Finance Bill (Ninth sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Committee divided: - Ayes: 7 / Noes: 10 - Question accordingly negatived.
The Financial Secretary to the Treasury (Jesse Norman)
It is a delight to see you in the Chair, Ms McDonagh. Welcome to day six of our deliberations—or is it day five? It feels like many more. At the start of the Committee, I said that we were like pilgrims in “The Pilgrim’s Progress”, and that hopefully we would get through the slough of despond. I venture to say that we have made it over the hill of difficulty, but perhaps not quite reached Calvary or the place of deliverance.
Clause 99 and schedule 14 exempt payments made under the Windrush compensation scheme and the troubles permanent disablement payment scheme from income tax, capital gains tax and inheritance tax. The Government deeply regret what happened to many members of the Windrush generation. The Windrush compensation scheme was launched in April 2019 and is a key part of the Government’s righting those wrongs. It compensates individuals who have suffered loss by being unable to demonstrate their lawful status in the United Kingdom. The compensation covers a number of areas, including loss of income, denial of access to social security benefits and incorrect detention. Similarly, the troubles permanent disablement payment scheme makes payments in acknowledgment that, during the troubles, many individuals suffered permanent injury through no fault of their own. It also aims to address the adverse financial impact that troubles-related disablement can have on individuals and families.
Payments made under schemes such as these are often made entirely free of income tax without the need for legislation, but there are circumstances where income tax may apply. Payments could be taxable if they were made to reinstate taxable social security benefits or in respect of a terminated employment. All types of payments could be subject to inheritance tax or capital gains tax if they exceed the relevant thresholds. Clause 99 and schedule 14 will ensure that payments made under the Windrush compensation scheme and the troubles permanent disablement payment scheme are exempt from income tax, capital gains tax and inheritance tax.
The changes reaffirm the Government’s commitment to the Windrush generation and to those who suffered as a result of the troubles, and give certainty about compensation to claimants. The clause also introduces a new power to allow the Government to extend the definition of “qualifying payment” to other compensation schemes, allowing the Government to act more quickly to clarify the tax treatment of any necessary future compensation schemes, including those set up by foreign Governments. As we have seen, payments from such schemes can begin before it is possible to pass legislation in a Finance Act to exempt them from those taxes. Exempting such payments from tax in the past has not been controversial, and I hope it will not be so today and in the future.
The clause provides tax exemptions and gives clarity to those eligible for payments under the Windrush compensation scheme and the troubles permanent disablement payment scheme. I therefore commend the clause and the schedule to the Committee.
Wes Streeting (Ilford North) (Lab)
It is a pleasure to be here for what is likely to be our final day of line-by-line scrutiny of the Bill. It is important to remember that the reason why we are discussing clause 99 is in no small part, as the Minister alluded to, due to the Windrush compensation scheme, which is the culmination and inevitable consequence of the appalling circumstances of the aggressive and deeply destructive hostile environment pursued by the Government over the course of the past 10 years. As Wendy Williams said in her review, the Windrush scandal, which saw so many people’s lives completely disrupted, and in many cases ruined, was the result of “foreseeable and avoidable” systematic operational failings, so it is right that the Windrush compensation scheme was established. The House has considered those issues many times.
It is a source of deep regret, to put it mildly, that fewer than one in 20 people who have made claims under the Windrush compensation scheme have been paid so far. I want to take the opportunity, as we are discussing clause 99, to restate again our view that the Government must act much more quickly. People are owed that compensation, although the financial compensation will never fully compensate for the emotional and mental trauma that British citizens suffered as a result of the Windrush scandal.
It is appalling that we have added insult to injury by moving so slowly on compensation claims, even where they have been made. Of course, as the Minister outlined, the clause improves conditions for people accessing such schemes, whether the Windrush compensation scheme or the troubles permanent disablement payment scheme, so we have no objection to the clause.
Alison Thewliss (Glasgow Central) (SNP)
It is regrettable that so many people are still waiting for their money through the Windrush compensation scheme. I urge the Minister to do everything he can to make sure that the money gets out the door.
It is useful that the clause allows for future schemes so that there will, hopefully, be fewer delays and less confusion for people in future about the impact of those schemes. We want to make sure that, where wrongs have been done, people can get the money that they are entitled to in compensation as swiftly as possible.
Jesse Norman
I thank both hon. Members for their comments. To pick up on the last point, the hon. Lady is absolutely right about the value of building in capacity to respond more quickly in future. It is noticeable that the Chartered Institute of Taxation, which is well respected across the Committee, commented that,
“This is a sensible move from the government to help… It is also encouraging to see that the bill…will make it easier in the future for payments…to be made tax-free, without the need for fresh legislation.”
That very much remakes the point she made, and I thank her for that.
On the point about the numbers paid out, I completely understand the concern and I know that other Ministers do as well. There is a balance between due process and speed. Of course, the compensation claims have to be agreed on both sides—the offers have to be accepted—for them to be payable. It is important that the hon. Members have put their concerns on the record, and I fully share them.
Question put and agreed to.
Clause 99 accordingly ordered to stand part of the Bill.
Schedule 14 agreed to.
Clause 100
HMRC: exercise of officer functions
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Clause 100 is a technical measure that makes changes to put it beyond doubt that tasks that are being done by an individual officer of Her Majesty’s Revenue and Customs may be carried out by HMRC using a computer or other means. It ensures that the intention of Parliament is appropriately reflected in the legislation and confirms that the rules work as they have been widely understood and applied over many years. No new charges or obligations for taxpayers will result. The changes merely clarify legislation.
If I may explain the context for the introduction of the clause, the Government announced by written ministerial statement on 31 October 2019 that it would legislate retrospectively and prospectively to confirm notices to file tax returns and penalty notices issued by HMRC through automated processes as valid. That long-standing practice has been challenged in the courts on the basis that the legislation states that some tasks are to be carried out by
“an officer of the Board.”
The relevant legislation in the Taxes Management Act 1970 is 50 years old and was designed to support a paper-based manual tax system.
The way in which HMRC administers the tax system has evolved over time, in line with taxpayers’ expectations for a modern and digital system. Decisions made by HMRC officers are often given effect by computer-driven processes, so that HMRC can assess and collect taxes in the most efficient and cost-effective way.
Harriett Baldwin (West Worcestershire) (Con)
As he expatiates on the value of digital technology to tax collection, will my right hon. Friend share with the Committee his thoughts on making tax digital and how the recent opportunity to make furlough payments has shown the value of a digital tax system?
Jesse Norman
My hon. Friend makes an acute comment. The response to covid has undoubtedly highlighted the need for greater investment in digitisation within the tax system, and specifically put a greater emphasis on the ability to reach taxpayers quickly to respond to a national emergency and to improve resilience.
As my hon. Friend will be aware, we are introducing making tax digital for VAT, but it is widely thought that there is a case for taking it further. We have it under close consideration. As her question highlights, taxpayers—and people more generally—expect nothing less than to have a tax system that is digital, effective and integrated, and not one where the lack of digitisation can be exploited for the purposes of legal suit.
To avoid any doubt, the clause clarifies the legal basis for the existing policy, which has been in place for many years, allowing for the use of automated processes. It puts beyond doubt that the law operates in the way Parliament intend it to and as it has been widely understood to work to date. It does not introduce new or additional obligations, and will help to ensure the tax system applies fairly to all, while preventing loopholes opening up in tax law that could be exploited by people who do not wish to pay their proper share of taxes.
The changes made by the clause will clarify that tasks being done by an individual officer of HMRC may be carried out by HMRC using a computer or other means. The legislation is treated as always having been in force. The effect of that is to protect over £100 billion in tax revenue, already collected. Failure to legislate would result in enormous disruption and uncertainty for taxpayers and HMRC alike. For these reasons, I commend the clause to the Committee.
Wes Streeting
The Government have brought forward clause 100 for obvious reasons. As we have heard from the Minister, it is patently absurd that we would be in position where HMRC was dragged through legal processes simply because section 8 notices were issued used automated processes, for example.
There is obviously a good case to be made for applying ever-changing technology to improve the efficiency of processes within HMRC’s systems, to try to improve the customer experience of HMRC customers, which, as we know as constituency MPs, can sometimes be very good and sometimes be absolutely abysmal. Where HMRC can automate processes to free up people time, the focus should be on redeploying those people to try to give people and the state overall a better service. There is nothing to quibble about there.
It is important to lay down a cautionary note about how automated processes and algorithms are used, particularly when it comes to decision making that can have substantial impact on citizens, organisations and businesses. Writing in Tax Journal, Catherine Robins and Steven Porter of Pinsent Masons were critical of the Government’s announcements, arguing that:
“Some of HMRC’s powers can have very serious consequences for taxpayers and the fact that a human being has to decide to exercise them is an important safeguard, which should not be eroded.”
I share their concern, up to a point. I think it is important that there are safeguards, checks and balances and, ultimately, opportunities for people to appeal to human judgment, to account for technical error and to appeal technical error. As the capacity and scope of technological change continues to widen, it is even more important that Ministers and civil servants think very carefully about the application of technology and whether it is indeed right and proper for a decision to be made by an automated process rather than a human being.
Those are much bigger, wider principled and ethical considerations. For the reasons that the Minister has outlined, clause 100 is a perfectly reasonable and sensible provision, and it is one that we are happy to support.
Alison Thewliss
I want to raise some of the concerns expressed to us by the Institute for Fiscal Studies’ Tax Law Review Committee, which sent an extensive note earlier in the week. It is looking for ministerial reassurance that the powers will not be used without proper consultation and discussion of safeguards to replace the discretionary decisions, especially about penalties, currently made by human officers. It is the discretionary point that I am most worried about. We must not get to a situation where computer says no and that is the end of the story, because sometimes it can be quite difficult for businesses to get the decision pulled back and unpicked, and reconsidered.
I will highlight the case of uploading real-time information, because businesses in my constituency had serious issues with the technology for uploading RTI prior to coronavirus and now find themselves unable to claim under the job retention scheme, for example. That has been an issue with technology, and it has been very difficult to resolve it. Meanwhile, those businesses are on the brink, on the point of going bust, with employees whom they are struggling to pay. That is because in an emergency it is difficult to unwind a technical, computer-based decision, made months ago.
I ask for reassurance about the automating of discretionary decisions. What safeguards will be put in place to ensure sure that no businesses find themselves in a situation where they cannot unpick a decision made by a computer, and to ensure that they will be able to speak to a human who has discretion and is able to exercise it effectively?
Jesse Norman
Again, I thank Opposition colleagues. Let me pick up a couple of the points raised. The hon. Member for Glasgow Central asks for safeguards, and of course she makes a very important wider point. In a rule of law society we want as little discretion as possible to be exercised—and, in particular, personal discretion—so it is important that within HMRC there is baked in a culture of accountability for decisions. From that point of view, nothing is changing. This measure is ratifying an existing set of arrangements by putting them on a legal basis. However, I can reassure her that the issue of safeguards and the balance of powers between HMRC and taxpayers is taken very seriously, and I have specifically commissioned work within HMRC to ensure that that balance is appropriately maintained, not just at customer level but more generally.
The hon. Lady and the hon. Member for Ilford North raised the question of decision making more generally. I think I have, in a way, spoken to that, but I recognise that there is a distinction between the automated exercise of a decision and the capacity to make a decision itself. Of course, HMRC does increasingly rely on computerised systems, and it is absolutely right for our purposes as a nation that it should do so. It is, for example, inconceivable that we could have responded to coronavirus with either the self-employed scheme or the furlough scheme without heavy reliance on computing. It is to HMRC’s enormous credit that it was able to commission and bring into effect a platform and an approach to those schemes in a matter of weeks, using that computing expertise. I also agree with the hon. Gentleman when he points out that there are benefits not merely in terms of customer service, but in freeing up people and, we hope, improving the quality of work by taking HMRC staff away from the more routine operations and more towards higher quality work that can give more professional satisfaction.
Question put and agreed to.
Clause 100 accordingly ordered to stand part of the Bill.
Clause 101
Returns relating to LLP not carrying on business etc with view to profit
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Again, this is a technical measure. Clause 101 makes changes to put beyond doubt that where an LLP is found not to trade for profit, HMRC can continue to amend LLP members’ tax returns using income tax rules as it has always done, in the same way that it does for general partnerships. It ensures that, as with the previous clause, the intention of Parliament is appropriately reflected in the legislation, and it confirms that the rules work in the way they are widely understood to work, and as they have been applied since they were introduced in 2001. To ensure that this is plainly and unequivocally understood, the measure is introduced with prospective and retrospective effect back to that date—2001—with the result that the changes simply clarify and support the legislation and continue to meet taxpayers’ expectations. Again, they do not result in any new charges or obligations for taxpayers.
By way of context, limited liability partnerships are a legitimate means of structuring business activity. They are used successfully by the vast majority of partnerships: for example, by many large law and accountancy firms that operate for profit. Since the LLP rules were introduced in 2001, HMRC has always treated LLPs and their members’ tax returns under income tax rules on the same basis as any other partnership. That is widely understood and accepted by the vast majority of taxpayers, but it has been challenged in the courts on the basis that where an LLP is found not to trade for profit in line with its partnership tax return, the law does not support its treatment under income tax rules. The upper tax tribunal recently confirmed that HMRC’s long-held tax treatment of LLPs is correct. This decision overturned an earlier decision of the first-tier tribunal that had judged it incorrect. However, as the matter is still in litigation, putting the matter beyond doubt in legislation will provide certainty for LLP taxpayers.
Such legal challenges come from a small minority who are intent on avoiding paying their tax and looking for technical loopholes to do so. They seek to use limited liability partnerships to create losses and to share and then offset them unfairly against their members’ personal income in their own tax returns. That is not fair either to the Exchequer or to the vast majority of honest limited liability partnerships. The Government are legislating to prevent such practice.
The measure introduces three conditions that clarify the position and apply where an LLP delivers a partnership return; where the basis of that return is trading with a view to profit; and where it is found that the LLP was not trading with a view to profit. This clarifies the legal basis relating to LLPs that submit partnership returns where they are subsequently found not to be trading for profit, allowing HMRC to amend LLP members’ tax returns in such circumstances, as it has always done, to remove any unfair tax advantage. The clarification does not introduce any new or additional obligations or liabilities for taxpayers and it prevents loopholes from opening up in tax law that could be exploited in future by those seeking to avoid paying their fair share.
The changes made by the clause clarify the treatment of LLP partnership returns where the LLP is found to be operating without a view to profit. It permits HMRC to amend such returns using income tax rules, as it has always done. The legislation is introduced with retrospective effect, treating it as always having been in force. This is necessary in order to maintain the status quo, provide certainty for taxpayers, and protect about £2 billion of tax revenue that has already been collected. It also ensures that people seeking to avoid tax do not secure unfair and advantageous treatment due to the exploitation of perceived loopholes in legislation.
The policy is not new and nothing will change for taxpayers. No new or additional liabilities will be created and HMRC’s policy and processes will continue to operate in the way that they have for many years. It provides clarity for taxpayers and ensures that there is a fair and level playing field for all. I therefore commend the clause to the Committee.
Wes Streeting
Limited liability partnerships are a legitimate way of structuring business activity that is used successfully by the vast majority of LLPs that operate for profit. There is no doubt about any of that, but as we heard from the Minister this morning, there have been too many examples of LLPs being used for the purposes of minimising people’s tax liabilities, effectively to avoid tax. Of course, Opposition Members take a very dim view of that.
Clause 101 seems to be a sensible provision, intended to help HMRC to close down tax-avoiding structures that use LLPs to generate and spread losses that the partners use to offset against their other personal income. Let the message go out that people ought to act within not just the letter but the spirit of the law, and if they cannot find in themselves the moral scruples to do that, this House will have no hesitation whatsoever in changing the letter of the law to make sure that people do the right thing and pay their fair share.
Jesse Norman
The hon. Gentleman has made the point extremely well, and with his support I hope the Committee will agree to the clause.
Question put and agreed to.
Clause 101 accordingly ordered to stand part of the Bill.
Clause 102
Preparing for a new tax in respect of certain plastic packaging
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Clause 102 ensures that Her Majesty’s Revenue and Customs can make preparations to introduce a new tax in respect of certain plastic packaging. The new tax will apply to plastic packaging that is manufactured in or imported into the UK and that contains less than 30% recycled plastic.
Plastic waste is a very serious global issue. Often, it does not decompose. Indeed, it can last for centuries in landfill, or it ends up littering the streets or polluting the natural environment. More than 2.2 million tonnes of plastic packaging are produced in the UK each year. The vast majority is made from new plastic, rather than recycled material, because recycled plastic is often more expensive to use than new plastic.
To tackle this problem, the Conservative manifesto reaffirmed the commitment to introduce, from April 2022, a world-leading new tax on the manufacture and import of plastic packaging that does not contain at least 30% recycled plastic. The tax will provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material, and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.
This follows an initial announcement of the tax at Budget 2018 and consultation on the high-level design in 2019. In its response to the consultation framework, the Chartered Institute of Taxation welcomed the Government’s measured approach to the implementation of the tax. Many respondents agreed with the initial proposals on the tax design, although there were areas where some respondents disagreed.
The Government took this feedback into consideration, announcing in response that we would extend the scope of the tax to include imported filled plastic packaging that contains less than 30% recycled plastic, given concerns about the impact on UK competitiveness without that adjustment. The Government are currently holding a further consultation on the detailed design and implementation of this tax, to ensure that it works as intended and so that businesses have time to prepare for it.
Clause 102 is a technical provision to ensure that HMRC can make preparations for the introduction of the new tax, such as incurring expenditure on the development of an IT system. Alongside this, HMRC is developing the detailed legislation to introduce the tax. We expect that this will be published in draft for technical consultation later this year, before being implemented in a future finance Bill.
In conclusion, the clause forms the first part of the legislation needed to introduce the plastic packaging tax. I therefore commend it to the Committee.
Wes Streeting
For very obvious reasons, it is quite right to move ahead and use the tax system to incentivise good behaviour, to reduce our reliance on plastics, particularly products using new plastics, and to improve the take-up and use of recycled plastics.
That is why this proposal received such widespread support in response to the Government’s consultation, and I recognise and welcome the fact that the Government responded favourably when the majority of respondents made representations about wanting the tax to be extended to imported filled plastic packaging.
In his remarks, the Minister addressed some of the questions I had about the timetable for introducing draft legislation, and when we can expect it to be implemented. Next year’s finance Bill feels a long way away, and, because of the events we are living through, finance legislation and a finance Bill might be introduced sooner. On the basis of the merits of this policy and the impact it is likely to have on the use of plastics in our country—we certainly hope it will have such an impact—we would support the Government if they were presented with the opportunity to move further and faster. I urge the Minister to consider doing so.
Jesse Norman
I thank the hon. Gentleman for his comments. As he will know, the introduction of any new text requires great care and attention, which is why, as he rightly highlighted, we have taken such a deliberate approach to consultation. However, I thank him for his support and note his suggestion. With that, I commend clause 102 to the Committee.
Question put and agreed to.
Clause 102 accordingly ordered to stand part of the Bill.
Clause 103
Limits on local loans
Question proposed, That the clause stand part of the Bill.
Jesse Norman
This is another small, technical measure. Clause 103 makes changes to ensure that Public Works Loan Board lending is available to local authorities in order to support worthy capital endeavours that benefit their residents. There is a statutory limit on the total amount that may be lent to local government through the PWLB, a limit that is governed by section 4 of the National Loans Act 1968. That Act allows for two future levels of that limit to be specified in advance through primary legislation and activated through secondary legislation.
The legislation would be exercised through HM Treasury. A date to exercise these powers has not been, and would not usually be, set in advance. The Treasury considers this clause to be a high priority because of the central role the PWLB plays in the capital finance system, supporting local authorities to deliver public services and, still more urgently, supporting communities through the pandemic as the need may arise.
The changes made by clause 103 will amend the predetermined legislated figures in the 1968 Act. The limit is currently £95 billion, and the clause resets the two future amounts to £115 billion and £135 billion. Clause 103 thus ensures the continuity of PWLB lending, which is a key stream of funding for local authorities across the country.
Harriett Baldwin
I know that Worcestershire County Council finds the Public Works Loan Board very useful. Can the Minister update the Committee on the interest rate charged on that facility?
Jesse Norman
That is a very helpful question. I cannot update the Committee at the moment, because, as my hon. Friend will know, that is a matter for consideration within the Treasury. However, she has usefully put the issue on the record, and I thank her for doing so.
Wes Streeting
Clause 103 gives me an opportunity to speak to some of the challenges facing local authorities and the role that the Public Works Loan Board can play. I also want to knock on the head some of the assertions that have been made about local government finances and the sensible use of borrowing by local authorities across the country to invest in local infrastructure and works that benefit their residents. I speak not just as my party’s shadow Treasury spokesperson, but as a former deputy leader of the London Borough of Redbridge and a current vice-president of the Local Government Association.
Local authorities have done a remarkable job managing their finances sensibly and effectively during a very difficult decade. Not only was the public sector broadly hit by cuts, but local authorities felt the brunt because those cuts were both deep and front-loaded. The local authority response to those challenges over the course of the past decade has, to be frank, been remarkable. The same can be said for the ingenuity of many local authorities in making sensible and wise investments that not only improve the lives of their residents but generate income that can then be ploughed back into frontline services and mitigate the impact of central Government cuts. I think I speak for people right across the Local Government Association, regardless of their party, in saying that, as well as devolving power without resources, the Government have too often devolved blame. I hope that Ministers will consider that. I will address the issue this afternoon, when debate the new clauses.
There have been some rather unhelpful and misleading headlines about local authorities borrowing to invest in local projects. Of course, as with central Government, we will always be able to point to decisions that, though made with the best of intentions, do not work and incur a liability for the public purse. If public funds are not used widely, it is absolutely right that there should be scrutiny, lessons learned and accountability. It is fair to say, however, that in the vast majority of cases where local authorities have drawn on the Public Works Loan Board, their approach has been sensible, effective and well deployed. It is important that the facility continues to be made available to local authorities in the same way.
When Ministers consider not just this Bill but impending decisions by the Treasury, I urge them to recognise the awful impact of covid-19 on local authorities. In responding to the Secretary of State’s plea to do whatever it takes to get their communities through the crisis, not only have their costs risen; their income has also fallen significantly. I urge Ministers to think carefully about the demands they place on local authorities, particularly in terms of loan repayments during this period, and to consider whether more could be done.
Stephen Flynn (Aberdeen South) (SNP)
I have had a look at the figures. Scottish local authorities are due to repay £793 million of PWLB interest and principal debt over the financial year 2020-21. Given the extreme challenges facing local authorities, does the hon. Gentleman agree that it would be sensible if the Treasury considered mitigating those debt repayments?
Wes Streeting
I am grateful to the hon. Gentleman for his intervention. The Government have to look very carefully at the liabilities facing local authorities and how they are having to balance them against other demands and challenges. As I have said, in addition to creating cost pressures, the pandemic has had an impact on local authority income, too. In that respect, local authorities really are all in this together, whether they are Labour, Conservative or SNP. There are challenges for local authorities right across the United Kingdom. As we will discuss when we come to the new clauses, some communities have been affected more than others. None the less, the challenges are universal.
I hope that Ministers will take that on board and that they will listen very carefully to the representations from the Local Government Association, which is cross-party but Conservative controlled. We will do our best to remedy that in next May’s local elections. I hope that the representations Ministers receive from Conservative LGA leaders—and not just Opposition party representatives —will help them understand the challenges that local authorities are facing, particularly as they have been unable to collect around £1 billion in combined business rates and council tax income during the crisis so far.
I also impress upon Ministers the importance of Government keeping their word to local government. When local authorities were asked to do whatever it takes—and whatever it took—to get communities through the covid-19 pandemic, they took the Secretary of State for Housing, Communities and Local Government at his word and they delivered. Now, they expect to be reimbursed, as was promised. The Government have given some additional funding to local authorities, but it is a drop in the ocean when compared with the cost pressures they face and the fall in income.
With that, I am content to support the clause, and I hope that the wider points that it has enabled me to make have been heard and well understood by the Treasury, and not just the Ministry of Housing, Communities and Local Government.
Jesse Norman
I will just move the clause, if I may.
Question put and agreed to.
Clause 103 accordingly ordered to stand part of the Bill.
Clauses 104 and 105 ordered to stand part of the Bill.
New Clause 1
Workers’ services provided through intermediaries
“Schedule (Workers’ services provided through intermediaries) makes provision about workers’ services provided through intermediaries.”—(Jesse Norman.)
This new clause introduces the new Schedule inserted by NS1.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss Government new schedule 1—Workers’ services provided through intermediaries.
Jesse Norman
The new clause and new schedule 1 make changes to ensure that the off-payroll working reform is extended to medium and large-sized organisations in all sectors outside the public sector from April 2021.
The reform moves the responsibility for determining whether the off-payroll working rules apply from an individual’s personal service company to the client engaging them. It also requires the client, or the party paying the individual’s personal service company to account for and deduct employment taxes where they are due, rather than that responsibility resting with the individual’s personal service company. The change is not the imposition of a new tax, but is focussed on improving compliance with the already existing off-payroll working rules.
The off-payroll working rules have been in place for nearly two decades. They are designed to ensure that individuals who work like employees but through their own personal service company pay broadly the same income tax and national insurance contributions as those who are directly employed. Without those rules, nothing prevents individuals from being engaged off-payroll simply to reduce the tax and national insurance contributions rightfully due.
Personal service companies have traditionally had to self-assess whether the rules apply. Unfortunately, non-compliance with the off-payroll working rules outside the public sector is widespread. The public sector reform has demonstrated that organisations engaging individuals are better placed to assess the employment status for tax of that individual.
There have been several attempts to tackle non-compliance with the rules in recent years. In November 2015, the Government carried out a consultation on how to improve the effectiveness of the off-payroll working rules. Since then, the Government have carried out three further consultations on reforming the rules. During this period, several alternatives to the original off-payroll working rules were suggested. The Government fully considered alternative proposals as part of the extensive consultation process on the reform.
In general, the approaches suggested would create a group of people who are exempt from the employment status tests and subject to a separate and advantageous tax regime, which the Government did not consider to be fair to the majority of working individuals who are subject to the existing boundary between employment and self-employment. Options such as administrative changes and strengthening HMRC’s compliance response were also discussed, but the consultation found that those would not be sufficient to tackle the problem.
The off-payroll working rules were reformed in the public sector in April 2017, shifting the responsibility for determining whether the off-payroll working rules apply from an individual’s personal service company to the public sector client engaging them. That was because organisations are better equipped to make the correct employment status for tax assessments than are individual contractors, and HMRC is better able to monitor their compliance. This reform is effective in reducing non-compliance with rules: it raised an estimated £250 million in additional revenue in the first 12 months, with independent research showing that it did not damage the flexibility of the labour market.
Jesse Norman
I am winding up, so perhaps I could let the hon. Lady introduce her point in her speech.
When their engagement meets the tests of an employment relationship, contractors should not pay less tax than those who are directly employed. I therefore move that new clause 1 and new schedule 1 stand part of the Bill.
Wes Streeting
Our position on IR35 has been well rehearsed in previous and recent debates on the Floor of the House, but let me revisit some of those points, because this debate is closely followed outside Parliament and matters to people across the country. Self-employment is a vital part of the UK economy. People who are genuinely self-employed deserve to be properly supported while also ensuring that everyone pays the right amount of tax. Historically, the tax arrangements for self-employed people have differed from those for people on payroll, reflecting the fact that self-employed people have lower levels of protection in areas such as holiday pay, sick pay and other rights and benefits that people would enjoy if they were employed on payroll. Clearly the system has also been subject to abuse, and it is right that we tackle that abuse.
Some of the anxiety arises from concerns that the Treasury, and the Government more broadly, sometimes have a tendency to think of the self-employed as if they fell into only two categories of people. The first is the very wealthy, who use self-employment status to avoid paying their fair share of tax, which should obviously be clamped down on. The second is the very low paid, who work in parts of the economy that are deemed unproductive—even to the extent that some people would think it desirable that such workers were not engaged in those forms of employment, as if that were the best way to tackle the UK’s poor productivity statistics. The true picture of self-employment in the country is a lot more complicated than that, and huge numbers of self-employed people make an enormous contribution to the economy and who provide a whole range of services that benefit citizens across the country and businesses more generally.
It is right that the Government have taken the decision to delay the implementation of the roll-out until April 2021 due to coronavirus. The Opposition would again impress on the Government the need to use the additional time ahead of implementation to provide an additional review and to learn from the mistakes of the public sector roll-out and the continuing anxieties about the planned private sector roll-out. Those concerns were expressed in the House of Lords report entitled, “Off-payroll working: treating people fairly”, which concluded that the Government must address IR35’s inherent flaws and unfairness, a point that was supported by the ICAEW.
The Opposition urge the Government to use this time wisely. We believe it is necessary for the Government to take a broader approach in order to modernise the law on employment status and to look at how it interrelates with tax status, so that we have a genuinely joined-up approach that brings together the issues of tax and employment law. Notwithstanding the planned roll-out of IR35, the Chancellor made it very clear, when he announced the self-employment income support scheme, that there will be consequences for future Treasury policy and future tax arrangements for Britain’s self-employed. That message was heard loud and clear by the self-employed, but if we are asking them to pay a greater contribution, we also have to address the inherent challenge and, in many cases, the injustice around their employment protections and the levels of social protection and social insurance that people enjoy if they are employed, as opposed to self-employed.
As the shadow Chancellor has said, having addressed this issue many times both in her current role and in her previous role:
“We really need a joined-up approach to the issues that brings together the consideration of tax and employment law and levels up protections for the self-employed, as well as dealing with the current implications of the tax system that boost bogus self-employment.”—[Official Report, 4 April 2019; Vol. 657, c. 489WH.]
She made those remarks back in April 2019; it is now June 2020. I am not sure that, in the year that has passed since she made those comments, the situation has changed particularly and that things have improved. The delayed roll-out is something that has been widely welcomed, but it is crucial that the Government use this time wisely. It is not clear from the year that has just passed that the Government will use the next year any better.
Stephen Flynn
Before I get into the substantive detail of this issue, I want to touch on the process and where we find ourselves at this moment in time with the new clause that has been tabled by the Minister. It is simply not acceptable that such a contentious tax matter was first introduced through a 45-minute money resolution debate in the House, instead of being subject to the full scrutiny of the Budget process.
The money resolution debate took place after the Finance Bill was published, meaning that the Government were able to introduce the detailed IR35 tax law as a Finance Bill amendment. The result of what can only be described as a procedural whizz is that Opposition parties cannot do what they were elected to do and amend the proposals as the Bill goes through its line-by-line scrutiny. Frankly, that is not good enough. I certainly thought better—perhaps wrongly—of the Government in that regard. Of course, that entire process missed out those MPs who have been disenfranchised from taking part in the House as a result of the Government’s shocking processes in recent weeks.
On the substantive issue at the heart of this, let us be clear that IR35 is creating a new group of zero-hours employees paying full taxation but without receiving the associated employment rights. What is just and fair about that? Speaking as a Member with a constituency that is dominated by the oil and gas sector, I have been inundated—inundated—with correspondence from contractors outraged by the decisions that the Government are seeking to take, particularly so given that we are in the middle of a global pandemic. I hope that the huge concern that I and others have about the long and, frankly, short-term sustainability of the oil and gas sector, and the impact that that has on employees, has not escaped the Government’s notice. To then add a further layer of complexity into their employment status is simply unforgivable.
In the north-east of Scotland, we are witnessing job losses hand over fist. Barely a day goes by when companies are not shedding staff. That is applicable to most sectors at the moment, be it hospitality, tourism or aviation, but it is very rare for a sector of such scale to be so dominant in one city, as is the case in Aberdeen. What the Government are seeking to do in relation to IR35 is a slap in the face to those workers who are having to deal with the most difficult of challenges.
Not only are the Government hitting those contractors—many of whom went down that path in good faith—with IR35, but they are failing to deliver any sectoral support to the oil and gas industry. Not a single penny of sector-specific support has been provided by the UK Government for the oil and gas sector, irrespective of the fact that the Treasury has lined its pockets with North sea oil and gas revenue for decades. It is time to give back, not time to double down on the damage, so I urge the Government to reconsider what they are putting forward.
Alison Thewliss
My hon. Friend makes an excellent point about contractors in the north-east of Scotland. In my constituency of Glasgow Central, it is IT contractors, many of whom came to live in Glasgow from India. They work in the IT sector and have found that their contracts have not been renewed with companies that they have been working for, and they are now really struggling to find employment, causing them a huge deal of uncertainty at this time, particularly with the coronavirus crisis.
Stephen Flynn
I welcome the intervention from my hon. Friend, which goes to the nub of the issue that we are discussing. The Government’s policy is, frankly, to turn their back on those people who need support at this time.
If the Minister is not willing to take my word for that, perhaps they will listen to the salient words of one of their own. The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) said late last year in a letter to the then Chancellor:
If the proposed changes—making every medium and large sector private business responsible for setting the tax status of any contractor they use—were to come into effect, I would worry for the industry”—
the oil and gas industry—
“and its ability to attract the highly skilled workers they need. It is also predicted that changes could see a worker’s income reduced by up to 25 per cent. Many of these workers are my constituents.”
Many of those workers are also my constituents, and it is simply not good enough. I am glad that there is cross-party support in north-east Scotland for opposing what the Government are seeking to do, and I sincerely hope that that cross-party ethos will be found in this room today, before the Government do more damage.
I just want to pick up on one final point. I think the Minister said in his opening remarks that he listened carefully—that the Government have listened carefully. They have not listened to the House of Lords—I do not say that with any joy, being a member of the Scottish National party—which has been clear that they need to pause this policy and go back to the drawing board. I urge them to do just that.
Andrew Jones (Harrogate and Knaresborough) (Con)
The issue of off-payroll working has attracted much attention in the House and beyond. Clearly, there are some problems to solve, but they are not easy problems to solve.
In some cases, the issue is straightforward. People work for one employer for prolonged periods up to several years and they really are employees, because they do similar jobs to colleagues and use company equipment, but they do so on different terms. It may be that they are better paid in terms of headline salary than their immediate work neighbours, but the situation is more complex, because they are not paid for holidays or potential pension contributions and so on.
Some workers may have been put under pressure to become self-employed by less scrupulous employers who have sought to save money on things such as NI payments. I have read of cases—I am sure we all have—where the imbalance of power that can exist between an employer and an employee has seen pressure on people to choose a particular route. That is not satisfactory for those employees or taxpayers generally as revenue for public services is missed.
While some may have been pressured into becoming self-employed, vast legions in our economy have chosen the self-employed route because they enjoy the challenge of that type of work or they want to be more in control of their own destiny, which being your own boss can achieve, or many other personal reasons.
That is to be really encouraged, because the flexibility that self-employed workers, often on contracts, provide has been a great boost to our economy. It is one of the ingredients that has contributed to the recent economic progress that we have enjoyed. Being swift of foot in response to commercial opportunities gives a competitive advantage. It has allowed companies to bring in extra resource where they need to boost operational capacity. It has allowed extra skills to be brought into a company when needed. Many people I have met or corresponded with in my Harrogate and Knaresborough constituency have highlighted to me that they have built careers adding real value to their clients.
There are some sectors where the use of contractors is more prevalent than others. We have just been hearing about the oil and gas sector, but that includes IT and technology more broadly, as well as marketing and the creative industries, sectors where the UK is strong, and where I worked before coming into this place. This is about bringing skills and capacity into a company when needed but when there is not enough work for long-term permanent employment. There is also the issue of the growing sector of interim managers.
I see a balance to be struck here in the way the issue is taken forward by Ministers between protecting some employees and recognising that the vast majority have chosen self-employment and are providing real value. We need to balance employment rights and protections between the employed and self-employed, while ensuring that the rules do not have a sclerotic effect on our economy. Flexible, nimble companies responding to customers, adding value, creating wealth and grabbing opportunities is how economies grow and jobs are created. Ensuring that is preserved is critical to the operation of these rules. That is something the Minister must consider as he takes this forward.
Miriam Cates (Penistone and Stocksbridge) (Con)
I refer hon. Members to my entry in the register of Members’ interests. This is clearly a contentious issue, but the majority of employers and contractors I have spoken to agree that some kind of reform is necessary.
Our tax system must be fair, but it should also support those who take risks to grow businesses and innovate in a way that benefits our whole economy. It should not offer advantages to those who are using PSCs to create wealth only for themselves. I am certainly not saying that it is wrong to create personal wealth, just that our tax system should not offer particular advantages in doing so and tax should not be avoided as a result. We must balance flexibility with fairness and it is not fair that two people doing the same job in broadly the same conditions pay different rates of tax. We must recognise that those who are genuine contractors do not have the same benefits as employees—they do not have the same job security—but where someone is to all intents and purposes an employee, they and their employer should pay their fair share of tax and national insurance.
I have personal experience of running a small business in the tech sector and I believe that current practices discourage people from becoming employees in some sectors. For example, in the tech industry, people with certain programming skills can command such high day rates as contractors that there is very little incentive to become an employee in a small company. That is a particular issue in a sector where there is a shortage of talent and a great demand for skills.
While there is and always will be a role for contractors, contracting costs can be prohibitively high for start-ups and scale-ups, and those businesses find it difficult to recruit employees with the right skills. Start-ups and scale-ups need employees—people who are committed to the company, who can help shape its culture and, importantly, who can pass on their knowledge and skills to new employees as the company grows. Labour market flexibility has to work for employers and employees. At the moment, the very businesses that we most need to grow and innovate are struggling to recruit skilled employees, especially in areas outside London and the south-east, such as Sheffield and Barnsley, which I represent.
I believe that the reforms will make employment and the benefit that it brings more attractive. As I said, we should be using the tax system to support those who create wealth not only for themselves, but for our whole economy. In that way, any tax saving to an individual or company is an investment for the taxpayer, not just lost revenue. A great example of that is the research and development tax reliefs, which I am delighted have been increased in the Bill and will encourage the kind of innovation that the UK really needs to boost growth and productivity. They are incentives that help to create wealth for us all.
In contrast, using a personal service company to reduce an individual’s tax burden does not benefit the taxpayer. The individual’s income tax and national insurance savings are not used to create other jobs or to invest in technology or create products, and so the taxpayer does not receive any return on the lost revenue. Where a worker is genuinely self-employed, facing additional risks, with none of the benefits of employment, there should be no change, but where someone is to all intents and purposes an employee, improving compliance should make sure the taxpayer does not lose out.
I understand that any changes bring risks and uncertainty and I am pleased that the changes to IR35 have been delayed for a year to give our economy some chance to stabilise after covid-19, but fairness should be the foundation of our tax system and properly applied, the regulations will help to achieve that aim.
Jesse Norman
I will respond to the many important points raised by hon. Members, who I thank for raising them.
My hon. Friend the Member for Penistone and Stocksbridge is absolutely right to highlight the importance of making employment attractive. It is vital that best practice be spread throughout the economy as rapidly as possible and if the effect of that is to create a more level playing field between two sides of a particular divide, that would be a very valuable thing. The Government’s concern is that there is an unfairness in that someone can be, as it were, latently employed, although working for a personal service company, and that is the concern that the Government seek to address.
My hon. Friend the Member for Harrogate and Knaresborough is absolutely right to emphasise the importance of having a flexible and nimble economy. He is right, and the hon. Member for Ilford North is right, to focus on the effect of the self-employment and self-employed contractors in making this happen. For reasons I will come on to, this reform does not tax the self-employed. It does not tax anyone. What it does is to change the determination for people who are not self-employed but who are in fact employed, and to determine whether they are or not.
The hon. Member for Aberdeen South made a series of comments that I am afraid are simply not true. He was very rude about the Government’s decision to introduce this via a separate resolution, but the details of the change were announced as part of the Budget resolutions. They were not moved. They could and may well have been discussed—I do not recall the details—during the Budget debates. Therefore, it was perfectly open to the House to scrutinise those details, although the resolution was not itself moved. If the resolution had been moved, it would not have been possible for us to legislate with anything like the same straightforwardness for the move to an April 2021 deadline. That was the purpose of delaying moving the resolution. The effect was that the resolution was debated on the Floor of the House of Commons in and of itself—given a separate debate to that resolution in order to discuss that. Therefore, the idea that there has been any short-circuiting of due process is entirely wrong.
Of course amendments can still be tabled on Report, and the hon. Gentleman may seek to do that. He was very rude about the reform, saying it would lead to zero-hours contractors, and calling it shocking, but is he planning to support it? Will he vote in favour of it or against it? That will be the true measure of his and the SNP’s position on this important reform.
Finally, the hon. Gentleman talks about the Lords Economic Affairs Committee, but of course he is entirely wrong about that. We have yet to respond to the Lords Committee—we will do so in due course—but we have engaged very closely with it on a whole variety of different areas. If he speaks to Lord Forsyth, he will know that I approached Lord Forsyth personally, having just become Financial Secretary, to reopen the relationship and make it flourish. Indeed, I volunteered to appear in front of the Lords Economic Affairs Committee last year precisely to hold myself and the Treasury accountable in this area.
Stephen Flynn
The Minister has gone through a number of the points I made, but one that he did not touch upon was the impact that the proposal will have upon contractors working in the oil and gas sector, given the huge challenges facing those workers at the moment. What message would he give those contractors, whose future is uncertain in any case, but who are facing this change on top of an already devastating situation?
Jesse Norman
We are obviously very concerned about the effects of coronavirus, which is precisely why we have delayed the implementation of the reform by a year. The message I would give is that we absolutely respect and support the work that those individuals are doing and understand the position they are in. The Government have rapidly made available very important sources of support for the economy across a whole range of different areas and sectors of work and, indeed, in the benefits system, both for businesses and families and the sustaining of jobs. Therefore, there is no absence of respect or support for the people the hon. Gentleman describes.
The hon. Member for Ilford North mentioned the diverse nature of these different forms of employment. He referred to the self-employed, but actually the self-employed are not taxed by this. The genuinely self-employed are not affected by the reform. The reform is designed merely to change the way in which the status of someone who is latently employed—actually employed, but perhaps unaware of it or not behaving on that basis—is determined. The hon. Member asks us to use the additional time appropriately. We have got before April 2021. I have said already, but let me say again that we are in the process of commissioning external research into the effect of the public sector reform. As he will be aware, the early research immediately after the public sector reform did not bear out the dire predictions regarding flexibility or reduction of income, but we will make sure that external research into the longer-term effects of the public sector reform is completed and placed in front of the House before April next year.
Alison Thewliss
Can I ask the Minister about the impact assessments that will be done? What monitoring is his Department doing of the chilling effect that this is having on contracts right now? What I am hearing from contractors in my constituency is that those contracts are not being renewed now and it is already having a chilling effect, regardless of when the measure is coming in. What monitoring is he doing of the situation?
Jesse Norman
As I have said, in relation to public sector reform, the external research did not detect any great chilling effect. We will be looking at the longer-term effects of public sector reform. On this reform, it is undoubtedly true that the measure is nudging some companies to consider whether people they had thought of as contractors are not, in fact, employees. In some cases, they are having to review the structure of their workforces. I do not think that is a chilling effect on the status of those contracts, because those people were always latently employed. It is then for the contractor and the company to work out what future arrangement they wish to have.
Alison Thewliss
The IT contractors from India who I mentioned earlier can choose to go anywhere in the world. They have chosen to locate in Glasgow because the work is there, the skills are there and they have a good community in my constituency. If the contracts are not there, they will take their skills and their money and go somewhere else. What is the Minister doing to mitigate against that?
Jesse Norman
That is a claim that the hon. Lady makes and we will be able to test it over time through external research. It is not a view that has been validated so far in the roll-out to the public sector. It is a diverse and vibrant area of our life and it may well have more resilience overall than she is giving it credit for, but we will not know until we have seen the effects of the reform.
The final point, raised by the hon. Member for Ilford North, is to do with rights. Of course, the measure is to do with the determination of tax due, but the Government have put in the Queen’s Speech a substantial commitment to bring forward a Bill in that area following the Taylor review. I know that my colleagues in the Department for Business, Energy and Industrial Strategy take that very seriously.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Review of geographical effects of provisions of Sections 27 to 30
‘The Chancellor of the Exchequer must within twelve months of the passing of this Act lay before both Houses of Parliament a report assessing the differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections 27 to 30 of this Act.’—(Alison Thewliss.)
This new clause would require a geographical impact assessment of the clauses of the Bill relating to reliefs for business.
Brought up, and read the First time.
Alison Thewliss
I beg to move, That the clause be read a Second time.
My understanding was that we were breaking after the previous clause, so I will scramble to find my notes. We think it is important to look at the geographical impact of the Bill. I support the new clause tabled by Plaid Cymru, which has suggested that we have a report assessing the
“differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections…of this Act.”
What is lacking in this House—I have said this before and I have no hesitation in returning to it—are real mechanisms to explore how effective the measures in the Finance Bill are in reality. My colleagues and I have supported work on a Budget Committee, which has been before the Procedure Committee to look at it as well. We do not understand the effectiveness of the policies and the ideas that the Government have, so we end up with things being proposed in Bills that turn out to be completely ineffective or we find out that they have differential effects from what the Government expected, so they have to come back later to amend things and try to fix their mistakes.
We feel that requiring the Government to consider the geographical effects of the changes to the reliefs, including research and development expenditure credit, would give a better understanding of how effective they are across the different regions and nations and of whether those incentives actually contribute to the continuing inequalities that we see across the UK. We think this is an issue of real importance to Scotland and to Wales for the measures where we do not necessarily have particular control ourselves and where the devolved nations do not have competence. It is important to understand what the Government are about with the legislation they are proposing as well as its impact, and whether the measures are truly seen to be effective.
Wes Streeting
The hon. Member for Glasgow Central makes a reasonable case—that will be a running theme throughout a number of new clauses, not least when we turn to new clause 3 in the afternoon session. I will make the points I want to make about the importance of reviewing the geographical impact of measures in the Finance Bill at that point, but I concur with her remarks.
Jesse Norman
I thank colleagues who have spoken. New clause 2 would require the Government to assess and report on the geographical effects of changes to business tax reliefs made by clauses 27 to 30 within 12 months. That relates specifically to the research and development expenditure credit, the structures and buildings allowance, and the treatment of intangible fixed assets.
Her Majesty’s Revenue and Customs does not routinely require businesses to provide geographical information about where expenditure is incurred as part of their claims for RDEC, SBA or intangible fixed assets treatment. In order to do so, changes would need to be made to the CT600 form, which would create a burden for businesses. In addition, those claiming the reliefs would only provide information after the year-end. For that reason, it does not make sense. It is not possible for Her Majesty’s Revenue and Customs to have that information within the 12 months stipulated in the amendment. HMRC does in fact already publish annual statistics on many tax reliefs, including a detailed breakdown of R&D tax relief claims, which analyses, by region and sector, the number of claims and the amount of relief received. However, the regional analysis is based on the company’s registered office, not necessarily where expenditure is incurred.
Although the next set of annual R&D tax relief statistics will be published by HMRC in the autumn, companies can claim R&D tax relief up to two years after the end of their accounting period. For that reason, the 2020 statistical release will include claims only until 2018-19, and will therefore not include claims for the increased 13% RDEC rate. The Government do, of course, remain committed to levelling up every region and nation of the UK to spread opportunity and to ensure that everyone benefits from growth. For example, the spring Budget provided a £1.14 billion increase to block grants for devolved Administrations to spend on their own priorities. That is in addition to the £2.7 billion that the Government are investing in city deals across Scotland, Wales and Northern Ireland, with £800 million of funding being provided to support four deals in Wales alone, and a further £1.4 billion being provided across 10 deals in Scotland.
As we look to our economic recovery from the impact of covid-19, that levelling-up agenda will be more important than ever. Given that the Government already publish detailed analyses and that regional information is collected and held as part of HMRC’s tax returns, asking business to record further information would represent a significant additional business burden. I ask the Committee to reject the new clause.
Alison Thewliss
The Treasury Select Committee is also looking at regional imbalances. Part of the Committee’s work has identified that the data collected by the Government on a range of areas is not sufficient. It is not good enough for the Minister to say, “Oh, it’s difficult to do that.” I accept that money is not necessarily spent where an office is based, but it is a start in understanding where that money is going. If lots of organisations based in London are taking in the money and perhaps it is going somewhere else, the Government ought to be aware of that and ought to be looking at it to make sure that if somebody based in London is taking in the money but it is being spent somewhere else, then perhaps they should be based where the money is being spent. Perhaps they should be moving their offices to where the money is being spent. That puts it back on to those businesses, to add to that consideration, so I do not buy the Minister’s argument that it is awfully difficult and that we should not do it. It is a first step into looking at how it might be done, so I would like to press clause 2.
