that it is still embedded in there. On his point about the transition from us being part of a European scheme to going into a wholly United Kingdom scheme, I know that the pressure on that commodity alone would be huge, given the past relationships and previous problems that some sugar-producing countries have had within the European regime. That is just one commodity. His point is clear: that this is not a simple issue but one that requires a great deal of thought, but that thought must be had and is worth having. We support this process and will involve ourselves if necessary in how this gets taken forward. Clearly, we want to be part of a future regime that has these objectives, but the means with which to produce that are not necessarily as simple as they might look on first appearance.
Baroness Neville-Rolfe (Con)
With the GSP, the key thing is who benefits. In the past, some quite surprising people have benefited who perhaps do not benefit any longer, such as Mexico, Chile, South Korea and so on, which are now very rich countries. India was in there for a long time. It is important who is on the list.
I have some sympathy with the points made by my noble friend Lord Lansley. If we leave the EU, I believe that we should have more choice in which countries we help with tariff preferences. We should be able to take a more independent view, with an eye to our own history—for example, of the Commonwealth—and not necessarily just copy out the EU list. Obviously it depends on where we finally end up in our relationship with the EU, and I do not want to go into that, but if we end up having a certain amount of independence, that should apply to GSPs. I am not sure that this amendment should be in the Bill, but it is very good that we are taking this opportunity to talk about this useful vehicle for helpful the poorest developing countries that we all want to see develop.
The Minister of State, Department for International Development (Lord Bates) (Con)
My Lords, it is welcome to move from the group of amendments that caused maximum divergence to the group of amendments after dinner where there is maximum convergence. I think we all side with the way that the noble Lord, Lord Stevenson, led this debate by pointing to the immense benefits in achieving sustainable development goal 1, the eradication of extreme poverty by 2030. We are not going to do that by aid—aid is around £1.5 billion a year. It requires significant trade flows and therefore this is crucial.
I will make some very brief general remarks. Around £20 billion of goods a year are shipped to the UK from developing countries, accounting for around one-third of our clothing, one quarter of our coffee and other everyday goods such as cocoa, bananas and roses. This trade also creates jobs, helping people to work their way out of poverty. Consequently, I am pleased to confirm to the Committee that this has already been legislated for in the Taxation (Cross-border Trade) Act. My noble friend Lord Lansley might still have been on vacation when on 4 September I took that Bill through this House. Although the debate on it was brief, it was very good. I shall come back to that point later.
The trade White Paper confirmed the Government’s intention to provide, as a minimum, the same level of import duty reductions to all current beneficiaries of the EU’s GSP scheme as we leave the EU. I am also pleased to assure the Committee that Section 10 of the Taxation (Cross-border Trade) Act enshrines in UK law the obligation to provide duty-free and quota-free trade access for least developed countries. The Government will lay secondary legislation to set out these details of the scheme before we leave the EU if needed by March 2019, or at the end of the implementation period. In the future, we will look to improve the UK’s trade preference scheme by making it even more generous, simpler to attain and capable of working better for the poorest people around the world. Alongside this, our aid spending will continue to provide support and expert advice to help break down barriers to trade and to promote investment so that developing countries can take better advantage of these arrangements.
As the noble Lord, Lord Stevenson, mentioned, I also have the privilege of being the Minister with responsibility for economic development in the Department for International Development. It may be of interest to my noble friends Lord Lansley and Lady Neville-Rolfe and the noble Lord, Lord Fox, that in that context I am undertaking a review of how we might approach the opportunities to look at more beneficial trade and tariff-reduction packages and economic partnership agreements in future as we leave the EU. I would be delighted to take this conversation into the Department for International Development, for those who are interested, to meet officials so that we can delve more into some of the great expertise and ideas that we have heard today.
Lord Purvis of Tweed (LD)
The Minister’s commitment is very welcome. We know that we can take him at his word on that because he is very open and a very responsive Minister who is respected across the House. I will follow up a point made by the noble Lord, Lord Lansley. With regard to the 49 countries under the EU Everything But Arms policy and, according to the OBR, the 27 other low-income countries that the EU has defined, if on exit we are going to replicate the EU system we would also have to replicate the rules of origin system that comes with GSP+. GSP+ has distinct EU rules of origin requirements for those countries that are part of it. Is the Government’s intention to replicate the rules of origin criteria that the EU currently operates for them?
Lord Bates
I am grateful for the noble Lord’s question. His precise point is that we are aiming to replicate what currently exists, so we would take across the current applicable rules of origin into what we would be laying in secondary legislation before we leave the European Union. Once we have left—without a deal or, we hope, after an implementation period—we could devise our own scheme during that implementation period and be aware of the EU’s thinking. I know from serving on the Foreign Affairs Council that it has done some tremendous development work, particular with the post-Cotonou negotiations, as to how we fit. The current plan is that what is presently the case will initially also be the case for these countries.
Baroness Neville-Rolfe
Before my noble friend sits down, could he give me some reassurance about the wealthier countries on the list? Have they actually come off the list or is it our plan to make sure that the benefit of tariff-free trade is given to those who are worse off?
Lord Bates
Yes, and my noble friend Lord Lansley touched on this point. He talked about the treatment of different countries. We work from a World Bank list and an OECD DAC list of the least developed countries. As countries graduate—which is a normal procedure—they need to move to other agreements as well.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for his full response. We would welcome the opportunity to meet up with him.