Question put, That the clause be read a Second time.
Trade Bill (Third sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2019-21 View all Trade Bill 2019-21 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
Thursday 18 June | Until no later than 12.10pm | Client Earth The Trade Justice Movement |
Thursday 18 June | Until no later than 12.35pm | Sam Lowe, Senior Research Fellow, Centre for European Reform and member of the Strategic Trade Advisory Group |
Thursday 18 June | Until no later than 1.00pm | Nick Ashton-Hart, Geneva Representative, Digital Trade Network |
Fleur Anderson (Putney) (Lab)
I have a declaration of interest. In my former role as head of campaigns for CAFOD—the Catholic Agency for Overseas Development —I was a co-founder of the Trade Justice Movement.
The Chair
Thank you. That will be noted on the record.
We will now hear oral evidence from ClientEarth and the Trade Justice Movement. Do we have them online?
David Lawrence: I am here; I can hear you.
The Chair
Hello. I am Judith Cummins, the Member responsible for chairing proceedings. I will not be asking you any questions, but I will be calling Members and witnesses to speak.
David Lawrence: That sounds good.
The Chair
Q
Welcome, and thank you very much for coming. Thank you, Tom—lovely to see you—and thank you, David. Could you start by introducing yourselves? Let us start with Tom.
Tom West: Thank you for inviting me. It is really good to be here, if slightly surreal; it is my first time out of the house for a while.
My name is Tom West. I work for an environmental law non-governmental organisation called ClientEarth. We are interested in the implications of the Bill and trade policy in general on the environment. The way we see it, there are a number of ways in which trade policy can affect the environment, directly and indirectly, in terms of the quality of goods we are trading, but also in terms of how our trade rules affect how able we are to meet our important environmental commitments.
At the moment, the UK has this great opportunity. It has this great chance to redefine and refresh how trade policy is designed. A lot of trade policy is quite old—years and decades old—and was not written in a time when the global environmental challenges, like climate change and biodiversity loss, were understood to the same extent. It is very well established now that there is a real urgent need to take action here. We think there is a chance for the UK to refresh the approach to reflect that and to move us forwards as global leaders in that area.
The Chair
Q
David Lawrence: Good morning, everyone. My name is David Lawrence and I am the senior political advisor at the Trade Justice Movement. We represent 60 NGOs, faith groups and trade unions that have an interest in trade issues. Our group has done a lot of work on international development and the relationship between that and trade agreements, but obviously our focus recently has been on post-Brexit trade agreements and the UK’s new independent trade policy. We have previously given a lot of evidence on parliamentary scrutiny of trade agreements, which I would like to talk about today, if possible. I also very much share Tom’s concerns about upholding environmental standards and using trade in an environmentally sustainable way, so I will touch on that as well.
Bill Esterson (Sefton Central) (Lab)
Q
Tom West: Sure. I will focus on the continuity trade agreements and what is being done there. It is worth saying at the outset that it is sensible to try to roll over and maintain where we are, as a starting point. It is also important to see that as a starting point as to where we are and where we want to go. The process gone through there demonstrates the need for, first, a better approach to scrutiny and oversight for how we conduct and design our trade policy. Secondly, there is the point about saying, “Let’s review and refresh.” With the continuity agreements in particular, there is a need to put in place mechanisms to review those in due course and to check up on them and say, “Are these delivering the economic things we need from the trade agreements but also, importantly, the environmental issues that we need to deliver on?” If we want to become a global leader in environmental issues, we need to think about what that means for all areas of policy. We cannot simply rely on directly environmental ways to deliver those. Let’s look at those and see: are these the sorts of trade agreements that are working from an environmental point of view? Are they encouraging the right sort of trade and the right sorts of goods and services? And are they allowing us to take the actions we will need to take to fight climate change and reverse biodiversity decline?
Bill Esterson
Q
David Lawrence: Could very quickly remind me what the question was?
Bill Esterson
What is your view of the Trade Bill as it is? Do you have concerns about it, and are there any additions you would like to see made to it?
David Lawrence: As I said earlier, parliamentary scrutiny is a big concern for us. When the Trade Bill was first introduced, which was a while ago now, it was billed as an open conversation on scrutiny and a new framework for how trade could be done, but in fact we see nothing new on parliamentary scrutiny, and so far the Government have not seemed to be very open to having that conversation or to listening to proposals for how scrutiny should operate. That is not just our concern; it is shared by a lot of other NGOs and businesses, and indeed by many MPs. The UK currently uses a pretty archaic form of treaty scrutiny that dates back to the first world war. It was designed to deal with secret defence treaties between European powers. Today’s trade agreements are a million miles from that. They cover a huge range of policy areas—from food standards and environmental regulations, to NHS prices and digital services. We think it is completely inappropriate to expect that MPs should have no say in how those deals are made.
It is also worth noting that that is an issue that many members of the general public are concerned about. If you think back to the Transatlantic Trade and Investment Partnership, or TTIP—the proposed EU-US trade deal—you will see that one of the reasons it collapsed was that people were not happy about the idea that these important talks were happening behind closed doors and that their own elected representatives did not have much of a say over them. In Westminster, MPs have less of a say over trade deals than MEPs in Brussels or, indeed, Members of Congress in Washington DC.
If I am honest, I think lots of people would be quite surprised and shocked to learn that their own elected MPs do not have a say over these trade agreements, the new deals we are doing with the EU, the US, Australia and Japan, or the new ones announced yesterday. It is not clear who people are meant to write to or who represents them and their interests when they are concerned about how these deals might affect their livelihoods, the food they buy or, as Tom mentioned, environmental standards and principles.
For us, scrutiny is an absolute priority. We also want to use trade to maintain high standards. We have concerns about the GPA and the way that public procurement works, but scrutiny is absolutely the priority. If we do not have that, there is no way Parliament can make sure that trade in the future meets with those high standards, and there is no democratic representation or transparency.
Bill Esterson
Q
David Lawrence: There is a scrutiny concern that is specific to public procurement as well—making sure that Parliament has a role, that there are democratic processes involved—and there is a standards concern to ensure that procurement can be used in a way that maintains standards. The Government have this levelling up agenda and the idea that post-Brexit Britain will support parts of the country that are not doing so well economically. Procurement is an opportunity to support those areas as well. As we have seen with covid, all sorts of big questions are raised around global supply chains. One of the immediate effects of covid was countries putting in place things like export controls and wanting to localise their supply chains. Procurement is one of the many tools that Governments can use to support local industries in that way and to maintain standards. The more that Parliament has a say over that process, the better.
Bill Esterson
Q
David Lawrence: From our perspective, there are four elements to an ideal scrutiny procedure. First, before negotiations begin, we think there ought to be a full debate, with a vote on the negotiation objectives, and that ought to be written into law. At the moment, the Government can grant a debate, if they want to—and they have done so, at very short notice, as some of you will remember, I am sure, on the US objectives and the EU objectives—but we want a guaranteed debate and vote on the objectives. Secondly, during negotiations, there should be regular reports back to Parliament on the progress of those negotiations, and, ideally, publication of texts from each negotiation round. That is a practice that is done elsewhere: the EU has updates during negotiations. As I am sure all of you are aware, MPs are very much left in the dark. At the moment, US and EU negotiations are going on, but we rely on leaks, essentially, and reports from Brussels or from DC because there is no formal process for reporting back.
Thirdly, after negotiations there should be a debate and a vote on the final deal to approve it. Again, that is something that happens in the US Congress and in the European Parliament. We do not have that guaranteed. The only way we can get a debate and a vote on a trade agreement is if the Opposition force a debate on it during an Opposition day within a 21-day sitting period. As you all know, it is not guaranteed that there will be an Opposition day that falls in that period, and if there is, the Opposition may decide to use it for other things. The Government are proposing a lot of new trade agreements, so the current system is not reliable in terms of ensuring that debate and vote on the deal.
Fourthly, throughout this whole process we would like to see public consultation and independent impact assessment. There have been some half-hearted attempts at that. I sit on one of the expert trade advisory groups at the Department for International Trade, but there is not a well-established, formal process of consultation with actual trade agreements where businesses and NGOs are brought in to comment on and critique the trade agreements themselves. We have not seen that happen yet. Again, that is something that happens in other countries, but the UK is very much behind on this.
Bill Esterson
Q
David Lawrence: It is about public trust. We saw in the TTIP negotiations a lot of distrust that ultimately led to the deal falling apart. If you wanted TTIP to happen—if you want these trade agreements to work—you need the public behind you. If there is not transparency, there will be conspiracy, leaks, theories about what is being discussed, accusations and a lot of uncertainty. That is why it is something that businesses and NGOs are united on: regardless of your view on whether the specific trade deals are good or bad for the economy or society, at least if you have transparency, you know what is being discussed and what is on the table. That is why we are pushing for it, and we have joined the British Chambers of Commerce, the International Chamber of Commerce and the CBI in pushing for that level of transparency. It has been a source of frustration, not just among civil society but also among businesses, that these important deals are supposedly on the way but we do not know what is being discussed at the moment.
Bill Esterson
Q
Tom West: We are supportive of the asks and processes David outlined. Greener UK, which is a coalition of environmental organisations, is also a signatory to the document David mentioned. I will just add some extra things around the side.
First, once a trade deal is in place and up and running, there is a need for ongoing scrutiny and involvement of civil society in making sure it is being implemented in the right way. That is crucial looking forward. Secondly, to give a bit more clarity as to the value of this, within the environmental sphere, the value—in fact, the necessity —of public participation is long recognised. The Aarhus convention 1998 enshrines in law that the public must be engaged in the design of policies related to the environment. It is true here as much as in other areas: by involving the people affected by the policies, you get better policies and better buy in.
There is another interesting point on the value of this. Last year the US negotiators said, “Look, we can’t refer to climate in our negotiations”. They were able to point to an Act of Congress and say, “Our hands are bound here. It’s impossible for us to do this”. In that way, a steer and an instruction from Parliament can strengthen our negotiating arm. As I have said, our vision is that the UK uses its blank sheet of paper on trade policy to align its trade policy with its global environmental ambition. Let us get that clear and written down so that our negotiators can point to it and say, “The conversation that we want to have—and, in fact, that we need to have—is around robust implementation of the Paris agreement, meeting our environmental goals”.
Lastly, David mentioned the need for public support: this matters to the public and they care. For me, this goes to the question—and annunciating—what are we going to get from these trade deals? What is the benefit and value to people? That is very much part of the question and review of what our trade policy is for. We have seen various estimates of what a US trade deal might get us, for example, from an economic point of view. The figures sometimes are relatively small. I have seen some say that the benefit in reduction in tariffs might amount to £8 per household per year. If that is the case, we need to understand what that will do for us and what other benefits we might be able to get from a trade policy that is more closely aligned with our environmental ambitions.
David Johnston (Wantage) (Con)
Q
First, given that this is about continuing agreements that we already have, if we sought to change them, they would not really be continuity agreements anymore. Secondly, could you both talk about the counterfactual? If we did not have this Bill or the continuity agreements, what would be the consequences for this country and for those countries in the developing world with which we are seeking these agreements?
Tom West: I think it is right to say that the Bill itself is focused on those continuation agreements, but in some ways that is symptomatic of the wider problem I am talking about in terms of the lack of an approach that says, “Let’s review and revisit what our trade policy is for and how it should be designed,” with an eye, in particular from our perspective, on what that means in terms of delivering our climate and environmental goals. As a first step, yes, we need to take those sorts of measures and it is sensible to do so, but that is just a first step. That, in and of itself, cannot be the full range of what we should be seeking to achieve when it comes to our approach to trade. However, taking that more ambitious approach requires putting in place certain mechanisms and frameworks. We are talking about scrutiny processes as a key part of that and, in addition, frameworks that seek to guarantee that, through our trade deals, we will be protecting and supporting our delivery of environmental goals by making sure that we retain our right to regulate in environmental matters and doing that thoroughly; that we have non-regression in environmental standards and a meaningful and enforceable commitment to non-regression; and that our import standards match up to our environmental goals.
David Johnston
Q
Tom West: I think that the EU’s approach to trade needs improvement, yes. This is not just about trying to replicate what the EU is doing in any of these areas. There is scope to do things better, to use this new power to conduct our trade policy in new ways where we can be a world leader and use our seat at the WTO to say, “There is a better way to do these things,” and that is a great opportunity.
David Lawrence: Can I just add to that? There are issues around the substance of the agreement, but you can improve the scrutiny processes without necessarily changing the substance of the roll-over agreements, while recognising the importance that those deals are rolled over the before the transition period ends. We work closely with Fairtrade and Traidcraft, which are two of our members. They have direct links to lots of the countries that have the EPA trade agreements—economic partnership agreements—with the EU that are being rolled over. There is a tension because a lot of countries want to change those EPAs—they see Brexit as an opportunity to renegotiate those deals—but there is also a desire for those to be done in time. Our hope is that those things are not completely incompatible and that you can have a new Bill, like the Trade Bill, that implements these agreements while also having a process of scrutiny and an opportunity for countries to reform EPAs where necessary.
In terms of the scope of the Bill, the Bill is about roll-over agreements. It is also about the creation of a Trade Remedies Authority and acceding to the government procurement agreement. Both of those latter two things are about future trade policy. They are not just backward looking—"We need to make sure those things are rolled over”. They are also about the UK’s new trade policy. That is why, for the previous version of the Bill, a number of amendments that were ruled in scope, both in the Commons and in the Lords, were about why the scrutiny process is not just for roll-over agreements but for new agreements as well. Indeed, some of those amendments were successful in the Lords. There is an element of, “If not us, then who, and if not now, then when?” about it as well, because the Government are not proposing any alternative trade legislation at the moment.
This is the only legislative opportunity, as far as we know, to put in place these scrutiny provisions. If the Government want to bring forward a trade framework Bill, or something else where there is an opportunity to have a proper conservation about scrutiny, then fine, but in the absence of that, this Bill should be used to put in place those scrutiny procedures, as with the previous Trade Bill.
Tom West: If I may add to that quickly, this lacuna that David and I are both describing, in terms of where is this bigger picture of trade policy, comes through in the conversations on the Agriculture Bill as well, where the issue of food import standards is, quite rightly, an important topic for debate. We are saying that what we do around our import standards is going to matter. It will matter for British farmers, but for our environmental impact and overseas footprint too.
Our view is that the Government clearly need to act to put in place those manifesto commitments to not compromise on environmental, animal welfare and food standards. We have seen statements in the media in the past around the Trade Bill being the right place to do this, but at the moment there is nothing in the Bill about it. The Agriculture Bill provides that opportunity as well. Clearly, there is a need to do something on import standards. That is true of food import standards, but it is true more widely as well. It is not just food that we are looking to import, and we need to make sure that that approach is compatible with our domestic environmental ambition and our global environmental ambition too.
David Johnston
Q
The Chair
Q
Tom West: We have not run the counterfactual of saying what would happen if these had not gone in there. Overall, the idea of continuing those agreements for now, and then looking at them in the round later on, is an approach that makes sense.
David Lawrence: Yes, I agree with that. The Bills both need to pass before the end of the transition period in order for the deals to be rolled over. We are in agreement on that. The question is whether you can do that, while also having better scrutiny and setting in stone better standards for the future.
Gareth Thomas (Harrow West) (Lab/Co-op)
Q
Tom West: Starting with the US deal, we are concerned about the attempts and the approach from US negotiators, particularly around agriculture and food standards, to change the way the UK currently regulates and legislates in that area. It is clearly set out in the US negotiating objectives that they want to open up UK markets to US agricultural products. Our view is that in many areas those are produced to lower standards than is currently allowed here in the UK.
That also raises the indirect effect that trade deals can have on environmental standards, which is incredibly important. Trade rules can place restrictions on what it is that countries can do to meet their environmental goals. Our view is that achieving environmental goals is a good thing do—it is of value in and of itself—and that trade rules should work within that framework. Limiting what we can do, in order to achieve certain trade goals, is a restriction that we should not have in place.
To go back to the specifics of the US deal, another area of concern is chemicals. Currently in the UK, there are more than 1,300 chemicals for use in cosmetics that are not allowed; in the US, that is around 11. I think that demonstrates the stark difference between the regulatory approach in the US and the current approach we have here. While the UK now has the chance to do things differently—I am not saying we must stick to EU ways; that is not necessarily the approach we need to be taking—we do want to make sure that our standards get better and not worse.
David Lawrence: In terms of the scope of the Bill, I do not think what we want is for the Trade Bill to become a big debate about the US trade agreement, but we do want it to be a debate about scrutiny. If you have those scrutiny practices in place, when the US deal comes round, Parliament can actually debate that properly, rather than relying on the occasional parliamentary question or a Backbench Business debate, which is what currently happens, even though it is on the Government’s own terms for really important big trade agreements.
I completely agree with what Tom said about standards. The key thing here is that there are two dominant regulatory regimes in the world—the EU’s and the US’s. In many ways, Brexit will force the decision about which of those regimes we align with. Something that we have called for—I believe Tom and ClientEarth have called for it as well—is sequencing, whereby the EU deal comes first. We sort out our relationship with our largest trading partner, with whom we are already aligned on so many things and have been for so long, before we negotiate with the US, because the US really do want us to align with their regulatory regime, as Tom said.
You mentioned Canada. Canada and Japan have both asked not to renegotiate their existing terms, but essentially want to seek new free trade agreements with the UK. They have also both emphasised that they want the UK to sort out its relationship with the EU first, because historically the UK has been a springboard, particularly for Japanese investment in the European Union. For a lot of our trading partners, sorting out our relationship with the EU is an absolute priority. We have said let us do that first and then we can think about new trade agreements, such as one with the US.
There are a number of other concerns with the US deal. I will not go into huge detail on that unless you want me to, but we have concerns around public services provision, digital services and regulations in a number of areas, not just the environment, but also health regulations and food standards; we are also concerned about investor protection provisions, because we have seen that those have been used in really damaging ways in other US trade agreements, such as NAFTA. Those are some other concerns we have about the US deal. As I have said already, the real priority is scrutiny, because then we can have that debate properly in Parliament.
Gareth Thomas
Q
Tom West: So, as David was talking about, there is this point about the two big regulatory spheres of influence. Canada is very much close to that US sphere and so, while there might be less of the direct issues, we see that stepping-stone effect.
One extra thing to add is that there are approaches that the US takes in its trade agreements and trade deals that are clearly better than what the EU is doing. Around enforcement, for example, some of the approaches that the US will often take include better enforcement mechanisms for environmental provisions in trade deals. Looking at the different approaches is certainly worth considering.
Fleur Anderson
Q
For Tom, a recent High Court decision about Heathrow airport ruled that we could not have Heathrow airport because it was counter to the Paris climate agreement. Are there risks if we do not put extra environmental standards in the Bill that future trade agreements will be brought into question, as that national policy statement was?
David Lawrence: In terms of downsides to scrutiny, we are very much calling for scrutiny and I do not think there are any really obvious downsides. As I said, it is an area where, perhaps unusually, we are very much aligned with the private sector. A lot of businesses are also calling for similar things.
In terms of developing countries, as you will know very well, Fleur, there are a lot of organisations in the UK representing the interests of developing countries and a lot of foreign aid organisations who would like to be able to see what is going on in trade negotiations and be able to represent those interests to MPs, but at the moment there simply are not those scrutiny proceedings in place. Obviously, the process of scrutiny takes time, so maybe it would slow things down a bit, but on the long-run game of improving public trust in what the Government are doing and public understanding of how trade deals work—where they are beneficial and where they are potentially harmful—it is absolutely worth having those additional scrutiny proceedings in place.
Tom West: The Heathrow decision is a really good example of how important it is to make sure that all of our policies are compatible with our environmental goals. While we might not get a direct read-across in this case here, what it does demonstrate is that we need to make sure that what we are doing in all areas is compatible with meeting Paris and our other environmental goals, too. We have got net zero and an Environment Bill that could provide a framework for some ambitious targets, and we need to make sure that that is compatible. Making sure that we have got that clear framework in legislation will necessarily help with that.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Q
David Lawrence: We have very similar concerns in relation to devolved nations. It is obviously tricky because you do not want to necessarily end up in a gridlock situation where an entire UK-wide trade agreement is blocked because one of the nations has a veto, but at the same time there will be parts of trade agreements that primarily or only affect the industries in the devolved areas and that cut across regulations that are normally devolved competencies. In those areas, we would like that to be the decision of the devolved authorities. Obviously, there is a role for consultation throughout that, as there has been through the Brexit process. I know it has not been handled perfectly in the Brexit process.
More generally, it is about applying the normal standards of democratic scrutiny that we would expect for other areas of domestic legislation to trade agreements, in recognition that trade agreements have a large and wide-reaching domestic effect. If the Government want to build a new railway like HS2, they have to put it in a Bill that has all of its Commons stages, layers of scrutiny and Committees like this one, and then it goes to the Lords and it comes back again. It goes back and forth, the media get involved and people write to their MPs about it. That is just for a railway and this is for a trade agreement that, if the Government are to be believed, is central to the UK’s post-Brexit industrial strategy, and MPs do not have anywhere near that level of say over it. So what we are calling for is similar to the way in which other regulations and big projects and proposals are treated with the level of democratic scrutiny that they receive.
Tom West: Yes, I agree. With environment, agriculture and fisheries all being devolved, this is obviously really important to our concerns, too. Clearly, there is a need for better mechanisms to be in place to make sure that the four Governments of the United Kingdom can work together to have the appropriate conversations about how we are going to work these things out. It is not straightforward exactly how it will work, but clearly it needs to be done so that the devolution settlements can be respected, and, as David says, so that the proper democratic input into trade agreements can be had.
The Chair
If there are no further questions from Members, I will thank the witnesses for their evidence and we will move on to the next panel. Thank you, David and Tom.
David Lawrence: Thank you.
Tom West: Thank you.
Examination of Witness
Sam Lowe gave evidence.
The Chair
Q
Sam Lowe: Thank you for inviting me. My name is Sam Lowe and I am a senior research fellow at the Centre for European Reform, a think-tank. I am also a member of the Strategic Trade Advisory Group.
Bill Esterson
Q
Sam Lowe: The first thing that I should say is that I think the Bill is necessary; there is a need for continuity when it comes to the UK’s trade relationships with third countries. Looking at the provisions for the government procurement agreement, I can see why there might be some concerns about the powers given to the Executive to alter things in future, but I also understand why the provisions are there, in that the government procurement agreement will evolve over time, new members will accede to it and there will be a need to update it.
Specifically on the continuity agreements, there are a few points that I would like to make. First, I am not sure that the scope is fully understood, in that it maybe covers more agreements than people think. As well as the ones that we all know about, for example Chile, Jordan and the like, it also covers Singapore and, to my reading, Vietnam, which was signed by the EU in June 2019. That is something that should be considered.
When it comes to the broad categorisation of continuity, I have a few questions. I would probably recategorise the agreements. I would start with category 1, which is the pure continuity agreements where there are just minor changes to be made. I am thinking of Chile, Israel, Jordan, Lebanon, Faroe Islands and the like. I would also include South Korea stage 1 in that box.
My second box would be the agreements that are continuity agreements but will be substantially different from what exists within the EU. Those are the agreements with Norway, Iceland, Switzerland and Turkey, and I would probably add Ukraine to that box as well. Because the existing relationship is so contingent on our EU membership, there is no doubt that the future agreement we have with them will be substantially different from today.
The third category are just new agreements, because we have decided that they cannot be rolled over and we are set to renegotiate them. That would be Japan and Canada. I would also put South Korea stage 2 in that box, in that the South Korean roll-over agreement contains a commitment to consider renegotiating after three years, but it also contains a poison pill that means that we will inevitably have to, because the rules of origin provisions that allow for EU inputs into UK goods to continue to qualify for the agreement’s local content provisions expire after three years. In that case, it will be a renegotiated new agreement.
As to whether I think the Bill is appropriate in its coverage, I think for box 1—pure continuity with minor changes—it is fine. For box 2—continuity but with big changes—I would say that it is probably still fine. There are obviously some concerns that they will change substantially, but those agreements are ones where we probably need to prioritise continuity over all else. In box 3, to my mind, they are new agreements, so I am not sure why they will be covered by a Bill that is focused on continuity—particularly in the case of Japan, where we have seen new objectives and even statements that we want to go beyond the EU’s existing agreement.
I would conclude with the need to consider the counter- factual. What we are discussing here is not necessarily the whole trade agreement; we are discussing how we deal with the implementing legislation accompanying the trade agreement. If we think about what that covers in practice, we are largely just talking about procurement and perhaps some issues on technical barriers to trade—that is it. In practice, we are probably talking about fairly minor changes in this space.
In the grand scheme of things, I suppose the question we are asking ourselves is: would slowing this down for everyone in order to do this via primary legislation add sufficiently extra scrutiny on the whole? I am not convinced it would, considering that it is ultimately still a yes/no decision either way. Parliament is not going to change; it just has to decide whether it wants it. Here is where I think it speaks to the bigger issue, which the Bill does not address but is hard to ignore. I listened to some of the first panel, and they touched on it. Parliament’s role vis-à-vis trade policy is incredibly limited; it is largely an Executive competence. Parliament has very little influence over what trade agreements look like, and very little ability to object to them if it comes to it.
Bill Esterson
Q
Sam Lowe: The question of whether it is needed is a very good one. I am not sure I can actually answer it. You have just acknowledged that some of the agreements have passed. I suppose it is required, in that there might be a need to get some legislation through very quickly at the last minute if some of these negotiations drag on, so there is an issue there. Your first point was about what is in the agreements.
Bill Esterson
Q
Sam Lowe: I cannot confess to have looked at the text of every single one, but one of the concerns that had been raised was that there was an issue about whether the tariff rate quotas will have been changed in a specific agreement. When I looked at Chile in this case, the changes that had been made did, to my mind, make sense. For me, the most interesting point about some of the continuity agreements is the approach to rules of origin, which I mentioned earlier. It is the process by which a product qualifies for tariff-free trade under a trade agreement, dependent on the amount of local value added. As the UK has an issue, which is that in many sectors we do not create enough local value added to qualify for free trade agreements under normal rules of origin-type provisions, we have inserted conditions that allow for EU inputs to continue to be accounted for—either indefinitely in the case with Chile, or temporarily with South Korea. That is not necessarily a concern, but it is interesting. It is actually quite a new approach to rules of origin, and the jury is out on whether it is WTO-compliant. I probably lean towards it being compliant, but I have certainly heard counterarguments.
Antony Higginbotham (Burnley) (Con)
Q
Sam Lowe: Sorry, you cut out at the end.
Antony Higginbotham
It was just about what the impact of our not having a TRA might be. Have you given any thought to that?
Sam Lowe: We do need a Trade Remedies Authority. As it stands, this is dealt with at EU level, and when it comes to disputes over trade—be it because we are worried about unfair subsidies abroad, or worried about products being dumped on our markets or being sold at an artificially low price—we need a means to investigate and remedy them. In the interim, I believe the approach is that following our exit from the transition, we are just going to continue with the EU trade defence measures. However, those measures might not be justifiable if we are only taking into account the UK context, so they are all going to need to be reviewed.
I do have some concerns about the practicalities of the Trade Remedies Authority. First, I believe it has lost two provisional chief executives already, and it is still looking for a new one. Secondly, speaking as someone who comes from south Wales, from Llanelli—I am not an “everything needs to happen in London” person—I am not convinced that it was a sensible decision to put it in Reading and offer the salaries it does when it is trying to attract trade lawyers with vast amounts of experience. My fear is that it will create a false economy: we will end up paying law firms to do it all for us for a while as we build up the internal capacity, and then because of the pay constraints, the people who have learned how to do the job will be able to leap into these law firms to get paid a lot more. That may point to a broader problem with retention in the civil service.
Gareth Thomas
Q
Sam Lowe: Canada is a long story, in that it links back to the previous iteration of the Government’s no-deal tariff schedule and its publication. When we put forward a tariff schedule that was very liberal and offered a lot of access to everyone, the Canadians looked at it and said, “We do not want to roll over any more, because you are giving the whole world for free what we had to pay for via our trade agreement”—remember, they also had to open up their market in that context. I believe that the more recent update to the new global tariffs has changed that calculation slightly on the Canadian side, and will lead to a renegotiation.
The reason that the Japanese were not able to roll it over from a domestic point of view was that from their perspective, they had liberalised their agriculture sector to a great extent over previous years—through their agreement with the EU, through the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and also through their more recent agreement with the US. If they were to roll the agreement over to the UK, they would be giving extra agriculture access to their market on top of all that, but for free. That was just not politically doable within the Japanese context, so it led to the need for this renegotiation.
Turning to the contentious issues, I suppose that with Canada we could return to some of the TTIP issues around investment all over again. That is also the case with Japan. I think both those deals are probably doable by the end of the year under certain circumstances, but you will notice that the UK has had difficulty replicating agreements with the bigger countries. It has not been so difficult with some of the smaller countries, but if you think about the ones that have not been done yet—Japan and Canada, but also Mexico and Ukraine—many of those countries want to be certain of what the future UK-EU relationship looks like, and what concessions the UK offers the EU, before finalising anything with the UK.
The Chair
We have until 12.35 pm for this session, and three other Members want to ask questions, so it would be good if we could keep questions and answers quite concise.
David Johnston
Q
Sam Lowe: Yes. In terms of countries that require continuity, Turkey is quite a good example: we currently have supply chains that run out of the UK into Turkey and back. I think particularly the automobile industry has some exposure here. This is a really tricky one, in that we are currently in a customs union with Turkey via our membership of the EU and, unless we are in a customs union with the EU, which is obviously not Government policy, we are going to be unable to replicate that relationship with Turkey. When it comes to the future trade agreement with Turkey, at least on the tariffs level, the most we can expect is for it to match what we have agreed with the EU. That, of course, would be better than not having a trade agreement; but the benefit of being in a customs union is you do not need to worry about rules of origin. So all of a sudden this becomes a slight issue with Turkey, and it is why I put it in my second box earlier, of being a continuity agreement but with big changes.
Of course the other ones that really do, probably, matter are Switzerland and the EEA countries—Norway, Iceland—in that we have quite deep trade relations with them now, as we are part of the single market. That will obviously, again, change quite substantially because of our decisions over our relationship with the EU.
Another country that does matter, and I believe it has been resolved—I do not want to say certainly, because I do not have a list up in front of me—is South Africa, in that we actually have automobile supply chains that run through South Africa. There we have a different problem, in that it does not achieve the same for the companies as now; we currently export products to South Africa—inputs to South Africa under the EU-South Africa agreement— that are put into, say, a car there and then sold back into the EU under the preferences of the agreement, because the UK-based inputs can qualify as local to South Africa under something called bilateral cumulation. That will cease to exist under the new agreement.
The point I would make is that all the agreements are going to change. I have just, in my head, got three different categories.
Matt Western (Warwick and Leamington) (Lab)
Q
Sam Lowe: Having read the Trade Bill, I think the approach seems broadly sensible. I do not have it in front of me at the moment, but I believe the Secretary of State approves the chair; and then the chair makes a recommendation on the chief executive, subject to sign-off of the Secretary of State, unless the chair is not there, in which case the Secretary of State does it. I understand it is an independent body to the Government, but it obviously needs to have close ties with the Department for International Trade.
Fleur Anderson
Q
Sam Lowe: Taking into account the current scope of the Bill, which is to achieve continuity, it is slightly unique in that sense. However, I agree with a comment by an earlier witness: if there is not going to be further legislation to lay down the scope for Parliament’s engagement in future trade agreements, it seems to me that it would be possible to expand the remit of the Bill to cover that. I think that is right, in that the Trade Remedies Authority and GPA provisions are forward-looking, so there is no reason why you could not do that as well.
The UK’s general approach to scrutiny is very poor. I think parliamentary scrutiny is very poor. Parliament has very little ability to influence trade negotiations or set the agenda of trade negotiations. To my mind, it has—[Inaudible]—yes/no vote. Just from a democratic point of view that seems slightly out of order to me, in that, when we compare it with the US or the EU, Parliament at the crudest level has a yes/no option on whether to approve a trade agreement or not. As a result it is much more involved with the process. That is something I should like changed. Of course that is not currently in the scope of the Bill, but if the Government are not going to introduce further legislation, I would understand if the scope of the Bill was expanded.
The Chair
Q
Sam Lowe: The point I am making is that this Bill is not really comparable to other systems, in that it is sort of unique. To score the UK approach more generally to treaty scrutiny out of 10, it would be below five.
The Chair
Thank you very much for giving evidence. If there are no further questions from hon. Members, I ask that we move on to the next panel. We are just waiting to get the technicalities sorted out, so we will suspend for a few minutes.
The Chair
We will now hear oral evidence from Nick Ashton-Hart from the Digital Trade Network. Nick, can you hear us?
Nick Ashton-Hart: I can indeed.
The Chair
Q
Nick Ashton-Hart: Thank you. I will try to be brief, because it is important for you to have time to ask me things. I am Nick Ashton-Hart, the Geneva representative of the Digital Trade Network, which is a coalition of industry groups throughout the world. I am the focal point for industry on digital economic policy in Geneva. I have been involved in the trade community for more than a decade and participated for about 20 years in multilateral telecommunications and trade policy as it relates to use of the internet.
I am frequently on national delegations and an adviser to countries or groups of countries that are negotiating economic policy. I am also the special adviser on international internet policy for the International Chamber of Commerce in the United Kingdom, although I am speaking to you today in my personal capacity as a trade expert in the field.
Bill Esterson
Q
Nick Ashton-Hart: Thank you very much for the question. Thank you all for asking me here. It is a great privilege and honour, as an immigrant who arrived here in 1986 with £900 in my pocket, to be heard by Parliament.
With respect to the Bill, many of the comments I made about the Bill in the last Parliament remain true. There are some changes in this Bill, but the core of the issue is the road it sets out in terms of consultation on trade policy with not only Parliament, but industry as a whole. In my work, I see how Trade Ministries worldwide relate to stakeholders and how they choose to involve stakeholders in trade policy-making and negotiating.
I understand the argument that the continuity agreements are intended to be as close as possible to and a simple replication of the provisions of the agreements that you benefited from via membership of the EU, and that consultation is not necessary because of that fact. As I said in 2018—and this remains true—these are not the same agreements. At that time, we did not have any of the agreements rolled over, if you will, so we assumed that they would not be the same agreements. Based on my experience in trade policy, nobody makes exactly the same deal with a smaller party that they did with the larger party, because it is not in their interest to do that. In this case, we have even more reasons.
As an example of how these agreements are not the same, I offer up the Swiss agreement. There are 20 mutual recognition chapters of the Swiss-EU agreement. The UK-Swiss agreement has only three, because Switzerland cannot agree that our regime is equivalent unless we continue to apply the EU regime, as the Swiss-EU agreement requires that. So, 24% of the UK’s exports and 16% of imports in that deal are not covered currently. That is also true in the agreement on customs, so UK goods will not be expedited through the Swiss border in many cases as a result.
Therefore, these are fundamentally not the same agreements, yet they are treated, in terms of consultation with industry and Parliament, as if they are, when they are materially different. It is like anything else—if you start out on a road, you want to make sure that the destination you are heading towards is the destination you want to reach. I think that, as a country, the destination we should want to reach is that the country as a whole buys into the arrangements for trade policy that the country proposes to make.
While I accept that in February 2019 the Government’s roadmap for consultation with Parliament and with civil society and the like began to approach what we would consider a more standard relationship, I offer this comment to Committee members to consider. If you are negotiating with another party about economic affairs, the reason why you want industry to have a close relationship with you when you are doing that is because industry has relationships with industry on the other side—in the country that you are negotiating with. Industry can then help you to gain support from industry in your negotiating partner for the provisions that you are recommending, which are also in the interests of industry in that other country, or negotiating partner. If industry is not a close collaborator with you throughout the negotiating process—not just in setting up the terms that you are looking for before you negotiate, but throughout the negotiation and ratification process—you are robbing yourself of a key element that will help you to negotiate a successful outcome.
That is just as true when you are dealing with issues such as the GPA as it is when you are dealing with regular free trade agreements, or regulatory co-operation agreements, which are not really discussed that often but are fundamentally important—financial technology bridges, or FinTech bridges, and the like.
That is the key thing that I have heard from industry, and the key thing that I have seen is that the continuity agreements are taking longer to reach than had been thought. I wish I had been wrong about some of my predictions back in 2018; unfortunately, pretty much all of them have turned out to be taking place. These agreements have been more difficult, they have been more different and there are gaps in coverage. Of course, all of that is not terribly surprising, but despite the knowledge that industry and other stakeholders were right when they said that more consultation was needed, the Bill still does not provide for that consultation to take place, which is a real lack, and an opportunity that should be seized.
The consultation should not be seen as a negative; it should be seen as a positive. These agreements will last longer than they are expected to, and the successor agreements to them will take longer to negotiate than is estimated, because there is one thing that you can guarantee about a trade agreement negotiation process and it is that the target date for finishing it is not the date you will finish. You will definitely finish at some later point than you predict. That has proven true for us with these continuity agreements, which is not a surprise to anyone in the trade community.
Hopefully, that is not too long an answer.
Bill Esterson
Q
Nick Ashton-Hart: First, I should say that you will have testimony from other witnesses who will have more knowledge of all the continuity agreements than I do. As you know from our conversations, I am a services guy, so I tend to focus on services and digital services.
As is the case in the Norwegian agreement, we will find that in any third-country agreement we try to make, the EU will quite naturally have made conditions on that country’s negotiations with additional third countries—the regulatory choices that the third country has with other parties with which they negotiate, other than the EU, are constrained by the agreement with the EU.
When it comes to regulatory chapters in trade agreements, there are really three major powers: the US, the EU and China. We do not have the regulatory freedom to determine, on our own sovereign nature, exactly what we do. Ultimately, we will adopt one of these three—we are smaller, and that is how it works. Big blocs carry the weight and tend to get more of what they want than do smaller parties. That is true of negotiating for anything in life. Anyone who has bought a car or a house will realise that those things stay the same. We will find that the choices that other countries are allowed to make in terms of their agreements with us are constrained by their deals with the great powers.
David Johnston
Q
Nick Ashton-Hart: The GPA is its own special animal. You will already have had descriptions of it, so I will not describe it. The GPA is a pretty loose agreement, and you can decide what you want to include within it and what you want to exclude. In theory—actually, in reality—it offers access to large amounts of potential supplies to Governments around the world, because Governments are major purchasers of everything. There are many conditionalities on that, and we will get less out of it than is suggested by the headline numbers, because of the flexibility of the arrangements and the scheduling. Countries, naturally, often like to sound more open than they are in this area.
I know of a certain European example: a major trading partner of ours in the EU that speaks a language that is not in the world’s top 50 most spoken languages has the same commitments on government procurement as does the EU, in terms of market access to third countries. What is not stated, however, is that you must do all of your bidding, contractual work and work with that party in that language that is not in the world’s top 50 languages, which quite naturally rules out the vast majority of people and companies in the UK, especially small companies. I am sure that a vanishingly small number of people in the UK speak that language.
So yes, the GPA is important, and yes, it does allow our firms access to many other markets but, looking at the fine print, access is not as simple and straightforward as is suggested. The GPA allows you to say to another country, “You—service provider X—can bid on services with my country.” It does not say, “And we will treat you as if you are one of us for regulatory issues.” You still need to be able to meet the regulatory requirements as a service provider that a domestic service provider has to meet. That is understandable and reasonable, but if your regulatory system in the UK is not seen as equivalent by that country, you will have to go through the additional step—if it is a regulated service, and many of them are—of being found to be regulatorily compliant with the regime of the country you are selling into. As we know, services are all heavily sensitive to regulation and to regulatory compatibility in third countries that you are selling into. That is why the single market is such a massive enabler of services trade throughout the European Union and its member states.
David Johnston
Q
Nick Ashton-Hart: Certainly.
Matt Western
Q
Nick Ashton-Hart: We are, as you know, one of the world’s powerhouses in services. Part of the reason we are a powerhouse in services is because, in the digital realm, we are also a great power in terms of innovation and firms that have had a lot of international success. Something like 60-plus per cent. of UK trade is underpinned in one way or another by digitalisation, so we are highly sensitive to any barriers to services through regulation, as well as through things such as the free flow of data and data protection.
We know that the agreements will not be duplications, because they are already not exactly the same. To the extent that we can, we should try to ensure that there are liberalising measures associated with at least the fundamentals of digital trade—some arrangements on data protection and on mutual recognition. Of course, that would also require us to stay quite close to the EU regime on data protection, which I and the industry have strongly argued in favour of. It is difficult, because if you are a negotiator and say, “I want to replicate this agreement, but I want to change one thing,” the other side is quite naturally incentivised to say, “Okay, then I want to change another thing.” The reality is that everyone will come to this with some changes, because—for many reasons, only one of which I covered—you cannot just copy and paste.
To the extent that we can put in digital measures, we should. It should be a part of the negotiating mandate for those agreements. It may be; I speak to DIT people quite frequently and have not heard whether it is, so I would not like to say whether it is, one way or the other.
Charlotte Nichols (Warrington North) (Lab)
Q
Nick Ashton-Hart: I would say that, at the level of principle, it probably should be. This is an example of an area of regulation that is not only economically consequential, but social and politically consequential. It is also not understood very well. The issues around platforms relate to business-to-consumer platforms, and particularly to social media. Those platforms are a tiny minority of the actual economic value of platforms as a whole. Business-to-consumer traffic represents about 10% of a platform’s value vis-à-vis the 90%, which is business-to-business traffic.
It is important at a level of principle to recognise that there are sensitivities, but it is also important to recognise that economic policy does not solve social problems and that the hooks need to be there to allow for exceptions, so that social problems can be anticipated and dealt with by the competent authorities that are responsible for them. In economic policy, however, the default is that platforms are a public good in the same way that markets are a public good. We want to facilitate innovation in the platform space, and our economy is a huge beneficiary of that.
The Chair
If there are no further questions from Members, on behalf of the Committee I thank you, Nick, for your evidence.
Ordered, That further consideration be now adjourned. —(Maria Caulfield.)
Parliamentary Constituencies bill (First sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Parliamentary Constituencies Act 2020 View all Parliamentary Constituencies Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Notices of Amendments as at 16 June 2020 - (17 Jun 2020)
The Chair
Before we begin, I have a few announcements. Please ensure your mobile devices are on silent. I allow you to bring in tea and coffee. I am not as strict as some other Chairs. You are welcome to keep refreshed during the proceedings. I call the Minister to move the programme motion in her name.
The Minister of State, Cabinet Office (Chloe Smith)
I beg to move, Date Time Witness Thursday 18 June Until no later than 12.20pm Boundary Commission for England Boundary Commission for Scotland Thursday 18 June Until no later than 12.40pm Boundary Commission for Wales Thursday 18 June Until no later than 1pm Boundary Commission for Northern Ireland Thursday 18 June Until no later than 2.30pm The Conservative Party Thursday 18 June Until no later than 3pm The Labour Party Thursday 18 June Until no later than 3.30pm The Liberal Democrats Thursday 18 June Until no later than 4pm The Scottish National Party Thursday 18 June Until no later than 4.30pm Plaid Cymru Thursday 18 June Until no later than 5pm Professor Richard Wyn Jones, Wales Governance Centre, Cardiff University Tuesday 23 June Until no later than 9.50 am Dr Alan Renwick, The Constitution Unit, University College London Tuesday 23 June Until no later than 10.10 am The Green Party Tuesday 23 June Until no later than 10.40 am Professor Roger Awan-Scully, School of Law and Politics, Cardiff University Tuesday 23 June Until no later than 11.25 am Professor Iain McLean, Department of Politics and International Relations, University of Oxford Professor Sir John Curtice, Department of Politics, University of Strathclyde Tuesday 23 June Until no later than 2.30 pm The Association of Electoral Administrators Tuesday 23 June Until no later than 3pm The Local Government Boundary Commission for England Tuesday 23 June Until no later than 3.30 pm The Electoral Reform Society Tuesday 23 June Until no later than 3.50 pm The Democratic Unionist Party Tuesday 23 June Until no later than 4.10 pm Dr Jac Larner, Wales Governance Centre, Cardiff University Tuesday 23 June Until no later than 5 pm Professor Charles Pattie, Department of Politics, University of Sheffield Dr David Rossiter
That—
(1) the Committee shall (in addition to its first meeting at 11.30am on Thursday 18 June) meet—
(a) at 2.00pm on Thursday 18 June;
(b) at 9.25am and 2.00pm on Tuesday 23 June;
(c) at 11.30am and 2.00pm on Thursday 25 June;
(d) at 9.25am and 2.00pm on Tuesday 30 June;
(e) at 11.30am and 2.00pm on Thursday 2 July;
(2) the Committee shall hear oral evidence in accordance with the following Table:
TABLE
(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 11, the Schedule, Clause 12, New Clauses, New Schedules, remaining proceedings on the Bill;
(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00pm on Thursday 2 July. Chloe Smith has given notice of her intention to move a motion in the terms of the Resolution of the Programming Sub-Committee [Standing Order No. 83C].
Thank you for your chairmanship, Mr Paisley. We all look forward to serving with you. I welcome the shadow Minister and all members of the Committee. I am grateful to everybody for their time and to the witnesses.
It is important that we have a motion here that provides for four oral evidence sessions and six sessions of line-by-line scrutiny, with the option, should we need it, for afternoon sessions to run longer, but I am sure none of us wants any midnight finishes, so we will stick to the work in hand. This gives a good amount of time for the Bill to be properly scrutinised. I really welcome the fact that we have a wide range of witnesses.
I draw the Committee’s attention to the letter that everybody ought to have received from me already, outlining a Government amendment we are making with respect to the data to be used by reviews, which I hope is welcome in the light of the impact of coronavirus.
The Chair
The Minister is referring to a letter of 15 June. I assume everyone has received that.
Question put and agreed to.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Chloe Smith.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee room. I believe they are at the back of the room.
Resolved,
That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Chloe Smith.)
The Chair
Mr Bellringer, you are very welcome before us, physically, and Isabel Drummond-Murray, can you hear me? Hello.
Isabel Drummond-Murray: Hello. I can, yes.
The Chair
You are very welcome with us virtually. Thank you both for taking the time to join us and for allowing the panel to proceed.
We are now in public session to hear evidence from Tony Bellringer, secretary to the Boundary Commission for England, and Isabel Drummond-Murray, secretary to the Boundary Commission for Scotland.
Before I call the first Member to ask a question, I remind the Committee that questions should be limited to matters within the scope of the Bill. We will stick to the timings in the programme order. The Committee has agreed that for this panel we will have until 12.20 pm or thereabouts.
I ask any members of the Committee who wish to declare any relevant interests in connection with the Bill to make those declarations now.
The Chair
I call the first witnesses. Will you please introduce yourselves? We will start with you, Isabel.
Isabel Drummond-Murray: I am Isabel Drummond-Murray, secretary to the Boundary Commission for Scotland.
Tony Bellringer: I am Tony Bellringer. I am the acting secretary to the Boundary Commission for England.
The Minister of State, Cabinet Office (Chloe Smith)
Q
Could you talk us through what it consists of to conduct a review? Also, given that this legislation focuses on having equal and updated boundaries, perhaps you would be able to give us some insight into the importance of updating your work, including the fact that we have a slightly shortened review for the first of the series of actions that is outlined in the Bill.
Tony Bellringer: How a review operates is set out in the current legislation. Prior to this review, the legislation was most recently and substantively amended in 2011, when the rules by which we work were changed. Essentially, we gather the parliamentary electorate from across the United Kingdom. There is a statutory formula set out, which calculates the distribution of the House of Commons seats across the different parts of the UK.
There are four commissions—one for each part of the UK. Effectively, each of us then works independently. At the end of the day, we have to come up with a report that recommends to Parliament the prescribed number of seats for that part of the UK. Currently, they must be within plus or minus 5% of essentially a mean average electorate figure for the constituencies, the official term for which is the electoral quota.
We go through a process of iterative public consultation; that process is also prescribed in the legislation. We have an initial proposal stage. We work slightly differently to the local government commissions, in that we start off by coming up with a scheme with proposals, and then we publish those and consult on them, whereas the local government commissions tend to consult first and then come up with some ideas.
The initial consultation then produces a raft of responses; we receive very many responses. We then work through all of those responses; we do genuinely consider every single response that we get. And we look at what we may need to change from our initial proposals.
Currently, we are required to do something called secondary consultation, which is publication of all the responses to the first consultation that we receive. So, there are no new proposals in there; it is simply giving people an opportunity to comment on what other people have said.
We then look at all the responses to that secondary consultation as well and come up with a set of revised proposals, which we again publish and consult on for a period of time. We then look at those again, decide whether any final changes need to be made, and then we write up our final report and recommendations. Currently, those are submitted to the Government, who are then required both to lay that report before Parliament and translate it into a draft statutory instrument, which must be actively debated by both Houses. If it is approved, those constituencies will be used at the next general election.
As for the second question about the importance of conducting a review now, the constituencies that we currently have were the result, in England, of a review that concluded in late 2006; the order was made in 2007. Those constituencies were first used in the general election of 2010. However, the process that led to that report began in 2000. Therefore, the electorate data that your current constituencies are based on dates from 2000.
A review was commenced under the new legislation, to report in 2013, and as we know from the Bill, there was also one that was held in 2018 and reported in the same year. To date, neither of those reviews have resulted in a new set of constituencies, so your existing constituencies are very out of date. So the Government have come forward with this proposal to set aside the recommendations of the 2018 review and proceed very quickly to another review, largely working to the same rules established in 2011, but with a slightly truncated timetable that I believe would see us report in July 2023, with—I guess—the idea being that you would then have about 12 months before the expected next date of a general election.
The Chair
Q
Isabel Drummond-Murray: I think that Tony has covered the legislative framework pretty well, so, no, there is nothing I would add to that.
Cat Smith (Lancaster and Fleetwood) (Lab)
Q
“One of the most testing issues in the context of the revised statutory framework has been the requirement to reconcile the need to adhere to a fixed electorate tolerance (i.e. within 5% of the electoral quota) with the need to respect local ties and/or existing constituency boundaries.”
Do those concerns still stand and, if so, is there any way of alleviating the difficulties that the commission will face?
Tony Bellringer: Yes, the problem still exists. It is essentially a pragmatic problem. The smaller the tolerance level you allow, the closer you get to the pure principle of electorate equality between constituencies, and that is all to the good. The problem is that that makes it very much harder to have regard to the other factors that you specify in the legislation, such as the importance of not breaking local ties, and having regard to local authority boundaries and features of natural geography. Basically, the smaller you make the tolerance, the fewer options we have. That is what it boils down to.
How could you mitigate the problem? The only real way to mitigate it is to make the tolerance figure slightly larger. The larger you make it, the more options we have and the more flexibility we have to have regard to the other factors—but obviously, the further away you are moving from the pure principle of electorate equality. You do need to strike the balance somewhere.
The commission itself does not have a view on what the correct figure should be—before anybody tries to ask me that question. However, we would highlight the fact that some academic work has been done on this. I believe that you are due to interview Charles Pattie, who was one of the authors of a report in 2014 that looked specifically at the issue. He is more qualified to say than I am.
Cat Smith
Q
Tony Bellringer: Yes is the short answer. As you say, particularly in England we work or we have traditionally worked on the basis of using wards as our building blocks—I am sure there will be some discussion about that in due course. But as you say, a number of wards, particularly in urban authorities in England, are larger than the entire possible range that you are permitted—the difference, I should say—so by moving one ward, you will move from being too big as a constituency to being too small, with nothing in between, so you then have to start looking at splitting the wards, which becomes more problematic for us, for reasons that I am sure we will get on to.
David Linden (Glasgow East) (SNP)
Q
Isabel Drummond-Murray: It is not possible to give an answer to that until we have the electorate data that the review will be based on. I think, informally, we did look at the December ’19 register, and if that were the one being used, it did suggest a reduction in seats in Scotland. Clearly, the Bill as drafted suggests the December ’20 register. Until we get those figures published, from whichever data is finally proposed by the Bill, we cannot tell you exactly how many seats there would be. We would have to run the formula that Tony referred to, and that would allocate between the four countries.
David Linden
Q
Isabel Drummond-Murray: It was problematic in the last review, because the public hearings were held during the initial consultation and that meant that you were trying to guess in advance where there was likely to be particular interest. You were trying to cover the geography and population of Scotland with five hearings, so if you held one in Edinburgh and one in Glasgow, you then had a large area to cover with the three remaining ones. The Bill proposes holding public hearings and a secondary consultation, which will help, because we will then have an idea of whether to hold the ones outwith the central belt in, for example, Inverness or Hawick. You just cannot tell. There is still an element of guessing, from the responses received, as to where people really want to come along and discuss in public what we propose, but yes, that will help. I think six also helps, geographically.
David Linden
Q
Isabel Drummond-Murray: We start the review by allocating loose groupings—they are not set out in legislation, but they enable us to divide up the country. As a preliminary step, we always look at the highlands first, because of the rule that an area bigger than 12,000 sq km can go below the minus 5% threshold. However, because of the way the legislation is worded, you would only need to go below that 5% if you could not reasonably construct a constituency otherwise, but we could. We found in the 2018 review that it was possible to stick within that plus or minus 5%, despite its being a very large constituency. I think Highlands North was the only constituency proposed in the 2018 review that was above 12,000 sq km, which is obviously geographically very large.
David Linden
Q
Isabel Drummond-Murray: We do not use polling districts, in part because there has not been an available Scotland-wide, up-to-date dataset that we could access. We create our own postcode datasets, so when we come down to split below ward level, if necessary, we do it on the basis of postcodes. We have always been able to split wards in Scotland, if necessary.
Christian Matheson (City of Chester) (Lab)
Q
Tony Bellringer: In essence, there are two categories. One is mandatory—the plus or minus 5%—which we have to stick to and is obviously our primary factor. About half a dozen other statutory factors are set out in schedule 2 of the Parliamentary Constituencies Act 1986. We do not prioritise any of them formally. I guess we would look first at the rule about having regard to existing constituencies. So far as possible, we actually start off by asking how many constituencies that are currently there already fit the plus or minus 5% and whether we can start by not changing those. We then look at those that are not within the plus or minus 5% and think, “Okay; that is going to have to change, and that is going to have to change”. That is why you often find, unfortunately, that you may be sitting as an MP in a constituency that perfectly meets the plus or minus 5%, but your constituency changes because some of the neighbouring ones have to change and have to take in some of yours, or vice versa.
As I say, we do not have a firm ranking, but we then probably look at local ties. To a certain extent, you would expect existing constituencies to have already respected local ties, which is why it is not higher, because local ties are generally what people feel most strongly about—in fact, probably more than the numbers, to be honest. They accept the principle of electorate parity, but if you ask most people on the ground, they are more concerned about their local communities being split off from each other in the drawing of the lines. That is what the vast majority of responses to our consultation are about, so we do look at whether we are breaking local ties.
There is also the obvious map factor of physical geography and what are termed significant geographical features. River estuaries, mountain ranges and motorways are fairly obvious bits of physical geography that can have quite a significant impact on how you would want to look at drawing a constituency. Is that enough for you?
Christian Matheson
It is, yes, thank you. Ms Drummond-Murray wanted to answer as well from the Scottish point of view.
Isabel Drummond-Murray: It is a broadly similar process. As Tony said, you weigh up the factors and go through the process of the various consultation rounds. That is an important part as well: whatever we have weighted or not at the beginning, by the time we go through the consultation, it is all open to change. In the 2018 review, by the end, only 10 of our mainland constituencies were unchanged from the initial proposals. Whatever we do at the start is open to public views on things such as local ties, names and so on.
Christian Matheson
Q
Tony Bellringer: Er, yes. [Laughter.]
Isabel Drummond-Murray: I was going to say that we never get it wrong—we have a technically correct proposal—but as I say, in consultation, we listen to people’s responses. Certainly, in our initial proposals, we set out constituencies that were very unpopular and we listened and changed them where we could. You are then constrained by how much you can change within the legislation and all the knock-on consequences of the change that you also have to throw into the mix.
Tony Bellringer: To clarify my initial flippant response, it is largely as Isabel says. You could almost say that we deliberately put some proposals out there at the initial consultation stage that are quite radical and, yes, get quite a lot of negative responses—Mersey Banks is a classic case. The other one that I have had to talk about quite a lot is moving the city of Gloucester out of Gloucester in the 2013 review.
We do that in the full knowledge that it is only the first round of consultation and people will tell us if they genuinely think it is a really bad thing to do. There are actually reasons for doing those things, but as I mentioned earlier, you are somewhat constrained by what is happening around that constituency. It might not be an ideal solution for that constituency, but it might have allowed us to solve a number of issues in neighbouring constituencies. It is not ideal, but we put it out there and test the water, because it is the first stage of consultation and we know full well that if we get a huge pushback on it, we will change it to something better.
Christian Matheson
Q
Tony Bellringer: Yes. We would like to get it right first, but we are cognisant of the fact that if we do not get it exactly right first time, we have a process whereby we can correct it.
We genuinely do not know. We feel that it is probably going to be unpopular in that particular constituency, but, as I say, we have had to do it there. We think that, as a whole in the wider area, it provides a better solution. It is not a good solution for that constituency, but any alternative we have been able to come up with creates problems in those other constituencies. As an overall balance, we think that is probably best, but we recognise that you are not going to like it if you live in that particular constituency, so let us test the water and see what the general public opinion is in that area. Everybody in the area could come back and say, “No, there’s a better option.”
Christian Matheson
I will not push it to a fourth. Do you have any consideration of constituencies that have multiple local authority areas? Some Members represent two local authorities and others represent three. Do you have any rules or guidance on minimising that?
Tony Bellringer: Yes. One of the statutory roles is having regard to local authority boundaries and local government boundaries. As far as possible, we try to limit the number of local authorities that the prospective MP of the proposed constituency will have to deal with. That is very much in our mind.
The Chair
Isabel, did you want to add something?
Isabel Drummond-Murray: No, I was just agreeing. That would be the approach we would take, too.
Mrs Maria Miller (Basingstoke) (Con)
Q
Can I follow up on one of the responses to David Linden’s questions, about splitting wards to do what this Bill is trying to do, which is to create equal and updated boundaries across the whole of the United Kingdom? I speak as one who represents a constituency of 83,000 people—well in excess of what I am sure will be the eventual quota. Isabel was talking about the importance in Scotland of using postcodes to try to get some sense of equalisation. Could Mr Bellringer outline for the Committee what the approach is to splitting wards in England, and whether any experts have looked at this to give us advice on what is a good process to follow, particularly when it comes to polling districts?
Tony Bellringer: As I mentioned earlier, we have traditionally had a general policy of using wards as our building blocks. However, as you will know from the previous couple of reviews, there have been instances in which we have been prepared to split a ward to solve a problem in that area.
As Isabel alluded to, the difficulty in England is that we do not have access to a comprehensive dataset below ward level that contains the parliamentary electorates and associates them with the boundaries of whatever that unit is—a dataset that we can then manipulate in the software and quickly move those units around to recalculate the figures, because that is how it works. When we split a ward in England at the moment, we have to go back to the local authority and get the detailed breakdown, usually on a polling district basis, and manually calculate those figures, which really slows the process. If we were to move to a much more open process of using sub-ward-level units as our building blocks, we would have to source that data from somewhere.
Mrs Miller
Q
Tony Bellringer: At the moment, we do not have the postcode areas in England. We would have to create them; they could be created, but it would take an awfully long time to do.
Between the 2013 and 2018 reviews, one of the things with which we kept ourselves occupied was constructing a polling district-level dataset with the help of Ordnance Survey, in order to map those figures against the actual polling district boundaries. That is almost the most difficult part of the process. We sort of have the figures already because we have access to the actual registers, which are usually subdivided by polling district. However, the polling districts are not mapped in a consistent way and we have to be able to associate the electorate figure with the actual boundary of the unit you are working with, so that when you move the unit, the numbers change accordingly. You need to have mapped those polling district boundaries electronically. We did that process, and it took us and Ordnance Survey about two years to map every polling district in England.
Mrs Miller
Q
Tony Bellringer: As I say, we went through the process between 2013 and 2018, so at one point in time we had a polling district dataset that we could use. However, as you know, polling district reviews happen all the time across the entirety of England, so that single, comprehensive polling district dataset goes out of date almost instantly. There has to be a way of keeping it up to date. At the moment, that requires us to know who is doing the polling district review and when, so we can go and find out what they have changed it to. Do they have it mapped? No—then we need to get somebody to map it into the system. At the moment, there is no process by which the results of a polling district review are notified either to us or to Ordnance Survey so that it can be incorporated and the dataset can be kept up to date.
Mrs Miller
Q
The Chair
You are being asked to write a wish list on this issue. Could you do that for us?
Tony Bellringer: Yes. We did actually approach the Government at the time. We have kind of done the work to build that and issue one. There is a requirement for a local authority that does a polling district review to publish the findings, but they just do that by publishing it on a website, and it is also not necessarily in a mapped format. All it actually requires is a bit of something tacked on to that legal requirement to publish, which says, “You also need to send it to Ordnance Survey and the Boundary Commission.”
Mrs Miller
Q
Can I ask one other question—will you indulge me, Mr Paisley? I noticed that the commissions try to minimise the disruption to existing boundaries in its proposals, which is obviously a sensible thing to do. I also noted that it has said in the past that the commissions are not obliged to shut their eyes to likely future growth. That is particularly noted in section 40 of the guidance that was produced at the last review. Will both commissions outline their approach to the next review and whether it will be the same sort of approach? I declare an interest in that I represent a part of the country that is building a lot of houses. To propose boundaries that will inevitably be changed radically in the future would seem to be a waste of the commission’s time.
Tony Bellringer: Immediately before we start a review, the commission meets representatives of political parties to talk about how it plans to operate its internal policies within the framework of the statutory requirements, and that is an example of the kind of thing that we would be talking about with them.
It is unlikely that it would change significantly. The fundamental principle in doing this work is that you have to at some point draw a line and say, “That is the data that we are working with.” You cannot build a house on constantly shifting foundations and so you have to say, “That is the data and we are going to work with that data.”
At the same time, where we are looking at competing options in an area, if one is obviously more suited to an area that is clearly growing in population—maybe we know that from strategic planning approvals that have gone through in the area—that will veer us towards that option as the preferred option. That is really what it means.
What we cannot do is say, “Well, okay, the electorate that we are supposed to be working with is this and the electorate is now this, so let’s use that instead.” We still have to stick to the original electorate figure, but be alive to the fact that it is clearly growing and can be demonstrated to be growing. That is quite key as well—we draw a distinction between proven growth in an area and projected or speculative growth in an area.
Mrs Miller
Q
Tony Bellringer: Yes and no. The distinction I am trying to draw here is that if you have had a strategic planning development approved and it has been built and people have started to move in, you can say that those figures have changed—it is clearly growing. Even though those figures have derived from a point in time after the electorate data that we are supposed to be using, there is a clear indication that the area is growing. If you have had a strategic planning development approved, but it has not been built yet at the time we are doing our review, we might go, “Well, it is not as convincing.”
Mrs Miller
Q
Isabel Drummond-Murray: I do not think there is much to add to that. We have to work with the electorate as set out in the legislation. On the local government side—I am also secretary to the Local Government Boundary Commission for Scotland—the legislation sets out that we take account of the forecast for five years.
That all points to the need for regular review. We draw a line when we know there is going to be growth and there is capacity to absorb it through the existing 5% tolerance. I guess we could take account of it, but it is not something that has featured particularly on the parliamentary side, simply because of the way in which the legislation is drafted. We use the electorate at the start of the review; we do not guess what the electorate will be at a point in the future.
The Chair
We have four more questions and about 11 minutes on the clock, though I will push it on to get all the questions asked, because the evidence we are getting is very good for the inquiry.
Alec Shelbrooke
Q
Thank you for your evidence, Mr Bellringer. It has been really informative. I want to explore the building blocks further. To pick up on the polling district, you said that you had done a piece of work and commented that it was difficult to stay on top of the reviews that came through—to be able to understand them—but, as you have also just outlined, you cannot build on shifting sands. At some point, you have to draw a line. In terms of using polling districts to build in this review, do you have a set of data sat there that you could use?
Tony Bellringer: Not this time round—because it was so expensive last time, in time and money, in the resource that had to be put in to develop it, and yet it was so instantly out of date. In the actuality, when we came to it, because in the last review we were still using wards as our building blocks—it is still our general policy to use the wards as the basic building blocks—we only split half a dozen in the final recommendations. So the times that that would need to be used under our existing policy are few compared with the amount of time and effort that needs to go into producing it, and given how quickly it goes out of date, we just felt that it was not worth doing this time around.
Alec Shelbrooke
Q
It is important that we get some steer on how you could get away from using wards, which is a tradition—it is not legislated that it must be wards—because it negates having to go outside the 5%, which is another Organisation for Security and Co-operation in Europe recommendation, that for free and fair elections seats should not vary by more than 10%, and would allow the objective of keeping communities together, of keeping county constituencies together and away from borough constituencies. In my city of Leeds, my seat is a county constituency; the other seven seats are borough constituencies. That would be giving regard to keeping those existing seats together.
I am asking both commissions about the practicalities of what recommendations you would make to the Committee before we finalise these laws—how to get to a situation in which you can use the smallest building blocks to cause the minimum disruption, which is what you are really after when looking at constituencies. I am seeking some comment on that. Mrs Miller explored it well, but just outlining—
The Chair
I think he has got the question, Alec. We are really appreciative.
Tony Bellringer: The policy of using wards is fairly long standing, and it has always been discussed with the representatives of the political parties in the meetings before each review commences. In the past, they have generally been supportive of that. It goes to the statutory factor of having regard to local authority boundaries, because a ward is a local authority boundary. We view a ward as almost a representation of a local tie; generally speaking, when the Local Government Commission does its work it should try to bring people of the same communities into one ward. We use that almost as a substitute.
Alec Shelbrooke
Q
Isabel Drummond-Murray: We certainly had a number of complaints about large constituencies bringing together communities that did not feel that they had anything in common with each other. Where possible, we made changes to reflect that. The tight tolerance of 5% meant that, initially, we had to come up with some ideas to put out for consultation. For example, we had a constituency in our initial proposal that stretched from rural south Perthshire down to urban Fife. There was very much a feeling that, “We do not have anything in common with that part of the constituency.” So yes, I think people take account of more than just whether their local community is kept together; some people have concerns about other communities that they are associated with.
Clive Efford (Eltham) (Lab)
Q
My question is about electoral registration. Do you find that it fluctuates between general elections? Do we get a higher registration level at the time of a general election, and should that be the point at which we count the population for future reviews?
Tony Bellringer: One of the few things that we do in between reviews is collect the electorates and see how they change from year to year, but we get only an annual snapshot. If it is around the time of a general election, the electorate numbers tend to go up. Unsurprisingly, people are encouraged to join the register and are motivated more to do so. I know there are arguments about the accuracy of the register at any given point in time. I do not feel qualified to comment on that, but it is certainly true that the numbers go up around the time of elections.
Clive Efford
Q
Tony Bellringer: If you are sure about the accuracy at that high point.
Clive Efford
Q
Tony Bellringer: I am very pleased to say that we hold ourselves up as a model of independence in the process. During the substance of a review, we do not share with the Government, Government officials or Ministers any information about the substance of what we are working on that is not communicated to the public at large.
Clive Efford
Q
Tony Bellringer: They did communicate and trial some of the proposals in the Bill with us in advance. They sought our views, specifically on administrative points and on deliverability.
Clive Efford
Q
Tony Bellringer: Those are not published, generally.
Clive Efford
Q
Tony Bellringer: We have been very clear in the past that we do recognise strength of local feeling. If there are lots of people locally saying a particular thing, that carries a lot of weight with us. However, it will not be an instant knockout if somebody comes up with what we feel is a very well argued solution that might not have been proposed by anybody else previously that in our view respects more of the different factors and across a wider area and provides a better solution overall—maybe not for an individual constituency, but overall.
Clive Efford
Q
Tony Bellringer: It is something that we always used to be able to do in the past and did do on occasion. Prior to 2011, there was not this hard maximum and minimum, but we would still be aiming to keep constituencies within a broad range. Occasionally we would breach that if we needed to, to provide a better holistic solution.
Chris Clarkson (Heywood and Middleton) (Con)
Q
My question is about how to deal with county boundaries or sub-units within a region. It is specifically an English problem, obviously. I will take the north-west as an example because there are five discrete units. If we take Greater Manchester’s current electorate—I am using the December 2019 figures—we can neatly subdivide it into 27 seats that are just on the edge of quota. However, there are basically 49,000 extra voters that you could take in from Lancashire, so at what stage do you make a determination on whether to start splitting wards and have a neat compact unit within one county? Or do you start looking across county boundaries?
Tony Bellringer: As Isabel suggested, we have our nine regions in England, so we work within the regions. We start off by subdividing that as well, and we largely try and work with county units. As far as possible, we start off by trying to keep within county boundaries, but we might need to put a couple of counties together because we know that if you just do that initial mathematical calculation distribution, they end up with halves of constituencies in both counties, for example, and that will not work mathematically. You cannot have the smaller number or the higher number in either because they would be either too small or too big.
Chris Clarkson
Q
Tony Bellringer: We use the same distribution formula that is used to allocate the seats across the UK initially. We do that for the regions, and within the region we work out what we call a theoretical entitlement: if you use this agglomeration of a couple of counties, it would be allocated this many seats on the face of it.
Cat Smith
Q
Tony Bellringer: I do not think that it makes a huge difference to us if they do not have a legal standing. They are a recognised administrative unit, as you say, that is used by electoral administrators in the delivery of an election. That is another reason why at the moment we use wards, because, although they have more of a legal status in law, they are used as a unit by the electoral administrators to deliver elections. One thing that we do have a mind to is that somebody has to use this constituency in delivering the election, and we want to make that process as smooth as possible for the people actually running the election as well.
The Chair
I am afraid that that brings us to the end of this session. As usual, it got more interesting as time went along. We probably could have had much more time, although I am sure that our two witnesses are very pleased that there is no additional time. However, it shows that there is considerable interest in this issue. More expert witnesses will come along now, so we will be able to continue some of these lines of questioning. I thank our two witnesses for coming today—you have been brilliant, informative and very helpful to the Committee. I thank you for your efforts.
Examination of Witnesses
Shereen Williams MBE gave evidence.
The Chair
We will now hear from Shereen Williams, who is on the line. Shereen, can you hear us?
Shereen Williams: Hi. I can hear you.
The Chair
You are very welcome. We are sorry for keeping you for a couple of minutes. I was only allowed to run over because we had a technical issue with bells ringing, and I felt that we lost a couple of minutes. We will not let that little technical difficulty deny you that time at the end of this either. Introduce yourself, and then we will move on to the Minister.
Shereen Williams: I am Shereen Williams, secretary of the Boundary Commission for Wales. I took up the role in January 2019, and I also head up the joint secretariat for Local Democracy and Boundary Commission for Wales, which is responsible for local government boundaries.
Chloe Smith
Q
Shereen, may I ask about how you hold public hearings? We have gone through some more general discussion with your two predecessor witnesses, so perhaps we might turn to this angle with you. As you will be aware, the legislation proposes moving the timing of one of the public hearings but maintains very firmly that there should be ample public consultation, which we think is really important for public accountability and public involvement. Perhaps you might give us some insight into how you manage that for Wales.
Shereen Williams: The challenge we have had in the past is that we have to pick the five areas in which to hold the public hearings quite early on, so we have to guess which areas might have the most challenge, in terms of proposed constituencies. It is hit and miss. Sometimes you could be there for two days, and you would have one full day of people turning up for the public hearings, and the next day there will be a much smaller number. It also uses up a lot of staff resources and the time of the commissioners.
The Bill proposes that that is done as part of the second round of consultation, which would give us a bit more flexibility on where we should physically choose to have these public hearings, based on the feedback and representations we get in the first round of consultation. For Wales, it is very important that we have an appropriate spread across the whole country, to make sure that people can get to a public hearing if they need to.
Chloe Smith
Thank you, Shereen. I will pause there and let other colleagues take over.
Cat Smith
Q
Shereen Williams: The challenge that we have in Wales is that whether we go with 600 seats or 650, Wales will take the biggest hit in terms of loss of constituencies. It would mean, I think, a massive change: across the whole country, I cannot guarantee that even seats that fit within the current limits will be able to remain intact. That is the challenge we have in Wales; the 5% does give a very tight range for us to work around.
I think the valleys will present a unique challenge for us, because you do not really want to split a valley and have half in one seat and the other half in another seat. It will require us to look at our building blocks and how we work on that, getting input from local communities and from local authorities—from our stakeholders—and asking, “If we had to go down the route of splitting a valley, what is the best combination to work?” I am aware that we had the exact same problem at the last review.
Cat Smith
Q
Shereen Williams: It would give us more flexibility, yes, to put communities together, but again, I think it is very clear that, as an independent body, we do not have a view as such on the electoral quota; that is something for our MPs to make.
Ben Lake (Ceredigion) (PC)
Q
Shereen Williams: From the commission’s perspective, it is about communities that are together. We look at your electoral wards and communities that are linked through joint programmes and projects. Also, quite uniquely, in Wales, as you are very aware, is the Welsh language. We take it into account that you have constituencies where there are lots of links to the Welsh language. That is something we would like to keep together. That, for us as a commission, is what we would consider a community tie as well.
Ben Lake
Q
Shereen Williams: I think it will be just as complex as the previous reviews, because we are losing quite a lot of seats. If you lost one or two seats, it might be easier to amend existing constituencies by adjusting, making small boundary changes, but the fact that the number is a bit bigger—if you lose eight rather than 11, that three will help slightly, but the complexity will remain the same.
Jane Hunt (Loughborough) (Con)
Q
Shereen Williams: I do not think that is something I can possibly comment on. As a commission, we are given the rules to work with, so it would not be up to the commission to comment on something like that.
Jane Hunt
Q
Shereen Williams: In the past, we have made full use of that plus or minus 5% to make sure that communities are kept together. If the variance is changed, we would still use the same practice where possible. A constituency could have exactly 0% variance or minus 5%, minus 4%, minus 3% or minus 2%. We would work within those parameters in helping communities stay together. That would be our limit.
Jane Hunt
Q
Shereen Williams: Like our colleagues in England, Scotland and Northern Ireland, we use electoral wards as our building blocks. However, if there was great difficulty, we would use community wards within the electoral ward. In the past, we have put forward proposals where one or two parliamentary constituencies had a split ward in them. It is a route that we would rather not take because it creates confusion for voters when you have a different local authority and a different parliamentary constituency compared with somebody who is in the same electoral ward as you.
Mrs Miller
Q
Shereen Williams: The four Boundary Commissions are in regular contact. We rely on each other and we share good practice on a regular basis. In terms of those changes that have taken place in Scotland, I cannot imagine why we would not be able to invite Scottish colleagues to present to commissioners and to inform our thinking on how we deliver this report for Wales.
Mrs Miller
Q
Going back to the question that my hon. Friend the Member for Loughborough raised about splitting wards, it is interesting that that seems to be something that can happen in Wales and Scotland, although the procedures are not as easy as they might be. We heard that from the commission in England. Would you be able to advise the Committee about working with Mr Bellringer on what would need to be put in place to ensure that, if it was helpful, sub-ward-level splits could take place? Would you be able to provide some more information for the Committee on that?
Shereen Williams: Scotland and Wales’s challenge is significantly different from England’s because of the number of electorates. Tony has to co-ordinate in terms of trying to get all the parliamentary constituencies set up for England. In Wales, we are used to splitting wards because we tend to do that for our local government boundary reviews, so we are quite comfortable with the practice of breaking up electoral wards and splitting up communities into sub-wards in order to create electoral wards—this is going back to community wards. In terms of sharing that practice with Mr Bellringer, that would not be an issue, but I have to acknowledge that he has a far more difficult job in hand compared with us in Wales and Scotland.
Mrs Miller
Q
Mrs Miller
I wondered whether, as somebody who was brought up in Wales and understands the importance of cultural identity within the Welsh nation and the psyche, you have thought further about how that constituency should be treated. I am a Hampshire MP, and the Isle of Wight gets particular protection because of that.
Shereen Williams: That would be something for Parliament to decide as to whether Ynys Môn becomes a protected constituency, as they have in Scotland and the Isle of Wight. It would not be for the commission to comment on that.
The Chair
Shereen, thank you very much for your wonderful evidence and, more importantly, for getting us back on time. You have made my chairmanship so much easier. Thank you for giving us your time this morning.
Shereen Williams: Thank you for having me.
Examination of Witness
Eamonn McConville gave evidence.
The Chair
Q
Eamonn McConville: My name is Eamonn McConville. I am the Boundary Commission secretary for the Northern Ireland commission.
The Chair
Could you speak up a little for us? It is not a problem I have, but it is one that some other people have.
Eamonn McConville: Sure, no problem.
The Chair
We will move to the Minister first, then to the main party spokespeople, and then Shaun Bailey is the first on my list for this section.
Chloe Smith
Q
Eamonn McConville: Yes, Minister. Northern Ireland is obviously geographically the smallest part of the United Kingdom, so we literally have less room for manoeuvre when it comes to creating our modelling of the constituencies. That can be compounded by the effects of rounding during the calculations under rule 8, when it comes to allocating constituencies to each part of the UK.
That can leave us restricted in our ability to create the correct number of constituencies under rule 2. The legislation does currently, and I think the new legislation does prospectively, include a small degree of flexibility that allows us to fall beneath or outside of the plus or minus 5% tolerance from the electoral quota, but as I say, that is there because it recognises the mathematical conundrum that can sometimes present itself in Northern Ireland.
Chloe Smith
Q
Eamonn McConville: The parliamentary constituencies create the boundary under which the Northern Ireland Assembly constituency areas are formed. They are further subdivided into five areas for the Northern Ireland Assembly elections. There is that coterminosity that does not exist, for example, in Scotland.
The Chair
For clarity, Eamonn, you said five areas, but do you not mean five seats in each constituency?
Eamonn McConville: Five seats, yes. Sorry, Chairman, that is exactly what I meant.
Cat Smith
Q
Eamonn McConville: The most pressing impact of covid-19 for ourselves in Northern Ireland is in relation to the recruitment and training of staff ahead of the commencement of the next review. There are obviously practical implications of being face to face while still maintaining social distancing, but there is the added difficulty that commission staff are seconded from other Departments. That is our normal practice. Those Departments are under pressure to resource their response to covid-19 and to Brexit, which is coming down the line. There is a real difficulty facing us at the moment in terms of getting staff in and trained in time for the next review, but we are working with Departments on that.
Cat Smith
Q
Eamonn McConville: We had hoped to recruit the first of the staff by September. We are a small team, so we plan to get the remaining two staff in by December of this year. We are still within a reasonable window, but time marches on fairly quickly when dealing with recruitment processes and getting staff released, so we are keen to get that work under way.
Cat Smith
Q
Eamonn McConville: During our public consultations, people are free to put forward whatever local issues or local ties pertain to themselves and their local areas. The one thing that we cannot take into account—this applies across the UK, to all of the commissions—is anything that would affect or is influenced by electoral trends, electoral outcomes and things like that. Anything that would fall under a local tie is valid, in terms of what we would consider.
The second part of your question was on the electoral quota range. Again, as my colleagues have told you, the 5% presents issues in terms of accommodating local ties more roundly across Northern Ireland. As I said earlier to the Minister, we have the flexibility in rule 7 in terms of geographical limitations, because of the particular circumstances in Northern Ireland. It is interesting to note that the flexibility in the 2018 review would actually have come within the plus or minus 7.5% that has been discussed previously by other people. It is not a huge degree of flexibility, but it does allow us—when we are restricted in circumstances under rule 2—to have a certain degree of flexibility.
Shaun Bailey (West Bromwich West) (Con)
Q
Eamonn McConville: You are absolutely right that we now have the 11 local government areas, but we are working with different factors. In the last review, the 2018 review, we had 17 constituencies. While our considerations would have included trying to fit as many whole parts of local government areas into the 17 constituencies, the mathematics just do not allow for that, so we then take on board the other factors, which include local ties.
In Northern Ireland—it is similar across the UK—we have more major towns with satellite towns and villages around them. That is one thing that came to the fore in our consultation process, and we tried to accommodate that in our proposals as they went through the various consultation stages. There are similarities, but clear differences, simply because of the rules that we operate under.
Shaun Bailey
Q
Eamonn McConville: Do you mean for our initial proposals, or as the process progressed?
Shaun Bailey
Yes, for the initial proposals, but perhaps you could say if you were diverted as the process developed.
Eamonn McConville: We operate with exactly—or very close to—the same operational methods as the other commissions. We all operate under the same legislation, with the requirement to carry out the three public consultations. As my colleague Tony said, the initial proposals are our best estimate as to what would be a good starting point. From there, we seek public views and, if required, we amend to accommodate those within the factors that my colleagues mentioned previously—local ties, geographical features, existing constituency boundaries. It is a very similar process to that outlined by my colleagues.
Chris Clarkson
Q
Eamonn McConville: Our building block is set out in the legislation as the local government ward that exists. In Northern Ireland, our electorate in each of those wards is smaller than, for example, in England. Tony spoke earlier of wards with 10,000. Ours typically have 2,000 to 3,000.
We still face the issue of how small we are geographically, plus having Lough Neagh right in the middle of Northern Ireland, so there are times when we are balancing all the factors. Consideration of splitting a ward does arise, but, like my colleague, there is no ready-made data set through which we could split a ward. We have to take that into account, whether by looking at geographical features or through another method. For the last review, we decided not to split any wards.
Christian Matheson
Q
Eamonn McConville: It is really a matter of mathematics. We have 11 local government areas and in the last review we had to create 17 constituencies. It is one of the methods that we try to take into account, initially and as the process proceeds.
Simply from a mathematics point of view, it will require splitting off the larger local government areas into the various constituencies. As I said, as well as the local government areas, we will take account of responses that come in from the public to inform the proposals and the creation of the constituencies as the process proceeds through the review.
The Chair
Eamonn, may I take this opportunity to thank you for presenting us with this evidence and for giving us your time this morning? Right on cue, like a Swiss clock, you have managed to get us to the end of this session on time. I appreciate that. That brings us to the end of this morning’s session. The Committee will meet again at 2 pm in the same room to take further evidence.
Ordered, That further consideration be now adjourned. —(Eddie Hughes.)
Parliamentary Constituencies bill (Second sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Parliamentary Constituencies Act 2020 View all Parliamentary Constituencies Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Notices of Amendments as at 16 June 2020 - (17 Jun 2020)
The Chair
You are all very welcome back to the Committee. We have six witnesses over this afternoon’s session. Three witnesses will be physical and three will be down the line using digital technology.
If people want to remove their jackets and bring in refreshments, that is fine by me. I emphasise that those who do not have a microphone in front of them but wish to ask a question should make their way to the microphone in the corner of the room, for Hansard’s sake.
Examination of witness
Roger Pratt CBE gave evidence.
The Chair
We will now hear from our first witness this afternoon, Mr Roger Pratt. Roger, you are very welcome.
Roger Pratt: Thank you.
The Chair
I hope that you enjoy today’s session, rather than endure it. If you introduce yourself for the record, we will then move on to questions, starting with Chloe Smith.
Roger Pratt: Thank you, Mr Chairman. I am Roger Pratt, the boundary review director for the Conservative party.
The Minister of State, Cabinet Office (Chloe Smith)
Q
Roger Pratt: Thank you very much. I fully support the use of electoral registers as the basis. They are likely to be the most up-to-date information that one has—they are conducted on an annual basis and electorates have always been the basis for parliamentary boundary reviews. In fact, it was the Labour Government in 1948 who brought forward the use of electorates, following a unanimous recommendation from the Speaker’s conference of 1944 that the electorate be used, and it has been used ever since—I think that is absolutely right.
On the data that might be used, I think it absolutely right, under the very strange circumstances that we have, that the 2 March 2020 data be used rather than the December 2020 electorates, which clearly would normally be used. I thought that might be worthwhile to look at. I know there have been suggestions that one should look at either the general election figures or the December ’19 figures, but I do not think that those are robust because the December ’19 figures—the figures published recently on the Boundary Commission website and by the Office for National Statistics—and the general election electorate data, which are publicly available, differ very markedly. The difference is about half a million electors between those two figures—that is a dramatic difference, but it is not all one way.
Three hundred and eighty-eight seats were actually larger at the general election than on 1 December, but 261 seats were smaller at the general election, so it went both ways. I do not think that either the general election or December ’19 figures are robust, and I am sure that the March figures, when they can be properly checked and cross-checked by the Boundary Commission, will be much more robust and that, in my view, will be the right data to use.
Chloe Smith
Q
Roger Pratt: Absolutely. Completeness and accuracy are absolutely the right words, and the best opportunity of that is to get it normally at the annual canvass and, in those special circumstances, on 2 March.
Chloe Smith
I have a final question to round off that set. Obviously, we all want to see as many people who are eligible to be registered as possible—and that, I trust, would be the view of the Conservative party.
Roger Pratt: Absolutely. Every effort to drive up registration, to make sure everyone is registered, is a goal we all support.
The Chair
We will now make our way around the group leaders, unless I signal otherwise. If anyone else wishes to speak, just catch my eye.
Cat Smith (Lancaster and Fleetwood) (Lab)
Thank you, Roger, for coming to give evidence. Are there any specific circumstances in which electoral quota could be relaxed in order to avoid splitting an electoral ward? For example, even though the vast majority of seats were within the 5%, if in one or two very localised examples a 6% variance would prevent a ward splitting, would you find that preferable?
Roger Pratt: No, I would not: I think we have to stick to the quota. There are already exceptions in the Bill—four constituencies are clearly protected, Northern Ireland has special rules for the quota and there are rules about the area of a constituency, which in effect affects only northern Scotland. Those exceptions are in the Bill. Otherwise, it is right to have the 5% tolerance and, within the 5% tolerance, we can get constituencies that meet quota but also respect communities.
The best opportunity, as was said in the report by Mr Pattie and others, is split wards, which make a considerable difference. Splitting wards is the opportunity to make sure that constituencies are in the right place in terms of communities. I know you are to speak to Mr Pattie later—very sadly, Ron Johnston died recently—but, just so you know, in their report, they said:
“The Boundary Commissions for Northern Ireland, Scotland and Wales were prepared to split wards where they considered that sensible; the Boundary Commission for England was extremely reluctant to do so, and many of the problems that emerged in its recommendations resulted from this.”
They went on:
“With ward-splitting, it is possible to have substantially more unchanged constituencies—and, as a corollary, substantially fewer undergoing major change—especially with the tighter tolerances. The advantages are particularly pronounced at lower tolerances with 650 seats but, as the tolerance is relaxed, ward-splitting is needed in fewer areas”.
So I believe in ward splitting, rather than in relaxing the tolerance.
The 5% tolerance—10%, either way—is right. Otherwise, we could have one constituency that is 67,000 next to another that is 78,000, so ward splitting is right. There are those few exceptions in the Bill, as is correct.
Cat Smith
One of those exceptions would be the Isle of Wight, which looks set to get two MPs under the Bill. On current figures, that would come in at about 55,000 electors in each, which is about the size of many Welsh constituencies, in particular if we look at the Welsh valleys and their geography, where mountains divide communities. How do you explain the difference between those geographical features that make the Isle of Wight the exception but not necessarily the Welsh valleys?
Roger Pratt: The Welsh valleys—I actually live in one, so I have some experience of this—are totally different from the Isle of Wight. You suggested that the Isle of Wight had similarities with the Welsh valleys, but the Isle of Wight is an island without any direct link to the mainland; all the Welsh valleys have links to the rest of Wales, and so on. It is not sensible to link the Welsh valleys with the Isle of Wight.
The treatment of the Welsh valleys is absolutely right. Unfortunately, Wales will take a hit—one has to say that—but the position is that just before 2005, Scotland was required to reduce the number of seats to the English quota. They were required to use the English quota prior to 2005 with the Scottish Parliament. That was not required in Wales with the Welsh Assembly—Wales now has a Welsh Parliament—but unfortunately that means that Wales will take a hit.
However, I think it is right that my vote in Monmouthshire should equal a vote in another part of the country. Monmouthshire is one of the largest, but my doctor’s surgery is in Blaenau Gwent, one of the Welsh valleys to which you refer. Is it right that Blaenau Gwent has 50,736 electors whereas just over the Severn bridge in Bristol West, they have 99,253? I do not think that is right, and Wales will take a hit—there is no doubt about that. However, it is right that you have a standard quota throughout the United Kingdom. That is fair and that is equal.
Cat Smith
My final question. We have the representative of the Conservative and Unionist party before us, and you have acknowledged that Wales looks set to take a hit. It looks to be the most badly affected of all the nations of the United Kingdom in the review. What assessment do you make about the integrity of the Union in terms of the consequences of this boundary review and Welsh voices in this place?
Roger Pratt: I think the Union is intact. The whole of the Union will have the same quota. It is absolutely right that everywhere in the United Kingdom has a quota and so every person in the United Kingdom has the same representation. The difference in Scotland and Wales is that they have a Scottish Parliament and a Welsh Parliament. They still have equal representation in the UK Parliament, which I think is absolutely right, but clearly the Members for Glasgow East and Ceredigion do not have responsibility in this place for health and education, whereas all the other Members on the Committee do.
Scotland has a slight advantage over the rest of the United Kingdom, quite rightly in terms of the Western Isles and Orkney and Shetland. I fully support that. However, it means that—slightly—Scotland has an advantage over the rest of the United Kingdom because those are very small seats. I do not object to that in any way. The Union is intact because everybody’s vote counts equally whatever part of the United Kingdom they come from.
David Linden (Glasgow East) (SNP)
Q
Roger Pratt: Correct, yes. I am fully supportive of 650.
David Linden
Q
Roger Pratt: I cannot say how many seats Scotland will lose because we do not yet have the figures from 2 March. When we have those figures, we will know, but on certain calculations they lose two and on others they lose three. I expect it to be either two or three seats. Wales is likely to lose eight, but we will have to see.
I think it is right that Scotland and Wales do that. Scotland’s electorate has not gone up as fast as England’s. It had to use the English quota previously and now that has not caught up because England’s electorate has gone up more. In terms of Scotland, your own seat is one of the larger seats in Glasgow, but there are four smaller seats in Glasgow, one of which is 57,000. I do not believe it is right that a seat in Glasgow should have only 57,000 and two other members of this Committee in the south-east of England both have well over 80,000. It is right there is an equal quota throughout the United Kingdom.
David Linden
Q
I want to ask you specifically about the idea of the size of constituencies. You have hit the nail on the head in terms of some island communities, which are protected; Na h-Eileanan an Iar is a good example of that. There is also what was proposed as the Highland North constituency, which is probably the size of a country like Belgium or Luxembourg. Do you have a view on the limit of 12,000 to 13,000 sq km being the provision for a constituency? Is it the Conservative party’s view that that is a manageable size of constituency for a Member to deal with?
Roger Pratt: Of course, your parliamentary leader represents a constituency that currently is the largest in the United Kingdom, and that is 12,000 sq km. I could not find a more accurate figure than 12,000, but it is 12,000, so I think that was why that figure was brought into the Bill as the constituency that was of that size. That is right in terms of 12,000. It cannot go beyond 13,000, but above 12,000 gives the Boundary Commission in Scotland discretion if it so wishes between 12,000 and 13,000.
There is discretion if the commission wishes to use it if a constituency is over 12,000. It is up to the Scottish commission, but that is the right balance. It is currently the largest constituency in the UK Parliament, and the Boundary Commission has discretion up to 13,000.
David Linden
Okay, can I finish off with one question going back to the equality of the United Kingdom? You said yourself that Scotland stands to lose two or three seats. How would you, as a representative of the Conservative and Unionist party, reconcile that with what people in Scotland were told in 2014—how we were better together and we should be a United Kingdom?
Roger Pratt: I still think you are better together, obviously. I do not think the fact that you will lose two or three seats affects that in any way. You will still have the same equal representation; actually, slightly larger because of the Western Isles—I apologise, but I cannot pronounce it in the way you did—and Orkney and Shetland, so there is a slight advantage there for Scotland. But I think it is right that it should have the same equal quota as the rest of the United Kingdom.
It is just right that Scotland should have the same quota. I do not think it means that the whole of the UK is an equal and fair place. I noticed that in the Bill brought before the House by the Member for Manchester, Gorton, there was no change in either Scotland or Wales; they would have been exactly the same. There was a change in the Bill to Northern Ireland, but no change as far as Scotland and Wales are concerned. That is absolutely right and I support that part—not others—of the Khan Bill.
Christian Matheson (City of Chester) (Lab)
If it helps, Mr Pratt, I believe the correct pronunciation is Na h-Eileanan an Iar.
Roger Pratt: I am not going to try!
Christian Matheson
I thought I would get that one in.
I have just one question. Moving away from the numbers, what is your experience of being able to influence local proposals once they are already out? How flexible have you found the Boundary Commission and the assistant commissioners to be? What are the most useful arguments to deploy when considering the ones that perhaps resonate most with the boundary commissioners when you consider local proposals?
Roger Pratt: Thank you very much indeed. Absolutely, the Boundary Commission and the assistant commissioners do listen. That is very important.
The whole point of this process is that it is consultative. It is a three-stage process and I think the changes to that process are right. You have got the initial proposals coming out and then you have got the secondary consultation stage, including the public hearings when people can discuss not only the Boundary Commission proposals but any alternatives that have been put forward, which I think is absolutely right for that secondary stage, and then you have got the revised proposals.
The commissioners do listen and they change their minds. I have found them to be very accommodating to what should be changed if people make a good argument. The arguments have to be based around the factors in rule 5: existing constituencies, local government boundaries, local ties and geography. Those four factors are the way in which you persuade them to change. Indeed, we changed them a number of times: in the last review, the Boundary Commission for England changed the composition of more than 50% of the constituencies. That showed they were prepared to listen.
During the Second Reading debate, you referred to the notorious Mersey Banks constituency, which illustrates the issue very well. I entirely agree with you: it was one of the strangest proposals I have ever seen from a boundary commission, but like the Labour party, the Conservative party opposed it. We all opposed it at the initial stage, and the boundary commission came out with revised proposals. They never came out with final proposals because the review was effectively suspended, but they changed Mersey Banks so there was no detached constituency. That is the whole point of the process: you have a proper consultation, then they come out with the proposals that best meet the factors within the quota tolerance level.
John Spellar (Warley) (Lab)
Q
Roger Pratt: I always support whatever is the Conservative party line. I am a Conservative party employee.
John Spellar
Q
Roger Pratt: I think I am right in saying that the decision about the Isle of Wight followed discussion in the House of Lords about the previous Bill. The Lords decided that it was wrong for the Isle of Wight to link with part of the mainland. There is quite a large chunk of water. Those two constituencies would be made up of about 55,000 people, as you rightly say, but it is difficult: you have to get a ferry and so on. I appreciate that there is a Skye bridge, but you could not do Skye on its own. I cannot remember what the Skye electorate is, but it is not very large.
John Spellar
There are lots of ferries between Portsmouth and the Isle of Wight, though. I was recently on a Defence Committee visit there, prior to covid-19, and the ferries are quite regular and quite quick.
Roger Pratt: There are ferries, but if we are talking about communities, I think the Isle of Wight would feel very let down if it were linked with part of the mainland. I remember a boundary commission where it was suggested that there should be a seat crossing the Mersey between Liverpool and the Wirral, and that suggestion was very unpopular and rightly changed as a result of the consultation. With the 12,000 people from Skye, the current electorate of Ross, Skye and Lochaber is almost exactly the same as the seats in the Isle of Wight would be. The Isle of Wight seats would be very slightly larger.
John Spellar
Q
Roger Pratt: You are right that Wales was not required to use the English Parliament. At that time, there was a Welsh Assembly; it is now called the Welsh Parliament. That Parliament has a lot of responsibility, particularly for health and education, but for a lot of other matters as well. Members of Parliament from England have to deal with health and education, whereas those from Wales do not, so I think it is right that Wales should be on a fair and equal basis with England, Scotland and Northern Ireland.