We are converging on this point, though the noble Baroness, Lady Neville-Rolfe, is coming from a slightly different direction. She is hoping to see some quite quick change towards—I cannot think of the right word—a family relationship, involving Commonwealth and other markers which are not a feature of the other lists we have been talking about. It might make sense to try to work out where this is going.
We are among friends, so I can confess that I tried to do exactly what the noble Lord, Lord Lansley, did, which was to go back to the Taxation (Cross-border Trade) Act 2018 and try to work out where we were. I gave up, but he did not. I could not make out the list markers. The confusion comes because we are working from two different directions, as the Minister said. One is from a World Bank list of economic measures and the other is from a trading and development list which gives a different feel. Clearly, you get a different group of countries if you look at different indicators—not just poverty but the potential to export, the development status of their industrial arrangements and their other markets. We would have to think hard about all these. This does not vitiate the main point that it may not be necessary to put an amendment into this Bill, but it would be quite useful to have something where we, on all sides of the House, roughly understand the basis on which the Government are progressing. The Minister did say rather remarkably—but I hope it is true—that, whatever the timing, even if it were 29 March, they would be ready to make sure and clarify full details of what would be available to all the countries in scope on the GSP and on the Taxation (Cross-border Trade) Act approach. If that is true, he is obviously ready for the meeting and we are too. I beg leave to withdraw the amendment.
Lord Grantchester
“UK support towards an Environmental Goods Agreement
It shall be the objective of an appropriate authority to take all necessary steps to enable the United Kingdom, after exit day, to fully participate in and fully support negotiations towards an Environmental Goods Agreement at the World Trade Organisation.”
Lord Grantchester (Lab)
My Lords, I rise to move Amendment 28 in the name of my noble friend Lord Stevenson of Balmacara. I declare my interests, as noted in the register, on this amendment and on Amendment 30.
Amendment 28, which proposes a new clause, is a probing amendment to better understand the Government’s intentions in transposing or rolling over current EU trade agreements into UK law. Behind EU directives are policies and aspirations. Following on from the previous amendment, how far do these necessarily transfer over with this legislation? I point to the intentions specified under Clause 5(2) and Clause 3(3) that these trade agreements will mirror the existing EU agreements and that, where differences may occur, they will be specified. The relevant words are “any significant differences”, on page 4, line 26, and page 3, line 37. I ask the Minister to give the Committee a definition of “significant differences” and how we should interpret this. It is pertinent to many businesses and regions within the UK, as I shall draw attention to when we discuss Amendment 30 on geographical indicators. The Government may have a different interpretation that a trade agreement could affect existing and future trade.
One such issue relates to an environmental goods agreement, one of the ethical themes drawn attention to in our debate on Monday on Amendment 8 concerning international obligations. If the UK is to begin an independent trade policy, it is vital that sustainability is at the forefront of our intentions and agreements, including through a renewed commitment to the environmental goods agreement. It is important at this stage that everyone is familiar with the concept of environmental goods. They are not any particular product as such but more like a public benefit, in the same terms as the concept in the Agriculture Bill of “public goods”—not necessarily a profit-and-loss item to be bargained with. It is important that such environmental goods, as a policy background already in EU thinking to be transferred over on exit, do not get squeezed out of trade talks. At the very least it should be recognised that the EU has been a very good international forum for initiating these developments.
Although talks are currently on hold, the EU and 17 other participants of the WTO have indicated a willingness to negotiate an agreement to abolish tariffs on items used to achieve environmental and climate-protection goals. The idea, which unfortunately has lain dormant since 2016, has great potential and, despite the reluctance of some of the world’s key players to take the ambition seriously, there is hope yet that the agreement can be revitalised. Even in recent months we have seen positive signs that talks can return. In July last year, a white paper from the Chinese Government used previous talks on the issue as evidence of their commitment to sustainability. If talks are eventually going to be successful, and there is good reason to believe that they will be, an agreement would reduce and remove tariffs on environmental goods, including those aiding and abetting efforts to control air pollution, generate clean and renewable energy, improve resource efficiency, and manage and treat water waste and waste of all kinds. Such components aid our efforts at home to be more sustainable but will also help us to meet targets, ranging from the UN sustainable development goals to the Paris climate change accord.
Talks relating to the environmental goods agreement have stumbled, in part due to the lack of enthusiasm from some of our allies, but the core principle is one that the UK should get behind and re-energise. The UK should present itself as a champion of the negotiations, using our influence on the world stage to persuade those who seem reluctant to re-engage in negotiation. As the UK evolves into a separate entity from the EU, we should focus efforts on playing a central role in future negotiations with the vision to fully participate. I hope the Minister will agree and will assure the Committee that this is within the Government’s intentions. More specifically, I ask the Minister to tell us how the Government interpret “significant differences” and to assure us that the transposition of EU law will include the approach initiated at EU level towards trade agreements. I beg to move.