John Spellar
Q
Roger Pratt: Certainly it needs to be as accurate and complete as it possibly can be. Some of those matters are beyond the scope of the Bill, but I would support all the measures that the Government are taking, as are the Scottish Government and the Welsh Government, and all the local authorities, to ensure the most accurate and complete register we can possibly get.
John Spellar
Q
Roger Pratt: There were some perfectly legitimate causes of local complaint, but one of the things they had to do was make sure that the knock-on effects were affected. Certainly, the Labour party and ourselves and others always put in an overall plan, so you could look at the overall plan. That is what you must do to try to get it right sometimes.
The Labour party and ourselves and other parties agreed in Dorset. All three of us came up independently with the same alternative plan for the Boundary Commission, so I do believe that it is right. I do not believe that a 7.5% quota is right.
It is a question of balance, isn’t it? It is a question of the balance you strike between getting a quota right and community ties. I think the quota at a 10% variance, rather than at 15%, which you would have under seven and a half, is the right balance to strike.
In the past, the Boundary Commission, in the rules under which you were all elected, stated quite clearly that it needs to get as near as possible to the electoral quota—that is in the Act—but it has been conflicted as to how it uses those rules. Under the new rules, it is not; it knows it has to get everything within 10%, that is 5% either side, but, in addition to that, it uses the rules to make sure that it uses the other factors. It does not need to get as near the quota as possible. Mr Bellringer made that clear this morning.
If I may, Mr Chairman, I have one other point on the 10%. The right hon. Member for Elmet and Rothwell referred to the Organisation for Security and Co-operation in Europe. The OSCE Office for Democratic Institutions and Human Rights publishes an election observation handbook, which says that,
“all votes should carry the same weight to ensure equal representation. This means that each elected representative represents a similar number of registered electors. For example, in a majority voting system, the size of the electorate should not vary by more than approximately ten percent from constituency to constituency.”
I think that is the right balance to strike.
Jane Hunt (Loughborough) (Con)
Q
Roger Pratt: Yes. I think that is absolutely right. When there was an original five-year term, it was linked to the Fixed-term Parliaments Act 2011. Since then, we have had two general elections not based on the Fixed-term Parliaments Act, and I think it is the Government’s intention to change that Act. So I think eight years is the right balance to strike, so that normally you would have two Parliaments between each review.
Jane Hunt
Q
Roger Pratt: I fully support the changes. I think it is right that the initial proposals should be out there for eight weeks, and you should not be having public hearings during that period. It was very difficult to have public hearings during the initial period; I think that caused problems for parties and people. It is much better that, during the secondary consultation stage, which is six weeks, you have those public hearings, and you can discuss not only what the Boundary Commission has brought forward but any other alternatives that are brought forward in the first stage. So I think it is absolutely right.
The Chair
Order. I am afraid that brings us to the end of the time allotted for the Committee to ask questions of you, Roger. Thank you very much for your time and your expertise today; they have been much appreciated.
Roger Pratt: Thank you very much, Mr Chairman.
Examination of Witness
Tom Adams gave evidence.
2.31 pm
The Chair
We now move to our second witness this afternoon. We will hear from Tom Adams. Tom is the acting director of data and targeting for the Labour party. And we will have until 3 am for—[Hon. Members: “Three am?”] Sorry, I knew there was something wrong there.
Tom, we have until 3 pm with you today. I will go round the Front-Bench spokespeople first and then other Members, as they signal, will ask you questions.
Chloe Smith
Q
Tom, may I invite you to talk about the automaticity provisions in the Bill? By that, I mean the measure that we are proposing whereby the review’s recommendations should come into effect automatically, without the possibility of political influence either from the Government or from Parliament. What is your view on those provisions?
Tom Adams: Broadly, I think there should still be some parliamentary scrutiny of the review’s recommendations at the end. Fundamentally, while the commissions are obviously independent, the advice and instructions given to them by the Government are obviously given by the Government of the day. And given that there is still some scope for whoever is in Government at that time to influence the process in some way, I think it is right that the review’s recommendations come back to Parliament.
Fundamentally, the Government have obviously now decided, rightly in my view, that there should be 650 seats and not 600, but obviously the previous reviews—two of them on 600 seats—would have been implemented automatically if these new rules had been in place at that time, which Parliament might later have come to regret if it has since changed its mind. And obviously at those times, there was no parliamentary majority for implementing the change to 600 seats, but Parliament would not have been able to do anything about it at the time.
So I think that Parliament offers a last stop-gap, and it is right that Parliament gets the final say on these matters, just as an important principle of parliamentary sovereignty on this material.
Chloe Smith
Q
Tom Adams: Sorry—what I mean is that obviously the Government, by proposing the Bill and passing it, will be able to set things such as the 5% threshold. That is obviously something that the Government have decided upon and Labour has taken a different position on that. That is what I mean—the Government are deciding that that is the threshold to be used. Therefore, given that the Government have some ability to influence this process—it is not completely and utterly independent, because fundamentally the commissions have to work within the guidelines that the Government have given them—I think it is right that the proposals that come back should be agreed by Parliament at the end of the process.
Chloe Smith
Q
Tom Adams: That is true, but if a Labour Government were proposing this Bill, there might be slightly different thresholds, for example, so clearly the Government still have quite a lot of influence over what is put in the Bill in terms of these boundaries, which obviously will persist for at least—possibly—two general elections. That is why I think it is right that it does come back to Parliament at the end.
Cat Smith
Q
Tom Adams: Broadly, yes, having a constituency that varies by 5.5% from the quota makes more sense than having a split ward or, indeed, an orphan ward added to a constituency, where you have one ward from a different local authority. I think that makes more sense from the perspective of maintaining community ties and having constituencies that the public understand and have trust in. It is a question of having some flexibility in specific areas. Obviously, some wards in the country are very, very large in terms of electors, particularly in the west midlands, where some wards in Birmingham have 20,000. That obviously makes it very hard, in those areas, to come up with arrangements, so having additional flexibility on the 5% figure would make that easier. The same applies to some bits of Wales, for example, where the geography obviously makes it much more challenging.
Cat Smith
Q
Tom Adams: Yes, I think wards should be the building blocks for this. Obviously, where a decision is taken to split a ward, if that is absolutely necessary, it should be along the existing polling district lines, but as you say, polling districts do not have a clear legal status. Councils can amend them, basically, as and when they want. There is not a clear process for how that happens in the same way as there is for how wards are done by the Local Government Boundary Commission. Polling districts are at the discretion of the councils, and although in some areas they are based on parishes, in many others they change quite frequently.
We saw, for example, in the general election some councils that created polling districts just for the purposes of helping them to administer the general election, and then they got rid of them afterwards again. Things like that make it very hard to have a consistent process that is based on using polling district boundaries. Using wards would be much preferable, and avoiding splitting where possible; and where that is necessary, that is when you can use the polling district boundaries to do that. I do not think polling districts should be the primary building block for this process.
Cat Smith
Q
Tom Adams: I very much welcome the move from December 2020 to March 2020. Obviously, the Minister will be aware that we have raised significant concerns about this, in the earlier engagement with political parties. We still have some concerns about the impact of people dropping off the register even between 12 December 2019 and March. Obviously that will be less significant compared with December 2020, but just in our rough estimations looking at it now, it does look likely that a few hundred thousand people will have dropped off the register in that time, because obviously there are areas where people move a lot and there is high turnover of population.
On 12 December there was a general election, so that register will be the most complete a register is going to be. To my mind, it makes sense to use that one, although obviously I strongly welcome the use of 2 March as compared with December 2020, when I think the impact on the annual canvass of coronavirus will have been quite significant. I think the 12 December one would be better: it will be more complete and a better representation of the actual electorates in these places. But 2 March is certainly preferred to December 2020.
David Linden
Q
Tom Adams: Obviously, the commissions did publish the numbers on this, but broadly, there is likely to be a loss of three seats for Scotland and a loss of eight seats for Wales. Obviously, that might change slightly, depending on exactly which register you use, but it is going to be in that region of change.
Ben Lake (Ceredigion) (PC)
Q
Tom Adams: That raises an important question, particularly when it comes to Wales, because Wales is due to lose such a significant number of seats; it is quite a drastic overhaul of the number of Wales’s constituencies. While there clearly needs to be some decrease to equalise the electorate sizes in constituencies, it seems slightly odd that Wales has no protected constituencies at all, yet there will be two constituencies on the Isle of Wight, the electorates of which will be roughly the size of an average Welsh constituency. The introduction of protected constituencies in certain places in Wales is one possible way of achieving that, and Ynys Môn would be a good example.
This big drop of eight in one go is quite significant, and we should be mindful of the impact that it will have on representation in Wales. Having additional protected constituencies—Scotland obviously has several and the Isle of Wight has two guaranteed, whereas Wales does not have any—is perhaps something to look at.
Christian Matheson
Q
Tom Adams: The first thing to say is that I am relatively new to this responsibility in the party. However, generally, they are quite flexible and accommodating. Particular MPs clearly have quite a large role in that, and their submissions are often taken quite seriously. The commissioners clearly do an excellent job of trying to balance all the competing priorities, but they are sometimes potentially constrained by things such as the 5% threshold. However, within the guidelines that they have, I think they do a good job of taking everything into account and coming up with proposals that are genuinely reasonable for everyone.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Q
Tom Adams: Whether we would vote it down is probably a question for the politicians in my party, rather than for me; I work in a technical role at head office. Obviously, it is likely that if the Government supported the proposals, they would still pass Parliament, even if Labour voted against them. I think there is a role for Parliament in finally approving those proposals when they come back, as has been the case for previous reviews.
Alec Shelbrooke
Q
Tom Adams: In the last review, not that many wards were split in the end. I think you are hearing evidence later from academics who have done some research on the difference between 5% and 7.5%, and the better outcomes that 7.5% produces. It is not quite an arbitrary number. Their research found that even the difference between 5% and 7.5% has quite an impact on the outcomes. While there are obviously likely to be occasions when you still need to split wards, clearly any increase in the threshold will improve your ability to maintain community ties and to not have to split wards or create constituencies that seem slightly odd.
Alec Shelbrooke
I just add that the last time, we were able to form much bigger constituency numbers.
Tom Adams: Yes, that change will have an impact.
Laura Farris (Newbury) (Con)
Q
Tom Adams: It certainly creates challenges from the perspective of political parties and others who are reliant on electoral geography boundaries. Given that wards are created by local Boundary Commissions to have some sense of community ties, and they are created for a reason, if you split them you are further cutting community ties, and potentially creating more challenges, in the sense that people are cut off from people who they would see as firmly part of their community by cutting across a ward. Obviously, you cannot always come up with a perfect arrangement.
Laura Farris
Q
Tom Adams: Local Boundary Commissions will certainly try to make that the case. They will come up with those wards for a reason, which is why I think they are sensible building blocks for the whole process. If you abandon that principle and say, “Does it really matter?”, we might as well just ignore them entirely. I do not think that is practical for the purposes of political parties or electoral administrators, who certainly find it much easier to think of wards as sensible building blocks for constituencies, rather than having entirely separate arrangements that do not bear any relation to the existing wards. Using those wards and keeping them as far as possible is sensible.
Clearly the Government recognise that to an extent, because there is the very sensible provision in the Bill of allowing the provisional wards to be taken into account. That is a fantastic reform that will help to keep some of that, so wards will continue to be in line with parliamentary constituencies. We had the problem in the past, even where we were using whole wards, that if those wards were then amended or changed only a year later, the new wards would bear no relation to the constituencies. The new provision enables you to make sure that you have wards and constituencies that are coterminous as far as possible. That does improve people’s experience of the democratic process.
Laura Farris
Q
Tom Adams: In terms of which ones we particularly—
Laura Farris
In the 2018 exercise—sorry, I am not familiar with it myself—do you know what proportion there was broad agreement over and what proportion there was not?
Tom Adams: Not off the top of my head. I do not know exactly; I have not studied that in detail recently. As I said, that was carried out by someone else at Labour head office, so I do not know exactly on which constituencies we agreed and which we did not.
Laura Farris
Q
Tom Adams: Presumably, they are not the only two submissions that will have been put in. The Labour and Tory submissions are not the only ones that will be put in.
Laura Farris
Q
Tom Adams: I am not completely sure off the top of my head, but I am not entirely sure that that is within the scope of the Bill either, to be honest. That is a matter for the commissions really, rather than a matter of law.
The Chair
I don’t think he could answer that, Laura. I think that is more for the Boundary Commissions.
Jane Hunt
Q
Tom Adams: Or equally what happened in the last few reviews. I think I have covered my views on that already, and what I think Parliament should do in terms of approving the proposals once they are put to Parliament. I do not have anything further to add.
Jane Hunt
Q
Tom Adams: Well, the fact that they would go straight to the Speaker is welcome, because that would mean that the Secretary of State could no longer make amendments to them, but I still think they should be subject to parliamentary approval, as I said earlier.
John Spellar
Q
Tom Adams: That gets at one reason why Parliament should ultimately have to approve boundary reviews: if you cannot even get half the House to agree to them, clearly there is not sufficient MP backing for them—not enough MPs agree that it is a sensible process. Last time, the proposed reduction to 600 seats clearly had a big impact on that backing. Keeping the number at 650 will mitigate that somewhat. I agree that that is one reason why it is important that Parliament has that oversight. If it struggles to get half of MPs to vote in favour of the proposal, that implies that people do not broadly think it would be a good outcome.
John Spellar
Q
The Chair
John, I do not think you are entitled to have fun with the witness.
Tom Adams: I would not want to comment too much on that, but clearly there are still community ties in large urban wards, yes.
The Chair
As no one else is signalling to ask a question, I thank Tom for taking the trouble to give us his evidence. It is much appreciated. I thank Members for asking their questions.
The witness on our third panel this afternoon, Mr Dave McCobb, is not here yet. I will suspend the Committee until 3 o’clock.
The Chair
We will now hear from Dave McCobb, the deputy director of campaigns and elections for the Liberal Democrats, with whom we have until 3.30 pm. Dave, I believe that you are joining us from down the line—can you hear us loud and clear?
Dave McCobb: Yes, I can hear you very well, thank you.
The Chair
Excellent; we can hear you too, which is great. Dave, you are very welcome. Could you introduce yourself for the record? I will then call Chloe Smith to ask the first series of questions.
Dave McCobb: Thanks very much. My name is Dave McCobb. I am the deputy director of campaigns and elections—covering the whole of the UK—for the Liberal Democrats.
Chloe Smith
Q
Dave McCobb: Yes, we support the retention of 650 constituencies in this iteration of the proposals. We certainly do not believe that there should be a reduction in the number of MPs unless there is a corresponding increased level of devolution across the UK that would enable us to reduce the number of Ministers. So while there is not further devolution across the UK, we support the retention of 650 constituencies.
Chloe Smith
Thank you very much. I am happy to leave that line of questioning there and allow other colleagues to come in.
Cat Smith
Q
Dave McCobb: Thanks very much. Our primary concern is about the restrictiveness of the 5% threshold in terms of equalising the electorates in constituencies. There have been widespread reports of the degree of under-registration of electors in many parts of the country and of the number of people who are not correctly registered. Setting a very restrictive threshold at 5% reduces the commission’s flexibility to recognise that significant under-registration is likely in some parts of the country.
It also means that constituencies could be constructed incredibly arbitrarily. In the previous round of the review —the proposals that were ultimately never implemented— many constituencies were constructed that really bore no reference to identifiable communities with which people who lived there would identify. That impacted cities in England particularly, where, due to the size of local government wards, the number of wards that needed to be added together could not be done within local authority boundaries. So very arbitrary constituencies were constructed including chunks of some local authorities, and they really bore no reference to communities that people would identify with. That could be eliminated by having a higher threshold of 10%, for example. That would be the No. 1 concern about the proposals as they are currently outlined.
David Linden
Q
Dave McCobb: I have not personally, no. That would be done by a colleague who is not currently in work. In terms of the overall distribution of seats between the four nations, that is something that I would not want to comment on until we actually see the registered totals that will be published for the electoral register that will be used for this.
I would like to bring it back to the 5% threshold. When I have been involved in cross-party talks on this, colleagues from the SNP have rightly raised concerns that the 5% threshold would require the creation of some geographically enormous constituencies in the highlands of Scotland and potentially in other parts of rural England and Wales.
Anyone who knows otherwise may correct me if I am wrong, but someone once told me that the constituency of Brecon and Radnorshire is larger than Luxembourg. It would require a constituency that is already that geographically large—the same applies to parts of the highlands of Scotland, too—to be 25-30% bigger to meet the 5% threshold. That is likely to make it very difficult to represent or campaign in a constituency on that scale.
David Linden
Q
Dave McCobb: As I say, I reserve judgment on the balance of seats between the four nations until we have seen the exact numbers on the proposed electoral rolls.
Mrs Maria Miller (Basingstoke) (Con)
Q
Dave McCobb: We support the principle that the proposals that come from the Boundary Commission should be subject to minimal potential political interference, or a majority party could use its majority to impose boundaries on other people. The critical issue is how far the whole process is as divorced from partisan political control as possible.
Mrs Miller
Q
Dave McCobb: I think that depends on the criteria that are set for the Boundary Commission’s review. Provided that the criteria are set for the Boundary Commission’s work in as non-partisan a way as possible, then not having a political vote at the end of it might be acceptable. Again, it comes back to the provisions that the Boundary Commission is required to work to also being free of party political influence to the largest degree possible.
Mrs Miller
Q
Dave McCobb: I would like to come back to the 5% variation threshold. The Organisation for Security and Co-operation in Europe specifically recommends a variation of up to 10% when doing [Inaudible] necessary. Having that greater degree of flexibility around the way the Commission is able to be flexible, to recognise natural communities where they exist, would enable it to be more free of political direction than as the Bill is currently set out.
The Chair
And the issue of what constitutes pressure on a commissioner.
Dave McCobb: I am afraid I could not hear that.
The Chair
I think the question was, what do you think constituted pressure on a commissioner? You were going to come back to that point.
Dave McCobb: Sorry, I think I have said what I wanted to on that point.
Mrs Miller
Q
Dave McCobb: You make an important point, which is specific to the way in which the commission in England worked on the last review, in that it was very clear that, apart from one or two examples in its final proposals, it was adamantly against ward splitting.
The combination of the English commission’s reluctance to split council wards and the tight 5% threshold contributed to some quite perverse constituencies being proposed in some cases, in particular in some urban areas. In parts of the country, a council ward is 2,000 or 3,000 electors, so a number of them can be added or subtracted around the threshold, but in Leeds, for example, there are 17,000 electors in a council ward and, if you are not willing to split one, in one case a lot of people had to have a random ward that really had no community links with Leeds tacked to the top of a Leeds constituency.
If the commission is given clearer direction on preferring ward splitting if that helps them to retain constituencies that relate to natural communities, that is obviously helpful. We support the principle that each MP should represent a roughly equal number of residents, but we highlight the fact that the Electoral Commission last September estimated that up 9 million potential electors are not on the register and that, while there is evidence that some particular groups might be heavily disadvantaged by under-registration, giving the commission a bit more flexibility to enable it to recognise the parts of the country where there might be major issues with electoral under-registration is the right thing to do.
Mrs Miller
It is interesting: in Wales and Scotland, there is an ability to split wards, even to go down to postcode level. It can be done, so I suppose the question is why it is not done more in England.
Dave McCobb: It is that combination of the two factors: the English commission’s reluctance to split wards, which contributed; and the 5% threshold, which, if that were 10%, would allow it the flexibility better to match natural communities and to recognise that there will be parts of the country with much greater problems of under-registration of people resident there than others.
Ben Lake
Q
Dave McCobb: That is not something that I am in a position to comment on at this time, but I am happy to take that question back to colleagues and to give you a written follow-up, if that would be helpful.
Ben Lake
I was interested to hear your comment about the overall number of MPs at Westminster, that there should not be a reduction without further devolution. I completely agree with you. Do you have a view that you can offer us—or come back to us—on whether the differential devolution statuses across both regions and nations of the UK need to be considered when it comes to the allocation of seats?
Dave McCobb: Again, if it is all right, I will happily get back to you about that, having consulted colleagues.
The Chair
If there are no other questions, I thank you, Dave, for taking the trouble and time to come to us today and to present your evidence before us. We look forward to receiving that written evidence over the next two weeks, if that is possible.
Dave McCobb: Thank you very much and yes, no problem.
The Chair
We will now hear from Scott Martin, the solicitor for the Scottish National party. We have until 4 pm for this evidence. Scott, will you please introduce yourself, for the record?
Scott Martin: I am Scott Martin, and I am the solicitor to the Scottish National party.
The Chair
Thank you, Scott. It is nice of you to join us. We will start with the Minister, Chloe Smith.
Chloe Smith
Q
Scott Martin: I think that the considerations in Scotland are the same rules that are applied elsewhere in the UK, as far as local ties. Obviously it will be perhaps a slightly easier exercise this time round, in so far as there may be fewer constituencies that need to be changed, but certainly a reduction of either two or three will mean some changes that are significant—rather less than the last time round; but clearly the Highland North constituency, or whatever it may be called after the next review, is one that any parliamentarian would clearly find it difficult to represent, given its vast area.
Chloe Smith
Q
Scott Martin: Clearly the two protected constituencies are there for fairly obvious geographical reasons. Highland North, or whatever you want to call it, is not as it were a protected constituency. It is just a constituency that comes up to the 12,000 sq km and 13,000 sq km rule.
Chloe Smith
Q
Scott Martin: I think there is a logic that says if one is reverting from a model of 600 to a model of 650, the existing distribution of constituencies between the nations of the United Kingdom should be retained. Of course, the position of the Scottish National party is that there should be zero Westminster constituencies in Scotland.
Chloe Smith
Thank you, Scott. I am looking forward to talking much more about that with David Linden, as the Committee goes on.
The Chair
Talk about getting your retaliation in last, there, Scott.
Scott Martin: I am sure Mr Linden will be invited to the celebration of his unemployment.
Cat Smith
Q
Scott Martin: I suppose our view on the integrity of the Union may be different from that of other political parties that are represented there. I suspect that it may be two rather than three seats that will be lost, with the current formulas. It rather depends, I think. The numbers we have so far do not include attainers. By my calculation, the percentage of attainers in Scotland is roughly 0.957%, whereas in England it is 0.644%. When the attainers are added in, it may be that Scotland will only lose two seats, rather than three. However, as people have identified, we will not know that until all the final figures are collated after March. I suspect the reason why there are more attainers in Scotland will be questions of life expectancy. Also, because we have voting at 16 in Scotland, it is likely that we manage to get more people on as attainers than other parts of the UK.
Cat Smith
Q
Scott Martin: I certainly think that work could be done on changing the variance, which is effectively half the gains I talked about as a permissible departure in relation to the Venice Commission “Code of Good Practice in Electoral Matters”. The question of wards is rather different in Scotland than in England. Parliamentary constituencies in Scotland are based on wards, with no ward splitting. Of course, before the 2007 Scottish Parliament and local government elections in Scotland, we moved to three or four-member wards. The consequence is that you cannot get sensible constituencies without splitting wards, particularly with the hard limit put in place as a result of the Fixed-term Parliaments Act 2011. It is a rather different situation in Scotland, for practical reasons, as a consequence of the size of wards we have.
David Linden
Q
I want to ask about parliamentary approval. You will note that in the Bill, Parliament’s approval role is being removed. Can you share your view on that?
Scott Martin: That is, in a sense, a highly political question. Do you want politicised districting—everyone has difficulty with that word—or independent districting? Do you want the model they have in the United States, where the word “gerrymander” comes from? The logic is that if you have an independent commission model, which we have had here since the commissions were put on a permanent footing, the ability for political interference is minimised. Automaticity, as it has been described, is a sensible approach to take on that—although clearly, as we have seen from a variety of reviews, including the last two, ultimately, if Parliament wants to stop a review, or wants to proceed or another basis, that can happen, but unless we move to having a written constitution, which I would obviously support, that is not something that we can legislate for.
David Linden
Q
Scott Martin: Yes. In Scotland, there is the Improvement Service, and if you go to www.spatialhub.scot, you will find a polling district map of Scotland. Not all of it is up to date—some of it was updated just before the general election, and some of it is a little bit older—but there is now a complete polling district map of Scotland. Where that data is available, polling districts are a sensible way of drawing boundaries.
The reason why the Boundary Commission for Scotland has had to take a postcode approach is because it cannot use wards, and it did not have the polling districts. I appreciate that there is a bit of a chicken-and-egg situation here, in that polling districts are supposed to be divisions of parliamentary constituencies, rather than being used the other way round, but thinking back to the first Scottish Parliament boundary review, I recall that the Boundary Commission, after its first review, was prepared to take representations from Edinburgh on realigning everything with existing polling districts. Electoral administrators and campaigners in Scotland have practical issues as a result of there being non-coterminous boundaries—it means they have some very strange polling districts—but those issues would certainly be removed if everything was built from one set of polling districts.
David Linden
Q
Scott Martin: There is obviously the 12,000 and 13,000 number there, and certainly some thought could be given to reducing it. My understanding was that that number was effectively taken from the size of Ross, Skye and Lochaber. Clearly we could look at reducing that.
The Chair
I do not see anyone else indicating that they wish to ask a question. Scott, you got off scot-free today. Thank you for your evidence and your time.
Scott Martin: Thank you.
Examination of Witness
Geraint Day gave evidence.
The Chair
We will now hear from Geraint Day. We come to this panel early—we are moving swiftly—so we can give it as much time as required. Geraint, could you please introduce yourself for the record?
Geraint Day: Sure. Hello! My name is Geraint Day. I am the deputy chief executive of Plaid Cyrmu, and head of its campaigns unit.
Chloe Smith
Q
Can we talk a little about how political parties, large and small—I hope you do not mind my acknowledging that Plaid Cymru is one of the smaller ones in terms of parliamentary representation—respond to the boundary commissions? Will you talk a little about how easy parties find it to interact with the boundary commissions, and how we can encourage members of the public to interact with the boundary commissions through the consultation stages?
Geraint Day: The boundary commissions should be praised for the way they approach their interaction with political parties and the public. On the whole, they are very open—they are available online and by phone, as well as through the more formal public hearings. I would reiterate something that one of the previous contributors said: the commissions are very open to alternative suggestions—I certainly agree with that.
Political parties start from the size of the electorate—the snapshot of the electorate. In Wales, which is the only area I feel competent to talk about, we have to start by looking at Ynys Môn. There is only one way you can go from Ynys Môn apart from the Irish sea, and that is across into Gwynedd. All boundary changes therefore start there and expand out. That has a knock-on effect—somebody referred to a domino effect earlier, and that is very true. If we decide to go one way on a proposal, it has a knock-on effect in a subsequent constituency. In the case of Wales, which is bordered on three sides by sea, with the English border on the other side, that leads to certain pressures, especially in mid-Wales, where the population is more sparse, vis-à-vis the more populous north and southern Wales.
Chloe Smith
Q
Geraint Day: Ynys Môn has been mentioned a number of times already today—I have been following the Committee online. It is a unique constituency. In Plaid Cymru’s view, it should be a protected constituency. It first got its franchise during the Acts of Union in 1536, and its representation has continued ever since, except during the Barebones Parliament in the English civil war. We certainly support and call for the protection of that constituency.
In previous reviews where that has not been the case and you start in the south, if you are limited by the percentage variance, you end up getting to Ynys Môn and suddenly realising that you cannot fit the remainder of the constituency within the variance that is left over, as you cross the Menai. Then you have to start again. Realistically, the only place to start when doing a boundary review in Wales is Ynys Môn. You then work your way east and south from there. You cannot go anywhere else; there is no alternative constituency. Only one constituency borders it, and that is Arfon.
Cat Smith
Q
Geraint Day: We do not believe that Wales should lose any MPs. The previous review, which would have reduced the number to 600, has in effect been scrapped, and the number has gone back to 650, yet Wales is losing Members of Parliament and England is gaining Members of Parliament. That seems like a strange place to be. It will appear very strange to the Welsh electorate when they look at this and say, “Where is the UK headed? Is it becoming more and more England-dominant?” We believe that would be incorrect, and that Wales should keep the same level of representation.
Cat Smith
Q
Geraint Day: Absolutely. The figure of 7.5% that has been suggested would help. I think it would still leave challenges, but it would certainly reduce the negative impact of the suggestion.
This is not just about the south Wales valleys, although it is interesting that in the last review, the first proposal from the Boundary Commission about the Rhondda constituency was to include part of Cynon Valley in it. To get there, you have to cross over the Rhigos mountain, which features heavily on winter travel reports on Radio Wales when the mountain road is closed because of bad weather. That is a common occurrence in Wales, due to its geography, and not just south Wales; it happens even more in the north, where you have the mountain ranges of Snowdonia and the Clwydian hills. They are big barriers to building constituencies, and taking a ward on the other side of a mountain away from its natural community has a big impact and is very unpopular with the local electorate.
A larger variance—7.5%, or something akin to it—would allow greater flexibility for the Boundary Commission. It must be said that the commission generally does a good job and is very open to other suggestions, but has its hands tied by the 5% rule. Giving it extra freedom to determine the best fit is a very sensible suggestion.
Ben Lake
Q
Geraint Day: The biggest difference in local ties between Wales and England is the Welsh language. A large percentage of Welsh language speakers are down the west coast, but they are also in some of the upland areas in north and south Wales. Local ties do not necessarily go down the same route as that. The Boundary Commission is looking at geographical ties—shopping centres, travel-to-work areas and those types of things—whereas at times the Welsh language communities do not fit into that local-tie element.
In the past, the Boundary Commission has made attempts to address this; where it has originally proposed splitting Welsh language communities, it has made efforts to put them back together. However, I suggest that it would be better to specifically state that in the Bill, rather than just lump it in with “local ties”. If you look at the Welsh Government’s planning process and the advice it gives to local government about local development plans, those plans are required to have a language impact assessment, a requirement that originates from the Welsh Language (Wales) Measure 2011. The way the Boundary Commission operates is perfectly bilingual and it deserves great praise for the way it operates. However, it is not required under the current local ties rule to specifically consider the impact on the Welsh language. I think that should be included as a specific item in the Bill.
Mrs Miller
Q
Geraint Day: In one regard, it is a very simple statement to make. However, the removal of parliamentary authority and moving that decision away from Parliament to straight implementation is a big step to make. If that rule had been in place in the last two reviews, we would now have a Parliament of 600 MPs and we would not be having this conversation.
Parliament provides a track to final proposals. If we cannot get a majority in the House of Commons, that raises questions about whether it should be implemented. I understand the trouble that the previous two reviews caused, and as one of the people who contributed and spent a lot of time putting submissions to that, it is quite frustrating. There should be some way of keeping some form of parliamentary overview of the proposals without necessarily enabling it to become a party political football in the House of Commons.
Mrs Miller
Q
Geraint Day: In terms of how the Boundary Commission operates, it has been doing its job; the issue has been with Members of Parliament in the House of Commons. The way in which that is solved is something that I think Parliament needs to come to an answer about, rather than the non-elected people in society, including myself. It is really a matter for Members of Parliament, but I understand where you are coming from and I have a certain amount of sympathy. I refer back to my previous point—if this rule had been in place in the past, we would already have a Parliament of 600 MPs and not 650. I think that 650 is by far a better fit and that seems to be the general opinion of the majority of the population, so I think the check has worked, to a certain degree, despite how frustrating it has been.
Mrs Miller
Q
Geraint Day: Island communities are unique and you see that not just throughout the UK, but throughout the world, not least in the fact that they even have the Island games, where various islands of the world get together and put on a semi-Olympic games just for the islands. You see it in the identity. That is something that is quite precious and unique and that we as a society need to foster and take care of.
In terms of their numbers, if the Isle of Wight has two MPs, each one will have an electorate the current size of Ynys Môn’s. If it is good enough for the people of the Isle of Wight, why is it not good enough for the people of Ynys Môn?
Mrs Miller
Speaking as a Hampshire MP, I am sure that the people who live on the Isle of Wight would understand exactly what you are talking about. Thank you.
Alec Shelbrooke
Q
Geraint Day: This is coming down to the constituencies of the United Kingdom vis-à-vis the nations of the United Kingdom. This is one of the consequences of our current constitutional set-up, without a parliament for England, which Plaid Cymru is quite supportive of. The other option if you have equal levels of constituencies in the UK is a reduction in the representation of the Celtic countries of the United Kingdom. Certainly, we do not support the reduction in the number of MPs.
Shaun Bailey (West Bromwich West) (Con)
Q
Geraint Day: Under the rules the Boundary Commission operates with, I can give an exact example from the last review. The Boundary Commission originally proposed putting Llandrindod in with Ceredigion. Llandrindod is in Powys on the other side of the Cambrian mountains from Ceredigion. That was a very strange decision. The argument on local links was that the main trunk road to Ceredigion goes right by Llandrindod. The subsequent argument that we put together, which I think was supported by every other contributor to the response, was that that should not be the case because the linguistic links and levels of Welsh speaking in Llandrindod are much different to those in Ceredigion. Instead, we proposed to look north into Machynlleth and the Dyffryn Dyfi area and take that into the proposed constituency of Ceredigion, which was subsequently adopted by the Boundary Commission.
That worked because there was unanimity of view among those giving comments to the Boundary Commission. Where you would find difficulty is where the different parties and individuals who give evidence differ in their approach. If one or two of the parties had said, “No, we want Llandrindod to go in,” we could have ended up with a very different end result from the Boundary Commission. If it had been required to consider the impact on the Welsh language right from the start, it would not even have made the initial proposal. That is the main reasoning behind it and that is where we come from.
Shaun Bailey
Q
Geraint Day: Absolutely. I pay credit to the Boundary Commission in the first instance; every time I have given evidence without simultaneous translation, it has been able to provide written evidence in Welsh or English. It works entirely bilingually, and it deserves credit for that.
Where it engages with the Welsh-speaking communities is around where it holds public hearings, which can be slightly awkward because of the number that it is restricted to. Having the ability to arrange more public hearings, without a cap, is one way around that. For example, in some of the constituencies along the north Wales coast, there are large population centres on the coast, but the Welsh-speaking communities tend to be in the island areas and the mountains. The public hearings, naturally enough, are held where the large population centres are. Getting rid of that cap and allowing people to interact with communities in more dispersed rural areas should be encouraged, whether it is done through public hearings or through more promotion of online submissions, which might be a way forward.
The Chair
There are no further questions from Members, so thank you very much, Geraint, for your evidence and for your time. We will move on to the next witness, whom I see waiting in the wings.
Examination of Witness
Professor Richard Wyn Jones gave evidence.
The Chair
We will now hear from Professor Richard Wyn Jones of the Wales Governance Centre. Professor Wyn Jones, you are very welcome. We will go round the table, starting with the Minister.
Chloe Smith
Thank you very much indeed, Richard, for joining us this afternoon. It is really valuable to have your insights.
Professor Wyn Jones: It’s a pleasure.
Chloe Smith
Q
Professor Wyn Jones: I have to say that I have had cause to make myself unpopular with Welsh MPs when appearing in front of various Committees over the past few years, because I have argued consistently that there is no real justification for the level of Welsh over-representation in particular.
I think that there is a real issue with the boundaries being so out of date. For those who are interested in such things, there is a historical precedent going back to the first world war, when boundaries were very much out of date. That finally changed, which unleashed a period of Labour domination of Welsh politics that continued, but that was basically what people in Wales wanted and still want, to a very large extent. That is fine, but I do think that there is a real problem with rumbling on with boundaries that are clearly outdated.
There is also a real problem because there is no in-principle argument in favour of Welsh over-representation. It was never anybody’s intention, as far as I can make out; it is an unintended consequence of the rules that were put in place for the other Boundary Commission. We have ended up with a situation that was never justified beforehand, as far as I can see, and for which it is very hard to retrofit a justification now. Even though I love having lots of Welsh MPs, because it makes my life more interesting, it is hard—in fact, in my view it is impossible—to justify the current position, the current stasis and the apparent inability to move forward.
Chloe Smith
Q
Professor Wyn Jones: These kinds of things are always a difficult balance. My general view is that equality of constituency sizes makes sense. I cannot see any particular reason for ensuring that the different constituent territories of the UK are over-represented here. There are different arrangements in place for Wales, Scotland and Northern Ireland. Frankly, the fact that Wales has 6% rather than 5% of MPs—I think that is right—does not make a blind bit of difference.
In terms of general principle, I think equality, with a relatively small margin of difference, is fine. I also support in principle the decision that the changes should be enacted without a further vote. It is probably better that MPs set the terms of the exercise for the Boundary Commission behind a veil of ignorance, if you like, without knowing exactly what the particular outcomes would be for them as individual MPs. It is probably preferable—I think definitely preferable—that they vote behind the veil of ignorance and set the parameters of the exercise, and then allow the exercise to play out in the way we are now used to.
Chloe Smith
Q
Professor Wyn Jones: You choose a particular way of phrasing it that I might not choose. It is human nature that MPs will look at any list of redrawn constituency boundaries and think, “Hang on, where do I fit in in this particular structure?” That may well colour how they then vote or agitate before the thing gets voted on, which I know happened quite a lot with the last review.
We need democratic involvement that is appropriate, in terms of setting the terms of the exercise, such as deciding how many seats there should be in the House of Commons, if you want rough and ready equality or if you want to be very precise in terms of equal constituency sizes. Those are all appropriate decisions for Members of Parliament to be involved in, and I think they should be involved in those.
However, there are in-principle advantages of allowing the Boundary Commission to get on with it, with all the safeguards that remain in place around process. The appointment of commissioners is then incredibly important, but, assuming all those things are done properly, it is better that MPs are not given the final opportunity to undermine the whole thing if they do not like the results.
Chloe Smith
Q
Professor Wyn Jones: I was not implying that that was not the case. I am saying that those safeguards become even more important in a context in which that final vote is removed. That was my sole point. You are absolutely right that the commissions have a very high reputation, deservedly so at present.
Chloe Smith
Q
Professor Wyn Jones: I have no particularly strong view as to 600 versus 625 versus 650, so I do not have a particularly strong view about that, but a reasonably narrow tolerance is absolutely fine. If you are going to will the ends of relatively equal constituency sizes, you have to will the means. If I am going to be consistent in saying that that seems to be the appropriate, fair thing to do in a modern democracy, so be it. We have to will the means to allow that to happen.
Chloe Smith
I salute the crystal clarity of your thinking and the way you have put it to us. Thank you.
Cat Smith
My question is about devolution, which looks very different in different parts of the United Kingdom. It looks a certain way in Wales and, even within England, there are huge variations. To what extent do you think that the Senedd boundaries should be taken into consideration, as opposed to ward boundaries? What do you think makes the best building blocks for Welsh constituencies that truly represent the communities and keep the communities together, while obviously striving to have constituencies as equal as practically possible?
Professor Wyn Jones: Thank you for the question. One of the things we tend to focus on, especially in these kinds of conversations, is the relative number of MPs from each of the constituent nations, but I think it is important to point out that within Wales, the boundaries are now so out of date that we have very large differences in constituency sizes in Wales.
If you take Arfon at one end of the spectrum and Cardiff South and Penarth at the other, there are very large differences in terms of size. To the extent that the boundaries of the Senedd, or parts of the Senedd electoral system, remain tied to those of Westminster, having relatively equal constituency sizes for Westminster will probably make the Senedd electoral system a little bit fairer, too. We miss the fact that the differences within Wales are now very substantial indeed.
If you will permit me to widen the optic a bit, you are right to say that we have distinct dispensations for Scotland, Wales and Northern Ireland. They now look more alike than they did in 1999, but they are still different. England has an incredibly complex—I would say pathologically complex—internal devolution system. My view is that that should be separated out from the issue of representation in Westminster.
There is room, I think, for variation within the state, but in terms of representation in the House of Commons, it seems to make sense to have a kind of equality, not least because I have never heard a good justification for the level of variation that we have. As I said earlier, why should Wales have 6% of MPs when we have 5% of the population? Why not 8% or 10%? There is no obvious logic to the current system. Equality makes more sense.
Cat Smith
Q
Professor Wyn Jones: I think we all recognise that commissioners always have a terribly difficult job to do, because there will be particular communities that feel a sense of association with some communities and less so with others.
Assuming this legislation reaches the statute book, the challenge for the Welsh commissioners is particularly daunting, because Wales would see the biggest level of change. That will be an enormous challenge, and there will be communities in Wales that feel that the changes being imposed are unwelcome; there is no doubt about that. I am an Anglesey boy, an Ynys Môn boy—I can well foresee that people at home will be extremely unhappy. I am sure that there will be different valleys and different communities thinking, “Well, we don’t really have much in common with the people over the other side of the ridge”, and so on and so forth.
So the challenge will be substantial. I think that my predecessor on this call, Geraint Day, pointed to a recent example around Ceredigion, where people felt that the commissioners had got it wrong, and fair play to the commissioners—they went back and changed things in a way that was regarded as being more acceptable. And I have no doubt that there will be lots of that.
David Linden
Q
Professor Wyn Jones: I do not really have that level of insight into the minds of the people involved. All I would say is that I spoke to Conservative MPs in Wales about this—I spoke to many of them because, as you probably have guessed, my views about this issue are not always particularly popular among Welsh MPs, and several of them were very keen to put me right. But it was very clear from a very early point that the reduction from 650 was not politically viable and that the Conservatives would have real issues, in terms of whipping their own MPs to support it.
It was certainly made clear to me very early on that, in all likelihood, the last attempt at reform would fail and that we would be coming back to this issue, and that we would be coming back to it with 650 MPs as the aim. And the people who I spoke to at that time were correct.
David Linden
Q
Professor Wyn Jones: I would not describe it as “particularly courageous”. The issue is that we have boundaries that are terribly out of date; I do not think that there is any argument about that. And we have a real issue, in terms of some constituencies being, by orders of magnitude, larger than others. Wales is a particularly egregious example of that, because we are over-represented to an extent that no other constituent nation is.
So the issue is that if you are going to try and redo the boundaries, on what basis do you do that? As I have said, and I apologise for repeating myself, I have never heard a good in-principle argument for Wales having, for example, 6% of MPs when it has 5% of the electorate. I have never heard an argument that makes any sense of that.
Equality seems to be a reasonable principle, and that means that the biggest impact of any change is felt in Wales. What precisely it means for continuing Conservative representation in Wales in four-and-a-half years’ time, if that is when the next election is held—you are a better man than I am if you can guess that, not least because we do not know what the new boundaries will look like—I do not know. However, that will have an impact on all the political parties; which one it impacts worst, I genuinely do not know.
David Linden
Q
Professor Wyn Jones: I agree that there are very serious tensions across the states, but I genuinely doubt that the relative numbers of MPs from the different constituent units will make much of a difference there. I would concentrate on trying to improve intergovernmental relations between Edinburgh, Cardiff, London and Belfast. That is much more likely to make a difference than having 31 Welsh MPs as opposed to 40. I am afraid that there are fundamental issues around constitutional design and the attitude of the UK Government to the devolved Governments. That is where the action needs to be. Whether we have 31 Welsh MPs or 32 as opposed to the current 40 will not make any difference in terms of dealing with the big issues.
Ben Lake
Q
This is a very interesting debate about representation and what we actually mean by it. You asked, Professor, what sort of logic could be applied and I suppose, if I were a Conservative and Unionist MP, I would have a particular logic of maintaining the voice of the constituent parts of the United Kingdom.
If you will indulge me for a moment, on that line of logic, Wales’s population is set to peak in 2023 and in the next 20 years, England’s population alone is estimated to increase by about 8 million. If we are to continue with the logic about seats, in 20 years’ time, Wales might have even fewer seats and the relative voice at Westminster would be significantly diminished. In the light of the fact that we are no longer members of the European Union, and so more decisions are now taken at Westminster that have a direct effect on Wales, do you think that we might be embarking here on a set of developments that could—down the line, if not immediately—cause quite considerable tension for the Union?
Professor Wyn Jones: Diolch yn fawr iawn am y cwestiwn. Diddorol iawn. [Translation: Thank you very much for the question. Very interesting.]
You make an interesting point. The difficulty with thinking through the logic is what is the pay-off, in terms of an alternative arrangement? In many multinational internally differentiated states, the second Chamber is often used as a way of trying to balance territorial representation and, as I know you are very well aware, there are proposals for changing the House of Lords and making it more territorially representative in terms of its membership and in enhancing that role of its activities too. That would potentially be one way forward. There, you could follow an American Senate-style logic of giving each of the constituent territories equal representation—an idea that was promoted by Carwyn Jones, the former First Minister in Wales. That was an idea that he put forward.
However, in terms of the House of Commons, I really struggle to see the logic of how that plays out in terms of the relative numbers of MPs for each territory. Equality at the UK level—dealing with those issues that are reserved or that are not captured by English votes for English laws—seems to be a relatively straightforward way of proceeding, if you are going to maintain the Union, but then, of course, you would have potentially differentiated devolution settlements for different territories, reflecting the differences of those devolved territories, and perhaps doing something with a second Chamber. Those are probably better ways of dealing with the problem you highlight than coming up with arbitrary numbers for the different representation of the different constituent units of the UK in the House of Commons. Sorry, that was a slightly long-winded response.
Ben Lake
Q
One final question: we have had quite a bit of discussion this afternoon—indeed, this morning as well—on the status of Ynys Môn and the proposal for it to be a protected constituency, given its island status. I know that you are a native of Anglesey. Do you have any particular views or comments in that regard?
Professor Wyn Jones: I am not sure that I will have any additional insight. As you are aware, and—I was listening in to the conversation earlier—as I know many other members of the Committee are aware, those of us who come from Ynys Môn view ourselves very much as “mocha Môn”, as we say in Welsh. That’s a strong identity. People from over the Menai Strait will say, “Well, it’s only a few hundred metres. What makes you so special?” You can go back and forward, as we do in the pubs of that area on a regular basis. The issue is: where do you draw the line in making special cases? At that moment, I am quite pleased that I am not an MP and that I am a mere academic. I can hand that decision back to you.
Christian Matheson
Q
Professor Wyn Jones: This is, as you know, a knotty, difficult issue. A century ago, we ended up with a system that was horribly weighted against more built-up areas and in favour of rural areas, because we had seen a lack of boundary reform. That was deeply unsatisfactory. There are, no doubt, more challenges in terms of MPs moving around in rural constituencies. On the other hand, urban areas often have different kinds of problems that may take up more time. I guess the point I am making is that you could make an argument for Powys being particularly rural. Then again, if you compare it with the north of Scotland or the isles, it looks relatively compact.
There is often a tendency for those of us who live in and who have been brought up in Wales to view ourselves as being particularly rural. Actually, in comparative terms, even Arfon is relatively built up. I really wouldn’t want to exaggerate the differences there. I am afraid I am not really answering your question directly, because I don’t think there is a “gotcha” answer to that. I still think that equality is the place to start from. Then you can say that the very northernmost parts of Scotland, or Shetland and Orkney, have rurality issues that are so obvious and pronounced that they trump the equality argument, but I struggle to make that argument in the Welsh context.
Christian Matheson
Q
Professor Wyn Jones: It certainly did not have the support of elected Members—that is why. Obviously, there was a manifesto commitment, and an election was won on the basis of that manifesto. The usual practice is that that is a mandate and should be enacted, but it was clear from talking to, for example, Welsh Conservative MPs that they were absolutely not keen. They did not view themselves as tied down by that mandate.
Christian Matheson
Q
Professor Wyn Jones: As I think I indicated in response to one of your colleagues, I do not really have a very strong opinion. I know that academics are meant to have strong opinions on everything, but is it 600, is it 625, is it 650? From a Welsh perspective, it is not a massive difference, because we are so over-represented at the moment. Equality is the key thing—if it is 600 or 650, it is not a massive difference in terms of the number of Welsh MPs. I have no strong feelings about that.
Christian Matheson
Q
Professor Wyn Jones: I think I have been very clear in saying that Parliament does have a legitimate role in scrutinising and, in fact, in setting up the basic policy—forgive me if I was not clear in saying that. Parliament should very much be involved in establishing the parameters within which the boundary commissioners work. That is absolutely what Parliament should be doing.
I was saying that there is a very strong in-principle argument for removing Parliament from the final approval. In effect, I advocate a system in which MPs, in particular, are voting from behind the veil of ignorance—they do not know what the particular parameters that they are voting to approve would mean for them as individuals. They should be involved at the start of the process, but then the boundary commissioners carry out Parliament’s will.