Baroness Young of Old Scone (Lab)
My Lords, I support my noble friend Lord Stevenson’s Amendment 28. The main objective of reducing tariffs on environmental goods in an accelerated manner is environmental, particularly the need to address climate change and the sustainable development goals, but an EGA also makes good economic sense. Among the benefits are reduced consumer prices for environmental goods. EGA tariff elimination can spur the uptake of energy-efficient goods, resulting in energy savings. I am sure the Minister will tell us that the EGA regulations at the WTO are not currently in a great place—or, indeed, in any place at all. We are told by those who espouse Brexit that we can and will show global leadership as a stand-alone nation. We would have been among those nations which support an EGA as part of the EU. Surely if we leave the EU, this is a good cause on which to start to show this global leadership role.
Viscount Younger of Leckie (Con)
My Lords, the UK Government support an ambitious environmental goods agreement. We believe that a high-standard environmental goods agreement would have three effects. First, it would enhance global access to clean technologies. Secondly, it would advance environmental protection. Thirdly, and not least, it would benefit UK workers, businesses and consumers.
Negotiations on the environmental goods agreement began in 2014 but stalled in 2016 due to disagreements over the scope of products to be liberalised and increasing global trade tensions. While the UK supports the objective of having an environmental goods agreement—and we have been a particularly active supporter in the WTO negotiations—I understand why the noble Lords, Lord Stevenson of Balmacara and Lord Grantchester, have proposed this amendment. I took note of what the noble Lord, Lord Grantchester, said. However, there is a reason we are not able to take this forward: it is already the objective of the UK to continue to support and participate in the negotiations on this agreement. That position will not change. It is not clear what “all necessary steps” in the amendment are, who would decide what those steps are, or what benchmark would be used to decide whether these legal conditions had been met.
I will attempt to answer the noble Lord’s question about significant differences. In our reports under Clause 3, we will be giving details and explaining reasons for all differences that have an effect on trade. There is no official definition, in fact. The noble Lord said that he is talking about the differences—let us be clear about this—in rolling over continuity agreements set out in reports which are prepared under Clause 3. If that does not satisfy the noble Lord, I am very willing to write a letter with the necessary legal ins and outs on this particular matter, but I hope with that explanation the noble Lord will be prepared to withdraw his amendment.
Lord Grantchester
I thank the Minister for his suggestions. It might be very useful to have a look at those, so that they are more widely known. I do not know how far they are already known or not, but I was unaware of them, so if he could write on that detail it would be significant. I thank him. I am pleased to have it confirmed that the intention and ambitions of the Government include the very point we wished to make with this amendment. With that, I am happy to withdraw the amendment.
“Involvement of judicial systems in trade disputes
(1) A trade agreement is not eligible for signature or ratification by the United Kingdom unless the agreement includes the provision in subsection (2).(2) Legal proceedings brought against the United Kingdom under investment protection provisions included in a trade agreement will be heard by the courts and tribunals system of the United Kingdom.”
Lord Stevenson of Balmacara
My Lords, in speaking to Amendment 29 in my name I will also speak briefly to the amendment with which it has been grouped: Amendment 56 from the noble Baroness, Lady Kramer.
At the forefront of my amendment is whether we should retain the rather disputed separate mechanism for resolving investor settlement disputes—this applies to rollover and new FTAs. The concept of ISDS is not new; it certainly predates us joining the EU in 1972. Over the years, we have had a very large number of trade agreements—some several hundred—which Members of the House will be aware of, and many of these contain clauses under which the ISDS was created. In the early days, it was done with some justification in some countries to try to ensure that investment from third parties—particularly private investment, which was obviously necessary to unlock the activity that was the focus of the trade agreement—could be protected in situations where political issues or other issues intervened. Given that the legal systems in some countries will not be regarded as being as well-developed as in other countries such as ours, it is not unreasonable to therefore concede that some sort of special protection was required. That is really where it came from.
I do not think that there is very much more to say about it, except that our argument is that these ISDS schemes are of a bygone age. They relate to a situation in the world that does not really exist anymore. It certainly does not apply to many of the countries with which we will be creating free trade agreements or rolling over existing arrangements. In so far as they have legal systems that we can respect, there should be no question that we should work with our own legal system and with theirs to reflect any requirement for the need to ensure that parties to the agreement can pursue the establishment of a tribunal and appellate mechanism for the resolution of investment disputes.
I should wait for the noble Baroness, Lady Kramer, to introduce her amendment, but in case she has any doubt at all, I do not support where she is coming from. I want to make it very clear that I am not alone in this: the most numerous of the very large number of submissions we received on the Bill were on ISDS. I am sure the Ministers are aware of that. It is worth thinking about the role that civil society more generally will play, but if just about everybody is saying that the Government should move away from these as a model and should think, as the EU is doing, about moving to a system that relies on existing tried and tested systems in the countries, this is something we should bear in mind. I beg to move.
Baroness Kramer (LD)
My Lords, I share one point with the noble Lord, Lord Stevenson, on this issue: many of the various systems for investor and trade dispute resolution are broken. A search is on for new, more effective mechanisms to deliver much more satisfactory resolution, particularly as trade arrangements become far more complex and encompassing, and disputes have much greater significance for the global economy.
The Committee will be aware that the WTO’s arbitration system is on the verge of collapse. It relies on a panel that includes a minimum of three judges and a maximum of seven. The panel, through death and retirement, is now down to three. The United States has made it clear that one further death or retirement will mean the end of the WTO’s arbitration mechanism—it will not agree to replace any retired or dying judges. That mechanism is now effectively teetering on the verge.
Many will also have been involved in the debates around TTIP when that was active in this House and will understand that the resolution methods contemplated under it created a great deal of concern that private companies—specifically American companies—would be able to use the mechanism to wade in and counter local law and local decisions. The structure under TTIP relied on arbitration panels chosen specially for the purpose, against which there was no appeal. They were not part of a traditional judicial system.
We do, however, have an example of a system that works exceptionally well for trade resolution: the European Court of Justice, working for the currently 28 members of the European Union. As Trade Minister, when I talked with the Chinese, the Japanese and a number of other countries with which we were trying to build trade relationships, it was very often in the casual relationships that the issue of dispute resolution would come up. They all spoke, with sad envy, of the system we had in the European Union, known to be incorruptible, fair and efficient, and to have judging panels of real intelligence that were then supported by the collective Governments. They kept wistfully saying what a pity it was that, on a global level, there is nothing that mirrors that.
This is why I differ from the noble Lord, Lord Stevens, who is basically saying that a British company with a complaint will go to the British courts, an American company will go to the American courts and a Japanese company will go to the Japanese courts. It would be hard to persuade anybody that they would be justly treated under those circumstances and that there would not be national bias. I can see this becoming an inhibitor to trade. I also believe that on trade issues generally we need to look to international co-operation and shared sovereignty solutions. We need to recognise that, frankly, the best example we have of trade resolution is the ECJ, and see what lessons and mechanisms we can pick out of that. This is relevant in discussing the continuity agreements as well as future agreements. As this House and the Minister will know, the European Union is now making dramatic changes to the way it structures dispute resolution, recognising the problems and criticisms around the existing system.
The noble Lord, Lord Stevenson, referred to the investor-state dispute settlement system. That is largely an ad hoc arbitration system, but it is in many of the EU’s various trade agreements. He will know, or certainly the Minister will know, that the EU is now migrating from that. In CETA, we have an example of the first new version of the European system: the investment court system. It is a permanent standing court with a panel of judges; it is not ad hoc; and it is two-tier, so there is an appeal mechanism. Interestingly, under CETA, the EU and Canada will collectively appoint 15 judges—five from the EU, five from Canada and five third-country nationals—who will hear cases on a rotational basis. It is therefore bringing in a much more multilateral dispute resolution system with a great deal of independence and the opportunity to create a much more broad template. There is an intention to migrate many of the existing EU trade agreements on to this system over the coming years, which is why the continuity arrangements pose real questions that have to be answered. In the continuity arrangements, are we copying over the rather unsatisfactory investor-state dispute settlement system? Are we going to try to migrate? It is going to be difficult. Look at the EU and Canada. You can see that the capacity to create a panel of 15 judges might be a little tricky if you were trying to do it simply between the UK and Canada. I do not know what sort of system the UK is looking at as it tries to establish a continuity agreement with CETA, but we need some answers on all this.
Lord Taylor of Goss Moor (LD)
If my noble friend will allow me to intervene, there is a really important point here. Many Members of both Houses have assumed that the WTO can be relied on as a backstop arrangement. But the Americans’ unwillingness to appoint new judges means that the WTO mechanisms are effectively being brought to an end, and that no reliance can be placed on the WTO as an alternative to the European Union mechanisms that she is describing.
Baroness Kramer
My noble friend is absolutely right. One of the frustrations when people talk so blatantly about WTO rules is that the United States is working very hard to undermine the entire structure of the WTO and is threatening to leave. Talk about timing: they hold up and pray in aid a system that is on the verge of crumbling. It is hard to see how the WTO rules will have ongoing force and substance when there is no dispute resolution mechanism available. It could happen any day; with elderly judges, all it takes is one death or retirement. This issue will not stretch out into the future; it is a current and immediate problem that has to be dealt with. In this House we often try to explain that the WTO has severe limitations and real risks, but apparently Brexiteers’ ears are closed to those concerns. I very much agree with my noble friend.
The Minister of State, Department for International Trade (Baroness Fairhead) (Con)
My Lords, first, I reassure your Lordships that the powers in the Bill will not be used to implement investment protection provisions, because such provisions in trade agreements do not require domestic legislation. I am grateful to the noble Lord, Lord Stevenson, for his explanation of the rationale behind Amendment 29, in his name. However, it would mean that no future free trade agreement could be signed or ratified unless any claims brought by foreign investors against the UK were heard by UK courts or tribunals.
The amendment overlooks the fact that foreign investors already have significant rights to legal redress in the UK—for example, through domestic law and normal procedures such as judicial reviews or commercial arbitration. As I think noble Lords would agree, UK courts are regarded internationally as reliable and independent. The amendment would preclude the possibility of disputes being resolved through ad hoc international arbitration tribunals, which is the internationally and currently accepted means of investor-state dispute settlements—ISDSs—in any future free trade agreement. So requiring investment disputes to be heard by UK courts or tribunals in all instances could undermine a framework that has successfully supported UK investors in many countries worldwide for, as the noble Lord said, a long time. In fact it has done so for the past 40 years.