I am absolutely not saying that Parliament should not have a role; I am saying that it should be a specific role at the start of the process. The human temptation for MPs to look at whatever the commissioners come up with through the lens of their own self-interest is too strong.
Christian Matheson
Q
Professor Wyn Jones: All the time, yes.
Christian Matheson
Q
Professor Wyn Jones: For example, you will guide a PhD student, but you do not mark their homework; you get external examiners in who decide if the standard is good enough.
Christian Matheson
Q
Professor Wyn Jones: But with respect, we are all human, and I think that asking MPs to look at the results of a Boundary Commission review in the abstract, without considering what it means for them as individuals, is asking for an inhuman level of self-denial. The experience of the last two reviews suggests that there is every likelihood that, if we continue with the current system, these boundaries are going to become so out of date that they actually endanger the legitimacy of the democratic process.
Christian Matheson
Q
Professor Wyn Jones: I do not think that the pressure valve was in any way related to an in-principle view that 650 was better than 600. There was a democratic mandate for reducing the size of the House of Commons. The reason why it did not happen, at least from what I understand after talking largely to Conservative MPs, is that too many people were unhappy about what it meant for them personally. It was not a great defence of principle that won out but—forgive me for saying so—pretty naked self-interest.
The Chair
Professor Wyn Jones, I thank you on behalf of the Committee for giving us your time and for the evidence you presented. That is very much appreciated.
Professor Wyn Jones: My pleasure. I thank all the Members.
The Chair
That brings us to the end of this marathon oral evidence session, in which we have taken evidence from nine witnesses. The Committee will meet again on Tuesday at 9.25 am in this room to take further evidence. Sir David Amess will be in the Chair for that session. I thank Members for their self-restraint—I think only two of you mentioned your own constituencies, which is incredible. I even got to mention Rathlin Island in my constituency, for some reason.
Ordered, That further consideration be now adjourned. —(Eddie Hughes.)
Immigration and Social Security Co-ordination (EU Withdrawal) Bill (Seventh sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 View all Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Committee divided: - Ayes: 6 / Noes: 8 - Question accordingly negatived.
The Chair
Today we continue line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. I remind Members that the Hansard reporters would be grateful if a copy of any speaking notes could be sent to hansardnotes@parliament.uk. We are all beautifully socially distanced.
New Clause 24
Annual review: Impact on the agricultural sector
‘(1) The Secretary of State must commission an annual report from the Migration Advisory Committee on the impact of the provisions of this Act on the number of seasonal agricultural workers in the UK.
(2) In undertaking the evaluation, the Secretary of State must consult—
(a) the relevant Scottish Ministers;
(b) the relevant Welsh Ministers; and
(c) the relevant Northern Ireland Ministers.
(3) The report must be laid before each House of Parliament as soon as possible after it has been completed.
(4) A Minister of the Crown must, not later than three months after the report has been laid before Parliament, make a motion in the House of Commons in relation to the report.’—(Holly Lynch.)
Brought up, and read the First time.
Holly Lynch (Halifax) (Lab)
I beg to move, That the clause be read a Second time.
Good morning, Sir Edward. It is a pleasure to serve under your chairmanship once again. New clause 24 is in very much the same spirit as new clause 21, which would require the Government to commission a report on the Bill’s impact on the health and social care sectors. New clause 24 would require them to take the same approach to the agriculture sector and food security.
Significant numbers of EEA nationals are employed on a permanent and seasonal basis, making them an instrumental consideration for the agriculture sector. As things stand, it would not function without them. The coronavirus pandemic has shone a light on certain sectors that we have often taken for granted but are absolutely essential. Food security has been a focus for people as never before. It is another area that brings recognition that food production is essential to life. Its workers have been classed as key workers for the purposes of the pandemic, yet so many of those who have worked incredibly hard to keep fruit and veg, in particular, on our tables throughout the pandemic are paid less than £25,600.
The Government’s February policy statement on their future points-based immigration system simply states:
“We will end free movement and not implement a route for lower-skilled workers.”
Members who served on the Committee that considered the Bill presented during the 2017-19 Parliament may remember that James Porter of the National Farmers Union of Scotland gave evidence. I spoke to Mr Porter about the Bill and about the issue of “low-skilled” workers. He was keen to stress that, although some of his workers may not have qualifications or letters after their names, being an agricultural worker and picker of soft fruits and vegetables is their profession. It requires skill and they take great pride in it.
Mr Porter said that most of his seasonal workers have been coming back to his farm for 10 or 15 years. He went on to explain that the exceptional circumstances of this year meant that attempts to redirect people traditionally from different lines of work and professions into agriculture from the local labour pool had brought out the likes of lawyers, electricians and teachers to pick fruit on his farm. That was welcome, but he made the point that although they were educated and highly skilled in their own field, they were not skilled fruit pickers. They took longer and their yield was not comparable with that of people who specialise in that line of work.
The Government’s February policy paper goes on to say:
“UK businesses will need to adapt and adjust to the end of free movement, and we will not seek to recreate the outcomes from free movement within the points-based system. As such, it is important that employers move away from a reliance on the UK’s immigration system as an alternative to investment in staff retention, productivity, and wider investment in technology and automation.”
I sought to make a point about this matter on Tuesday, during the discussion on the social care new clause. I completely accept the Minister’s point that social care and agriculture are very different sectors. He will look to the unemployment figures and say that we will fill labour shortages from the domestic workforce, but I gave the example of how attempts to channel those who are out of work into other sectors over the course of the pandemic had not exactly been an easy or straightforward process.
I cited the Pick for Britain scheme as an example. The Minister may have more up-to-date figures but, after overcoming some initial teething problems with the website, one of the organisations managing the scheme, Concordia, reported that it had 35,000 applications after the initial appeal for domestic workers. However, only 30% of applicants had farming experience—as was probably predictable—and only 16% of people opted to interview after their initial application, with even fewer actually making it on to a farm.
Some of the pressures have been alleviated thanks to specially chartered flights from EU countries such as Romania, which have provided us with the skilled workers we need, but they have been a warning of what is to come. When we have problems in the sector, we will say with absolute certainty that the writing was on the wall.
The seasonal agriculture workers pilot scheme needs to be much improved if it is to sustain the levels of migrant work needed after the end of the transition period. The pilot allows for 10,000 visas, when actually 70,000 would be much closer to the agreed number of people required. The cost of permits is too high and farms simply do not have the administrative capacity needed to process the bureaucracy that accompanies each individual application.
FLEX, the Focus on Labour Exploitation group, has also repeatedly raised concerns about the potential for worker exploitation in the scheme, citing the issue of tied visas, where the worker is tied to one specific employer and prohibited from changing employer while in the UK under that visa. Debt bondage, where the worker’s wages go towards paying off costs of entering the scheme, such as visa charges and flight costs, alongside recruitment fees paid to labour brokers, is another worrying trend that will need to be addressed in any future scheme.
Right across the sector there are problems. The Select Committee on Environment, Food and Rural Affairs took evidence on this in May, with Ian Wright, the chief executive of the Food and Drink Federation, telling the Committee that the crisis had shown how vital the food industry was. He said:
“If you can’t feed a country, you don’t have a country. That has been borne out in this crisis in massive order.”
He went on to explicitly say:
“We don’t think the current Immigration Bill addresses the sort of country we want to be. I think it is surprising that, given the lessons of the last eight or nine weeks, the Immigration Bill is back in parliament unchanged, given what we have learned about the people working in food and drink, in distribution centres and the care sectors.”
Mr Robert Goodwill (Scarborough and Whitby) (Con)
The hon. Lady is right to identify some of the exploitation that can occur. Does she agree that the Gangmasters (Licensing) Act 2004 addressed many of those problems and that the situation is much better than it was because of legislation passed by the Conservative-led Government?
Holly Lynch
I am grateful for that intervention and I welcome the point made by the right hon. Member for Scarborough and Whitby—
Holly Lynch
Further to my hon. Friend’s correction, James Porter was keen to stress that that has been a helpful intervention to improve standards for workers. I hope that the hon. Gentleman agrees that there is still much more to do to ensure that we are looking after these workers.
Mr Goodwill
May I correct the record? It was because of legislation passed by the last Labour Government, which I do not recall that we opposed.
Holly Lynch
That is one of the best interventions I have taken during the course of this Committee, and it was a welcome addition.
The Royal Association of British Dairy Farmers has estimated that in the UK, 56% of dairy farmers have employed workers from the EU; 60%––around 22,800 EU migrants––make up the workforce in poultry farming. According to the NFU, the UK’s horticulture sector is completely reliant upon seasonal migrant workers to collect crop yields: 99% of all harvesters in the UK come from Europe. All these working relationships have been forged over time due largely to the flexibility granted by freedom of movement.
The British Poultry Council has warned that the new immigration plans are likely to have a crippling impact on UK food businesses. A report of the kind outlined in new clause 24 is therefore necessary to safeguard the UK’s agriculture industry, during a time of much upheaval. As both the National Farmers Union and National Farmers Union of Scotland have stressed, fruit and vegetable picking requires a high level of manual skills, and farms can only operate efficiently when they recruit workers with this skillset.
This is the one sector where we can say that we have just been through a trial for the ending of free movement, brought about by lockdown. Migrant labour dried up due to lockdown and the Government tried to recruit from the domestic labour force. Nowhere near the required numbers joined up, fruit and veg started to rot in the fields and we were forced to very quickly get migrant labour from Europe back in on chartered flights. It is vital that the Government learn from our experiences during the crisis and develop a proactive and pragmatic agricultural policy for implementation after the transition period. New clause 24 would give us the information required to do this.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
It is a pleasure to serve under your chairmanship again, Sir Edward. I can be relatively brief because the shadow Minister has spoken to the National Farmers Union of Scotland and represented its interests pretty well. There is real concern about shortages in the labour market for agriculture, particularly in relation to seasonal workers. Research on seasonal migrant labour from 2018 showed that in Scotland alone the number of seasonal agricultural workers required in any year is not far short of 10,000.
More recently, the NFUS and the UK farming unions have given evidence to the UK Government, demonstrating that for the whole UK around 70,000 seasonal staff are required in the horticultural sector and 13,000 seasonal staff are required in the poultry sector every year. That is obviously many times more than the number of places in the current pilot.
Challenges in recruiting seasonal workers have already been seen in recent years. In 2018, the NFUS conducted a survey of its horticultural membership in which every single respondent reported being “concerned” or “very concerned” about the impact worker shortages would have on their businesses in 2018 and beyond. Almost 60% of respondents said they were “likely” or “very likely” to downsize their business and the remaining 42% said they would have to cease current activity.
The NFUS was opposed to the end of free movement but, even while free movement was retained, farmers increasingly needed to look beyond the EU to fill such posts, with countries such as Ukraine, Russia, Belarus and Moldova already supplying a significant proportion of the workers required. The seasonal agricultural workers scheme pilot has been described as a step in the right direction, but it does not provide nearly enough permits if shortages such as those experienced in recent years are going to continue.
The NFUS is calling for a seasonal scheme that is open to both EU and non-EU workers, with capacity to provide farmers with access to returnee employers. It also calls for the scheme to be open to a wide number of labour providers and direct recruiters. Some concerns have been expressed about the expense and the somewhat laborious processes that are involved in taking advantage of the scheme.
The NFUS has also expressed concerns that the future immigration system proposed by the Government is not based on realistic expectations of the ability of the UK to fill the jobs currently carried out by migrant workers. It says that
“to maintain the productivity of the agricultural sector, immigration policy must allow recruitment on a seasonal basis for workers from both the EU and non-EU, at a non-restricted level.”
I echo what the shadow Minister, the hon. Member for Halifax, said about the SAWS scheme and how we always have to be cautious about the need to carefully protect workers against exploitation. She was right to highlight concerns raised by Focus on Labour Exploitation during the passage of the Bill last year.
To come to the rescue of the right hon. Member for Scarborough and Whitby, the gangmasters legislation was very welcome, but so too was the introduction of the director of labour market enforcement in 2016, under the Conservative Government, which may have been what he was thinking about. Those are both welcome moves, but we have a long way to go to build on the creation of those posts in ensuring that migrant workers—and workers generally—are properly protected.
One criticism of the new clause is that it is not just on seasonal workers that we need to have a report; we need a broader report on the impact on access to labour in the agricultural industry. The concerns of organisations such as the NFUS go further than seasonal work, and include the cost of sponsorship under tier 2, which it has described as
“prohibitively expensive in terms of both financial and administrative burden.”
It is fair to say that the NFUS has welcomed some of the recent developments, for example the decrease to the salary threshold that has been introduced by the Government, but it asks how non-salaried roles will fit into the points-based system; how the revised shortage occupation list will generally take account of the range of occupations that exist in agriculture; whether the Government will consider targeted routes for remote and rural areas—unfortunately, from what the Minister said the other day, it sounds as if it will be disappointed in that regard—and how the expense and bureaucracy of the system can be improved. It simply calls for close engagement as we move towards the implementation of the new system.
The new clause is sensible and will contribute to our understanding of what is going on in a future debate about labour in the agricultural sector.
The Parliamentary Under-Secretary of State for the Home Department (Kevin Foster)
It is a pleasure to serve under your chairmanship, Sir Edward. I welcome the general tone of the debate that we have had so far.
As the Migration Advisory Committee—or MAC—has already made clear in its report of September 2018, agriculture is an exceptional case, as we believe the labour market is totally distinct from the labour market for resident workers. For this reason, although the MAC recommended against a dedicated route for recruiting workers based on paying at or near the legal minimum—advice that this Government accept—it did consider that the position was different in respect of the UK’s world-leading agricultural sector.
Accordingly, on 6 March last year the Government announced the implementation of a nationwide pilot to enable non-EU migrant workers to undertake seasonal work on UK farms. The seasonal worker pilot admits temporary workers from outside the European Union to work in edible horticulture for up to six months. The pilot scheme ran last year on the basis of 2,500 places, and on 19 February, in line with the commitment made in our election manifesto, we increased the annual quota for the second year of the pilot from 2,500 places to 10,000 places.
Stuart C. McDonald
Can the Minister give us a rough outline of when a review of the pilot scheme will take place and when any sort of decision can be expected on how it will look in the future?
Kevin Foster
We expect to undertake that evaluation later this year and then announce the results as part of confirming the final details of the future migration scheme. If the hon. Gentleman’s next question is about whether we will take into account the unique circumstances this year, the obvious answer is yes, given the restrictions on travel. We have found that the net is going wider in trying to recruit. Just creating migration opportunity does not automatically bring workers to the United Kingdom, as we have seen with free movement—for example, it used to be common for people from parts of western Europe to come here to do this work, but now it is not. Again, migration cannot be seen as an alternative to providing attractive terms and conditions that will encourage people to wish to do the work. Our intention is to make that announcement later this year and then confirm our intentions, in good time for next year’s season.
The Department for Environment, Food and Rural Affairs already conducts quarterly seasonal labour in horticulture surveys, explicitly looking at the questions of supply and demand of seasonal labour in horticulture. I am therefore not persuaded that a further annual MAC report would significantly add to our knowledge on this matter, especially when the MAC will in future have more ability to work on matters of its own choosing, including an annual report on the migration system, in which it can choose to cover the areas suggested in the new clause. If we are giving the MAC the ability to choose what it sees as the priorities in its annual report, with debate in the House on that report, it seems strange to give it that freedom and then compel it to do a number of reports by primary legislation. With those reassurances, I hope that the hon. Member for Halifax will feel able to withdraw her new clause.
Holly Lynch
I am grateful to the Minister for those assurances. We welcome the increased flexibility that the MAC will have. I wonder whether there will be an opportunity for Opposition parties and MPs to cast a particular spotlight on an area, so that MPs can feed into that process with the MAC.
It is in everyone’s interest that we continue to see the wide availability of fresh fruit and veg for families. I accept the point made by my friend the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East that we would like to see any assessment of this sector be broader than seasonal agricultural workers and take into account the requirements of the workforce right across the food sector.
Having said that, I do not intend to push the new clause to a vote. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 25
Report on status of EEA and Swiss nationals after the transition
“(1) This Act shall not come into effect until a Minister of the Crown has laid a report before each House of Parliament setting out the impact of the Act on EEA and Swiss nationals in the UK.
(2) A report under subsection (1) must clarify the position of EEA and Swiss nationals in the UK during the period between the end of the transition period and the deadline for applying to the EU Settlement Scheme.
(3) A report under subsection (1) must include, but not be limited to, what rights EEA and Swiss nationals resident in the UK on 31 December 2020 have to—
(a) work in the UK;
(b) use the NHS for free;
(c) enrol in education or continue studying;
(d) access public funds such as benefits and pensions; and
(e) travel in and out of the UK.”—(Holly Lynch.)
This new clause would require Government to provide clarity on the rights of EU nationals in the EU in the grace period between the end of the transition period, and the closure of the EU Settlement Scheme.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Holly Lynch
I beg to move, That the clause be read a Second time.
We have been through a great deal of this subject matter earlier in the debate on clause 2. I was grateful to the Minister for some of the clarity he was able to provide at that stage. New clause 27, however, goes that little bit further and asks the Government to produce a report on the associated rights given to citizens in the common travel area.
The aim of this proposed change is to ensure that Ministers set out in detail the scope of what has been officially referred to as the reciprocal rights of the common travel area, and to compare and contrast them with the rights that can be retained under part two of the withdrawal agreement, as provided for domestically under the EU settlement scheme. The Minister’s predecessor stated that Irish citizens do not need to apply to the EU settlement scheme because of the CTA, but since then the Government have instead suggested that individuals whose immigration status is covered by the CTA may wish to register under the EU settlement scheme. Inevitably, this has caused a degree of confusion about possible gaps between where free movement rights finish and CTA rights start.
As highlighted by the Northern Ireland Human Rights Commission, the EU SS is enshrined in law through the withdrawal agreement. Comparatively, however, the CTA is upheld essentially by a gentlemen’s agreement, the non-legally binding memorandum of understanding between the UK and Ireland on the CTA of May 2019. A report on the associated rights of the CTA would therefore be incredibly helpful to ensure that Irish citizens can receive equal rights to EEA and Swiss nationals.
We also believe that the report on the associated rights granted through the CTA would provide scope to begin to answer the pertinent questions about clause 2 raised during the evidence given by our expert witnesses. As previously discussed, while we welcome the provisions set out in clause 2 for Irish citizens, there is still outstanding ambiguity regarding the status and legality of the associated rights that are prescribed by the common travel area.
We believe that it would be incredibly welcome if the Government were to take this opportunity to clarify any ambiguity before the Bill takes effect. A report would provide unequivocal guidance on the status of Northern Irish citizens who identify solely as Irish. It would hopefully guarantee the same provisions for deportation and exclusion as those for Northern Irish citizens who identify as British. It would also clarify issues raised by the Committee on the Administration of Justice on questions relating to cross-border provisions and the right to vote in referendums. More must also be done to tackle the current problematic loophole whereby someone with an Irish passport is not granted protections on arriving in the UK, because they have travelled from a country outside the common travel area. Professor Ryan illustrated the opacity surrounding the status of acquisition of British nationality for British-born children, children born to Irish parents and Irish citizens wanting to naturalise. He stressed that this is currently an unanswered question in British citizenship law.
Finally, the report could also lead to a more sustained debate on Alison Harvey’s proposal on the right to abode, which was raised during evidence. The right to abode would grant citizens a plethora of citizenship rights, while simultaneously safeguarding people’s right to identify solely as Irish. We hope the new clause will catalyse discussions on this issue that will lead to a definitive conclusion.
Stuart C. McDonald
I can be very brief. I echo and support what the shadow Minister has said. I am not going to repeat what I said on clause 2; that is a welcome clause, although we have one or two concerns about the detail. What this whole debate has shown us is that, even though we are told that the common travel area pre-existed the European Union and everything is fine, in actual fact it is hard to discern what precisely is involved in the CTA and precisely what rights it confers on individuals.
My understanding from the debate we had last week is essentially that the Government propose to progress this in a rather piecemeal way, changing bits and bobs of the legislation on different subjects to ensure that Irish citizens will continue to enjoy equivalent rights in this country. Okay, that will get us to where we want to be, but it does prohibit us from having a comprehensive overview of what progress has been made and what exactly we are trying to achieve by restoring the common travel area and making sure that there is not a loss of rights because of the loss of free movement.
The new clause would be genuinely be helpful for MPs to understand what the CTA is all about, what exactly the Government are trying to achieve and what progress they are making towards that. It is a genuinely helpful suggestion.
Kevin Foster
I thank the hon. Member for Halifax for tabling new clause 27 because it gives me a chance briefly to outline the Government’s commitments to maintaining the common travel area arrangements, including the associated rights of British and Irish citizens in each other’s states, and the status of Irish citizens under the EU settlement scheme arrangements.
For brief background, the common travel area is an arrangement between the UK and the Republic of Ireland, as well as the Isle of Man, Guernsey and Jersey. It allows British and Irish citizens to travel freely between the UK and Ireland, and to reside in either jurisdiction. It also facilitates the enjoyment of several associated rights and privileges—in effect, by forming one area for immigration entry purposes.
As mentioned when we debated clause 2, both the UK Government and the Irish Government have committed to maintaining the CTA. The CTA is underpinned by deep-rooted historical ties, and maintaining it has been and continues to be a shared objective of both nations. Crucially, it predates the UK’s and Ireland’s membership of the European Union. It has been agreed with the EU that the UK and Ireland can continue to make arrangements between ourselves when it comes to the CTA.
Irish citizens in the UK and British citizens in Ireland will continue to have access to their CTA associated rights. Both Governments confirmed that position on 8 May 2019, when we signed a common travel area memorandum of understanding, which I have mentioned previously to the Committee. It is worth noting that that also builds on our commitments in the Belfast agreement that are part of international law.
The Government continue to work closely with the Irish Government to ensure that our citizens can access their rights as set out in the memorandum of understanding. This has been and will continue to be taken forward through bilateral instruments, and we have committed to updating domestic legislation. This is why we are proposing clause 2 of this Bill, which will ensure that Irish citizens can enter and remain in the UK without requiring permission, regardless of where they have travelled from, except in a very limited number of circumstances, which we debated under clause 2.
New clause 27 would also require the Government to publish details of the rights and benefits provided by the EU settlement scheme. The European Union (Withdrawal Agreement) Act 2020 protects the residence rights of European economic area citizens who are resident in the UK by the end of the transition period and eligible family members seeking to join a relevant EEA citizen in the UK after that time. EEA citizens and their family members can apply under the EU settlement scheme for UK immigration status, so that they can continue to work, study, and, where eligible, access benefits and services such as free NHS treatment. We continue to make every effort to ensure that people are aware of the benefits of applying to the EU settlement scheme.
Stuart C. McDonald
Given what the Minister says, people will have to decide whether they want to apply for the EU settlement scheme, or whether they want to continue to rely on their CTA rights. They could make that decision much more easily if they knew precisely what their CTA rights would be. Can he say anything about when the Government will take forward a programme of work to ensure that Irish citizens continue to enjoy the rights that they have now? When can people can see this on the statute book, rather than just hear it being spoken about? People are describing these as rights written in the sand.
Kevin Foster
Clause 2 explicitly puts Irish citizens’ rights on the statute book and removes the anomaly by which an Irish citizen is treated differently depending on how they enter the country—whether they arrive on a flight from Dublin or a flight from Brussels, whether under EEA free movement or CTA rights. That difference is removed completely by clause 2; it makes it clear that the same position applies, however an Irish citizen arrives in the United Kingdom.
I am very much a supporter of the provisions of the Belfast agreement, under which a person can identify as British, Irish or both. Effectively, in the United Kingdom, the person will be treated as if they were a British citizen, in terms of their rights, including their right to live here, and the services they can access. There is a very tiny number of exceptions. On this Committee, we have all struggled, as have the witnesses, to find in recent times and under modern legislation an example of an Irish citizen being deported from the United Kingdom. The position outlined in a written statement in 2007—and yes, I know who was in government in 2007—still stands, and we have not had any representations from the Irish Government on changing that. I suspect that if we looked to behave in an unreasonable way towards an Irish citizen, the Irish Government would be very clear in their response.
Stuart C. McDonald
The Minister is obviously doing his bit by putting clause 2 into the Bill, but what I am really asking—I suspect that he does not have the answer today—is what other work is under way across Government to make sure that Irish citizens have rights on housing, health and everything else on exactly the same basis as before, and to make sure that the loss of free movement rights does not mean that they will be in a worse position. Some sort of timetable on what is going on, and how the change is being processed, would be useful for lots of citizens.
Kevin Foster
I thank the hon. Member for quite a constructive intervention. He obviously will appreciate that those arriving after the transition period would not have free movement rights, but those arriving before are covered by the withdrawal agreement. I am more than happy to get a letter to him setting out how we will make sure of the position that he mentions. I suspect that his concern is that when an Irish citizen is in the United Kingdom, talking to a person at a Department for Work and Pensions office, or a landlord, and presents them with an Irish passport, it should be understood inherently that it has exactly the same status in terms of renting, or accessing a service or employment, as a British passport, particularly given the different commentary. I am more than happy to set out in writing to the Committee the work that will be done on that point.
In summary, the Government have already made clear the rights available to individuals under the common travel area and the EU settlement scheme following the end of free movement, and we will continue to do so. I therefore respectfully ask the hon. Member for Halifax not to press the new clause for the reasons I have outlined.
Holly Lynch
I welcome the fairly constructive way in which the Minister has engaged on this point. The points made in intervention by my friend from the SNP, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, do still stand. I reinforce that there will continue to be a desire and unanswered questions in this area. There are certainly merits to committing more of what we have discussed to primary legislation, but I will not press the new clause at this point. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 28
Annual review: Higher education
(1) The Secretary of State must commission an annual report from the Migration Advisory Committee on the impact of the provisions of this Act on the number of overseas students in the UK from the EEA and Switzerland.
(2) The report must be laid before each House of Parliament as soon as possible after it has been completed.
(3) A Minister of the Crown must, not later than three months after the report has been laid before Parliament, make a motion in the House of Commons in relation to the report.—(Kate Green.)
Brought up, and read the First time.
Kate Green (Stretford and Urmston) (Lab)
I beg to move, That the clause be read a Second time.
It is a pleasure to see you in the Chair again this morning, Sir Edward. The new clause would require the Government to commission an annual report from the Migration Advisory Committee on the impact of the Bill’s provisions on the higher education sector.
As the Committee will know, the UK higher education sector has a world-leading reputation, which helps it to attract international students. The proportion of international students is a measure in most global university rankings, meaning that by choosing to study here, international students contribute directly to the sector’s world standing. Today, 18 of the UK’s universities rank in the world’s top 100, and 76% of UK research is ranked as excellent or world-leading. International staff and students are crucial to the UK’s economic success, and it is important that the UK continues to attract both EU and non-EU students and staff in the future.
International students deliver more than £26 billion to the UK economy. They bring more than £6.9 billion in income to universities in tuition fees. They generated £13 billion of export revenue in 2016, an increase of 41% since 2010. Universities UK estimates that universities supported more than 200,000 jobs and were worth £3.3 billion in tax revenues.
Aside from the direct economic benefits, international students and staff are crucial to the provision of skills, the conducting of research and the culture of the UK’s universities. In 2017-18, UK higher education institutions reported a £4.3 billion deficit between research income received and the costs of delivering research activity. Much of that gap was covered by international tuition fees, so international students are key to the UK’s research capacity.
In 2018-19, there were 485,645 international students enrolled at UK universities, an increase from 436,600 international students in 2014-15. Some 342,620 of those international students—that is 70%—were from outside the European Union. The remaining 143,025 students were from EU countries, but the UK’s market share has dropped in 17 of the world’s top 21 sending countries. The Office for Budget Responsibility has identified higher education as the sector likely to take the hardest hit from the covid crisis.
Given the pressures, it will be vital to understand the impact of immigration policy on future student numbers. The impact assessment attached to the Bill is optimistic, suggesting that a potential reduction in the number of EEA students attending UK universities of 25,000 after the first five years of the new points-based system will be offset by a corresponding increase in non-EEA students.
However, some of the assumptions in the impact assessment are highly speculative—as, indeed, the Government themselves acknowledge. Paragraph 160 of the impact assessment states that
“measures such as proof of funds and employment rights might have an additional deterrent impact—but there is little evidence on which to base an estimate. The impact of any administration cost or visa fee or change to student funding will also impact student choices. Therefore, the estimates presented here will only reflect the potential impacts from changes in immigration policy and not the overall impacts on EU student numbers.”
Paragraphs 163 and 164 state:
“The restrictions on the rights to bring dependants, which will apply to EU students from 2021, may also have an impact on inflows under the future system, as only those who are studying a full-time course which is a least nine months long at a postgraduate level of study are allowed to bring family members to the UK…Applying these potential deterrents, the reduction in EU student inflows are estimated to be around 15,000 per annum in the first five years of the policy.”
In paragraph 165, expected-length-of-study data is applied to the change in inflows, pointing to:
“an estimate of up to 25,000 fewer EU higher education students in the UK by academic year 2024/25 relative to the baseline.”
The paragraph also argues that
“any places not taken by EU students may be occupied by non-EU students, so the overall impact on foreign student numbers is not clear.”
In paragraph 166, the Government estimate that
“non-EU enrolments might increase by up to 10 per cent, depending on the level of study”,
but the paragraph also notes:
“This assumption is very uncertain, not least because other drivers could have affected non-EU inflows over the period of the last post-study work visa.”
None the less, paragraph 167 states:
“The assumption of around 10 per cent increase in enrolments is estimated to lead to an average annual increase in non-EU enrolments by around 25,000 over the first five years of the policy.”
That is a strikingly convenient conclusion in the light of the assessment of 25,000 fewer EU students at the end of the same period.
Paragraph 172 notes:
“Changes in the numbers of students enrolling will affect tuition fee income for universities. Overall, projected tuition fee income is estimated to increase under the future immigration system. This is primarily driven by the”—
assumed—
“increase in tuition fee income from additional non-EEA students which is expected to more than offset the decline in EEA student tuition fee income. The increase is estimated to be between £1 billion and £2 billion over the first five years of the policy.”
However, paragraph 172 goes on to state:
“Estimates do not take any account of behavioural impacts, nor any changes in universities expenditure.”
Paragraph 173 expands on that, stating:
“EU students are currently classified as ‘home’ students, and therefore benefit from accessing student loans and paying domestic tuition fees which are currently capped at £9,250 for undergraduates. Estimates above assume home fee status and access to student loans will remain the same as the current system. However, any changes to this will have an impact on both EU student enrolments and the projected tuition fee income of universities.”
Paragraph 175 concludes:
“As a result of changes to net student enrolments modelled above, a cumulative net fiscal benefit is estimated of under £1 billion over the first five years of the forecast period.”
That is a bold statement that will be true only if the assumptions in the impact assessment are correct and the reductions in EU students are indeed replaced by non-EU students.
We can already identify a number of policy choices that could affect those assumptions. The current situation for EEA students coming to the UK is that for academic year 2020-21, they retain the same status as domestic students. However, delays in start dates and term times as a result of the covid crisis may mean that there will be students who enrol on to academic year 2020-21, but do not enter the UK until 2021. Which immigration system will apply in such circumstances is uncertain.
Stuart C. McDonald
Again, I fully support and echo much of what the hon. Member for Stretford and Urmston has said. If anything, I would argue that the review requested in the new clause should be slightly broader and encompass not only student recruitment but staff recruitment, because that is an important issue for our universities. I also suggest that the report needs an urgent timeframe, because the clock is ticking down to a new academic year and a new recruitment period, but she made all sorts of valuable points.
Some changes made to the Government’s original White Paper have improved matters, such as the reduction in the salary and skills thresholds, but there remain lots of challenges, and of course just now universities are under immense pressure in dealing with the coronavirus pandemic and its fallout. I have spoken with Universities Scotland about the review suggested in the new clause, and what follow are some of the issues it raised. What steps are the Minister and the Government taking to get the visa system working again—lots of visa processing centres remain closed—and how can alternative measures be put in place to ensure we can recruit students at the moment?
What steps will the Government take to ensure that students can start courses online with confidence—for example, by extending the window from three months to six months so that people can have extra time to arrive in the UK from when their visa becomes valid? What steps are being taken to ensure that online study does not disqualify students from the graduate route, and will the Minister consider increasing the graduate route length to three or four years and promoting it intensively, because as we he heard awareness rates are still very low?
Finally, the report should also look at whether consideration has been given to waiving tier-4 visa fees for one year only? In the longer run, what steps are being taken to ensure that our visa fees are competitive and allow us to compete with countries such as Canada and Australia, which have such strong offers in terms of fees and post-study work. These are all things the Government should think about as part of the report, and we think the new clause would be a welcome addition to the Bill.
Kevin Foster
The new clause provides the Committee with a useful opportunity to consider the important issue of international students in the UK, and I am grateful to hon. Members for tabling it.
I want to start by picking up on the point made about Erasmus by the hon. Member for Stretford and Urmston. My constituency sees a large number of Erasmus students, and we very much welcome it. At the moment, the scope and content of EU programmes post 2020, including Erasmus, is being negotiated within the EU institutions and has not been finalised. The Government have made it clear that the UK is ready to consider participation in certain EU programmes, in particular Erasmus+, once the EU has agreed the baseline in its 2021-27 multiannual financial framework. Given that that has not yet been agreed, we are preparing for every eventuality and considering a wide range of options with regard to the future of international exchange and collaboration in education and training if it is not possible to secure a deal on Erasmus+. I want to give reassurance that the will is there. Once the EU has agreed its baseline, we will look to continue to be part of that valuable programme.
The Government strongly welcome international students, as I know Members across the Committee do. We see the academic and creative energy they bring to communities across our Union, including Belfast, Glasgow, Cardiff, Birmingham and Exeter. The Committee will be pleased to hear that the UK is one of the world’s leading destinations for international education, and hundreds of thousands of talented students choose to come to the UK’s world-leading institutions.
The Higher Education Statistics Agency has found that the total number of international students in higher education in the UK increased by 10% between 2014-15 and 2018-19, with the latest data suggesting that around 140,000 EU domiciled and 340,000 non-EU domiciled students enrolled in higher education institutions in the UK. The most recent set of immigration statistics show some very welcome growth in the number of people studying at our institutions from China and India in particular.
I want to reiterate that the Government place no limit on the number of international students who can come to study in the UK and have no intention ever to introduce any such limit in future under the new migration system. Indeed, as set out in the “International Education Strategy”, published last year, it is the Government’s ambition to increase the number of international higher education students studying in the UK to 600,000 by 2030. However, I recognise that we must not stand still if we are to continue to be a leading destination for international students. The Minister of State for Universities recently announced a new international education champion, Sir Steve Smith, to spearhead the UK’s efforts in the international student market. The Minister and I liaise regularly about the role that the migration system can play in facilitating that.
In summer 2021, we will launch a new graduate route, which will enable international students who have successfully completed their degree to remain in the UK for two years post study to work or look for work at any level, in order to kick-start their career. That will ensure that the UK continues to attract the brightest and the best and that our offer to prospective international students remains competitive internationally. I know that this policy change has significant cross-party support. It was even one of the first requests made by an SNP MP in a recent Opposition day debate on migration, in which my hon. Friend the Member for Moray and I took part, and I am pleased that it has been welcomed by the education sector.
I want to respond to the points made about eligibility for this route. We have published guidance, which confirms that those having to study overseas by distance learning due to the current circumstances will still be eligible for the graduate route. I do not blame Opposition Members for not having seen it, because it came out this morning, so I do not make that point to have a go at them. That followed discussions that the Minister of State for Universities and I had.
We will not penalise people for circumstances that are beyond their control, and we are working to finalise some of the details. Particularly for those on a one-year course—who will predominantly be postgraduate students, where we probably have a record of compliance and they have a very high skill level—we will be working to find that they have spent some time in the United Kingdom. For those starting three-year courses, we will not hold against them an absence from the United Kingdom caused by having to do distance learning, as a general principle.
We are looking at a range of other measures we can take to facilitate applications for tier 4, particularly from those who are applying to a new course having already been in the United Kingdom, many of whom are postgraduates or have done foundation courses. We have had strong representations on the extension to six months. It is clear that that will not be a huge advantage to someone looking to start a course in late September or October, given that it is now mid-June, but we are looking at where we can make some appropriate changes to the migration rules to reflect the unique situation. We will of course continue to work with Universities UK to ensure that those changes are appropriate. As I say, we have today published some guidance, which I am sure Committee members will find interesting. I will make sure that a link to it, or perhaps a copy of it, is sent round, to make one or two of these points clear.
Kate Green
I welcome much of what the Minister has said. I welcome his and the Government’s ambition to be and to continue to be a leading player in the international student market. I very much welcome what he said about the commitment either to continue our association with Erasmus+, if that is possible, or to find other ways to continue to offer international exchange opportunities to students. He gave useful assurances in relation to the guidance published this morning—which I apologise for not having read—on greater flexibilities in respect of the covid-19 crisis. I am sure that the MAC will have heard what the Minister said about encouraging its continued active review of the international student market. Given the Minister’s comments, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 29
Report on arrangements for temporary entry and stay for business purposes for EEA and Swiss nationals
“(1) A Minister of the Crown must, within 12 months of this Act coming into force, lay before Parliament a report evaluating the effects of this Act on the arrangements for temporary entry and stay for business purposes for EEA and Swiss nationals.
(2) That report must include—
(a) the qualification requirements for a short-term business visitor
(b) the activities that can be undertaken by a short-term business visitor;
(c) consider the reciprocal arrangements for UK nationals travelling to the EEA and Switzerland.”—(Holly Lynch.)
This new clause would require the Government to consider the requirements of short-term business visitors.
Brought up, and read the First time.
Holly Lynch
I beg to move, That the clause be read a Second time.
The new clause is not unlike some of the other proposals we have made in this sitting to ask the Government to go away and develop an evidence base, shining a spotlight on certain sectors, which we hope would then inform more concrete proposals. This proposal has a particular focus on the creative industries, temporary migration and visa requirements for working arrangements.
We understand that the Government are currently negotiating a reciprocal agreement with the EU that would allow UK citizens to undertake some paid business activities in the EU without a work permit on a short-term basis. However, the precise details, including the range of activities, the documentation needed and the time limit, are all still to be negotiated; certainly the details are still to be put into the public domain.
One sector directly affected is culture, music and the performing arts. The creative sector contributes over £100 billion a year to the UK economy and employs over 3 million people, according to the Confederation of British Industry. There are growing concerns in this sector about the lack of progress on a reciprocal agreement being reached before the end of the transition period, and whether it would guarantee short-term work and visits for EU nationals, all of which is critical for the survival of the music profession.
Britain’s music industry has long attracted world-class artists, entertainers and musicians to perform in the UK, but this is all very precarious if visa issues are not resolved by the end of the year. This is also one of the sectors hardest hit by the coronavirus, as events and performances will no doubt be one of the last elements across society to return to normal.
Working in the European Union, whether that involves performing, recording, teaching or collaborating, is an essential part of the music professional’s ability to earn. The music industry is very transient and often there is not enough work available in the UK for musicians to sustain livelihoods, but going abroad has often provided a solution. We are not talking about performers earning megabucks, although of course we want the UK to be an attractive stage for them and for our international talent in the rest of Europe—for example, UK performers who may go to work in a holiday resort for two months of the year, or may tour venues in a number of European countries.
If the UK leaves without a comprehensive arrangement in place, musicians could very quickly find themselves trying to navigate the entry requirements for each of the 27 EU member states, which risks causing major disruption to the UK’s music industry. Without effective reciprocal arrangements, the UK may see a decline in skilled culture sector workers entering the country from the EU. If the music industry is to survive and we are to continue attracting the best talent from across the world, musicians and performers must be able to continue travelling abroad to work with ease after the transition period. It is the same for many other businesses and industries.
The Home Office previously pledged that it would allow EU bands to enter the country freely for gigs post Brexit, and that it would continue to include special arrangements for creative workers. A potential solution might be a multi-entry touring visa valid for about two years and EU-wide, covering all 27 member states, which I know is the preference of the Incorporated Society of Musicians.
I hope the Minister agrees that the UK must continue to attract musicians and performers from all over the world with an immigration system that is fit for purpose. Providing the best possible situation to do that would be achieved by commissioning the report set out in new clause 29.
Kevin Foster
It might help if I briefly outline how the current system for those visiting the UK for business purposes operates. I note the shadow Minister has focused on creative purposes, but the wording in the new clause is “business visitor”.
The Government welcome genuine visitors to the UK, and this is not going to change once free movement has ended. We want to ensure legitimate travellers who support our economy and enrich our culture can continue to come to the UK smoothly in future. The UK’s current immigration rules for visitors are already fairly generous. Visitors can, in most cases, come to the UK for up to six months, and take part in a wide range of activities beyond simply tourism, or visiting family and friends.
Visitors can attend conferences, carry out independent research, undertake work-related training and maintain and install equipment where there is a contract with a UK company. We also allow audit activity and knowledge transfer where these take place in an intra-company setting. Visitors can undertake creative and sporting activities, and there are also some exceptional instances in the visitor rules whereby we allow payment by a UK source for certain activities, including performing at a permit-free festival, such as the Edinburgh festival. There are also provisions for paid performance engagement—or PPE, as we call it—whereby an individual who has been invited by a creative organisation can be paid for a short period for performing in the UK.
Those are already available to non-visa nationals, such as Canadian, Australian, Japanese and New Zealand citizens, and we have made it clear that EEA and Swiss citizens will not need a visa to undertake these activities, and will be able to travel and enter the UK on that basis. The EU has already legislated so that UK nationals will not need a visa when travelling to the Schengen area for short stays of up to 90 days in any 180-day period, as opposed to our slightly more generous provisions for visitors.
The Government recognise that it is desirable for UK nationals to have greater certainty about what they can do when travelling to the EU on a temporary or short-term basis, hence future arrangements on entry and temporary stay in the EU are subject to ongoing negotiations. Further, we look forward to reaching agreement on the future entry and temporary stay of natural persons with Switzerland and the EEA-European Free Trade Association states. For obvious reasons, we cannot legislate that the 27 member states of the EU offer a deal to the UK, but we hope we can come to a mutually beneficial agreement.
The UK’s visitor rules are kept under regular review. In our points-based system policy statement from February, we committed to
“continue our generous visitor provisions, but with simplified rules and guidance”.
We have engaged with stakeholders to understand how the rules can be simplified and improved and will continue to do so once free movement ends. For these reasons, there is no requirement for an additional report, and the new clause would be an odd addition to the Bill, for reasons I have set out in response to previous new clauses. I would therefore ask the hon. Member for Halifax to consider withdrawing the new clause.
Holly Lynch
I am grateful to the Minister for that response. At this stage, we will continue to follow the negotiations on the additional reciprocal arrangements, and on that note I beg to ask leave to withdraw new clause 29.
Clause, by leave, withdrawn.
New Clause 30
Procedures for amending Immigration Rules
“(1) The Immigration Act 1971 is amended in accordance with subsection 2.
(2) After section 3(2) insert—
“(2A) Any statement of the rules, or of any changes to the rules, which affect the rights and obligations of persons who will lose their right of freedom of movement under the provisions of the Immigration and Social Security Co-Ordination (EU Withdrawal) Act may not be made or have effect unless the Secretary of State has complied with subsections (2B) to (2F) below.
(2B) If the Secretary of State proposes to make changes to the rules under subsection (2A) above, the Secretary of State must lay before Parliament a document that—
(a) explains the proposal; and
(b) sets it out in the form of a draft order.
(2C) During the period of 60 days beginning with the day on which the document was laid under subsection (2B) (the “60-day period”), the Secretary of State may not lay before Parliament a draft order to give effect to the proposal (with or without modification).
(2D) In preparing a draft order under section (2A) above, the Secretary of State must have regard to any of the following that are made with regard to the draft order during the 60-day period—
(a) any representations; and
(b) any recommendations of a committee of either House of Parliament charged with reporting on the draft order.
(2E) When laying before Parliament a draft order to give effect to the proposal (with or without modifications), the Secretary of State must also lay a document that explains any changes made to the proposal contained in the document under subsection (2B).
(2F) In calculating the 60-day period, no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is not adjourned for more than 4 days.”—(Stuart C. McDonald.)
This new clause would amend the Immigration Act 1971 to ensure that any changes to the UK’s Immigration Rules which affect EEA or Swiss nationals must be made under the super affirmative procedure.
Question put, That the clause be read a Second time.
Question negatived.
New Clause 32
Annual report on labour market
“Within 12 months of this Act coming into force, and every 12 months thereafter, the Secretary of State must lay a report before Parliament setting out how any changes made to the Immigration Rules for EEA and Swiss nationals have affected the extent to which UK employers have adequate access to labour.”—(Stuart C. McDonald.)
This new clause would mean the Secretary of State must lay a report before Parliament on how changes to Immigration Rules for EEA and Swiss nationals are affecting access to labour.
Brought up, and read the First time.
Stuart C. McDonald
I beg to move, that the clause be read a Second time.
I can be relatively brief, since we covered much of this territory in earlier discussions, but it is a useful opportunity to push the Minister on a few issues. What progress can he report on raising awareness of the new tier-2 procedures in which so many small and medium-sized enterprises will have to participate, and what support is being rolled out for those businesses to help them to navigate the new system? What change has he noticed in the number of applications for tier-2 sponsorship licences, and what work is under way to streamline the system, which we have spoken about at length previously?
I suspect the Minister’s answer to the new clause will be that there is to be an annual MAC report. If so, can we ask that it is laid before Parliament and then have a debate on it? The Home Affairs Committee spoke about an annual debate on migration in a repot two or three years ago in trying to build a consensus on migration. It looked at how other countries developed immigration policy, and one issue that featured heavily in other jurisdictions was, at the very least, an annual debate on immigration policy generally.
We are talking about seismic changes to the way in which many businesses will go about recruiting and accessing the labour market, and the number of industry bodies that have come to me to express concerns is unbelievable—industry bodies I did not even know existed until they got in touch—across food and drink, agriculture, tourism and hospitality, fishing, manufacturing, engineering, logistics, financial services, social care, education, and many more. There is significant apprehension, and it is not because any of these industries want to exploit low wages; it is their realistic assessment that they are struggling already to access the labour they need in the UK at a price they can afford and which keeps them competitive. Now they are going to struggle to access labour from abroad, because of immigration rules.
Holly Lynch
I lend our support to the new clause. I anticipate that the Minister will reflect on the developments with the MAC, in that plans are afoot for an annual assessment of labour requirements across the UK, which will influence our immigration approach. However, I echo what my friend from the SNP, the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, has said. We would very much welcome that report being placed before both Houses, so that there can be further debate across this place.
We have called for reports on the sectors we are most concerned about, which we have debated and discussed this morning, but there will be so many others. As with any change like this, there will be unintended consequences. We want the opportunity to mitigate the impact of the end of free movement, and to debate that in Parliament. That would, we hope, lead to much more dynamic decision making on changes to mitigate the impact of the ending of free movement on further sectors. We welcome the new clause.
Kevin Foster
I thank the shadow spokespeople for their comments and the constructive way in which they have put forward the new clause, which hits on an important point. Certainly neither I nor anyone else in government wants businesses to fail due to an unavailability of labour, although, sadly, as many outside this room would note, the impact of covid-19 on our economy means that not many people would see that as a likely issue over the coming period, for all too obvious reasons.
It is precisely for that reason that the Government are bringing forward the new points-based immigration system. It will be a single global system that will treat everyone alike and will allow people to come to the UK on the basis of their skills and the contribution they can make, not their nationality or where their passport is from. It will be a fair system, and we are introducing a number of important elements, such as reducing the skills and salary threshold below those in the tier 2 system, and abolishing the cap and resident labour market test, which will remove a lot of bureaucracy for employers engaging with the system.
The system will also be flexible. We are making it points-based, precisely so that we can facilitate the entry of those with the greatest skills or those who are coming to fill jobs where there is the greatest need. The system will be kept under careful review.