The ISDS system does not allow other countries’ courts to have jurisdiction over matters that UK courts could determine themselves. Instead, it is independent of both states’ legal systems. It is important for foreign investors to have an independent means of redress, as they may be more susceptible to certain risks such as discrimination, as the noble Lord, Lord Stevenson, said. ISDSs allow claims to be brought for potential breaches of obligations of the type that the noble Baroness referred to—expropriation and discriminatory practice, et cetera.
The UK expects other countries to treat British businesses operating abroad as we treat investors in the UK. Although I do not believe that this was intended, it is likely that if this amendment were adopted, any future partners would insist on reciprocal provisions, meaning that any disputes brought by UK investors against a host state might also be required to be heard in that host nation’s courts.
I turn to Amendment 56, tabled by the noble Baroness, Lady Kramer. Accepting this amendment would mean that for any future trade agreements to be signed and ratified, they would have to contain an agreement on the parties pursuing a multilateral investment tribunal system and an appellate mechanism for the settlement of investor-state disputes. Before I go on, there is an issue with the WTO appellate court; I think that the members of the WTO are trying to resolve it. It is not directly relevant to the ISDS as it is a different system, so in the interests of time I will stick to ISDS.
Not all trade agreements cover investor protection and dispute settlements. We therefore do not think it appropriate to require all trade agreements to include a commitment to pursue a multilateral investment tribunal system. In fact, to introduce such a requirement might hinder the development of our trade policy. As I mentioned, ISDSs have provided UK investors overseas with a means of redress which is independent of and outside the host state’s national courts. The UK has over 90 bilateral investment treaties which include these provisions.
The noble Baroness, Lady Kramer, is absolutely right that reform of ISDS is under scrutiny. It has taken centre stage in recent years, frankly, with many international fora taking a keen interest. The UK supports the reform agendas which, as she said, focus on ensuring: fair, efficient and cost-effective outcomes of claims; high ethical standards for arbitrators; and increased transparency of hearings. We in the UK have supported the EU’s mandate to open negotiations to establish a multilateral investment court, or MIC, which would be a permanent body created to hear investment disputes. The CETA with Canada is currently the only EU FTA containing that investment court system. We are working with our Canadian partners on its provisions as part of the broader work on trade agreement continuity. This includes the question of our future approach to investor-state dispute settlements.
Lord Purvis of Tweed
The Minister mentioned Canada and it was interesting to hear that. May I seek clarification? I raised this issue on Monday in Committee with regard to Singapore. As a consequence of the court of justice judgment in May 2017, the Singapore agreement was made into two: a stand-alone free-trade agreement and a separate investment protection agreement. These draft trade and investment agreements were signed on 19 October last year. What is our position in the UK on seeking to roll them over? I think the Government have stated clearly that they will roll over the free trade agreement. Do they intend to roll over the investment protection agreement also, which is quite distinct?
Baroness Fairhead
My understanding is that it does not require any further domestic legislation. I will write to the noble Lord if that is in error, but I understand that it is already in domestic legislation. If that is incorrect, I will write to him and put a letter on file in the Library.
Baroness Kramer
I understand what the Minister is saying, but as she addresses that issue, would it be possible to understand what will happen with the other continuity agreements? Singapore is just the beginning. We will be seeing others moving over to this split—a free trade agreement here, a dispute resolution system there—and it is unclear whether we will have negotiated to follow that pattern and to mirror that split of the new structure, or whether we will remain tied into the old structure while the EU moves on to the new one. There must have been an internal decision somewhere in government on how we deal with this.
Baroness Fairhead
I am happy to meet the noble Baroness and the noble Lord with officials to go through the detail of this, and then we will prepare a letter for the Committee if required. The discussions on whether the UN Commission on International Trade Law—UNCITRAL—should seek to establish a multilateral investment court are in their preliminary stages; there are no firm proposals on the structure, governance or cost. We are actively engaged. However, discussions on that possible reform are at an early stage. We should not prejudge the outcome of that process, because to do so could preclude the UK from making a later judgment when proposals are more advanced. We look forward to working with international partners. In addition to the discussion I offered, I welcome discussing this topic further. There are a range of views on this question. At this stage, should the UK require a universal commitment to pursue a multilateral investment court in all future agreements, that could result in the loss of our negotiating space.
In respect of the true aims of this Bill and the resolution systems that are already in place, and given our commitments to discuss MICs, I ask the noble Lord to withdraw his amendment.
Lord Stevenson of Balmacara
I am grateful to the Minister for her full discussion of these issues. As she started I was thinking that we could have got a better result if we had drafted Amendment 29 in the positive rather than negative tone—to make it optional in, rather than to restrict out, which was the main complaint she had about it. As the argument has extended, I can see there is a lot more going on here than we were aware of at the time we drafted it. I am sure that I share with the noble Baroness, Lady Kramer, the idea that if we can have a discussion about all the various things going forward, we might be able to have a better understanding of where, if at all, there is any need to move on that.
Having said that, the Minister mentioned that there was a lot of interest in it. I stress again that this is the one single issue that I have had the most correspondence about. Just about every group involved in trade and development has picked this as its number one issue. It is good that work is being done on it, in the sense that one is not trying to constrain good and effective systems that arrive at having a fair, efficient and highly regarded court that will have all the details and be able to deal with the various aspects of it. Clearly, we do not want to disadvantage other countries in relation to anything we might be doing. These are the pieces in play, as it were, and it is a question of trying to get confidence from Ministers and officials that things are moving forward.
In some ways—although this may be the wrong line to follow—it is quite like the discussions on the Unified Patent Court. There is a person not too far away from the noble Baroness who has quite a lot of detailed experience of that. That is an ad hominem—I do not know what the Latin is—but it relates to a particular issue: patentem. It has a link into but is not part of the European Court of Justice, which would play back to the noble Baroness, Lady Kramer. It might be too elegant a solution, but I wonder if that might be something we might also pick up, because there is something in there that might square all the circles. With that, I beg leave to withdraw the amendment.
Lord Grantchester
“Geographical Indications
It shall be an objective of an appropriate authority to take all necessary steps to implement an international trade agreement which ensures mutual recognition of Geographical Indications in the United Kingdom and the European Union.”
Lord Grantchester
Amendment 30 is a probing amendment. It may not be of great intent but it is of wide importance to rural areas and the food chain in general. Following on from my earlier amendment which sought to understand the rollover nature of EU trade agreements into UK law, this involves the protection of geographical names designating agricultural products that have been in existence for more than 100 years. This is where the Minister’s definition of “significant differences” will be most helpful.
At present, as an EU member state, the UK falls under three specific geographical product designations. The first is the protected designation of origin—PDO—such as that for Stilton cheese, of which I know the Minister is well aware, which is designated to cheese-making dairies in three east Midlands counties. Secondly, there is the protected geographical indication framework, such as for West Country beef and lamb. Thirdly and lastly, there is the traditional specialities guaranteed framework, such as for traditionally farmed Gloucestershire Old Spot pork. These co-ordinated efforts have given some of the UK’s most well-respected and internationally renowned produce the legal protection it deserves. From each corner of the UK, British produce of world-class quality with links to a certain area or using certain traditional methods has had its reputation enshrined, preventing outside manufacturers reproducing or passing off the product and selling it as a regional one. There is great concern that these protections will be lost post Brexit.
I ask the Minister: what is the status of the recent EU-Canada trade agreement that has been mentioned throughout our proceedings? The noble Lord, Lord Purvis, brought up this issue under Amendment 18, and the noble Baroness, Lady Jones, did so under other amendments. Under the Comprehensive Economic and Trade Agreement—CETA—no UK geographical indicator was given protection and only two European indications were included. What was the role of the UK Government in negotiating this EU agreement? Will it be included in the rollover of EU agreements, or will it be challenged or disagreed to by Canada as a counterparty in any rollover? The ink is barely dry on this new agreement. What the Minister has said so far needs to be clarified further in this respect.
With the UK leaving the EU, the position of the food chain, including retailers, in rollovers, and the relative importance given to the issue by the UK Government, these matters will impact on the ability of UK products to be designated foodstuffs under the GI schemes. I understand that the Government wish to set up a UK register of designations after exit. Will these be exclusively British? Will it include the register under the EU scheme, including those products registered by non-EU producers who also use the scheme as a marketing tool, aiding their promotion within the EU? How comprehensive will this register be? It is important to recognise the high percentage of UK trade that goes to the EU. Will the UK Government seek to enable products designated on the UK register to be considered for inclusion on an EU register? Will the Minister confirm that reciprocal arrangements will be maintained without any sunsetting? She will recognise the importance of Welsh lamb exports to the economy of north Wales and the whole of Wales.
If I may, I have some further issues about which I would be happy for the Minister to write to me. First, there will be various transitional costs, such as branding and labelling. As changing labels is a resource-heavy activity, can she give reassurances that changes will be considered together in future regulations? Secondly, can she say what will be the resolution scheme or body that hears disputes? Will the future TRA adjudicate immediately on these PDO issues or will there be a role for the First-tier Tribunal, which presently presides over branding issues? These and other issues are not important for the proceedings tonight, but I merely flag up how essential it is to businesses, especially SMEs, to be aware and informed of the changes happening, even on transition.
The Minister will be aware of the wide benefits that these designations bring to the food chain—the reduction of food waste, the provenance and security for consumers, and the quality of the product—and export markets across the world, as well as the obvious financial and employment benefits. I would welcome confirmation that this amendment is among the objectives of the Bill and future trade arrangements, taking at face value the task of the Bill merely to transfer existing EU agreements into UK law. I beg to move.
Lord Tyler (LD)
My Lords, I am a signatory to this new clause and I am delighted to endorse everything that the noble Lord, Lord Grantchester, has already said. By way of background, I was responsible for my party’s policy when some of these issues were addressed in the other place when I was responsible for agriculture, food and drink. I also represented a Cornish constituency and I shall come back to that in a moment.
It is very dear to my heart, as I know it is to the Government’s Chief Whip, that we should recognise the particular contribution of the agriculture industry in this country and that we should recognise that it is going to go through some very difficult times in the near future if what is projected comes to pass. In those circumstances, it is extremely important to address the issues to which the noble Lord has already referred.
Protected geographical status was introduced throughout the EU in 1993, when I had that responsibility in the Commons. I was especially delighted when the schemes were updated under Regulation 1151/2012 during the coalition Government. This has been a great success by Ministers of all three major parties—we should recognise that. It is instructive to see how influential UK Ministers have been on an issue such as this when they have played a full part in the EU. It has also been a very interesting example of how the EU has provided essential trading encouragement and protection for uniquely significant food and drinks products from all parts of the United Kingdom.