I do not think anyone would disagree that it is profoundly important to look at the effect that immigration is having on the labour market. That means looking at the situation for employers and the impact on UK workers seeking employment. The new clause, focusing as it does solely on employers, would give only one side of the story, leaving workers’ interests at a disadvantage. I also do not believe that the Government are best placed to look at this issue; this type of request is why the independent Migration Advisory Committee exists and is commissioned to produce expert, independent reports on the interplay between immigration and the labour market. I do not believe that what it produces could be further improved by another report from the Government. As part of its work, the MAC already looks at which occupations in the UK are currently experiencing a shortage of workers and, crucially, where it thinks it would be beneficial to fill vacancies through immigration. We maintain shortage occupation lists to recognise that.
The work of the MAC and the reports it produces go beyond the narrow scope of the work proposed by the new clause. The MAC looks at the whole immigration system, rather than just changes to the immigration rules. The MAC also looks at the impact of all migration, rather than limiting itself to EEA and Swiss migration, as the new clause seeks to do, although I accept that the wording is probably because of the scope of the Bill. The future immigration system will be a global one, where an EEA citizen has the same basic rights to migrate to the UK as someone, for example, from the Commonwealth.
The new clause would simply result in duplication of work already being undertaken by the pre-eminent labour market economists and migration specialists of the MAC. Parliament regularly debates the MAC’s reports. I hope that the MAC’s annual reports will help to inform regular, structured debates on migration—something to which Opposition Members alluded—allowing us to take a more considered view, rather than simply reacting to particular proposals or events. I have outlined the role that the MAC will play. I hope that the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East will feel able to withdraw his new clause.
Stuart C. McDonald
I am grateful to the Minister, and I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 41
Children in care and children entitled to care leaving support: Entitlement to remain
‘(1) Any child who has their right of free movement removed by the provisions contained in this Act, and who are in the care of a local authority, or entitled to care leaving support, shall, by virtue of this provision, be deemed to have and be granted automatic Indefinite Leave to Remain within the United Kingdom under the EU Settlement Scheme.
(2) The Secretary of State must, for purposes of subsection (1), issue guidance to local authorities in England, Scotland, Wales and Norther Ireland setting out their duty to identify the children of EEA and Swiss nationals in their care or entitled to care leaving support.
(3) Before issuing guidance under this section the Secretary of State must consult—
(a) the relevant Scottish Minister;
(b) the relevant Welsh Minister; and
(c) the relevant Northern Ireland Minister
(4) The Secretary of State must make arrangements to ensure that personal data relating to nationality processed by local authorities for purposes of identification under subsection (1) is used solely for this purpose and no further immigration control purpose.
(5) Any child subject to subsection (1) who is identified and granted status after the deadline of EU Settlement Scheme (“the Scheme”) will be deemed to have had such status and all rights associated with the status from the time of the Scheme deadline.
(6) This section comes into force upon the commencement of this Act and remains in effect for 5 years after the deadline of the EU Settlement Scheme.
(7) For purposes of this section, “children in the care of the local authority” are defined as children receiving care under any of the following—
(a) section 20 of the Children Act 1989 (Provision of accommodation for children: general);
(b) section 31 of the Children Act 1989 (Care and Supervision);
(c) section 75 Social Services and Well-being (Wales) Act 2014 (General duty of local authority to secure sufficient accommodation for looked after children);
(d) section 25 of the Children (Scotland) Act 1995 (Provision of accommodation for children);
(e) Article 25 of the Children (Northern Ireland) Order 1995 (Interpretation); and
(f) Article 50 Children of the (Northern Ireland) Order 1995 (Care orders and supervision orders).
(8) For the purposes of this section, “children entitled to care leaving support” means a child receiving support under any of the following—
(a) paragraph 19B of Schedule 2 Children Act 1989 (Preparation for ceasing to be looked after);
(b) s.23A(2) Children Act 1989 (The responsible authority and relevant children);
(c) s.23C(1) Children Act 1989 (Continuing functions in respect of former relevant children);
(d) section 104 of the Social Services and Well-being (Wales) Act 2014 (Young people entitled to support under sections 105 to 115);
(e) sections 29-30 Children (Scotland) Act 1995 (Advice and assistance for young persons formerly looked after by local authorities) as amended by s.66 Children and Young People (Scotland) Act 2014 (Provision of aftercare to young people); and
(f) Article 35(2) Children (Northern Ireland) Order 1995 (Persons qualifying for advice and assistance.).’—(Dame Diana Johnson.)
This new clause aims to ensure that the children of EEA and Swiss nationals who are in care, and those who are entitled to care leaving support, are granted automatic Indefinite Leave to Remain under the EU Settlement Scheme to ensure they do not become undocumented.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss new clause 58—Settled status: children in care—
‘(1) Any child who has their right of free movement removed by the provisions contained in this Act has the right of settled status in the United Kingdom if that child is in care, is subject to the public law outline process via a declaratory system, undertaken on the child’s behalf by the Local Authority whose care they are under, or is entitled to care leaving support.
(2) For the purposes of this section, “a child in care” means a child who is under 18 and is—
(a) living with foster parents;
(b) living in a residential children’s home; or
(c) living in a residential setting like a school or secure unit.”
(3) For the purposes of this section, “public law outline process” is as set out under Family Court practice direction 12A of 2004.
(4) For the purposes of this section, “children entitled to care leaving support” means a child receiving support under any of the following—
(a) paragraph 19B of Schedule 2 Children Act 1989 (Preparation for ceasing to be looked after);
(b) s.23A(2) Children Act 1989 (The responsible authority and relevant children);
(c) s.23C(1) Children Act 1989 (Continuing functions in respect of former relevant children);
(d) section 104 of the Social Services and Well-being (Wales) Act 2014 (Young people entitled to support under sections 105 to 115);
(e) sections 29-30 Children (Scotland) Act 1995 (Advice and assistance for young persons formerly looked after by local authorities) as amended by s.66 Children and Young People (Scotland) Act 2014 (Provision of aftercare to young people); and
(f) Article 35(2) Children (Northern Ireland) Order 1995 (Persons qualifying for advice and assistance).’
This new clause would seek to provide automatic settled status for all looked after children in the care of local authorities and for children entitled to care leaving support, removing the requirement on the local authority to make an application to the EU Settlement Scheme on that child’s behalf.
Dame Diana Johnson
It is a pleasure to serve under your chairmanship, Sir Edward. New clause 41 is a cross-party amendment tabled by the hon. Member for East Worthing and Shoreham (Tim Loughton), who is respected particularly for his knowledge and expertise on children in care, having formerly been the Minister for Children. The Chair of the Home Affairs Committee has also added her name to the new clause, so I am sure the Minister will want to give it his usual careful consideration. I also support new clause 58, tabled by my hon. Friends on the Opposition Front Bench.
This Bill focuses on bringing an end to freedom of movement, but the system for dealing with those who arrive before 31 December 2020 is far from problem-free. New clause 41 deals with looked-after children and care leavers. The Minister is well aware of the concerns about that group. I want to stress at the outset that every Member of this House, as an elected representative, has a role as corporate parent to those children, and it is our duty to ensure that every single one is able to secure permanent immigration status.
The Home Office has estimated that there are 5,000 looked-after children and 4,000 care leavers in the United Kingdom who would need to apply to regularise their immigration status before the end of the transition period. That figure is likely to have increased, as more children entered care this year, and it is just an estimate, because local authorities do not ordinarily collect the nationality data of children in their care. A recent analysis by the Children’s Society found that, as of January 2020, 153 out of 211 local authorities across the United Kingdom had identified just 3,612 EU, EEA or Swiss looked-after children and care leavers. Only 404—11%—of those young people have settled their status. It is unlikely that many more applications have been made in the past few months; owing to coronavirus, it is not a priority for busy local authorities. We also know that helplines to assist with applications have been closed or are operating a reduced service.
I know the Government are concerned about that issue and have conducted their own survey to get a better understanding of the number of looked-after children who need to apply to the scheme, but that information has never been published. It would be interesting if the Minister agreed to publish the Home Office’s data. We have yet to receive reassurance from the Minister that sufficient work is under way to regularise the immigration status of those children before the EU settlement scheme deadline. Why is the application rate so much lower for those vulnerable children? Like any children, looked-after children and care leavers need the help of their parents, and it is the local authority that is responsible for their care and for making the application to the EU settlement scheme.
Local authorities first need to identify which children in their care have an EU nationality. That can be problematic, as many children who have entered care at a young age do not know their or their parents’ nationalities. They may have no passport or birth certificate, and the local authority’s engagement can be difficult or non-existent. The children see themselves as British, as they have often not known any other home. The responsibility of identification and application has fallen on social workers, many of whom have stretched caseloads and do not have the expertise or legal knowledge to deal with these issues, particularly if they begin to encounter problems in the process.
It is worth reflecting on the fact that, outside this scheme, it is prohibited for social workers to give immigration advice. During the pilot phase of the EUSS, every application that the Coram Children’s Legal Centre made on behalf of a child in care or care leaver included detailed nationality advice, which requires expert legal knowledge and understanding. Social workers had to be supported at every stage of the process.
I am aware that the Government produced non-statutory guidance to local authorities on the EUSS, regarding their roles and responsibilities. As recently as April, they reminded local authorities of that responsibility. However, many local authorities still seem to be unaware of the existence of that guidance or their responsibilities under it. Even before we come to the issue of rates of application and status received, there is an issue of oversight. How many children are we talking about, and who is making the applications for them?
I have already briefly referred to the problems with applying. There is difficulty acquiring nationality documents and evidencing the length of residence in the UK. Social workers have to spend their time chasing various European embassies to acquire the appropriate paperwork. Right now, when so many embassies and services are shut, that is proving difficult. The previous Immigration Minister stated that the group could apply with alternative documentation, but operating a system of discretion can be very dangerous, and often has the opposite effect. It requires children to receive a significant amount of additional extra support.
Of course, local authorities are very stretched. They have limited resources and do not have the legal immigration expertise to handle complex cases that arise for children in their care and care leavers. The risk is compounded by the covid-19 pandemic. The Home Office has stated that children who do not apply because their parent or guardian did not submit an application on their behalf can submit a late application. That includes children in care and care leavers. However, there has not been a formal policy statement to that effect. In any case, I am sure the Government would rather act to prevent a child in their care becoming undocumented than rectify mistakes after they were made.
Tom Pursglove (Corby) (Con)
I beg to move, That the debate be now adjourned.
The Chair
I thank the Whip for that. Mr Stringer is chairing the Committee this afternoon, and I understand that the Committee intends to report then, so I will not see Committee members again. I thank you all for your courtesy. Even the Government Whip has been well behaved.
Immigration and Social Security Co-ordination (EU Withdrawal) Bill (Eighth sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 View all Immigration and Social Security Co-ordination (EU Withdrawal) Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Chair
I remind the Committee that with this we are considering new clause 58—Settled status: children in care—
‘(1) Any child who has their right of free movement removed by the provisions contained in this Act has the right of settled status in the United Kingdom if that child is in care, is subject to the public law outline process via a declaratory system, undertaken on the child’s behalf by the Local Authority whose care they are under, or is entitled to care leaving support.
(2) For the purposes of this section, “a child in care” means a child who is under 18 and is—
(a) living with foster parents;
(b) living in a residential children’s home; or
(c) living in a residential setting like a school or secure unit.”
(3) For the purposes of this section, “public law outline process” is as set out under Family Court practice direction 12A of 2004.
(4) For the purposes of this section, “children entitled to care leaving support” means a child receiving support under any of the following—
(a) paragraph 19B of Schedule 2 Children Act 1989 (Preparation for ceasing to be looked after);
(b) s.23A(2) Children Act 1989 (The responsible authority and relevant children);
(c) s.23C(1) Children Act 1989 (Continuing functions in respect of former relevant children);
(d) section 104 of the Social Services and Well-being (Wales) Act 2014 (Young people entitled to support under sections 105 to 115);
(e) sections 29-30 Children (Scotland) Act 1995 (Advice and assistance for young persons formerly looked after by local authorities) as amended by s.66 Children and Young People (Scotland) Act 2014 (Provision of aftercare to young people); and
(f) Article 35(2) Children (Northern Ireland) Order 1995 (Persons qualifying for advice and assistance).’
This new clause would seek to provide automatic settled status for all looked after children in the care of local authorities and for children entitled to care leaving support, removing the requirement on the local authority to make an application to the EU Settlement Scheme on that child’s behalf.
Holly Lynch (Halifax) (Lab)
Thank you very much and welcome back, Mr Stringer; it is a pleasure to serve under your chairmanship once again. It is a pleasure to follow my hon. Friend the Member for Kingston upon Hull North, who made a powerful and persuasive contribution earlier to reinforce the merits of new clause 41.
I rise to speak in favour of new clause 58, about which we feel strongly and which is not dissimilar to new clause 41. As things stand, it is currently the responsibility of local authorities to make an application to the European Union settlement scheme for children under 18 who will be eligible to apply but who are currently in the care of the local authority. The Committee heard evidence on that from the Children’s Society, and I noted the Minister’s scepticism about aspects of that approach. I will seek, with genuine sincerity, to persuade him of the merits of taking an alternative approach.
Children are taken into care only if they have had the worst possible start in life. The cohort of children who would be affected by the new clause have the fateful combination of absent parents and precarious migration status. If we do any good with the Bill, it should be by giving those kids some stability on just one those fronts, in the hope that they can go on to a much brighter future.
In answer to a written parliamentary question, the Home Office said that it estimates—as we have already heard—that around 5,000 looked-after children and 4,000 care leavers in the UK would need to apply to the EU settlement scheme, but the exact numbers are unknown. Any further investigations undertaken by the Home Office to better understand those numbers have not been published, so, like my hon. Friend the Member for Kingston upon Hull North, I wonder whether the Minister is in a position to update the Committee on those estimates.
My hon. Friend referred to the incredibly informative survey work of the Children’s Society on this matter, in the absence of any further official data. It conducted its own research, sending freedom of information requests to every local authority or children’s services provider in the UK. That totalled 211 providers, 153 of which responded to the FOI requests by January this year. Those local authorities identified just 3,612 European economic area or Swiss looked-after children and care leavers, which is only 40% of Home Office estimates. Of those 3,612 children and young people, only 730 had so far applied to the EU settlement scheme. Of those, only 404 were in receipt of status—282 had settled status and 122 had pre-settled status—meaning that, of those identified by local authorities, only 20% have applied and only 11% have been granted status. Although the data represents 73% of local authorities or service providers, and as such is not fully representative, it offers a strong indication that there are serious and urgent concerns about identifying and settling the migration status of vulnerable children whose status and future will be significantly affected by the Bill.
The Minister might argue that as those figures relate to data gathered in January of this year, progress may since have been made. However, considering that we started to enter lockdown in mid-March, I suspect that not a great deal of progress has been made in the intervening weeks. The Minister might argue that because only 153 local authorities responded and 58 councils did not contribute data, the stats might actually be better than that sample suggests, but a number of those councils said they did not have that information and could not provide it to the Children’s Society. In fact, 32 local authorities said that they were unable to provide the data or that they did not hold the information in a reportable format.
Whether through the Government’s proposed approach, which means going through the full application, or through the streamlined alternative proposed in the new clause 58, for those children the local authority has responsibility for securing their status either way. If those very councils are saying that they do not know how many children in their care are eligible, we all ought to be incredibly concerned.
The Government have produced non-statutory guidance to local authorities on the EUSS regarding their roles and responsibilities in making or supporting applications for looked-after children and care leavers. However, in its oral evidence last week, the Children’s Society said that it had engaged with several councils that were still unaware of the existence of the guidance or their responsibilities as set out within it. Although the Children’s Society has attempted to address that by providing councillors with resources aimed at helping them in their accountability, overview and scrutiny roles, we clearly still have a number of barriers to overcome.
Even where local authorities are aware of their responsibilities, the young people in their care often have extremely complex cases that require considerable support and legal advice. Many require nationality advice, others have complex family arrangements, and most simply do not have the required documentation. Social workers are consequently spending months navigating advice and acquiring the necessary documents from European embassies. Social workers are by no means specialists in that area of work, and do we really want them to be acting as immigration caseworkers when we know the incredible case loads that they face?
All those factors were in play before they were compounded by the coronavirus. Local authorities are in the fight of their lives to keep communities going. The resources are, and will continue to be, spread incredibly thinly, diverting efforts to the frontline of fighting the virus for the foreseeable future. We have vulnerable children at home without day-to-day interaction with services. Although those children can still attend school we know that, disappointingly and worryingly, numbers are still low.
The challenges presented for children’s services are enormous. Identifying and assisting children in care to apply for an immigration status that is seemingly non-urgent has inevitably been de-prioritised. The most recent EUSS statistics show that applications fell by 46% in April this year, and anecdotal evidence from practitioners indicates that the number of applications and referrals of EU children in care or care leavers has been low, as we would expect during this time.
Even when applications have been made, the Children’s Society research found that in its sample only 404 EU national children in care or care leavers were in receipt of status through the EUSS, out of an estimated 9,000. In just over a nine-month period, only 11% of the vulnerable children identified through the survey, which is just 4% of the Home Office estimate of 9,000, were able to settle their status, compared with 79% of the overall official estimate of 3.4 million EEA citizens over the same nine-month period.
If those trends continue, thousands of European children either currently in the care system or who have recently left care will fall through the gaps, becoming undocumented and left without immigration status—rubbing salt into the wounds of what has already been a troubled start in life. The Home Office previously stated in answer to a written question that children who
“do not apply because their parent or guardian did not submit an application on their behalf can submit a late application. This includes children in care and care leavers.”
That is welcome, but both local and national Government must work to ensure that no child in the care of the state becomes undocumented, and we can do that with the new clause.
Having discussed some of the practicalities on the matter at length with my local director of children’s services, Julie Jenkins, for whose assistance I put my gratitude on the record, we propose that local authorities, on a declaratory basis, provide a list of names to the Home Office of the children and young people who would be eligible. In responding to reservations raised by the Minister at last week’s evidence session, the Home Office would then grant those young people settled status, as they would for a person who had made an application.
The Minister asked the Children’s Society how these young people prove their status. To answer his question: in the same way any other person with settled status would. We have been unable, sadly, to convince the Minister of the merits of physical proof, so they would have confirmation through an e-visa. On the issue of pre-settled and settled status, of the 404 children in the sample that we are talking about who are in receipt of status, 282 were granted settled status and 122 were granted pre-settled status.
Given everything that those kids have been through, why are we giving them pre-settled status? Let us just give them settled status. Let us not simply sign them up for yet more years of paperwork and burdens of proof; let us just take all that uncertainty off the table for them in this instance by giving them both settled status and proof of it.
Mr Robert Goodwill (Scarborough and Whitby) (Con)
On burden of proof, is it not the case that the Government have made it clear that alternative types of documentation might be available for children who cannot get access to birth certificates or other documents because they are estranged from their parents?
Holly Lynch
I would welcome that in the event that there is no alternative and that some of the more regular items of documentation are not available. In taking that route, however, we are still asking children to go away and gather a potentially enormous amount of information and documentation. When we know that such children are eligible, why can we not just deal with this issue in a streamlined way through local authorities and the Home Office?
I hope I have satisfied the Minister’s reservations about this approach. We are talking about a cohort of children and young people who are our responsibility; we the state are acting as their legal guardians. Let us do the best we can for them and at least give them confidence in their immigration status, in the hope that they can go on to overcome all their challenges and build happy lives here in the UK.
The Parliamentary Under-Secretary of State for the Home Department (Kevin Foster)
It is a pleasure to serve under your chairmanship, Mr Stringer. I will speak to the two new clauses that have been moved. I appreciate the intentions behind them, and the concerns and genuine points that have been raised. That is why, from the outset, there have been arrangements in place to ensure that the EU settlement scheme is accessible to all, including looked-after children and care leavers. Prior to the full launch of the scheme in March 2019, agreements were reached and plans put in place with local authorities to ensure that relevant children and care leavers receive the support they need in securing their UK immigration status under the scheme.
Local authorities in Great Britain, and health and social care trusts in Northern Ireland, are responsible for making an application under the EU settlement scheme on behalf of an eligible looked-after child for whom they have parental responsibility by way of a court order. Their responsibilities to signpost the scheme and support applications in other cases have also been agreed. They concern children for whom there is no court order but where the local authority has a clear interest in supporting the best interests of the child—for example, children accommodated by the local authority, children in need and care leavers.
The Home Office has implemented a range of support services to ensure that local authorities and health and social care trusts can access help and advice when they need to. We have engaged extensively with relevant stakeholders, such as the Department for Education, the Local Government Association, the Ministry of Justice, the Association of Directors of Children’s Services and equivalents in the devolved Administrations, to understand and address the needs of looked-after children and care leavers, and to ensure they are all supported. Guidance has also been issued to all local authorities on their role and responsibilities for making or supporting applications under the EU settlement scheme for looked-after children and care leavers. The Home Office is holding regular teleconferences specifically for local authority staff who are responsible for making relevant applications, in order to support them and provide a direct point of contact for them within the Home Office.
A new burdens assessment has been conducted, and funding has been issued to local authorities that have responsibilities for carrying out specific duties in relation to looked-after children and care leavers, to ensure they are adequately funded to do such work. Along with the Minister for Children and Families in the Department for Education, I have written to lead council members to underline the importance of the work that their local authorities are undertaking to ensure that eligible looked-after children and care leavers make applications to the EU settlement scheme, and to highlight the support available. Home Office caseworkers are directly working with local authority staff who are responsible for making applications, as well as with organisations that specialise in working with children, such as the Children’s Society and Coram.
Additionally, the Home Office has provided £9 million of grant funding to 57 voluntary organisations across the UK in order to support vulnerable citizens in applying to the EU settlement scheme. They include several organisations specialising in support for vulnerable children and young people. We have now committed a further £8 million for such work, allowing charities and local authorities to bid for grant funding to provide support to vulnerable people and help ensure that no one is left behind. To reassure the Committee, we are continuing the existing arrangements until new arrangements and a new bidding process are completed.
Dame Diana Johnson (Kingston upon Hull North) (Lab)
I am listening carefully to all the steps that the Home Office is taking, but is the Minister now in a position to publish the information about the number of children affected by needing to apply for the EU settlement scheme? I understand that his Department has already undertaken that work.
Kevin Foster
It is probably worth saying that, as of today, we cannot publish a final list of all who will be eligible under the EU settlement scheme because the transition period extends to 31 December this year. Therefore, people may yet arrive in the country who would be eligible to apply under the scheme. As part of the quarterly statistics publication—not the monthly one—we publish the number of applications from children. A large amount of work is going on, but it would be impossible today to have a definitive number of all who will finally be eligible, because eligibility, along with freedom-of-movement rights, runs up to 31 December.
Mr Goodwill
Is it not also the case that there may be children claiming to be EEA citizens who may turn out to be, for example, from Albania, so publishing a figure based on what people claim would not be the true figure?
Kevin Foster
I thank my right hon. Friend for that intervention. Yes, there is always that possibility. For example, one of the reasons why we will not look to accept EEA identity cards in the long term at the border and internally for certain right-to-work checks is that some EEA identity cards are very prone to abuse, unlike secure passports. There are always going to be such claims, but certainly there is strong work going on. However, as we touched on, the core reason is that we cannot produce today a final list of who will be eligible, but we are working closely with local councils. Of course, each day children come into care, sadly, so again, snapshots do not reflect the work that needs to be done.
Kate Green (Stretford and Urmston) (Lab)
I do think that a running total—albeit one that would be changing from quarter to quarter—would give us a sense of the scale of the challenge, especially as we are now within six months of the end of the transition period and a year from the end of the extended period in which applications can be made. This point was raised, I think, a year ago in a debate in Westminster Hall when the Government first gave the undertaking to collect the data, and to do so through local authorities, which ought to give us a bit more confidence about its validity than if children or their families were simply providing it themselves. I say to the Minister that it would reassure Parliament if such information as is available were made public as soon as possible, although we understand that it is a bit of a moving feast.
Kevin Foster
I have outlined the work that we are doing with local authorities to identify who is eligible. As the hon. Lady said, it is a moving feast, and we particularly want to make sure that those responsible for making these applications are aware of how to apply and who qualifies, and that they then proceed to do so.
I understand the concerns expressed by hon. Members about looked-after children and care leavers, and we must ensure that their corporate parents secure the best possible outcomes for them.
Dehenna Davison (Bishop Auckland) (Con)
Does the Minister agree that the best way that we can support looked-after children is by ensuring that they can take full advantage of the EU settlement scheme through local authorities, rather than having a two-tier system?
Kevin Foster
Absolutely. Once someone has their status under the European settlement scheme, they join another—why, we have had over 3 million decisions taken on granting status. That will be part of how our border system will operate in future. One of the lessons learned from the past is this—status was granted under an Act of Parliament, but then in several decades’ time it has to be explained to someone how their status was under a different approach from how status is granted to those who are in the same cohort, in terms of nationality and citizenship. That is not helpful to anyone. That is one of the lessons learned, of course, from the experience of the Windrush generation. That Act of Parliament was in 1971. The status was granted on 1 January 1973 and the issues then started to be encountered 30 years later, and not just since 2010— the first case mentioned on the front of Windrush lessons learned review is from 2009. Again, it is about how those issues are created.
A declaratory scheme as proposed in new clauses 41 and 58, under which those covered automatically acquire UK immigration status, would cause confusion and potential difficulties for these vulnerable young people in future years, with their having no solid evidence of their lawful status here. They will need evidence of their status when they come to seek employment, or access to benefits and services to which they are entitled. A declaratory system would leave them without that evidence, struggling to prove their rights and entitlements over decades to come.
I listened carefully to the comments made by the hon. Member for Kingston upon Hull North, in which she outlined the process local authorities could go through to list the children and send those lists to the Home Office. I thought, “If local authorities are going to go through all this, then the logical thing for them to do is make the applications that are required under the EU settlement scheme, and ensure the children they are listing have the status they need.” It is hard to see what the benefit to councils would be if we introduced a different process that did not produce a better outcome. If that is what we are going to ask people to do—arrange a working identifier—the next stage is to ask them to make quite a simple application to the European settlement scheme to get the status that child deserves.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
The Minister must accept that a declaratory system does not leave people without a means of proving their status. They have every incentive to apply to the settlement scheme to get the document they need to access the services the Minister has referred to, and would have the facility to do so.
Kevin Foster
Again—here we go—this would mean that someone who had a status could not be distinguished from someone who did not have a status, and would then have to make an application. We have been clear that we cannot allow people to have a status without going through the process, but that we have some generous provisions in place. Similarly, physical documents that are decades old, that date from when someone is a child, are unlikely to be particularly convincing proof in many instances. That is why we need to move towards a digital system that is a permanent record, and if the children are being identified—as Opposition Members are suggesting—the next stage is to make that application, make it simple, and get their status secured. That means the children are then secure for the rest of their life, which is a better outcome.
Fundamentally, changing a system that is working well overall would have the exact opposite effect to that which the new clauses appear intended to achieve, leading to confusion and uncertainty. We have also made it clear that where a person eligible for status under the scheme has reasonable grounds for missing the deadline—for example, if their council did not apply to the EU settlement scheme on their behalf—they will be given a further opportunity to apply. We will ensure that individuals who have missed the deadline through no fault of their own can still obtain lawful status in the UK, which I suggest is a far better response to the concerns expressed by Opposition Members than the new clauses they are proposing. That is why the Government will not accept them.
Dame Diana Johnson
I am disappointed by the Minister’s response to new clause 41. It is also disappointing that the Minister is not able to update the Committee with some information, recognising that that information about numbers may be changing over time. This is a matter that will not go away, and rather than test the opinion of the Committee today, I may wish to return to it on Report. I therefore beg leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 45
Immigration: no recourse to public funds
“Section 3(1)(c)(i) and (ii) of the Immigration Act 1971 cannot be applied to persons who have lost rights because of section (1) and Schedule 1 of this Act, until such time as may be specified in a resolution passed by each House of Parliament.”—(Stuart C. McDonald.)
This new clause seeks to delay application of No Recourse to Public Funds rules during the current pandemic and until such time as Parliament decides.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss the following:
New clause 56—Recourse to public funds—
“(1) For the purpose of this section, a person (“P”) is defined as any person who, immediately before the commencement of Schedule 1, was—
(a) residing in the United Kingdom in accordance with the Immigration (European Economic Area) Regulations 2016;
(b) residing in the United Kingdom in accordance with a right conferred by or under any of the other instruments which is repealed by Schedule 1; or
(c) otherwise residing in the United Kingdom in accordance with any right derived from European Union law which continues, by virtue of section 4 of the EU Withdrawal Act 2018, to be recognised and available in domestic law after exit day.
(2) Regulations under section 4(1) may not be made until the Government has brought forward legislative measures to ensure that P can access social security benefits, where P is habitually resident, including repealing or amending the following provisions insofar as they relate to P—
(a) section 3(1)(c)(ii) of the Immigration Act 1971;
(b) section 115 of the Immigration and Asylum Act 1999;
(c) any provision in subordinate legislation, which imposes a “no recourse to public funds” condition on grants of limited leave to enter or remain; and
(d) any other enactment or power exercised under any other enactment, which makes immigration status a condition to access social security benefits.”
This new clause seeks to restrict measures prohibiting recourse to public funds.
New clause 59—Analysis of exemption from no recourse to public funds condition—
“(1) The Secretary State must produce a report on the impact of no recourse to public funds conditions for those who meet the criteria in subsection (2).
(2) The report under subsection (1) must include the impact on EEA and Swiss nationals—
(a) with children;
(b) with pre-settled status; and
(c) who are victims of domestic abuse.
(3) For the purposes of this section, a public fund is defined as any of the following:
(a) attendance allowance;
(b) carer’s allowance;
(c) child benefit;
(d) child tax credit;
(e) council tax benefit;
(f) council tax reduction;
(g) disability living allowance;
(h) discretionary support payments by local authorities or the devolved administrations in Scotland and Northern Ireland which replace the discretionary social fund;
(i) housing and homelessness assistance;
(j) housing benefit;
(k) income-based jobseeker’s allowance;
(l) income related employment and support allowance (ESA);
(m) income support;
(n) personal independence payment;
(o) severe disablement allowance;
(p) social fund payment;
(q) state pension credit;
(r) universal credit;
(s) working tax credit; and
(t) Immigration Health Surcharge (IHS).
(4) For the purposes of this section—
“domestic abuse” has the same meaning as in section 1 of the Domestic Abuse Act 2020;
“victim” includes the dependent child of a person who is a victim of domestic abuse.”
This new clause will require the Government to consider the impact of no recourse to public funds exemption.
New clause 62—Recourse to public funds: EEA and Swiss nationals with dependants—
“(1) EEA and Swiss nationals with dependants under the age of 18 must be exempt from any no recourse to public funds condition that would otherwise be placed on them under Immigration Rules.
(2) For the purposes of this section, a public fund is defined as any of the following—
(a) attendance allowance;
(b) carer’s allowance;
(c) child benefit;
(d) child tax credit;
(e) council tax benefit;
(f) council tax reduction;
(g) disability living allowance;
(h) discretionary support payments by local authorities or the devolved administrations in Scotland and Northern Ireland which replace the discretionary social fund;
(i) housing and homelessness assistance;
(j) housing benefit;
(k) income-based jobseeker’s allowance;
(l) income related employment and support allowance (ESA);
(m) income support;
(n) personal independence payment;
(o) severe disablement allowance;
(p) social fund payment;
(q) state pension credit;
(r) universal credit;
(s) working tax credit; or
(t) Immigration Health Surcharge (IHS).”
This new clause would allow EEA nationals and Swiss nationals with children under the age of 18 to access public funds.
Stuart C. McDonald
It is a pleasure to serve under your chairmanship, Mr Stringer. In tabling new clauses 45 and 56, my party wants to set out our opposition to how the no recourse to public funds regime is working, both in general and specifically during the current covid crisis. We think it is having some drastic effects, and therefore refuse to extend it to EEA nationals during the current public health crisis, or indeed more generally. Of course, we urge the Government to go further by also disapplying NRPF rules in relation to other migrants.
Because of this Bill, any EEA migrants coming to the UK under the new system will face the same problems as those coming from outside the EEA. They will be prohibited from accessing public funds until they are granted permanent residence, something that will take five years for some migrants and 10 for others, if it is granted at all. No recourse to public funds conditions will be applied to the family members of UK citizens and settled persons, as well as those to whom we have extended an invitation to come on a work visa. That means that individuals, families and children are prevented from accessing most in-work and out-of-work benefits, including child benefit, tax credits, universal credit, income-related employment support allowance, income support, local welfare assistance schemes, housing benefit and social security.
Mr Goodwill
Does the hon. Gentleman agree that the term “no recourse to public funds” is slightly misleading, because there are a number of benefits that people are entitled to, including the furlough scheme, should they be entitled to that?
Stuart C. McDonald
It is welcome that the furlough scheme is extended to these individuals, but it is nowhere near enough. I will come to specific problems in relation to covid later in my short speech.
In short, if these new clauses are not agreed, many thousands more people who are here because they are family members or because they are wanted for their work will be put at risk of poverty and insecurity.
Those who come here with limited leave visas certainly do not expect to have to rely on public funds, but as we have seen all too well in recent months, unforeseeable events that are completely beyond their control can have a dramatic impact on their capacity to sustain themselves and their family. I am talking about coronavirus, but the ability of individuals to support themselves can be affected for reasons that are many and varied. It could be economics, illness within the family, relationship breakdown, accidents or the death of a loved one.
We have allowed and welcomed people who come to work here or to join their families. There is no reason or justification for denying them the safety net and security that we regard as essential for everybody else.
Included in those impacted by the NRPF rules are parents who are working hard in roles that are absolutely crucial at this time, including care workers, NHS staff, cleaners and people involved in food preparation. Some are working extraordinarily long hours but still cannot access even limited top-up benefits to help them meet the needs of their children.
Thanks to the Children’s Society, we know that many of the families detrimentally impacted by the rules are headed by single mothers, often from black, Asian and minority ethnic backgrounds. There are also significant numbers of families that include children with special educational needs who require additional help from supporting agencies.
It is also important to note that many of the children who will be victims of the NRPF rules will have been born and brought up here. I link back to my amendment on fees for registering British citizens; some of these children would be entitled to British citizenship, but cannot access it, either because they are not aware of it or because they are priced out of it. There will even be British citizens among those children, who are being punished because their parents’ immigration status prevents them from accessing support.
The disastrous impacts of all the rules are well established. People who are prohibited from accessing public funds are clearly at risk of destitution, with no access to the social safety net. The impact on children can be particularly devastating, in so far as deprivation is clearly detrimental to their long-term growth and development. As the Children’s Society points out, living in poverty even for short periods of time has significant detrimental effects on children’s outcomes, both in childhood and in later life, affecting their school attainment, cognitive and behavioural development, and physical and mental health.
Recently, the High Court found no recourse to public funds policies to be unlawful, holding that the relevant immigration rules and casework instructions did not adequately account for human rights obligations. That case was brought by an eight-year-old boy whose mother was subject to NRPF conditions and on the 10-year route to settlement. She was a carer for mentally disabled clients, before the imposition of the NRPF conditions led her and her son to experience periods of destitution. They moved house repeatedly, with the boy having been moved five times before the age of eight, and at one point they were street homeless. The court found that the Home Secretary must not impose or should lift NRPF conditions when it is clear that a person is at risk of imminent destitution in the absence of public funds, rather than waiting for that destitution to take place. As legislators, we should be doing better than that; we should avoid families being at risk of destitution at all. We invite families and individuals to come to undertake vital work here, and we should extend the safety net that we enjoy ourselves.
As in other areas, the Home Office sometimes attempts to pass the buck to local authorities and argues that support under legislation relating to children should mean a safety net of sorts is provided, but the number able to access such support is extremely limited, and the support is also incredibly restricted—sometimes as little as £3 per day per child. As I understand it, children are not even allowed to access free school meals.
The Home Office will also point out that, on application, NRPF conditions can be lifted, but those on the frontline say that such applications are incredibly difficult to have success with and have to be repeated multiple times. Those who apply who are currently on five-year routes to settlement will instead be placed on a 10-year route to settlement, with none of their residence to date being counted towards that target. The price of access to that safety net is insecurity.
Mr Goodwill
Does the hon. Gentleman not accept that benefits that people are entitled to by virtue of their paying national insurance contributions are able to be paid, including important ones such as contribution-based jobseeker’s allowance, incapacity benefit and, of course, retirement pension?
Stuart C. McDonald
I do not think I have denied that certain benefits are still available to people, but none of that explains or resolves all the challenges that I outlined. For all these reasons, we believe that the no recourse to public funds rule should be got rid of altogether.
That is all the more urgent in relation to the covid-19 crisis, for which the implications of these policies are absolutely counterproductive. People who are prohibited from accessing public funds will feel compelled to continue to work, even when doing so is not safe for them or their families. As I said, their inclusion in the furlough scheme is welcome, but someone who is subject to NRPF and is dismissed from their job will obviously not have access to the furlough scheme, and nor can they claim universal credit. They are at real risk of destitution.
We all watched the Prime Minister at the Liaison Committee recently. He was questioned, quite memorably, by the Chair of the Work and Pensions Committee, who provided an example to the Prime Minister of parents who had lived in the UK for at least 15 years and who had two children, aged 11 and 13. They found themselves facing destitution for reasons entirely beyond their control. It was telling that the Prime Minister could not explain why the family was not able to access support. Of course, they should be able to access support, and these new clauses would allow that to happen.
Kate Green
It is a pleasure to serve under your chairmanship, Mr Stringer. I rise to speak to new clause 59, tabled in my name and those of my hon. Friends. The new clause would require the Secretary of State to produce an analysis of the impact of the no recourse to public funds condition on EEA and Swiss nationals, including those with children, those with pre-settled status and those who are victims of domestic abuse.
As we heard from the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, no recourse to public funds conditions can prevent access to some welfare benefits, to free school meals and to other support for working families who may have been paying tax. That may include families with children, including British-born children, and other vulnerable people. As we heard, application can be made to lift the condition, but it is necessary to reapply at each visa renewal, and the condition can be reinstated.
The impact of no recourse to public funds conditions on the poorest households has been magnified, as the hon. Gentleman said, by the covid crisis. The Greater Manchester Immigration Aid Unit reports that applications to lift the condition are subject to considerable delay; that the process for applying is overcomplicated, and that is exacerbated for those who struggle to make digital applications; that the evidential requirements are high and unnecessarily onerous; and, as a result, that decisions are still awaited weeks after applications have been submitted.
This makes it harder for those subject to the condition to achieve social distancing or to self-isolate if they need to. They are more likely to be living in overcrowded accommodation, with many building up rent arrears. Even though they may, as the Minister rightly says, be eligible for the Government’s furlough scheme, they are under considerable pressure to keep working in many cases. Often, their children are not in school and they cannot access free childcare, forcing them to rely on friends and family to provide that care, meaning that children are moving between households, further increasing the covid risk.
Meanwhile, Safety4Sisters tells me that local authority housing services in Greater Manchester have been turning women subject to no recourse to public funds conditions away from the emergency homeless accommodation set up during the crisis, even though that should not happen. This has resulted in at least one vulnerable woman becoming street homeless in Manchester in recent weeks, until she was found by the police and taken to safety.
Given these shocking circumstances, Labour has called for the no recourse to public funds condition to be suspended during the covid emergency. As we heard, new clause 45, proposed by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, would give effect to such a suspension, while ensuring that, if Parliament wishes to reinstate the regime as soon as the crisis ends, it can do so. Suspension of the condition now would not only provide vital relief to families who have had their livelihoods catastrophically affected by covid, but would give the Government the opportunity to give full consideration to the impact of the no recourse to public funds condition more broadly and to future policy.
As we know, and as we have just heard, the Prime Minister was apparently surprised to hear about the effects of the condition during his recent session with the Liaison Committee, and he was right to say that
“people who have worked hard for this country, who live and work here, should have support”.
Sadly, just a week later, on 3 June, in his response in Prime Minister’s questions to my hon. Friend the Member for Sheffield Central (Paul Blomfield), he appeared to backtrack on his commitment to see what could be done to help them.
It is, of course, welcome that the Government have now issued guidance to give effect to the judgment in the case described by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, but this still leaves many potentially vulnerable people at risk of being subject to the condition. That includes those EU nationals who are here now but are able to secure only pre-settled status. They will not meet the habitual residence test and will be ineligible for non-contributory benefits; that includes disabled people, who will not be able to claim universal credit. I am sure my hon. Friend the Member for Kingston upon Hull North will speak to her new clause 62 and the damaging effect the condition could have on EEA and Swiss national families with children.
Given the potential impact on vulnerable groups, I hope the Minister will accept the suggestion of an analysis of the impact of the no recourse to public funds condition in the constructive spirit in which it is offered. If the Prime Minister’s commitment to review the application still holds, and if, as is reported, the Government intend to bring forward a further immigration Bill in the near future, they could take that opportunity to legislate to make any changes Parliament then deems necessary. The evidence base that such a review could supply would also be a useful prerequisite for a decision on the broader proposals set out in new clause 56 by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, were the Government minded to consider them. I commend our new clause to the Committee.
Dame Diana Johnson
It is a pleasure to serve under you this afternoon, Mr Stringer. I wish to speak to new clause 62, on the no recourse to public funds policy and to support new clause 59, tabled by my hon. Friends.
New clause 62 would exempt EU, EEA and Swiss nationals with dependants under the age of 18 from being subject to any NRPF condition that would otherwise be placed on them under the immigration rules. Many believe that these protections should apply to all families, regardless of their nationality, but for the purposes of the Government’s tightly drawn Bill, the new clause is limited in the way I have described.
Many find it astonishing that this condition is applied to children at all. Having NRPF means that the life chances of thousands of children are dictated by their parents’ inability to access support from the social security system because of their immigration status, even though the children themselves might be British.
I know that the Minister will use his concluding remarks to say that limiting access to public funds for these children and families is in the public interest and that they should be paying in to the system before they benefit from it. He will know that many of the families affected are those of key workers, who are at the frontline at this very moment in the fight against coronavirus. We are talking about NHS hospital cleaners, and about people who work in food preparation or social care, but they are being denied the same access to the safety net that they are working within. These families are paying income tax, council tax, immigration application fees and the health surcharge. It is calculated that if a family started their 10-year settlement journey in 2012, assuming they were not successful in getting fee waivers, and fees did not increase again, a single mum with two children would be expected to pay more than £23,000 for the family to settle in 10 years. A family of five—a couple with three children—would be expected to pay more than £39,000 to settle in the UK.
The NRPF does the opposite of making work pay, because families may end up forced into destitution if parents try to work but cannot access benefits. Working parents, single mums, mothers fleeing domestic violence, parents who have children born in the UK and children with British citizenship currently cannot access benefits to which they should be entitled. For children and families, that includes not being able to access benefits to support children’s upbringing and families’ wellbeing, to ensure that children have the same life chances as their peers.
As we have already heard, in May 2020, the Unity Project and Project 17 supported an eight-year-old British boy in taking the Government to court over the policy. The court ruled that the NRPF policy breached article 3 of the European convention on human rights, which prohibits inhumane and degrading treatment.
Applicants can apply to have their NRPF condition removed if they are likely to become destitute, but the process is time-consuming and requires specialist advice, which is difficult to obtain, especially during the current pandemic. NRPF families may be able to access support under section 17 of the Children Act 1989, which is often the only safety net available. That is payable, as we all know, through local authorities, but the pressure of austerity and cuts to local council budgets have left councils largely unable to offer much support.
Section 17 is often referred to by the Government as the basic safety net for migrant families with NRPF, but there is little support—sometimes as little as £3 per child per day—which makes it nearly impossible to meet the basic needs of a child, let alone support them to have a healthy, happy childhood. We have to acknowledge that that, again, puts an unnecessary strain on stretched local authority budgets.
Most, if not all, services that support migrant families with NRPF state that having no recourse to public funds increases the risk of families becoming trapped in a cycle of extreme poverty, vulnerability and abuse. Many children in NRPF families go without things that other children get to enjoy and that are important for their development, including, for example, days out as a family or school trips. One example that the Children’s Society gave me was of Hamid, who said that if his son’s classmates were going on a school trip, he would not take his son to school that day, because he did not want him to see his friends going while he stayed behind because they just could not afford it.
Other Government Departments are beginning to recognise the consequences of NRPF. The Department for Education has temporarily allowed children with NRPF to access free school meals, and the Ministry of Housing, Communities and Local Government has instructed local authorities to house homeless people with NRPF. In the longer term, the solution lies with the Home Office, so I ask the Minister to give an assurance to the Committee that safeguards will be put in place to ensure that more families will not be forced into destitution as a result of a condition placed on their leave to remain.
The Government have made it clear that they want to wrap their arms around everyone during this time of crisis. Vulnerable children are at the heart of the Government’s agenda, so the new clause will ensure that that can happen. I commend it to the Committee.
Kevin Foster
After the end of the transition period, EEA citizens coming to the UK will be subject to the same requirements as non-EEA citizens and the same conditions restricting access to public funds under our new global immigration system. The new clauses would maintain a system in which EEA citizens, including those arriving in future, continued to enjoy preferential treatment over non-EEA citizens in relation to their access to benefits. That is not the Government’s intention, nor would it be fair, and it is not something that the British people would support, given the mandate that they have given to the Government.
New clause 45 would delay the introduction of the no recourse to public funds condition to EEA citizens until Parliament had decided on the matter in the light of the current pandemic. However, as has been touched on by some Opposition Members, to their credit, the Government have already made provision to support people through the pandemic, including those subject to no recourse to public funds, and are keeping the situation under review.
It should also be noted that the no recourse to public funds condition does not bar access to all benefits, as pointed out by my right hon. Friend the Member for Scarborough and Whitby. People covered by it may still, for example, access contribution-based benefits and statutory sick pay. Exceptions are also made for vulnerable migrants, such as refugees and those granted humanitarian protection. Those granted leave on the basis of their family life under article 8 of the European convention on human rights can apply to have the conditions lifted if they would otherwise be destitute.
Mr Goodwill
Does my hon. Friend know whether any other EU countries have extended to UK citizens living in the European Union the type of benefits proposed by the new clauses?
Kevin Foster
It is probably worth saying that many European welfare schemes are based on slightly different premises—for example, social insurance schemes. As we reflected on when we talked about healthcare costs, people accessing healthcare services in other European countries may be required to pay for things that the NHS provides free at the point of need to UK nationals. It is hard to give different examples, but there are protections in the withdrawal agreement for UK citizens living in the EU before the end of the transition period. To be fair, many countries have been good in wanting proactively to support UK citizens living in their nation. I cannot give a list of each countries’ individual migration system off the top of my head, but it is probably safe to say that it is relatively common around the world for those who have newly arrived in a country to be unlikely to be able to access and qualify for a range of welfare provisions.
EEA citizens who apply under the EU settlement scheme secure their rights in UK law, so they can access benefits and services on at least the same basis as before they were granted that status. The Government have provided guidance for local authorities to enable them to support vulnerable EEA citizens in making an application under the scheme. The Government have also made available to local authorities and charities a further £8 million, in addition to the £9 million announced last year, to help them to assist vulnerable EEA citizens in making applications.
New clause 56 would risk impacting the Government’s ability to make regulations under the power in clause 4, the importance of which I have set out previously in Committee: to ensure that our laws operate coherently once free movement ends; to align the immigration treatment of newly arriving EEA citizens and non-EEA citizens from 1 January 2021; and to make relevant savings and transitional provisions for resident EEA citizens that cannot be made under powers in the 2020 Act.
New clause 59 would require the Government to publish a report on the impact of the no recourse to public funds condition on certain groups of EEA nationals. This is not necessary; the Government are already required to consider the impact of policies on all those to whom they apply, not just certain groups.
On new clause 62, I share the interest of the hon. Member for Kingston upon Hull North in ensuring the wellbeing of children, but I do not believe the new clause is necessary. Immigration law already provides that local authorities may intervene where required, regardless of the immigration status or nationality of the child or parent. The safeguards in place for the vulnerable will be retained, but it is only right that the future immigration system continues to play a part in ensuring that taxpayers’ funds are protected for the residents of the UK, whose money it is, and in assuring them that immigration continues to benefit the country as a whole and is not based on creating new costs and burdens for public resources.
I understand and appreciate the intentions behind new clause 62, but it would provide EEA citizens with greater access to benefits in the UK than they currently have under UK law. Generally speaking, under EU free movement law, EEA citizens may currently access benefits when they exercise a qualifying EU treaty right—for example, through employment or self-employment, or when they have become permanent residents. The new clause would remove that qualification and provide that any EEA citizen in this country with a child, for whatever period and in whatever capacity, may qualify for welfare benefits.