This is not nostalgic parochialism, as I think the noble Lord has emphasised. It has real economic marketing benefits, as well as protecting our producers from cut-price and inferior competitors. The UK could never have achieved anything like this benefit without the support of our European partners.
There are 65 products with protected status under this scheme in the UK. They are designated to protect the reputation of regional products, to promote traditional and agricultural activity and to eliminate non-genuine products of inferior or different character that may mislead consumers—I will come back to that point. Obviously, I will not go through all 65 products at this time of night, but I will take one or two examples: the traditionally farmed Gloucester Old Spot pork, which I know extremely well because I have neighbours who produce just that, introduced by the coalition in 2010, West Country lamb and beef, Dorset Blue cheese, Single Gloucestershire cheese and Export Jersey Blue. There were very significant improvements to the marketing opportunities for those products, but also, much more generally, for West Country farmhouse cheddar, Cornish sardines—again, dear to my heart—and Fal oysters in 2013.
However, we have to be very careful about the use of these descriptions. As the noble Lord said, one of the particular characters is protected geographical indication. It happens that in my constituency we had one of the best vineyards in the whole of the United Kingdom, the Camel Valley vineyard. That is not in England, it is in Cornwall—and as all Members will know, Cornwall is not part of England, it is not an English county. I have a particular attraction to the wines from that vineyard, not just because it was local to my constituency but because one of the partners of that extremely enterprising vineyard was Annie Lindo, who stood for the Labour Party against me in a general election. She did not win, but the Guardian said that the wake would be one of the best in the country—and it certainly was. The vineyard now produces an excellent rosé as well as sparkling wine.
Cornish clotted cream was another big issue—and I will come to another very important dish in a moment. I remind the House that the difference between Cornish and Devon clotted cream is that Cornish clotted cream is so good that you must have it on top of the jam, while in Devon you can put the jam on top—otherwise, you do not get enough.
Cornish pasties were another big issue. My noble friend the then honourable Member for Truro will recall that it was on St Piran’s Day, I think, that one of our coalition colleague Ministers announced that the Cornish pasty was to be protected. That is a classic example, because of course the recipe for a Cornish pasty is quite precise. It is not permitted to add carrots or peas, let alone minced beef or lamb; it must be skirt of beef. I have had pasties in different parts of the world. Indeed, a part of Lithuania produces its own pasty, originating in the Middle East—but it is not a Cornish pasty. This is a serious issue. I ask noble Lords to recognise that this can be of huge importance to not just small enterprises but substantial ones, too.
Lord Taylor of Goss Moor
I think that Stilton is wonderful, but the Cornish pasty is much more important. The issue is that these protected designations are often extraordinarily important to some of the poorest rural economies in the country, as they are in other parts of Europe. At a time of enormous uncertainty for such economies over how Brexit will progress, whatever one may think about it, I think my noble friend would agree that it is extraordinarily important that we ensure that the protections for these specific local and regional products, which underpin those regional and very poor economies, are maintained. That is at the heart of this proposal.
Lord Tyler
My noble friend is absolutely right. The important point is simply this: here is a truly successful scheme where UK Ministers have taken the initiative and grabbed the opportunities in the EU. We cannot allow it to disappear. The threat to a large number of enterprises would be disastrous. It would set such a bad example to the agricultural and food industry if we allowed the scheme to be diluted or dissolved in any way.
As we know, the Bill and the proposed new clause are caught up in the rather absurd contingency planning for the crash-out, no-deal scenario that the Government now insist Parliament must play with, despite the dire warnings about how awful such a result would be. If we are not careful, not carrying forward this very good scheme would be disastrous. Indeed, it would be tragic if this excellent scheme, in which successive Governments have invested so much energy, initiative and political capital and on which so many UK producers rely, were lost in the wash. The threat is there.
Of course, the ideal solution would be for it to continue exactly as it is now, with full UK membership of the EU—but I suppose we have to admit the possibility that the ideal will have to give way to the best available replication: hence the proposed new clause. In the words of the 20th century’s most authoritative actuary, Frank Redington, we are faced at the moment with an “expanding funnel of doubt”. We cannot afford for there to be any doubt about the success of this scheme and the necessity of its continuation. The best we can do is to insist, through the amendment, that we do not throw out this precious baby with the bathwater.
Baroness Kramer
My Lords, my son lives in Kent. I enjoy giving sparkling English wine from an excellent local vineyard as a present to various people, so I am slightly put out to understand that some local campaigners for Brexit have been urging vineyard owners to look forward to the day in late March when they will be able to call their product “champagne”—apparently with the Government’s backing, they have been assured. It is important that we understand the reciprocal nature of an arrangement like this. Therefore, to feed the expectation that we will keep our designation but remove it from other people is highly dangerous, and I suspect that the Minister sitting on the opposite Bench will have heard some very similar language.
Baroness Fairhead
My Lords, the Government see GIs as extremely important, and we are working to ensure that existing UK GIs will continue to be protected in future. I note the comments of the noble Lords, Lord Tyler and Lord Taylor, about the importance to specific rural economies. I could not agree more. They play a really important role in some very remote economies. For example, lest Scotland be forgotten, I know that the Scottish salmon industry directly supports 8,800 people, mainly in coastal locations. I hope my words today will offer noble Lords significant reassurance on a number of the points raised.