We believe that a general qualifying threshold of five years for access to benefits in immigration procedures is the right one, as it reflects the strength of a person’s connection to the United Kingdom and the principle that people should come to the UK to contribute, rather than to take advantage of, and place pressures on, taxpayer-funded services and welfare payments. Non-EEA migrants who come to live in the UK are currently expected to provide for any children they have without recourse to public funds. There can be no reasonable justification for adopting a different principle for EEA citizens arriving in the UK when the new immigration system is introduced, given that we have now left the European Union.
Finally, new clauses 59 and 62 incorrectly reference the immigration health surcharge. The immigration health surcharge is not a public fund. It is a contribution made by temporary migrants towards the costs of the NHS services they can access from day one. These new clauses would undermine the intention to establish a unified immigration system that builds public confidence in its operation, and therefore the Government cannot accept them.
Stuart C. McDonald
People do not come to this country to take advantage of the social security system; they come here to work or because they are family members of British citizens or settled persons. Having asked them to come to work or join family members here, I regard it as unfair that we do not extend the same social safety net to them. We are not arguing for a discriminatory system.
As the Minister knows, we are limited by the scope of the Bill. I feel that we have not got to the fundamental principle of why we can ask people to contribute on the one hand and yet not provide them with the same safety net. This is particularly urgent in relation to the coronavirus, and we need fast action. The Minister referred to this matter being under review, but we are several months into the crisis and we will have to revisit this issue on Report. In the meantime, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 46
Family reunion and resettlement
“(1) The Secretary of State must make provision to ensure that an unaccompanied child, spouse or vulnerable or dependant adult who has a family member who is legally present in the United Kingdom has the same rights to be reunited in the United Kingdom with that family member as they would have had under Commission Regulation (EU) No. 604/2013.
(2) The Secretary of State must, within a period of six months beginning with the day on which this Act is passed—
(a) make regulations amending the Immigration Rules in order to preserve the effect in the United Kingdom of Commission Regulation (EU) No. 604/2013 for the family reunion of unaccompanied minors, spouses and vulnerable or dependant adults; and
(b) lay before both Houses of Parliament a strategy for ensuring the continued opportunity for relocation to the UK of unaccompanied children present in the territory of the EEA, if it is in the child’s best interests.
(3) For the purposes of this section, “family member”—
(a) has the same meaning as in Article 2(g) of Commission Regulation (EU) No. 604/2013;
(b) also has the same meaning as “relative” as defined in Article 2(h) of Commission Regulation (EU) No. 604/2013;
(c) also includes the family members referred to in Article 16 (1) and 16 (2) of Commission Regulation (EU) No. 604/2013.
(4) Until such time as Regulations in subsection (2) come into force, the effect of Commission Regulation (EU) No 604/2013 for the family reunion of unaccompanied minors, spouses and vulnerable or dependent adults with their family members in the UK shall be preserved.”—(Stuart C. McDonald.)
This new clause would have the effect of continuing existing arrangements for unaccompanied asylum-seeking children, spouses and vulnerable adults to have access to family reunion with close relatives in the UK.
Brought up, and read the First time.
Stuart C. McDonald
I beg to move, That the clause be read a Second time.
It is a pleasure to address new clause 46, this time with a cross-party hat on, rather than my usual SNP hat. I am grateful to the Chair of the Home Affairs Committee, the hon. Member for Kingston upon Hull North and others for co-ordinating on this new clause.
As Members will know, the European Union has in place a fairly mature—it is certainly not perfect, but it is long standing—system of deciding which member state should appropriately consider a claim for asylum. For example, if an unaccompanied child is found on one of the Greek islands seeking asylum and it is known that they have family members in another EU country, few of us here would argue against the notion that the child should be reunited with their family and the claim considered in that member state.
In January this year, Parliament passed section 37 of the European Union (Withdrawal Agreement) Act 2020, which regrettably abolished the previous requirement on the Government to seek to negotiate an alternative to replace the family reunion provisions in the EU’s Dublin regulation. At the time, the Government were full of assurances that this did not represent a downgrading of their ambitions and said that they would protect family reunion for unaccompanied children in the Brexit negotiations, but in its current form, the UK’s proposal to the EU rows back on those assurances and would leave hundreds of children stranded.
There are numerous problems with what the Government propose. Most fundamentally, the proposed text removes all mandatory requirements on the Government to facilitate family reunions and would make a child’s right to join their relatives entirely discretionary. The text also intentionally avoids providing rights to children. It does not provide for appeals and attempts to put these issues beyond the reach of UK courts. Other categories of vulnerable refugees, including accompanied children and adults, would lose access to family reunion altogether. A series of other key safeguards are removed, including strict deadlines for responses and the responsibility for gathering information being on the state rather than the child.
This issue is hugely important. Between 2009 and 2014, before mandatory provisions were introduced by Dublin III, family reunions to the UK were carried out at an average rate of 11 people annually. Between 2016 and 2018, after the mandatory provisions were introduced by Dublin III, family reunions to the UK were carried out at an average rate of 547 people annually. The Government were not straight with Parliament when they proposed clause 37 of the withdrawal Bill earlier this year, and I think they have behaved in a rather upsetting manner, if I can put it like that.
We now have a situation where there are unaccompanied child refugees and refugees more generally living in appalling conditions in Greece and France. Of course those countries are under an obligation to do more to support and assist them, but many of those kids have family here, and I cannot see how any reasonable person can argue against the logic, the sense and the simple compassionate idea that that child should be reunited with their family in this country and have their asylum claim decided here.
The Government should stop messing about, stop trying to water down their previous commitments and revert to the obligation that Parliament previously placed upon it, which is to negotiate a full and proper replacement of the Dublin regulations, including an obligation to allow children to be reunited with their families in the United Kingdom.
Holly Lynch
It is a pleasure to follow the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East, the SNP spokesperson, who used his experience to make a very convincing contribution.
Labour will support new clause 46, which was tabled by the Chair of the Home Affairs Committee with the support of a number of its members, as well as the Chairs of the Joint Committee on Human Rights and the Housing, Communities and Local Government Committee.
As we have heard, as a member of the EU, the UK has participated in the Dublin III regulation, which has allowed people seeking asylum in Europe to be transferred to the UK on the basis of family unity and to have their asylum claims considered in the UK. The Dublin III mechanism generally affects a small number of children, but it has a transformative effect on their lives. It has become an increasingly important family reunion route, with more than 1,600 people having been reunited through it since the start of 2018.
However, this route will end once the transition period comes to an end on 31 December 2020. While the Government have committed to seeking an arrangement through the UK-EU negotiations that would maintain a family reunion element of the Dublin system for separated children, we would very much like assurances that the Government are firmly committed to this.
We are concerned that, unlike Dublin III, the current proposals would not be mandatory and would take us back to the days when child refugees were reunited with family only at the discretion of the national Government. That would require the transferred person to make an asylum claim and only secure family unity pending a decision on that claim. Labour, along with the Families Together coalition, supports new clause 46. We want to see a system that retains the family reunion route under the Dublin III regulation for all families.
This is Refugee Week, and family reunion has been a long-standing feature of the UK’s immigration system. The United Nations High Commissioner for Refugees has said that
“there is a direct link between family reunification, mental health and successful integration.”
By diminishing children’s chances of reaching their relatives legally, restrictive rules sadly only drive people to take more and more perilous alternatives, putting lives at risk and empowering people smugglers.
Labour joins Safe Passage, Amnesty International, the British Red Cross, Oxfam, the Refugee Council, the UNHCR and so many others who make up the Families Together coalition to urge the Government to prioritise family reunion, so that children, spouses and vulnerable adults can reunite with their family and close relatives, by maintaining safe and legal routes for people to come to the UK.
At a time when we are all feeling the effects of separation from our families due to the pandemic, the Government must recognise the need to protect all child refugees adequately and provide a legal and safe means for the reunification of families.
Dame Diana Johnson
In speaking to new clause 46, I want to be clear that this is not about placing additional burdens on the Home Office or Government; it is about asking the Government not to water down their obligations to child refugees, but instead to carry on doing what they already do.
As we have heard, new clause 46 is intended to ensure that the safe and legal routes to the UK for refugees with relatives here and for unaccompanied children without family are protected in domestic legislation. I gently say to the Minister that he may well talk about the Dubs scheme—I know that all the places on the Dubs scheme have been filled—but I do not think that that discharges us of our moral duty to help children on the continent.
Indeed, Lord Dubs says that some of the conditions that he has seen in camps in Europe are worse than those in the region, because of the utter lack of hope of those living in those camps. We can give them hope by adopting the new clause and showing that we are not turning our back on child refugees just a few hundred miles away. In all his campaigning on these issues, Lord Dubs has always maintained that he believes that public opinion is behind him when it comes to child refugees. It is heartening to know that recent Ipsos MORI polling suggests Lord Dubs is entirely right in his assessment of British feeling on this. Some 79% of people polled said that children should be able to reunite with parents, and over half said children should be able to reunite with siblings, grandparents, aunts and uncles. The British public supports refugee family reunion and I hope the Minister will do the same.
Kevin Foster
The Government are committed to the principle of family reunion and supporting vulnerable children. We recognise that families can become separated because of the nature of conflicts and persecution, and the speed and manner in which people are often forced to flee their country.
We will continue to provide safe and legal routes for families to reunite in the UK. We have a proud record of providing protection to those who need it, including children, and of reuniting families under the existing immigration rules. The new clause fails to take into account our negotiations with the EU, which I will come to later.
The UK continues to be one of the world’s leading refugee resettlement states. We resettle more refugees than any other country in Europe and are in the top five countries worldwide. Since September 2015, we have resettled more than 25,000 vulnerable refugees in need of protection through our refugee resettlement schemes, with around half being children. We can be proud as a country of our ambitious commitments and achievements. The Government are delighted that their overall approach was endorsed in the general election in December by the British public.
Furthermore, the UK already has a wide range of provisions in existing immigration rules that allow UK-based family members to sponsor children and other relatives to enter the UK for family reunion purposes. Those rules apply to a sponsor who is a refugee, a settled person or a British citizen. All those rules are unaffected by the UK leaving the EU and they will continue to be available after the transition period ends.
Our refugee family reunion policy is intended to allow those granted refugee status or humanitarian protection in the UK to sponsor pre-flight, immediate family members to join them here. Where appropriate, our policy includes scope to allow other family members to reunite with refugees in the UK. This may be on an exceptional basis or simply under a different route.
The new clause fails to distinguish between the very different circumstances of sponsors who are refugees and those who are asylum seekers—those seeking refugee status. It is important that the sponsor already has refugee or humanitarian leave in the UK before they are able to sponsor family members to join them. Allowing individuals to sponsor family members to join them in the UK before a decision on their asylum claim is made creates greater uncertainty for families, who may be unable to remain in the UK.
Very careful consideration is required before we extend family reunion provisions, to guard against significantly increasing the number of people who could qualify for family reunion, but who do not necessarily need protection themselves and who may be making unfounded claims of our protection systems for economic migration purposes. That could reduce our capacity to assist the most vulnerable refugees.
In the year ending March 2020, over 7,400 refugee family reunion visas were issued to partners and children of those previously granted asylum or humanitarian protection in the UK, which—hon. Members may be interested to know—is 37% more than in the previous year. There are further provisions in the immigration rules that allow those with refugee leave or humanitarian protection to sponsor adult dependant relatives living overseas to join them. This is where, as a result of age, illness or disability, a person requires long-term personal care, which can only be provided by their relative in the UK, without recourse to public funds. The same approach is applied to British citizens who wish to sponsor such relatives.
Furthermore, under part 8 of the immigration rules, children with relatives in the UK with refugee status or humanitarian protection are able to apply to join them in the UK, where there are serious and compelling family or other considerations that make exclusion of the child undesirable and where suitable arrangements have been made for the child’s care. In addition, appendix FM of the immigration rules already provides routes for British and settled sponsors, and those with protection-based leave, to sponsor family members to join them in the UK. We are aware that financial and other requirements are in place in those rules, which have been upheld as lawful by the Supreme Court. It is appropriate that all those who seek to sponsor a family member under these routes can meet a consistent set of requirements.
The new clause proposed by the hon. Member for Cumbernauld, Kilsyth and Kirkintilloch East is based on the Dublin regulation, which is an EU provision. The UK is no longer an EU member state. As a sovereign country, we already have our own routes for adults and families to be reunited in the UK, which are substantial, as I have just set out. As a sovereign state, it is important that we do not seek to recreate EU laws unilaterally, without considering what we want the UK’s migration and humanitarian protection system to look like. Importantly, we have been very clear that, while we are no longer in the EU, the UK and the EU have a long history of working together and we have recognised that it is in our best interests to continue to do so. That is why we are pursuing, through formal negotiations, new reciprocal arrangements with the EU for the family reunion of unaccompanied asylum-seeking children in either the UK or the EU with specified family members in the EU or the UK, where it is in the child’s best interests.
We published our draft legal text as a constructive contribution to the negotiations. A negotiated agreement for a state-to-state referral and transfer system would provide clear and consistent processes between the UK and EU member states, ensuring appropriate support for the child and guaranteeing reciprocity, yet these guarantees cannot be provided for in domestic UK provisions alone because they are inherently reciprocal. In addition, subsection (2)(a) of the new clause would require immigration rules to be made by regulations. That is not how immigration rules are made; they are made under the procedures set out in the Immigration Act 1971.
Finally, the new clause would require the Government to lay before Parliament a strategy on the relocation of unaccompanied children. The scope of this strategy is ambiguous. It is unclear whether it relates only to family reunion or whether it covers asylum-seeking children. The explanatory note accompanying the new clause suggests that it is solely about family reunion, but that is not reflected in the drafting. Therefore, for the reasons that I have outlined, the Government are not able to accept the new clause.
Stuart C. McDonald
I am grateful to the Minister for his response. I welcome the fact that the Government are committed to the principle of family unity. Indeed, the Minister was right to point out some of the good work that has been done in recent years, particularly in terms of resettlement. Currently, some of that tends to be forced upon the Home Office, rather than being designed and promoted within it, but nevertheless it is welcome and that has been a success.
In other senses, I fundamentally disagree with the Minister. He cited some rules that had been deemed lawful by the Supreme Court. That is not exactly a ringing endorsement, but, nevertheless, it is clear that some of the rules he was referring to and the financial requirements are absolutely impossible—so impossible that the rules are almost worthless.
The SNP wants the UK to go further on family unity. My hon. Friend the Member for Na h-Eileanan an Iar (Angus Brendan MacNeil) had the endorsement of Parliament to expand the family reunion rules and, of course, the Government managed to use the system to ignore that vote. Given what we have heard today and in previous weeks, including the publication of that text, I fear that we are in danger of going backwards, and not just in terms of Dublin. We urgently need to hear what the future of resettlement will be, so we will be watching carefully.
In the meantime, Mr Stringer, we will revisit this matter on Report. Meanwhile, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 51
Immigration Detention: Removal from Association
“(1) Section 153 of the Immigration and Asylum Act 1999 is amended as follows.
(2) After subsection (2) insert—
‘(3) Rules made under this section must prohibit the involuntary removal from association of any affected person detained in a removal centre save for where that is—
(i) reasonably necessary to protect that person or another person from immediate harm; and
(ii) for no longer than is necessary for this purpose and for no longer than maximum 24 hours.
(4) For the purposes of this section—
“affected person” means any person whose rights are affected by repeal of legislation by or under Schedule 1 of the Immigration and Social Security Co-ordination Act 2020 or by regulations made under section 4 of that Act.
“removal from association” means any restriction on a person associating with others that is not common to all persons then detained at the same removal centre.’” .—(Stuart C. McDonald.)
This new clause seeks to prohibit removal from association with others in detention save for removal where that is necessary.
Brought up, and read the First time.
Stuart C. McDonald
I beg to move, That the clause be read a Second time.
I had originally anticipated that this would be part of a much wider debate on immigration detention, but it looks like we will be having that on Report instead of in Committee. I am grateful to Medical Justice for flagging up the continued use of segregation in immigration removal centres, which we believe risks causing severe and permanent damage to detainees. In the past decade, at least two deaths in IRCs have been directly linked to the use of segregation. Segregation has played a role in four High Court cases in which a detainee’s detention or conditions of detention were found to amount to inhuman and degrading treatment in breach of article 3 of the European convention on human rights. Countless more detainees have suffered the negative impacts of segregation on their mental and physical health.
What we are really talking about is the practice of keeping a detainee separate from the rest of the IRC population. It is usually done by placing the detainee in a special unit at the centre, either alone or with other detainees being held under similar conditions. Segregated detainees can be locked in their cells for up to 23 hours a day, with severe restrictions placed on their activities and interactions with others.
In short, segregation is one of the most severe and draconian measures used in any detainment setting. Detainees can be held for an initial period of 24 hours, but that can be extended to seven days and 14 days with the authorisation of the Secretary of State. It can then be subsequently renewed, if required.
The effects of segregation on physical and mental health can be devastating. It has been found to lead to increased rates of anxiety, social withdrawal, hallucinations and suicidal thoughts. Even after relatively short periods of time, the damage done to a person’s health can be long-lasting and in some cases permanent. Research has shown that segregation can have a negative effect on the health of anyone who experiences it, and the risk for those with pre-existing mental health conditions or other vulnerabilities is particularly high. People who have been held in similar conditions in the past as part of torture, for example, may find the experience extremely re-traumatising.
The stated justification for the use of segregation in IRCs is the interests of safety and security or for refractory or violent detainees. However, a report from Medical Justice in 2015 showed that segregation is being used as a form of punishment and to house individuals with mental health issues that cannot be adequately managed in detention, including to manage detainees at risk of self-harm.
Inspection reports from independent monitoring boards and Her Majesty’s inspectorate of prisons continue to raise concerns about the use of segregation in IRCs. Examples of such practices include detainees inappropriately segregated for months and years, with one detainee being segregated more or less continuously for 22 months. Another detainee was only transferred to psychiatric hospital following 80 days in segregation, and yet another was segregated more than eight times during her 800 days in detention. The issues are ongoing. Segregation is not helping people, but is, on the contrary, making things much worse.
The key point is the availability of segregation, which perpetuates the inappropriate detention of those who often end up subject to it. It allows for problem individuals or vulnerable individuals who cannot be managed in detention to nevertheless still be detained. Despite their detention being inappropriate, the Home Office knows that there is always a possibility of placing them in segregation, should their condition deteriorate or their behaviour grow increasingly difficult to manage. Once these vulnerable detainees end up being segregated, they are housed in an environment that is totally unsuited to their needs. They are placed in forced isolation, removing them from the support of their peers, as well as limiting their visibility and access to organisations that could provide help.
If the use of segregation was not an option, proper attention would need to be paid to whether it was appropriate for the individual to be in detention at all, whether they can be managed safely in an IRC or whether an alternative approach should be sought with more appropriate support in the community. That is why the safeguards and protections in place under rule 40 and rule 42 can never be adequate. We need to abolish the practice altogether.
The new clause would still allow and make provision for crisis intervention where there is an imminent risk of harm to the individual or other individuals in the IRC, but that should be the purpose of those interventions, and that should be it. Too often, that intervention is being used and abused by the Home Office. People who belong either in police custody if they have breached the criminal law, or in a mental health institution should not be detained in IRCs in inappropriate conditions for days on end. I hope the Minister will address those points and seriously look at the issue I have flagged up, because the situation cannot be allowed to continue.
Kevin Foster
I thank the hon. Member for the opportunity to debate this topic. As he will be aware, in recent years the numbers in detention overall, excluding the current period, have been declining, but a process obviously still needs to be in place to manage the detentions, the detention centres and the detention estate, as we still have it.
Stuart C. McDonald
I am grateful to the Minister for his explanation of what should happen, but I suspect that the theory of the rules does not match the practice. The view of Medical Justice is that what the Minister has just described does not reflect what is actually happening in detention centres. I am sure this is something that we will revisit, but in the meantime I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 53
Private life
‘(1) This section applies when a court or tribunal is required to determine whether a decision made under the Immigration Acts in respect of a relevant person—
(a) breaches a person’s right to respect for private and family life under Article 8; and
(b) as a result would be unlawful under section 6 of the Human Rights Act 1998.
(2) In subsection (1) a “relevant person” is any person who, immediately before the commencement of Schedule 1, was—
(a) residing in the United Kingdom in accordance with the Immigration (European Economic Area) Regulations 2016;
(b) residing in the United Kingdom in accordance with a right conferred by or under any of the other amendments which is repealed by Schedule 1; or
(a) otherwise residing in the United Kingdom in accordance with any right derived from European Union law which continues, or immediately before the commencement of Schedule 1 continued, by virtue of section 4 of the European Union (Withdrawal) Act 2018 to be recognised and available in the United Kingdom.
(3) In a case to which this section applies, section 117C of the Nationality, Immigration and Asylum Act 2002 shall be read subject to the following modifications.
(4) Section 117C(5) shall be read as if the words “and the effect of C’s deportation on the partner or child would be unduly harsh” were replaced with “and either
(a) the effect of C’s deportation on the partner would be unduly harsh; or
(b) it would be unreasonable for the child to leave the UK or to remain in the UK without C.”
(5) Section 117C(6) shall be read as if—
(a) the word “(“C”)” were inserted after “foreign criminal”; and
(b) the words “there are very compelling circumstances, over and above those described in Exceptions 1 and 2” were replaced with “either
(c) C has a genuine and subsisting parental relationship with a qualifying child and it would be unreasonable for the child to leave the UK or to remain in the UK without C; or there are very compelling circumstances, over and above those described in Exceptions 1 and 2.’—(Stuart C. McDonald.)
This new clause modifies the threshold for deportation of EEA nationals and family members who are parents of “qualifying children” – children who are British or have lived in the UK for 7 years or more.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss
New clause 54—Family life—
‘(1) This section applies when a court or tribunal is required to determine whether a decision made under the Immigration Acts in respect of a relevant person—
(a) breaches a person’s right to respect for private and family life under Article 8, and
(b) as a result would be unlawful under section 6 of the Human Rights Act 1998.
(2) In subsection (1) a “relevant person” is any person who, immediately before the commencement of Schedule 1, was—
(a) residing in the United Kingdom in accordance with the Immigration (European Economic Area) Regulations 2016;
(b) residing in the United Kingdom in accordance with a right conferred by or under any of the other amendments which is repealed by Schedule 1; or
(c) otherwise residing in the United Kingdom in accordance with any right derived from European Union law which continues, or immediately before the commencement of Schedule 1 continued, by virtue of section 4 of the European Union (Withdrawal) Act 2018 to be recognised and available in the United Kingdom.
(3) In a case to which this section applies, section 117C of the Nationality, Immigration and Asylum Act 2002 shall be read subject to the following modifications.
(4) Subsection (4)(a) shall be read as if the words “C has been lawfully resident in the United Kingdom for most of C’s life” were omitted and replaced with “one of criteria (a) to (c) in subsection (4A) is satisfied”.
(5) Section 117C shall be read as if after subsection (4) there were inserted the following words—
“(4A) The criteria in this subsection are—
(a) that C has been lawfully resident in the United Kingdom for most of C’s life,
(b) that C was born in the UK, or
(c) that C arrived in the UK aged under 18 and has lived in the United Kingdom for a continuous period of seven years or more.
(4B) If the criterion in subsection (4A)(b) or the criterion in subsection (4A)(c) is satisfied, it shall be presumed that C is socially and culturally integrated in the UK for the purposes of subsection (4)(b).
(4C) A presumption under subsection (4B) is rebuttable.’
This new clause modifies the criteria for the deportation of third country nationals with very significant connections to the UK who are impacted by this Act.
Stuart C. McDonald
I am optimistically—and perhaps naively—attempting to spark a sensible, measured and constructive debate on laws relating to deportation, and the balance and interaction with family and private life. It is my fault, but I think the headings on the new clauses should probably be the other way around. The one relating to family is more closely linked to private life and vice versa.
Of course, there are people who commit serious crimes and have no connection with the UK, and they must be deported without any real hesitation. However, there are also many other cases where the impact of any such decision has such serious consequences—not just for the individual, but for the family member—that deportation is not appropriate in the minds of most reasonable people. Once a person has completed the punishment provided for by our criminal laws, they resume their life in this country.
There is also a second category of case, where to all intents and purposes the Home Office is not deporting foreign national offenders. In reality, it is deporting British people—people who have lived pretty much all their lives here and have no connection with the place to which they are being deported, other than the passports that they have never used or used only once when they were toddlers. From time to time, we need to be brave enough to confront the question of where we draw the line. I make the case that the line has been drawn in the wrong place, and that powers of deportation are now used too often and in inappropriate circumstances. That is a challenge to MPs on both sides of the House, because much of our deportation legislation has been in place under Labour Administrations as well as Conservative Administrations.
I turn first to new clause 53, where other family members are affected. As hon. Members will be aware, those from EEA countries and Swiss nationals and their family members cannot generally be deported, except on grounds of public policy, public security and public health, and where their conduct poses a genuine, present and sufficiently serious threat to one of the fundamental interests of our society—a forward-looking assessment that allows for consideration of competing family life considerations. By contrast, people from outside the EEA are subject to automatic deportation if sentenced to imprisonment of 12 months or more. No consideration is given to whether a person continues to pose a risk, and those sentenced to less than 12 months can also be deported if the Secretary of State believes it to be conducive to the public good.
Consideration of matters relating to family has been seriously restricted. There are only two very narrow circumstances in which issues of family will trump deportation. A person must show that they have either a genuine and subsisting relationship with a qualifying partner, or a genuine and subsisting parental relationship with a qualifying child, and they must show that the experience of deportation for the partner or child would be unduly harsh. The test is even higher where there has been a sentence of four years or more, but where very compelling circumstances must be shown.
The new clause concerns children, and we argue that the test set out just now is unduly restrictive and not in the best interests of children. Instead of requiring unduly harsh circumstances, the new clause would stop deportation where it would be unreasonable for a child to leave the UK or to remain in the UK without the parent. It is important to appreciate just how demanding the current test is. Home Office policy states that the words “unduly harsh” must be given their ordinary meanings. It notes that the Oxford English Dictionary defines “unduly” as “excessively”, and “harsh” as “severe” or “cruel”. In short, Parliament has put in place a regime that allows for child cruelty; only where that child cruelty becomes excessive do we think again.
It is little wonder that judges have sometimes expressed great sympathy with appellants and surprise at the effect of the legislation that this place has enacted, but their hands are tied. As Lord Justice Baker remarked in the case of KF Nigeria:
“For those lawyers, like my Lord and myself, who have spent many years practising in the family jurisdiction, this is not a comfortable interpretation to apply. But that is what Parliament has decided.”
Two tribunals had found that KF should not be deported because of the significant impact it would have on his son, despite a three-year sentence for burglary and robbery. Being a parent does not exempt someone from facing the criminal justice system if they break the law, but deportation goes further; it can effectively and summarily end a child’s family life for at least the duration of their childhood. There are well-documented long-term negative impacts on a child’s upbringing, education and social behaviour, with repercussions for their communities. There are also, of course, implications for a partner left behind in the United Kingdom, who is now responsible for bringing up the child alone.
I am not submitting that parents can never be deported; I am submitting that we need to be much more careful and sensitive about the circumstances in which it happens. This is not about people escaping justice, because they will still face the criminal justice system; it is about protecting innocent children. Deportations would still be possible, even where a child was involved, but only where a court assesses that it would be reasonable for the child to leave the UK along with the parent, or for the child to remain in the UK without the parent.
I turn to new clause 54, which challenges the Government on the criteria used to decide on the deportation of people who have significant connections with the United Kingdom. The issue was summarised by the former prisons and probation ombudsman, Stephen Shaw, in his 2018 review of treatment of vulnerable adults in immigration detention, which was commissioned by the then Home Secretary, the right hon. Member for Maidenhead (Mrs May). He reported that, time and again, those he met who were being held under immigration powers after serving custodial sentences were long-term British residents who had often been brought to the UK as young children and who were, to all intents and purposes, British.
To quote Stephen Shaw’s review:
“I find the policy of removing individuals brought up here from infancy to be deeply troubling. For low-risk offenders, it seems entirely disproportionate to tear them away from their lives, families and friends in the UK, and send them to countries where they may not speak the language or have any ties. For those who have committed serious crimes, there is also a further question of whether it is right to send high-risk offenders to another country when their offending follows an upbringing in the UK.”
It bears remembering that some of those individuals would have been entitled to British citizenship had they been aware, or not been priced out of it by the Home Office, to reference my earlier amendment on that subject.
I agree absolutely with Stephen Shaw, and I have personal experience of representing, very occasionally, clients who faced deportation. I remember in particular one Glaswegian lad—and he was Glaswegian—who was 18 years old and had been in this country since the age of four. He had been essentially abandoned, and passed from pillar to post around the care system. Persistent fairly low-level offending resulted in custody. In those circumstances, it was outrageous to deport him.
Some of the people on the charter flights to Jamaica in February 2020 were in that cohort, including young men whose offending involved belonging to county lines operations, which we all know are closely associated with coercion and modern-day slavery. Some were deported for offences committed a long time ago, with no account taken of rehabilitation.
A terrible example of that type of case is the ongoing saga of Osime Brown, a 21- year-old who is severely autistic. He arrived in the UK at the age of four from a country to which the Home Office now wants to deport him. I urge Members to have a look online at the facts and circumstances of the case and to say, hand on heart, that they have no problem with what the Home Office is up to.
The new clause changes the exceptions so that greater consideration is given to people established here at a young age and the reality that they are usually, to all intents and purposes, British, even if they do not hold that passport. It adds exceptions for people who were born in the UK, or who arrived in the UK under the age of 18 and have lived here for seven years or more. It also establishes a presumption that if a person was born in the UK, or arrived in the UK aged under 18 and has lived in the UK for a continuous period of seven years or more, they are considered socially and culturally integrated into the UK—albeit that that presumption would be rebuttable. The person would still have to show that there are very significant obstacles to reintegration.
The 33rd recommendation of Stephen Shaw’s review was:
“The Home Office should no longer routinely seek to remove those who were born in the UK or have been brought up here from an early age.”
Instead of commissioning reviews, it is time for the Government to start implementing the reviews that they have already heard from. For those reasons, I urge the Committee to look favourably on the new clauses.
Kevin Foster
The new clauses concern the principles that a court or tribunal is required to take into account when assessing what is in the public interest for the purposes of determining whether a foreign national offender’s deportation breaches article 8 of the European convention on human rights. The article 8 ECHR right to respect for private and family life is a qualified right, which can be circumcised—[Interruption.] I will have to ensure I write that one out again next time. It can be circumscribed where lawful, necessary and proportionate, in the interest of a number of factors including national security, public safety, the prevention of disorder or crime, and the protection of the rights and freedoms of others.
Section 117C of the Nationality, Immigration and Asylum Act 2002 provides that, when assessing whether deportation breaches article 8 of the ECHR, the deportation of a foreign national offender is in the public interest unless certain exceptions apply. The new clauses seek to alter those exceptions and therefore undermine Parliament’s clear position on what the public interest requires in such cases.
New clause 53 would amend the exception at section 117C regarding foreign national offenders who have been sentenced to less than four years’ imprisonment, and who have a genuine and subsisting relationship with a qualifying partner or child, meaning that deportation would not be in the public interest if it would be unreasonable for the child to leave the UK, or to remain in the UK without the foreign national offender. That would be in addition to the existing exception that applies when the effect of the deportation on the partner or child would be unduly harsh.
Stuart C. McDonald
I am grateful to the Minister for his response. We need to look at this issue much more closely, as we have only skimmed over the issues today. The Government must start collating data on the number of kids who end up being separated from a parent because of deportation, including a number of British citizens. We will ask questions and revisit the issue, but for now I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Stuart C. McDonald
I would like to speak to new clause 55, Mr Stringer. I did not speak to it because new clause 47, with which it is grouped, was not moved.
The Chair
Sorry. My script is completely wrong. I call the hon. Member to move new clause 55.
New Clause 55
Hostile environment
“(1) For the purpose of this section, a person (“P”) is defined as any person who, immediately before the commencement of Schedule 1, was—
(a) residing in the United Kingdom in accordance with the Immigration (European Economic Area) Regulations 2016;
(b) residing in the United Kingdom in accordance with a right conferred by or under any of the other instruments which is repealed by Schedule 1; or
(c) otherwise residing in the United Kingdom in accordance with any right derived from European Union law which continues, by virtue of section 4 of the EU Withdrawal Act 2018, to be recognised and available in domestic law after exit day.
(2) Regulations under section 4(1) may not be made until the Government has brought forward legislative measures to ensure that hostile environment measures do not apply to P, specifically—
(a) sections 20-43 and 46-47 of the Immigration Act 2014;
(b) sections 34-45 of the Immigration Act 2016; and
(c) schedule 2, paragraph 4 of the Data Protection Act 2018.” —(Stuart C. McDonald.)
This new clause seeks to limit the application of the hostile environment.
Brought up, and read the First time.
Stuart C. McDonald
I beg to move, That the clause be read a Second time.
It used to be that the Home Office enforced immigration rules by good old-fashioned intelligence-led investigation and action, but under political pressure and the influence of austerity, increasingly the Home Office has decided to rely on essentially outsourced immigration control, hoping that if they made life tougher for unauthorised migrants, they would leave of their own accord. This is of course the hostile environment, and it has been ramped extensively in the last two Immigration Acts, such that little landladies and landlords, as well as bank staff and Driver and Vehicle Licensing Agency workers, all have to work as immigration officers now. All sorts of Government Departments are tasked with helping the Home Office with its work by sharing information, which makes people wary of accessing public services.
When these measures were introduced, Opposition MPs warned that there would be all sorts of negative consequences and that errors would be made, meaning that people would be denied housing or would have their bank accounts closed when they should not have been. We warned that there was little to suggest that attempts at enforcing destitution and desperation would persuade people to leave, that its impact would lead to all sorts of injustices, and that it could actually make immigration enforcement harder, not easier, as undocumented migrants are forced into the hands of unscrupulous landlords and employers and made ever more difficult to trace.
Four and six years on from the relevant Immigration Acts, the Bill would see that same hostile environment impacting on many more people. We should not allow that to happen without first assessing whether the Government have achieved what they set out to achieve with the hostile environment measures, or whether the warnings from Opposition MPs have been proven correct. Has the hostile environment achieved anything, or has it caused relentless problems, as was forecast?
It appears that the Home Office cannot tell us what the impact of the hostile environment has been in contributing to its policy goals. As the National Audit Office said only yesterday, it is currently unable to assess whether these measures have had any meaningful impact on the likelihood that an individual will leave the UK voluntarily. In fact, the number of voluntary departures has reduced significantly since 2015—in 2015 there were an average of 1,200 such voluntary departures each month, and by 2019 that was down to 460.
That echoes previous findings by the chief inspector of borders and immigration in relation to the right to rent, which is probably the most dangerous of the hostile measures, in that it leaves private citizens with the job of doing immigration checks. He concluded that the scheme had yet to demonstrate its worth as a tool for encouraging immigration compliance, with the Home Office failing to co-ordinate, maximise or even measure effectively its use, while doing little to address stakeholder concerns.
I want to emphasise those concerns. Time and again, the Home Office has been warned about the discrimination in the housing market caused by the right to rent scheme. These warnings came from the Joint Council for the Welfare of Immigrants and from the Residential Landlords Association. It is not difficult to understand how this comes about. Let us imagine a close relative who happens to let properties. How easy would it be for them to assess immigration status? How easy would it be for them not to be influenced by the fact that if they made a mistake in that assessment they would face criminal prosecution, a fine and even imprisonment? It is blindingly obvious that there is a huge danger of discrimination. Repeated surveys and assessment by organisations such as JCWI and the Residential Landlords Association have shown that to be the case.
We now have a court case proceeding to the Supreme Court. Both in the High Court and in the Court of Appeal, the finding of fact was made that this scheme has in fact resulted in discrimination. The Home Office had success at the Court of Appeal stage, on the basis that on paper and in theory the scheme could be operated in a way that did not lead to discrimination, but that is not anything to celebrate. The scheme has been ruled lawful, but it has been found to operate in a discriminatory way.
This is a time when we really must have a thoughtful and comprehensive analysis of what has happened to immigration policy and the functioning of the hostile environment. That is exactly what Wendy Williams suggested in her Windrush lessons learned review, yet today we have been asked to extend the scope of that hostile environment without such a review taking place, and without any evidence being provided by the Home Office that the scheme is having an impact or contributing towards any of its policy goals.
Right to rent is the most scandalous of these problems, but it is causing all sorts of problems in other areas as well. For example, the independent chief inspector of borders and immigration found that something like 10% of the bank accounts that have been closed as part of the scheme related to people who had every right to be here. That is a huge number of people who have been caused problems by this way of doing things, and they are not only migrants; of course, several million UK citizens do not have a passport and therefore struggle sometimes to prove their right to access services and housing, and to go about their lawful business.
We need to know from the Minister what work is being done to assess the impact of the hostile environment. Rather than celebrating the finding that, in theory, the right to rent scheme could operate without discrimination, what work has been done to make sure that it operates without discrimination? If no such work has been done, or if it cannot be guaranteed that the scheme will operate without discrimination, when will it be repealed?
Holly Lynch
I support new clause 55 and I would have supported new clause 47 had it been moved. Both new clauses seek to safeguard EEA and Swiss nationals from the reality of the Home Office’s hostile environment policy.
We have cited examples of potential problems relating to the hostile environment throughout the sittings of this Bill Committee, but the Windrush lessons learned review highlighted the structural flaws that permeate the hostile environment approach. Instead of increasing the effectiveness of the Home Office machine, that approach has instead led to the hounding of those unable to prove their status, while simultaneously disregarding the legitimacy of independent cases.
Throughout the sittings of this Committee, we have been at pains to articulate our concerns that unless the European Union settlement scheme is 100% successful, we will never be in a position to know whether it has been or not. People will suddenly find themselves subject to the hostile environment.
Of the Windrush generation, it has been said:
“Paulette Wilson was detained in an immigration removal centre and warned that she faced removal after living in the UK for 50 years. She spent decades contributing to the UK—working for a time in this very House—yet she was treated like a second-class citizen.
Junior Green had been in the UK for more than 60 years, raising children and grandchildren here, but after a holiday to Jamaica he was refused re-entry despite holding a passport confirming his right to be in the UK. The injustice he suffered was compounded when, because of this action, he missed his mother’s funeral.
Lives were ruined and families were torn apart.”—[Official Report, 19 March 2020; Vol. 673, c. 1154.]
Those words, setting out those examples, are an extract from the Home Secretary’s statement to the House on presenting the Williams review in March. Yet we are still waiting for the necessary structural reforms to be made at the Home Office to give us any confidence that those who missed the EUSS deadline, because of reasons that should be looked upon favourably, will not be refused by one of the same decision makers who made misguided judgment calls on Windrush cases in the pursuit of Home Office targets.
In trying to mitigate the impact of the Windrush scandal, the Government launched a number of initiatives to go into communities and undertake almost a tidying-up exercise, to ensure that people had the paperwork they needed to protect them from such encounters with the Home Office in future. The Commonwealth citizens taskforce and the vulnerable persons team have delivered that work in communities, but we know that comparable preventive initiatives seeking to support those most at risk of not applying to the EUSS on time have had to stop work, due to the coronavirus. I hope the Minister might be able to update us on how those activities will be super-charged to make up for lost time, once it is safe for them to continue.
Kevin Foster
I would like to start by reassuring Opposition Members. We are making plans for what will be a major restart of engagement and promotion of the European settlement scheme in a face-to-face way. Work is still being done online. The latest statistics have been published and we always use those as an opportunity to promote the scheme and make it clear to people what their entitlement is. We still have a good flow of applications coming in even during the lockdown, which partly reflects the fact that the vast majority of people are applying by using an app on their phones. So strong work is being done there.
On the list of reasons for late applications being accepted, as I said on Tuesday it will be a non-exhaustive list because, as the hon. Member for Halifax rightly says, we cannot predict every single circumstance that would be a reasonable reason for being late. A common reason would be a child in care where the council did not apply, but the list will be non-exhaustive because no one could write all the reasons that we as individuals might find reasonable. So far, the scheme has operated by being flexible and pragmatic in working with those applying. That is why the grants of status are in the millions and the refusals in the hundreds.
I am grateful to hon. Members for their contributions. I share their desire to ensure that EEA citizens and their family members who are currently in the UK lawfully are not denied access to work, healthcare or anything to which they are currently entitled.
Gary Sambrook (Birmingham, Northfield) (Con)
Does the Minister share my frustration when Opposition Members talk about the hostile environment? It was in fact a former Labour Immigration Minister, the right hon. Member for Birmingham, Hodge Hill (Liam Byrne), who, in May 2007, introduced the new immigration regulations that created a hostile environment in this country.
Kevin Foster
I thank my hon. Friend for highlighting that point. Many of the enforcement mechanisms that we use originate from before 2010. There is a little amnesia among some of the people who were here and voted for them. It is right that there are protections in place around public welfare benefits and suchlike. That has not been particularly controversial for parties of all colours over the past 10 to 20 years. We need to consider carefully the lessons learned review. In the Wendy Williams report there is a 2009 case of someone who was unable to return to the United Kingdom, even though they had a status granted under the Immigration Act 1971 as someone who had been settled in the UK before 1 January 1973.
As with many of the amendments that we have debated, the new clause is at odds with our commitment to the British people to introduce a single global migration system. New clause 55 is unnecessary, unworkable, and risks being detrimental to the cohort in question. As we have been clear before, free movement is ending, and from 1 January 2021 EEA and non-EEA citizens will be treated equally. Under the new system, everyone will be required to obtain the correct immigration status, and we will clearly distinguish between those who are here lawfully and those who are not, regardless of their nationality. Allowing EEA citizens to rent accommodation or exempting them from other measures, even if they do not have lawful immigration status, would contradict the Government’s stated position. It would in practice result in different rules applying, depending on a person’s nationality. This would be inherently discriminatory, given that there would be no justifiable reason for them after the end of the transition period.
New clause 55 would also weaken the UK’s new points-based immigration system. The measures in question are designed to encourage individuals to comply with UK laws and rules, and they have all been approved by Parliament. In the future, once free movement has ended, it is right that these measures will apply on the basis of whether or not someone has lawful status, rather than on the basis of their nationality, although I appreciate that the wording would probably be done to bring this within the scope of the Bill.
EEA citizens are already subject to the universal eligibility checks carried out by employers, landlords and the NHS, as these checks apply to everyone regardless of nationality, including British citizens. I had to show my own passport recently, when renting a flat. Disapplying the measures for a certain group would increase the scope for illegal migration and place taxpayer-funded services at risk of abuse.
It is not clear how new clause 55 would actually work. To exempt an EEA citizen from an eligibility check, it would first be necessary to establish that they are part of the exempt cohort. It would not be possible for those carrying out the checks, including employers and landlords, to do this without checking everyone, as they do now, to establish eligibility. Alternatively, they would have to second-guess who was in a particular cohort, which brings the obvious risks of leading to potential discrimination and unfair treatment.
I recognise that the hon. Members for Cumbernauld, Kilsyth and Kirkintilloch East and for Halifax wish to ensure that EEA citizens and their family members who are currently resident in the UK are not adversely impacted by such measures. This is why we have set up the EU settlement scheme, making it free and easy to get UK immigration status and to enjoy the same rights as now. That is why I believe it would be unhelpful to accept the new clause, and the Government will not do so.
Stuart C. McDonald
I am grateful to the Minister for his response, but I feel he rather skirted around getting to the heart of the issue, and he knows full well that the new clause is as it is because of issues of scope. When he talked about how this would not work because there would have to be checks on whether an EU national was seeking to take advantage of this new clause, he spoke about the dangers of guessing whether an individual may or may not be an EU national. That is exactly the problem with the right to rent scheme at the moment, in that some landlords and landladies are guessing people’s nationality when they are approached with inquiries about accommodation. I am glad that he has recognised that there are dangers in the scheme that causes such judgments to be made. Yes, there are problems with the wording of the new clause because of scope, but I shall drop it for now and think about this again in advance of Report. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 57
Data protection
“(1) For the purpose of this section, a person (“P”) is defined as any person who, immediately before the commencement of Schedule 1, was—
(a) residing in the United Kingdom in accordance with the Immigration (European Economic Area) Regulations 2016;
(b) residing in the United Kingdom in accordance with a right conferred by or under any of the other instruments which is repealed by Schedule 1; or
(c) otherwise residing in the United Kingdom in accordance with any right derived from European Union law which continues, by virtue of section 4 of the EU Withdrawal Act 2018, to be recognised and available in domestic law after exit day.
(2) Regulations under section 4(1) may not be made until the Government has made provision to ensure that P has safe and confidential access to essential public services by ensuring the Secretary of State, or any other individual or body on his behalf, must not process personal data, by any means, for the purposes of immigration control or enforcement, where that personal data has been collected in the course of the data subject accessing or attempting to access the public services identified in subsection (3).
(3) For the purposes of subsection (2), the relevant public services are—
(a) primary and secondary healthcare services;
(b) primary and secondary education; and
(c) the reporting of a crime by P, where P is a witness to, or the victim of, the crime, any investigation or prosecution of it.
(4) The prohibitions contained in subsections (2) and (3) do not apply where the data subject has given his or her explicit and informed consent to the disclosure of the personal data, for the purposes of immigration enforcement.”—(Stuart C. McDonald.)
This new clause seeks to limit use of data gathered by key public services for immigration enforcement control or enforcement.
Brought up, and read the First time.
Stuart C. McDonald
I beg to move, That the clause be read a Second time.
I am pleased to speak to new clause 57, which brings us to another discrete example of the broader hostile environment and the ever-expanding powers of the Home Office to gather information and require information to be shared with it. The new clause requires that the Government take measures to prevent the sharing of data for immigration purposes where that data has been collected or provided in the course of a person accessing healthcare and education or reporting a crime.
The fear of information being shared with the Home Office can have a pernicious effect on people’s willingness to seek help or to access vital public services, and of course it can also lead to injustice, as we saw in the Windrush fiasco. This is about supporting the survivors of serious crimes—such as domestic abuse, human trafficking and other forms of exploitation—to report them to the police, seek healthcare and escape to safety.
Essentially, the new clause challenges us about our priorities. Is our priority to ensure that people can feel safe when reporting crimes, and that they do not have to be anxious when sending their children for education and do not have to be in two minds about seeking healthcare when that is required, or is our priority to provide the Home Office with endless additional powers to snoop and gather information on the off-chance that it might be able to detain and remove another few individuals, even if that comes at an incredibly hefty price, including injustices such as Windrush? I say absolutely clearly that my priority is protecting safe access to vital public services, and that is why I am moving new clause 57.
Kevin Foster
I thank the hon. Gentleman for his contribution. I do understand his concern that those who come to this country should have safe and confidential access to essential public services. However, new clause 57 would restrict the ability of the immigration authorities to use data that has been collected in particular circumstances for immigration enforcement purposes, as far as those who now benefit from freedom of movement are concerned. In so doing, it would maintain the status quo for those cohorts as far as the use of such data collection is concerned. However, the crucial difference is that they would now be subject to the same measures of immigration control as people from the rest of the world subject to the same restrictions.
The new clause would severely restrict the ability of the immigration authorities to take enforcement action against that cohort. It would thereby result in differential treatment in respect of a migrant whose data would be collected in the same way, but which would continue to be used for immigration enforcement purposes when deemed appropriate, as it is now. It would also weaken the effect of the immigration system, as we are concerned to encourage compliance with immigration laws as approved by Parliament. We welcome the contribution made to the United Kingdom by those who are lawfully present, but it must be in accordance with the laws and rules that have been set out and agreed. No cohort should be exempt from measures that are put in place to ensure compliance with those laws and rules.
On the prohibition on sharing data collected by the police in respect of witnesses or victims of crime, we believe that could lead to unintended consequences. It could prevent those with unresolved immigration status, particularly those who are vulnerable, from being brought into the immigration system, regularising their status and receiving necessary support. In some cases, such as where someone has been the victim of domestic abuse, it could prevent the Home Office from providing information to the police on known vulnerabilities or safeguarding concerns, thereby reducing a perpetrator’s ability to control or coerce their victim. Engagement with immigration enforcement could, for example, reveal previously undisclosed evidence of domestic abuse, which the Home Office could then pass on to the police, leading to the provision of support from a specialist domestic abuse team and potential access to a refuge. Data sharing in those circumstances would be proportionate and necessary, and in the best interests of the victim. Data sharing also enables the Home Office to trace missing families and protect children who may be at risk, working collaboratively with social services, the police and local authorities to ensure safeguarding actions are taken. We will always have due regard for the safety and best interests of any children.