Baroness Kramer
I will be asked this question by the sparkling wine producer. Will Champagne, for example, need to apply to the UK for protection of its name, or will this carry over?
Baroness Fairhead
I was just coming on to that point: the future protection of UK GIs in the EU and then the reciprocal. We have heard loud and clear the desire of UK GI producers, and I can assure noble Lords that we are seeking to make this happen. At the time of this amendment being tabled, I believe there was no public statement from the EU on the future of existing GIs after exit. Since then, the European Commission has publicly stated, in November 2018, that:
“EU-approved geographical indications bearing names of UK origin … remain unaffected within the EU and therefore continue to be protected in the EU”.
This is consistent with what has always been the UK’s understanding. We expected that existing UK GIs would enjoy continued protection even after exit, because the current legislation means that the protection is indefinite unless specific grounds for cancellation are met. These grounds do not include removal from the EU. UK GIs will therefore continue to have the same level of protection as other third-country GIs protected in the EU. They are protected by virtue of being on the register, having earned that right by successfully passing the EU scrutiny processes. That protection will remain unless the relevant entries can justifiably be removed.
Lord Tyler
The Minister has been very kind in giving us so much detail. Do I understand that the EU has guaranteed that the reciprocal arrangement will continue if by any chance there is no agreement? What happens if one of the other countries challenges that designation—that protected status—and we are no longer a member?
Baroness Fairhead
As I stated, the protection is indefinite unless there is a justifiable challenge, which would take an enormous amount of time—and that does not include leaving the EU.
The EU needs to comply with the TRIPS agreement in relation to how it handles GIs, and the EU member states are also bound by the European Convention on Human Rights. In terms of future protection of the GIs in the rest of the world, we are currently working with global trading partners to transition those EU FT agreements, which also include obligations on the protection of GIs.
Regarding the protection of EU GIs in the UK—I think the noble Lord was talking about reciprocal arrangements—should we reach a withdrawal agreement with the EU, existing EU GIs will be provided with the same level of protection as now until the future economic relationship agreement between the UK and the EU comes into force or becomes applicable and supersedes. The potential long-term protection of EU GIs in the UK would therefore be determined as part of the negotiations under the future economic partnership. It is key for the Government to retain different options to give the flexibility needed successfully to conclude these negotiations.
Baroness Kramer
I did not understand this: so if there is no deal, the EU has given a guarantee that it will protect UK GIs—and its system would require it to do so—but the UK has given no guarantee that it will protect EU GIs or those of any other country. Is that correct, unless it goes forward into the continuity agreement?
Baroness Fairhead
The departure from the EU is just between the EU 27 and the UK. It is true that, legally, UK GIs are protected under EU law indefinitely and in the UK the matter is subject to negotiation under the FEP.
I have assured your Lordships that we understand the desires of UK GI producers for continuity. We will continue the protection in the UK, and the public statements of the European Commission give us assurance. If this amendment passes, it would remove the flexibility necessary for the UK’s negotiating position to successfully build new trade relationships with the EU. I believe that a number of my answers addressed the questions raised by the noble Lord, Lord Grantchester. If he feels that they have not, I am happy to write to him, but I ask him to withdraw his amendment.
Lord Grantchester
Following up on the assiduous questioning by the Liberal Democrat Benches, I entirely understand what the Minister is saying about the EU and the UK and that the position will be maintained indefinitely going forward. However, can she clarify the situation of the two registers and how reciprocal they will be? Will it involve two applications from a UK producer, one to the UK register and one to the EU register, or will reciprocity maintain throughout, such that when they appear on the UK one, they will necessarily appear on the EU one at the same time? Will there be one system with two applications, as it were, both inside the EU when the UK is within it and outside the EU when the UK leaves? I hope I have made myself clear on that point.
Could the Minister say anything at all about the appeal process—the dispute mechanism—or will that be included in her letter to me on the more erudite questions I have asked her?
Baroness Fairhead
My answer on the application procedure is that there will be a very similar procedure of application when the UK leaves the EU. There will be two processes that are very similar, but equally the UK will have to comply with TRIPS and with the European Court of Human Rights.
I just wanted to add a word about the CETA agreement without taking too much time. There are no UK GIs recognised in the CETA agreement. That was because Scotch whisky already had protection in Canada. The final decision on which GI products were submitted in the trade deal negotiations was made by the EU in an agreement negotiated with all parties. On leaving the EU, the UK will be able to take back that decision-making, but I am happy to confirm that and I will write to the noble Lord on that subsequent point. On that, I invite him to withdraw the amendment.
Lord Grantchester
I thank the Minister for all her clarifications. They have been very helpful. I also thank the noble Lord, Lord Tyler, and his colleagues on the Liberal Democrat Benches. I realise that Cornwall is a very long way away from Merseyside and Cheshire, but I will have to check my passport arrangements. I do know that Cornish people are always very eloquent, and I thank him for all his comments. Having said all that, and understanding the utmost importance and gravity in which this subject is held dear to the Government’s heart, I beg leave to withdraw the amendment.
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