The Home Office has robust safeguards and controls in place to ensure data are handled securely, lawfully, ethically and in accordance with relevant data protection regulations. It must have a legal basis for processing data, and comply with the General Data Protection Regulation and the Data Protection Act 2018 when doing so. Individuals’ rights are protected by the role of the Information Commissioner’s Office, the UK’s independent body which upholds information rights. I remind the Committee of the comments I made at one of the last Home Office oral questions that were held physically in the Chamber before the current arrangements. When asked, for example, about whether the details of those approaching the NHS for treatment for covid-19 would be passed on to immigration enforcement, we were clear that, purely for the purposes of immigration enforcement, that would not be something we would be doing. Our approach is proportionate.
Stuart C. McDonald
The purpose of the new clause, and what it says expressly, is that information cannot be shared with the Home Office for the purposes of immigration control or enforcement. To my mind, that does not mean, for example, stopping the police making inquiries with the Home Office about whether somebody has been the victim of domestic abuse. I therefore think that is a rather unfair interpretation of what we are proposing.
Kevin Foster
Part of how we respond to victims and others is sometimes to look to resolve their immigration status as well. I would say it is quite proportionate that two parts of the Home Office work together on the enforcement of the UK’s laws, subject to it being proportionate and appropriate to do so. I think people would find it strange if that did not occur.
For the reasons we have outlined, with the robust safeguards in place, and the proportionate and legitimate aim of ensuring our immigration laws are not completely undermined, the Government will not accept the new clause.
Stuart C. McDonald
I am grateful to the Minister for his response. I am not sure I agree with his reasoning on what the new clause would or would not allow, but I will take that away and give it further thought. In the meantime, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 60
Report on the status and social security entitlements of UK nationals in the EU member states
“(1) The Secretary of State must prepare and publish quarterly reports on the progress being made by EU member states on the migration status and social security entitlements of UK nationals in their countries.
(2) A Minister of the Crown must, not later than a month after the report has been laid before Parliament, make a motion in the House of Commons in relation to the report.”—(Kate Green.)
This new clause would require the Government to update the House of Commons on the progress being made by the EU27 countries on the implementation of protections for UK nationals in their countries on a quarterly basis.
Brought up, and read the First time.
Kate Green
I beg to move, That the clause be read a Second time.
The new clause would require the Government to report quarterly on the status and social security entitlements of UK nationals in EU member states. I am grateful to British in Europe for its comprehensive briefing in preparation for this debate.
Implementation in the EU of the citizens’ rights part of the withdrawal agreement is still in its early stages, with few countries having final or even draft legislation in place. Application processes have begun in only a handful of countries. The situation has understandably been exacerbated by delays caused by the covid crisis. However, that creates uncertainty for thousands of UK families and individuals in the EU, who are awaiting the outcome of applications to be allowed to stay in countries in which they have made their home that have opted for an application or constitutive system.
The European Commission’s promised guidance note, which was eventually published on 12 May, is helpful in clarifying some of the uncertainties, but outstanding issues include how dual UK-EU nationals and other citizens who do not rely on the withdrawal agreement for residence rights can evidence their rights; how the withdrawal agreement applies to UK citizens who are eligible for protection under the withdrawal agreement in their own right and for protection under EU law as family members of EU citizens; and whether UK citizens eligible for protection under the withdrawal agreement, which of course confers no right of free movement to third EU countries, can obtain the rights at least to some mobility enjoyed by other third-country nationals, either in addition to their withdrawal agreement rights or by waiving that protection and opting to register as non-withdrawal agreement third-country nationals.
In addition, the common format of the card evidencing withdrawal agreement rights, mandated by the Commission for UK nationals in the EU, fails to distinguish between permanent residence and ordinary residence. The conditions for lawful residence under EU law, which applies during the transition period, and under the withdrawal agreement for those who have not yet acquired permanent residence or had permanent residence confirmed, include requirements to be employed or self-employed, or economically self-sufficient with comprehensive health insurance.
Those conditions are applied strictly in many EU countries. The lockdown restrictions of the covid crisis, however, have caused people to lose their jobs or much of their income, and some will be unable to obtain comprehensive health insurance because of exclusions—students studying abroad and recent graduates are at particular risk.
We know the Government do not intend to extend the transition period. Will the Minister tell us whether the Government intend to ask EU member states to grant extensions to time limits for securing rights under the withdrawal agreement, which people have been unable to comply with because of covid restrictions on travel or the closure of administrative offices? That applies not only to residence rights across the EU, but to citizenship applications where 31 December this year is a cut-off date, such as is the case in Germany or Italy.
With much still unresolved, British in Europe and the3million have suggested that they should attend the specialised committee on citizens’ rights of the joint committee on implementation of the withdrawal agreement established—
The Chair
Order. The new clause is about the Government reporting to the House of Commons. I understand the points that the hon. Lady is making, but if she would relate her comments to the reporting, I would be grateful.
Kate Green
Of course, Mr Stringer; that is very helpful guidance. These are matters on which I hope the Minister may be able to give some immediate answers about the Government’s current actions, but obviously the report to the House would be able to demonstrate the effect on UK nationals in the EU of our withdrawal from the European Union, which I think the public as a whole will be concerned about. As I go through further remarks about possible effects, I will naturally seek to come back to the point that I seek the approval of the Committee on regular reports on these matters being made to the House, including on the suggestion by British in Europe and the3million that they should be able to attend the specialist committee on citizens’ rights of the Withdrawal Agreement Joint Committee.
There are other uncertainties for UK nationals who are not covered by the withdrawal agreement. Jeremy Morgan of British in Europe agreed in our oral evidence session last week that UK nationals resident in the UK but who own second properties in the European Union will potentially now be caught by the 90 out of 180 days rule under the Schengen arrangements. It is not clear whether the UK Government have given up on negotiating up to 180-day stays for UK citizens visiting the European Union, so it would be useful to have regular reports to the House on whether negotiations are continuing, or on the impact if they are not.
The concerns I have outlined so far affect UK nationals who already live, work or own property in the European Union, but there will also be concerns about UK nationals moving to the EU in the future after the end of the transition period. In our evidence session on 9 June, Jeremy Morgan of British in Europe drew attention to whether UK nationals will be able to buy property in certain EU countries after the transition, which again I think would be of interest to the House and the wider public, and future reports on that would be welcome.
On Tuesday, we debated the implications of clause 5 and the draft social security arrangements published by the UK and the EU. I am grateful to the Minister for the letter he sent me late yesterday evening, which I think has been copied to all Committee members, in response to a number of issues I raised in that debate. The analogy drawn in the letter with other treaties between the UK and third countries simply exposes the more limited protection that those treaties provide, and that such treaties seem to be the model for our future arrangements with the European Union—for example, on aggregating contributions, sharing information or healthcare. If those are to be a model for future coverage for UK nationals in the EU, again I think that is something that should be drawn regularly to the attention of the House.
The draft social security agreement attached to the free trade agreement published in February makes it clear that the Government envisage that short-term visitors would be covered, but what of those who go to work or make their home in the EU in future? The Minister’s letter says that contributory employment and support allowance will be available for four weeks. I note in passing that a decreasing number of people get contributory ESA anyway, and that that four-week grace period will be of no use to disabled people moving abroad, or even visiting for five, six or seven weeks. I think the House would like to be aware of the implications of new arrangements for disabled people.
Similarly, on healthcare, the Minister’s letter may try to gloss over this, but for those who are not going to be covered by the withdrawal agreement, the S2 will be scrapped, so they cannot in future go abroad and have treatment paid for in the EU, even if the NHS cannot provide that treatment. Importantly, we will lose the mutual recognition of prescriptions, which could have quite significant consequences for some UK nationals.
My assessment is that, for those UK nationals moving to the European Union after the transition, the unspoken thrust of the letter sent by the Minister last night is a levelling down of protections and rights, which I feel the House should want to track on a regular basis. I recognise that a number of bilateral reciprocal arrangements—some going back many years—between the UK and certain member states may fill in some of the gaps in social security co-ordination arrangements in the future, but it is unclear whether either country will regard them as remaining effective. In any event, many of the arrangements offer only very limited protection. Again, I think it would be useful for the House to be updated on the standing of, and application of, these bilateral agreements.
If no agreement is secured with the European Union and the Minister hopes that instead a series of new bilateral arrangements might be negotiated between the UK and each individual member state, there may be a fear in those member states that that could impinge on the co-ordination arrangements that apply in relation to other member states, and that fall within the scope of European Union co-ordination regulations. It would be useful for the House to have regular updates on that.
The picture that I have painted suggests at best confusion, and at worst the prospect of less favourable protections for UK citizens in the European Union—those already there, and those who move to European Union countries in future. The UK Government have an obligation to look after the welfare of their citizens wherever they are located. Quarterly reporting to Parliament will make it possible to conduct scrutiny of the way in which the Government meet the obligation.
Kevin Foster
I thank the hon. Member for Stretford and Urmston for moving new clause 60, which is well intentioned but ultimately unnecessary. The Government are monitoring closely the implementation of the withdrawal agreement for UK nationals in the EU and information on citizens’ rights in each EU member state is already provided by the Government on our “Living in” guides on gov.uk.
Having ratified the withdrawal agreement and legislated for it domestically in the EU (Withdrawal Agreement) Act 2020 in January, the Government are now closely monitoring the progress of member state implementation during the transition period, via our network of embassies, high commissions and consulates across Europe. We are committed to providing UK nationals overseas with clear and appropriate information and are working with member states to ensure that any introduction of, or changes to, administrative procedures that are in line with the withdrawal agreement will be communicated to resident UK nationals.
The EU’s social security co-ordination rules will continue to apply in full to individuals in full scope of the withdrawal agreement, including UK nationals living and/or working in the EU, and EEA citizens living and/or working in the UK by the end of the transition period. Those rights are protected for as long as they remain in full scope of the withdrawal agreement.
Information is available via our “Living in” guides on gov.uk, and UK nationals should sign up for the latest information on the actions they need to take. The “Living in Europe” guide, which is also on gov.uk, provides further information on citizens’ rights to UK nationals in the EU.
Beyond that, we also have a governance structure established by the withdrawal agreement to monitor the correct implementation and application of the withdrawal agreement. The Withdrawal Agreement Joint Committee, chaired by my right hon. Friend the Chancellor of the Duchy of Lancaster, has already met twice, on 30 March and 12 June.
The Specialised Committee on Citizens’ Rights, co-chaired by UK and EU officials, met on 20 May. As set out in the joint statement following the meeting, both the UK and the EU exchanged updates on the implementation of the citizens’ rights part of the withdrawal agreement and discussed preparatory work for future meetings. The Government and European Commission share the objective of ensuring the correct and timely implementation of the withdrawal agreement to provide certainty to UK nationals in the EU and EU citizens in the UK. The Committee will therefore meet regularly during the transition period and thereafter.
Finally, I reassure the Committee that we are calling on the European Commission and all member states to ensure timely implementation and clear communications to UK nationals in the EU, in line with what has been agreed in the withdrawal agreement.
I will briefly cover some of the points that the hon. Member for Stretford and Urmston made. The Government are continuing their negotiations with a view to a future partnership. We have already looked to extend our generous visitor visa provisions to EEA nationals from 1 January, on the same basis as we have to many of our traditional international friends and allies, such as Canada, the United States and Japan. We continue in discussions to seek a productive partnership. However, I am sure that the hon. Lady will appreciate that it is not possible for us, in domestic UK immigration measures, to legislate for what other nations should offer the United Kingdom.
On that basis, I ask the hon. Lady to withdraw her new clause.
Kate Green
I feel that the Minister’s response has rather missed some of the points that I was trying to make. In seeking a report to Parliament, I am asking for something a little bit different from information to UK nationals about what they should be doing at any given time, whether or not they moved to the EU before or after the end of transition. Intergovernmental discussions—or discussions between the UK Government and the European Union—taking place in the joint committee are very important, but they are not a parliamentary event that ensures full public information and scrutiny of those discussions. My point on the bilateral treaties was also about thinking of protections for UK nationals, which, if I may say so, are in the gift of the UK Government. The signs are worrying when looking at the Government’s draft agreement, published earlier this year.
I will not press the new clause to a vote, but I gently suggest to the Minister that keeping the House updated on such matters is not only important to hon. Members, but of considerable importance to our constituents. We have found at times that Ministers are quite tardy in coming to the House to inform us about the progress of negotiations with the European Union, at least in relation to these important matters. I hope that the Minister will use his good offices to encourage his colleagues to keep us as well informed as possible. I beg to ask leave to withdraw the motion.
New clause, by leave, withdrawn.
Question proposed, That the Chair do report the Bill to the House.
Kevin Foster
On a point of order, Mr Stringer. I thought it appropriate to thank you and Sir Edward for your very effective chairmanships and for keeping us all in order—even me, with the interesting slip that I managed to make earlier today. I hope that it did not cause too much hilarity in the Committee.
Kevin Foster
I am sure it did. I should also thank the shadow Minister and the SNP spokesperson for the spirit in which we have debated the Bill, put on the record a number of important points and explored a number of issues of concern to a range of constituents. I am sure that hon. Members would want me to express gratitude to the Clerk, who has ensured that the Committee was conducted professionally and well. I also thank my officials at the Home Office and those at the Department for Work and Pensions who have supported me both by preparing for the Committee and by preparing briefings on a range of amendments.
I can imagine how you will rule on this point of order, Mr Stringer—probably in line with every other point of order that has ever been raised in the five years that I have been here—but I wanted to put those few comments on the record as we come to our conclusion.
Holly Lynch
On a point of order, Mr Stinger. I echo the Minister’s sentiments—I am grateful for the points that he just made. I thank my Committee colleagues, not least the hon. Member for Stretford and Urmston—I am eternally grateful for her support on a personal basis; her experience in this subject area is second to none—the hon. Members for Kingston upon Hull North and Coventry North West, and our Whip, the hon. Member for Ogmore, for their support. I also thank you, Mr Stringer.
I echo the Minister’s sentiments: the Clerk has been incredibly helpful to Members across the Committee and her efforts have been nothing short of herculean, often responding to emails in the early hours of the morning. We are eternally grateful to her for that. I also put on the record my thanks to my staff members, Jamie Welham and Charlotte Butterick, as well as to Heather Staff in the office of my hon. Friend the Member for Stretford and Urmston.
Putting politics and the subject matter to one side, we can always collectively breathe a sigh of relief when the intensity and pace of any Bill Committee comes to an end. I very much look forward to returning to some of these issues on Report and Third Reading.
The Chair
That was outrageously out of order. Thank you for the kind comments.
Bill accordingly to be reported, without amendment.
Trade Bill (Fourth sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Trade Bill 2019-21 View all Trade Bill 2019-21 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Committee divided: - Ayes: 6 / Noes: 10 - Question accordingly negatived.
The Chair
We now begin line-by-line consideration of the Bill. The selection list for today’s sitting is available in the room. It may be helpful if I note that, because no one is present to pass the Hansard reporters notes, there is an email address, which is hansardnotes@parliament.uk. To keep any great orations in their most accurate form in the record, you should email your speaking notes to that address.
Clause 1
Implementation of the Agreement on Government Procurement
Stewart Hosie (Dundee East) (SNP)
I beg to move amendment 29, in clause 1, page 1, line 4, leave out “may” and insert “must”.
It is a pleasure to serve under your chairmanship on this important Bill, Sir Graham. If I may, I will crave your indulgence for a few minutes to make some introductory remarks about the Bill before I move on to amendment 29. First, I recognise the difficulty the Minister has in the absence of officials. A number of the amendments I have tabled are technical, so it is not my intention—I hope this is helpful to you, Sir Graham—to press to a Division any amendments or new clauses until we hear detailed responses from the Government, probably towards the end of these Committee proceedings next week. Of course, I reserve the right to come back to these themes on Report, if and when we reach that stage.
Right now, there are three main threats to trade, as I have said before. The first is self-evidently the covid crisis. The World Trade Organisation has suggested there will be a fall in global trade of between 13% and 32%, which is larger than the collapse in trade during the financial crisis. The second threat is the impact of Brexit. We have all seen many of the assessments, which suggest a significant fall in UK global trade. The third threat is a more systemic problem, from the continued implementation of new, and the continuation of existing, trade restriction measures, mainly tariffs—about $1.5 trillion or $1.6 trillion-worth around the world. I am not confident that any of those problems will be resolved any time soon, not least because there is no cure or vaccine for covid; because of the well-publicised difficulties with the Brexit negotiations; and because of the failure to appoint a functioning appellate body in the WTO.
However, the Bill does address a number of other matters. It implements procurement obligations arising from membership of the GPA—the agreement on government procurement, it creates the Trade Remedies Authority and it gives Her Majesty’s Revenue and Customs and others powers to collect and share data. It also allows the Government to modify retained direct principal EU legislation, and it appears to me that, other than a few minor restrictions, those modifications are almost without limit.
The Bill also includes descriptions of what an international trade agreement is and says that it may be
“an international agreement that mainly relates to trade, other than a free trade agreement”.
But, as we know, modern agreements are little to do with quotas and tariffs, and as much to do with standards, conformity, dispute resolution and food safety, for example. Many people are therefore uncomfortable that the Government may be able to modify existing legislation, even in roll-over agreements, in the way proposed. I am sure we will come to all those matters over the next few days.
Amendment 29 does not appear to be particularly important, but it is, because it would require the relevant authority to make the regulations referred to. The reason is as follows. The UK is already party to the GPA, and requiring the relevant authority to make regulations to implement the GPA would ensure continuity upon withdrawal from the EU. Under clause 1(1), the Bill grants an appropriate authority the power to make regulations that it “considers appropriate” to implement the GPA. If the intention is to ensure implementation of the GPA 1994, the authority should be required to make such provisions. While it could be helpful to allow the relevant authority discretion—that is facilitated by the current wording—to make regulations that it considers appropriate to implement the GPA to ensure continued alignment with EU requirements, if the intention is actually to implement the GPA in order to ensure continued alignment, the relevant authority must make the necessary regulations. I commend the amendment to the Committee.
Bill Esterson (Sefton Central) (Lab)
It is a pleasure to serve under your chairmanship, Sir Graham. The hon. Member for Dundee East has made some important observations about our proceedings, which I agree with. We may take a slightly different view on pressing our amendments, and we will come to that in due course. I make no promise; it will depend on the nature of the Minister’s answers, his ability to garner information and what he says.
The hon. Member rightly drew attention to the impact of the covid-19 crisis on trade. He also drew attention to the importance of discussing trade, and indeed legislating for international trade, at this time in recovering our economy and the prosperity of our people. He referred to the estimated fall in the economy of between 13% and 32%. He is right that that fall is far larger than in the global financial crisis—it is the largest in history, over all the time in which such figures have been recorded. It is therefore essential that, where we can, we get what we are doing as accurate as possible.
Following the hon. Member’s speech, I now have a much better understanding of the intention behind the amendment. I am confident that he is trying to do what he has set out. The Labour party, as we made clear on Second Reading, fully support the accession to the GPA. If that is the Government’s intention, it seems entirely right that they should make sure they do so, and it is odd that they have not already committed to that in the Bill.
Gareth Thomas (Harrow West) (Lab/Co-op)
Might one of the other potential benefits of the amendment be that it helps to create a voluntary pressure on the implementing authority to support businesses to take advantage of the procurement opportunities that Ministers have said the GPA offers? If there is a slightly more lackadaisical approach, as the hon. Member for Dundee East appears to suggest, the incentive for Ministers to actually find ways to support businesses to take advantage of those opportunities may not be there in quite the same form.
Bill Esterson
My hon. Friend makes a good point. We want businesses to take advantage of the opportunities available in procurement. Having the Government make the strength of that case through how they legislate is an important way of achieving that goal. It should be clearly set out that the procurement obligations that we currently have through our EU membership have passed into UK law via EU retained legislation, and the Government should make clear commitments to their implementation. The hon. Member for Dundee East said that, if the Government intend to implement the GPA, they should say so, to ensure the continuity that my hon. Friend the Member for Harrow West rightly referred to and to make sure that alignment in the regulations is in place straightaway.
Gareth Thomas
Perhaps I can be a little clearer. My concern is that, under successive Governments the opportunity, the opportunity for local organisations to take advantage of public procurement opportunities has not been given as much assistance or priority as it might have been by both central Government and—on occasion, sadly—local government. Perhaps the amendment might help to create the pressure for central Government, in particular, to take a bit more seriously their responsibility to make that happen.
Bill Esterson
My hon. Friend is quite right: we need to make more of the opportunities available in procurement, and this kind of amendment is a way of delivering on that agenda.
I am pleased that the hon. Member for Dundee East has tabled the amendment. I note his comments about waiting, to ensure that the Minister is able to respond in full and in the event that he needs additional advice. I am happy to support the hon. Member in principle, on the basis of waiting to hear what the Minister’s reply might be.
The Minister for Trade Policy (Greg Hands)
Sir Graham, first of all, it is a pleasure to serve under your chairmanship, and I welcome everyone to the Committee. I think the previous Bill Committee I served on was for the previous gestation of this Bill, in early 2018, so I know from past experience that we have interesting discussions ahead in the coming days on this important legislation.
As the Secretary of State and I made clear on Second Reading, the Bill is about ensuring continuity and providing certainty for businesses and consumers as the UK strikes out once more as an independent trading nation. We will use the freedom that we have gained through our departure from the EU to negotiate trade agreements with new partners, but we also remain committed to seeking continuity in our trade relationships.
I will turn to the amendment in just a moment, but let me be absolutely clear. I have not spoken about the Bill since Second Reading, and I was genuinely surprised that the Opposition parties opposed the principle of it. The Bill consists entirely of wholly sensible proposals to secure the continuity of more than 40 trade agreements and our continued membership of the World Trade Organisation’s government procurement agreement, and to allow UK trade defences.
I hope that the Opposition parties will reconsider their principled opposition to the Bill after all the scrutiny that we are about to have and on Report, and will consider voting for it on Third Reading.
Gareth Thomas
I am sure we would be happy to reconsider if the Minister committed at this point to being sympathetic to some of the amendments we have tabled—for example, on extending scrutiny opportunities and extending the Bill to cover future free trade agreements. I will look sympathetically at his request if he will look sympathetically at ours.
Greg Hands
I thank the hon. Gentleman. He is an old sparring partner of mine over different years and different Sessions. It would be impossible for me to commit to that today, because there is still the opportunity, as I understand it, for further amendments to be tabled, so it would be impossible for me to either rule in or out opposing all future amendments.
I want to say a quick word on the practicalities for Members who are on their first Bill Committee. Due to the social distancing requirements, as you mentioned, Sir Graham, there is no one to pass notes to the Hansard reporter. Normally, the Minister also has with him or her a small group of officials, but they are unable to be with us today, also due to social distancing. On occasion, therefore, if a Member has an extremely technical question—I am just trying to think of a good example; perhaps it would be something about diagonal accumulation rules in the EU-Faroes agreement—it may be necessary for me to write to them. However, I commit that if I do write to a Member, I will of course copy the information to all members of the Committee.
Gareth Thomas
That may be one of the issues on which the Minister needs to write to the Committee. He will know that there have been long-standing concerns about British companies’ ability to get access to public procurement markets in an honest way, in, for example, China and Russia, given the levels of support that the Governments there often give to their own companies. The market is not necessarily an honest and level playing field. I understand that China and Russia are in the process of acceding to the GPA, but it might be helpful at some stage for the Committee to understand how far along the journey to accession those two countries are. They are potentially critical for British companies that want to get into the procurement markets there.
Greg Hands
I thank the hon. Gentleman for that very good question. I do not have current information about how far down that process China and Russia may be. Of course, both those countries are members of the WTO. It would, ordinarily, not be unnatural for them to seek membership of the GPA, but, of course, the GPA does not include all members of the WTO—it has 20 members, and they are typically western liberal democracies. Australia is the most recent to join. I imagine that China and Russia joining would become a significant issue on the international stage, and at the WTO.
If the UK were not an independent member of the GPA in its own right—or if it were to fall out—our ability to influence accessions would be very much diminished. That is another good reason to be a member of the GPA—so that we can exert UK influence on the global stage to make sure that accessions are in the interests of the wider world community, as well as UK businesses and taxpayers.
The reciprocal nature of the agreement supports the public sector to get the best value for every taxpayer pound that it spends. Those benefits will increase each time another party joins. Each new party that joins increases the procurement opportunities available to UK businesses and public sector bodies.
Turning to amendment 29, the powers in clause 1 will enable us to give effect to our international obligations on joining the GPA as an independent party, and to make changes as necessary in response to specific circumstances that may arise from time to time after our accession. Examples might be changes to reflect, and arrange for, the accession of other parties to the GPA—the hon. Member for Harrow West mentioned a couple of possible future members—or to make the necessary adjustments where parties leave the agreement. The ability to make these changes is essential to allow us to keep in line, and up to date, with our international obligations.
Gareth Thomas
The Minister will understand that there have been concerns about acceding to the GPA and doing so at a time when we have exited the European Union. One concern relates to how low the threshold is for other GPA members to potentially get access to central Government contracts, thereby potentially putting at a disadvantage British companies wanting to win those contracts. What reassurance can he offer British companies that are potentially beginning to seek out opportunities to win central Government contracts that they will not lose out against other countries’ companies?
Greg Hands
It is a good question, but the assurance I would give is that our intention is to join the GPA with substantially the same arrangements as we currently have as members of the EU. That will give the assurance of continuity as we move forward.
The power in the clause is appropriately drafted to ensure that our international obligations will be fully complied with, including by making changes to national law, where appropriate, using the power in this clause. The use of the power is expressed in the usual way. I say to the hon. Member for Dundee East that we have expressed these powers using quite a usual formulation, allowing authorities to make regulations in the circumstances set out. If the wording were to be changed from “may” to “must”, as proposed in the amendment and as he suggests, changes would need to be made in all circumstances covered by clause 1. There would, however, be certain circumstances where it would not be appropriate or necessary for regulations to be made. For example, a dispute with another party might be resolved without the need to make any changes at all to domestic regulations. Likewise, not all modifications of another party’s appendix I will require changes to domestic law. On that basis, I ask the him to withdraw the amendment.
Stewart Hosie
I make a number of observations. The Minister said that the Bill was about continuity. If I take that at face value, as I do, it strengthens the case for the relevant authority being required to make the necessary regulatory changes. He also said that the flexibility allows the relevant authority to respond to specific circumstances, but if those change, there are lots of reasons why it should—absolutely must—make the necessary regulations to respond to those changes. The final argument the Minister made does not hold water:
“An appropriate authority”—
must—
“by regulations make such provision as the authority considers appropriate”.
So if a circumstance stands changed where the relevant authority did not deem it appropriate to make a change, it would not be required to do so.
The hon. Member for Harrow West said that the amendment might encourage more businesses to take advantage of procurement opportunity. It would not do so directly, but, certainly, if the relevant authorities were required to do something, it might act as a nudge measure to encourage businesses to look at those procurement opportunities.
I will do what I said at the beginning: I will not seek to press these matters to a Division now, but I will ponder on the Minister’s answer. I am sure he will consult others and ponder further, and we may have a similar debate on Third Reading. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Bill Esterson
I beg to move amendment 24, in clause 1, page 1, line 16, at end insert—
“(1A) No regulations under subsection (1) may be made until the Secretary of State has entered into negotiations with other parties to the GPA with the objective of enabling greater labour market interventions and compliance with ILO standards in any UK procurement contract to which the GPA applies, and
(a) the Secretary of State has made a statement to the House of Commons that the objective has been achieved either in full or in part, or
(b) the Secretary of State has made a statement to the House of Commons that the objective has not been achieved.”
The Chair
With this it will be convenient to discuss the following:
Amendment 25, in clause 1, page 1, line 16, at end insert—
“(1A) No regulations under subsection (1) may be made until the Secretary of State has entered into negotiations with other parties to the GPA with the objective of securing greater environmental exceptions and carbon considerations in any UK procurement contract to which the GPA applies, and
(a) the Secretary of State has made a statement to the House of Commons that the objective has been achieved either in full or in part, or
(b) the Secretary of State has made a statement to the House of Commons that the objective has not been achieved.”
Amendment 26, in clause 1, page 1, line 16, at end insert—
“(1A) No regulations under subsection (1) may be made until the Secretary of State has entered into negotiations with other parties to the GPA with the objective of securing greater scope for UK small and medium-sized enterprises in any UK procurement contract to which the GPA applies, and
(a) the Secretary of State has made a statement to the House of Commons that the objective has been achieved either in full or in part, or
(b) the Secretary of State has made a statement to the House of Commons that the objective has not been achieved.”
Amendment 27, in clause 1, page 1, line 16, at end insert—
“(1A) No regulations under subsection (1) may be made until the Secretary of State has entered into negotiations with other parties to the GPA with the objective of securing improvements to public health as a consequence of any UK procurement contract to which the GPA applies, and
(a) the Secretary of State has made a statement to the House of Commons that the objective has been achieved either in full or in part, or
(b) the Secretary of State has made a statement to the House of Commons that the objective has not been achieved.”
Bill Esterson
In the debate we have just concluded, the Minister referred to matters that fall under the set of amendments we are now considering and the reciprocal nature of the benefits of the GPA. These amendments relate to the impacts on those companies tendering for UK procurement contracts and the way they might be addressed through the annexes to the GPA that we might seek once we have acceded to that body. The amendments relate to the desire for procurement to look beyond short-term pricing—a problem that has bedevilled procurement—and I will give some examples a little later. All four amendments pick up elements of the points made to us by Rosa Crawford in her oral evidence on Tuesday about the desirability of price value or life cycle costing in procurement.
In his remarks just now, the Minister said that we should have the same arrangement we have with the EU, and we agree with the accession to the GPA for that reason. But if we are to have the same arrangement that we have as members of the EU, there is also the significant matter of retained EU law, which needs to continue if that statement is to hold. In this case, it is the Public Contracts Regulations 2015, which will run out on 31 December 2020. As my hon. Friend the Member for Harrow West has said, it is extremely important that we maintain the strongest possible procurement system for companies in this country, and there are other reasons referred to here to do with international and domestic labour rights.
Gareth Thomas
The House of Commons Library brief is very helpful in this regard, because it makes clear that
“the GPA will limit the ability of UK public sector buyers to choose to buy only from”
British or local companies, for example. It is surely an extraordinary situation for Ministers not to want to do more to help British companies or, indeed, to help local councils support local businesses to get access to procurement contracts.
Bill Esterson
Yes, and that is why it is important that we maintain as a minimum not just the GPA regulations but the Public Contract Regulations 2015, that they are renewed and that we look to build on them, which is the reason for the amendments. Ministers—including, on occasion, the Minister present—have indicated their support for British business, and the Prime Minister on numerous occasions has encouraged us to buy British. I imagine that the logical extension of that statement is that he wants Government procurement departments to buy British as well, and I will come to other examples of what Ministers have said.
This is about having the strongest possible procurement system. That is why our amendments call for the Government to pursue with GPA partners the potential for the inclusion of labour standards, environmental standards, support for small and medium-sized businesses and consideration of public health consequences in our annexes to the GPA. I will define what we mean by that.
In amendment 24, we refer to
“labour market interventions and compliance with ILO standards”.
That means we want to ensure that companies that fulfil their obligations to their workers, treat workers well and meet their commitments to working with trade unions in a productive manner are not undercut by companies that do not. This is about rewarding responsible businesses, as well as supporting workers.
Labour market interventions in procurement allow for minimum wages and living wages. They also allow for maximum wages, although that is rarely used. They allow for legislation to prevent discrimination on the grounds of age, sex and religion; legislation to support or regulate trade unions; a maximum working week; legislation on health and safety; behavioural nudges, which are making an appearance for a second time in our deliberations, to encourage workers to take up pensions, for example; and Government provision of education and training schemes to enhance skills and encourage the recruitment of apprentices.
Charlotte Nichols (Warrington North) (Lab)
I just want to come in on the point about labour market interventions. Local government procurement is a good example of where there is a need for something sectoral and robust. For example, there is a national agreement for the engineering construction industry, known as NAECI, for which the minimum rate of pay is £18.63 an hour. If a local council was to procure even on a real living wage, rather than the Government’s living wage, the minimum rate of pay would be about 60% of that. In local government and central Government procurement, companies that are trying to do the right thing and are abiding by sectoral agreements are being undercut. That is why it is very important that we get that right in this legislation.
Bill Esterson
I thank my hon. Friend for that excellent example of why ILO obligations matter. She is absolutely right that it is about paying decent wages, but of course one of the consequences of having such provisions in public procurement is that not only the workers and their families, but communities benefit due to greater spending power in local economics. This is an economic measure as well as a social measure. That is why it is right that progressive procurement considers it.
Gareth Thomas
I do not think my hon. Friend has the great benefit of being supported by the Co-op party. One of the ways in which I am unique is that I am from the co-operative tradition in the Labour movement, and therefore have had a lot of contact with social enterprises and co-operatives. A social enterprise that stands out is Hackney Community Transport, which has won contracts from a central Government organisation—in this case, Transport for London. It has done so while providing employment for offenders who are seeking to get back into the work environment, and offering discounted minibus hire to local community groups. The risk is that, if there is not proper support and flexibility in the procurement regulations, such initiatives will be stifled. Hackney Community Transport is a big social enterprise, but there are many similar community transport organisations that do not have its size and depth, and if this amendment is not passed, they risk not being able to access public procurement opportunities.
Bill Esterson
I am grateful to my hon. Friend. He said that smaller organisations find it difficult to win contracts, and that is why the Government have to use their authority and make sure the regulations are in place. Amendment 26 is about small and medium-sized enterprises, and it should absolutely cover social enterprises too, many of which are SMEs. It is essential that such things are in regulations to support the sorts of enterprises that my hon. Friend describes, and to pursue socially valuable activities. I will come to the Public Services (Social Value) Act 2012 a bit later, which was initiated by a former Conservative MP, Chris White, and passed with the support of the coalition Government. It gives more detail in this area.
Similar descriptions are applied in amendment 25, which mentions,
“environmental exceptions and carbon considerations”.
The current UK minimum standards take into account energy and water use, carbon footprint, resource efficiency, and life-cycle costs in order to set minimum standards of sustainability for Government purchases. Our standards need to be protected, both in terms of maintaining these procurement standards and of ensuring that our schedules at the GPA remain up to date with the action needed to address the climate crisis. If we allow the public procurement regulations to lapse, we will not include such provisions as those I have just described, which are picked up in amendment 25. I know that Ministers take this seriously because the point was made in oral questions just this morning. I cannot remember whether it was the Minister of State or the Secretary of State who quoted the Government’s attitude towards the climate crisis and the achievement of net zero, but it certainly was quoted by Ministers this morning.
Bill Esterson
It was you. I knew you wouldn’t sit there quietly.
I am glad that the Minister did mention it, because he is absolutely right, but without the support of the regulations, it is that much harder. The climate crisis will not be addressed unless there is intervention—and substantial intervention. Public procurement policy through the GPA is one very important tool in the toolbox in achieving those objectives.
Gareth Thomas
On the climate crisis, I wonder whether I can pray in aid the example of Baywind Energy, which is a comparatively famous wind energy co-operative in Cumbria. For a long period of time, the energy that it supplied and could have supplied to local authorities would have been more expensive than that from its nearby neighbour, the great Sellafield nuclear plant. Had the local authority wanted to source its energy needs from Baywind without the type of measure that my hon. Friend is suggesting be locked into law, Cumbria Council might be at risk, in a modern situation, of not feeling able to take advantage of the Baywind offer, and would, perhaps, have had to accept the lowest supplier of energy costs. That would have meant that a substantial local business helping to tackle the climate emergency did not benefit.
Bill Esterson
I thank my hon. Friend for providing an excellent example in the renewable energy sector of just how important it is that we do as we say and that we are strongly committed through Government action—at national, local and devolved level—to tackling the climate crisis.
Charlotte Nichols
Just to pick up on that point, it is important to consider employment multipliers in public procurement around renewables. I am concerned that as the balance of renewables in our energy mix has increased substantially over the past 10 years, which is fantastic news for the UK’s commitment to decarbonisation, the number of green jobs has actually significantly reduced. The Office for National Statistics estimates that about 40,000 green jobs have been lost during a period in which the renewable output in our energy mix trebled. A big part of that is procurement, because as we are investing more in wind technology, a lot of this is coming in from Korea, Denmark and Holland. Meanwhile, companies such as Appledore and BiFab, whose shipyards manufacture things such as jackets for wind turbines, are lying empty because the Government are not procuring them from these places. I just really want to pick up on my hon. Friend’s point about the need to lock in this legislation going forward to ensure that, as we meet our climate change objectives, we are also meeting our economic and jobs objectives, too.
Bill Esterson
I thank my hon. Friend. That is absolutely right, and there are a number of good examples. Unfortunately, the evidence is there that we did not adopt a life cycle-costing approach or a price-value ratio for procurement decisions, instead basing them on narrow, short-term pricing. My hon. Friend the Member for Harrow West made a similar point but, fortunately, life-cycle costing was chosen in his example from Cumbria. This is one of the changes. Yes, the amendments are about ensuring the continuity of existing arrangements, but in the end they are about improving our procurement and improving the social, environmental and labour outcomes of these matters, to the benefit of society as a whole.
Gareth Thomas
The Soil Association gives another example that perhaps supports my hon. Friend’s point. It notes the considerable amount of processed food that we eat in the UK, and how that has contributed to our obesity crisis. It says that one way to tackle that obesity crisis is to try to stimulate demand for British, locally produced fresh fruit and vegetables, particularly by trying to get public bodies such as hospitals and schools to source more of the fruit and veg that they need from domestic producers. Would that not be at risk if our amendments were not to succeed?
Bill Esterson
Again, I am grateful. We should take my hon. Friend’s question seriously, because if we have a procurement system that encourages a greater carbon footprint in our food supplies, the consequences will be damaging to our attempts to meet our climate obligations and to tackle the climate crisis. He also mentions the public health elements of this; in fact, he picked up on at least two of the amendments just in that example.
In the end, we want to address the problems of obesity, which has been one of the most serious public health challenges in our society for some time, but we also want to address the carbon footprint. There are some wider questions, which may well be raised as we discuss the next set of amendments, about where we source food from and the need to consider not only the carbon footprint and transport, but some of the impact of intensive farming more widely and the way that our society eats a lot of meat, which is a real concern not only for health, but for the climate, because of the natural resources used up in feeding animals. We have so far addressed the descriptions of ILO standards, environmental exceptions and carbon considerations in the amendments—
Matt Western
It is a pleasure to serve under your chairmanship, Sir Graham. On the environmental amendment, so many authorities have shown leadership in recent months on adopting a zero carbon objective. At a simplistic level, it is perhaps easy perhaps to look at what that might translate to, but it is actually a proper audit of every facet of the services they provide to the community, and is about how they show leadership to the public, but also to businesses, on how far-reaching that should be. We in this place said that we want to be zero carbon and carbon-neutral by whatever date it was, and likewise our county and district councils—Warwick District Council is in my constituency—have really sought to show leadership, but are they actually going to be able to without the amendment?
Bill Esterson
That is a good question: what is possible if restrictions are in place because of international obligations in this area? I imagine the Minister will pick up on that in his response, but there are a number of important points in my hon. Friend’s comments. Yes, we must show leadership, but we should do that at a local and national level for businesses in this country. We should also show leadership elsewhere in the world, by setting our sights high regarding our obligations on the environment, labour, public health and support for SMEs. Through our procurement policy there are other areas of regulation and law where such things also apply.
Gareth Thomas
Another reason to endorse my hon. Friend’s suggestion is the productivity challenge our country faces. As I understand it, we are the worst country in the G7 for productivity performance. We have even fallen behind France. We know from the evidence of business analysts that the response of medium-sized businesses and co-operatives often is often more productive because of the closeness of management to staff. Moreover, co-operatives have joint collective management and a sense that everyone benefits from the collective endeavours of the business. My hon. Friend’s suggestion of including a carve-out in the UK’s GPA arrangements would be an eminently sensible way to tackle the productivity crisis that the Government have not even begun to get to grips with.
Bill Esterson
I am pleased that my hon. Friend has mentioned the innovation and entrepreneurial ability of our SMEs. The Under-Secretary of State for International Trade, the hon. Member for Beverley and Holderness (Graham Stuart), said this morning that small businesses are the “backbone of the economy”—I think I have remembered that correctly—and he is right. However, we need to encourage them more. They are innovators and entrepreneurs. That entrepreneurial spirit is often where the best ideas come from, and my hon. Friend is right that that drives productivity.
Businesses running start-ups and scale-ups with new ideas and often enthusiastic members of staff are in a stronger position to deliver the kinds of new ideas, changes and technological advances that make such a difference. Indeed, that is generally where effective research and development in technology is derived from. Lately, large firms without their own research and development departments have simply taken over small firms that do. That is because of the kind of the situation under discussion.
If we want to succeed, it is essential that we put our investment, including public investment through procurement, into those small businesses. I intended to speak later about some of the procurement problems, but I will mention one or two now. I am about to move on to public health improvements, which is the subject of the fourth amendment in this group, and in which context contracts have been awarded.
SMEs that have come to me since the start of the crisis have expressed concerns about their inability to contract directly through the Department for Business, Energy and Industrial Strategy or the Cabinet Office, or to get support for exports—this point is often made—through the Department for International Trade. They have been unable get such support because everything goes to the big firms. The big firms have their own procurement departments and they win all the contracts.
That has happened yet again with Serco, which only a few months ago was fined for failing to complete a contract successfully. Serco was the cause of so much of the problem in the failed probation privatisation. Thankfully, last week’s statement by the Justice Secretary put a final nail in its coffin. However, Serco has now won the contract for the test and trace system. It has no experience whatever in test and trace. There are companies and small firms out there that have the expertise and have been saying for months that they can do it. They have been trying to help, but they have hit a brick wall.
Once we join the GPA, I do not see why we could not negotiate along those line with our partners. Ideally, that would be part of our procurement regulations. That is possible. In the interim we need to retain the best possible arrangements and then build on them. The danger is that the public contracts regulations will expire at the end of December and we will go backwards when we need to go forwards. The Government spend nearly £6.5 billion—a very large figure—on procuring with UK SMEs. That is great, but it is not always going to the SMEs that it should.
There are other examples from the public health crisis. Companies in my own constituency have come to me wanting to either import or manufacture personal protective equipment, but they have been completely unable to do so because of the barriers to entry in our procurement system.
Stewart Hosie
May I seek some clarity? When it comes to general SME bidding for Government contracts, the proportion of Scottish Government contracts that go to SMEs is substantially higher than the UK Government figure. It is all done through the public procurement quota. Likewise, the manufacture and supply of PPE has been done through a specific portal, but I know there was a dedicated Minister—a Trade Minister was actually involved directly in this—and the situation in Scotland is not the same as that in the UK, as described by the hon. Gentleman. I just want to make sure that, if the regulations are changed in the way he describes, we do not end up throwing out good bits of local SME procurement from around the country—the nations and regions—and lumping it all into a Westminster system that he is right to say has not so far covered itself in glory.
Bill Esterson
I am grateful to the hon. Gentleman for raising that issue. I have seen from the figures that Scottish procurement has been significantly better, by an order of magnitude. I do not know the balance between direct and indirect procurement, but if indirect procurement is handled appropriately and margins are still maintained and the quality and innovation is still available in the contracts, then that works.
The hon. Gentleman asked me a question. My intention is to make things easier to do, not harder. Our request is to improve the regulations, negotiate with our partners in the GPA, and to retain and enhance what is in retained EU law. This applies not only to Scotland but to local government, Northern Ireland and Wales. There are different systems and they do a much better job. For example, Manchester City Council—I want to ensure a good political balance in the examples given by Labour Members—has delivered according to an environmentally sustainable local agenda. It has delivered support for workers—the agenda set out by my hon. Friend the Member for Warrington North—and it has delivered on public health agendas, too.
Charlotte Nichols
The Government’s professed commitment to levelling up is really important and relates to points made by other hon. Members. My constituency of Warrington North is considered to be the second-best place in the country for start-ups and the best place in the north-west. It is important to get public procurement right. As my hon. Friend the Member for Sefton Central has said, there have been examples during this public health crisis of it going disastrously wrong. In my own constituency, a certified medical devices manufacturer put itself forward to make ventilators, which it was already in a position to do. I was told that the Government turned down the contract because of its geographic distance from London. Given that this is a national public health crisis, it is alarming that a north-west manufacturer with experience in the sector was told, basically, that it was too northern to be procured by the Government. It is very important to underline even further the point that we must get this right for all the regions and nations of the UK.
Bill Esterson
That is an excellent local example. As I said, constituents have made similar points to me. I have a constituent who can manufacture 40,000 reusable medical robes a month. They are reusable up to 100 times. In comparison, the winner of the contract—whichever very large conglomerate it is that keeps winning them—is delivering medical gowns from overseas. We saw the fiasco with the Turkish consignment, where most, if not all, were unusable. There have been earlier examples of where what was taken out of the packaging fell apart. Yet here was somebody in my constituency making that offer, but they were completely unable to make progress or to win the contract. They had demonstrated their capability, having gone through all the accreditations. Yes, of course, there are questions about ensuring that quality standards are in place—I understand that and they understand that—but they had done all that work because they have a long-established business. Yet they were unable to break through the procurement system.
I will give another example of a company that contacted me. It was set up by a British man in California, so it operates in America. He has the scientific specialism to design tests that identify whether people have the virus. He worked out how to do it with a saliva-only test. He had proven to the Food and Drug Administration, the US accrediting organisation, that he could do it and won a sizeable contract, including with the US military. He then approached the UK. This was at a time when we had a real problem with a shortage of tests. I will not go into how many tests we are doing, whether they are actually being done, how much double-counting is going on or any of that. He had a solution, which was better because it did not involve the invasiveness of nasal swabbing—it was saliva only. I have raised this with the Minister’s colleagues and tried to break through. I am not just using these as examples; I have done my best to get through to Government procurement, because they can really make a difference in this crisis. To this day, he still has not managed to get UK approval for those tests, which are easier to administer and easier to analyse. He could have set all that up and we could have been here two months ago, given when he first developed the technology to do it. I think that is a real shame. That is a piece of international trade we could have benefited from, which should add to the value of the story. I am afraid that we have not done this well.
Gareth Thomas
My hon. Friend the Member for Warrington North gave a great example, sadly, of bias by the Government against northern firms.
Gareth Thomas
One of the more encouraging stories of northern procurement in recent times comes from Preston, where the council has sought to use its limited procurement tools to try to counteract the gradual moving away of businesses and good jobs out of Preston to other areas. If our amendment were to be passed, and the carve-out for small and medium-sized enterprises in the US, as described by my hon. Friend the Member for Sefton Central, were adopted by the UK, would that not provide additional tools to councils such as Preston to counteract that northern bias in Government procurement?
Bill Esterson
That is my understanding. I heard a reaction from one Member on the Government Benches that suggested that they did not agree with the assertion that there was a bias against the north. I represent a constituency very near to that of my hon. Friend the Member for Warrington North. I am glad that our mutual hon. Friend the Member for Harrow West raised that point, because one of the reasons given to firms in my constituency was that they were too far from London. I am afraid that that is what has been said by procurement officials in Government, and that cannot be right. My hon. Friend is right to raise the matter, and he is right that it has to be one of the answers. It covers the environmental aspects of amendment 25 and the small business and economic requirements of amendment 26, as well as those under amendment 27.
Lee Rowley (North East Derbyshire) (Con)
I hate to break up the party, but as a fellow northern MP I do not recognise anything that has been stated with regard to this issue, which is slightly broader than the scope of the discussion. However, given that we are on it, I would be very interested in getting more details from the hon. Members for Sefton Central and for Warrington North about why they think that their companies are being affected in that way. The companies in my constituency have not had the same experience.
Bill Esterson
I am very glad that the hon. Gentleman’s constituents’ companies have been successful in contracting with the Government, but the fact remains that in the experience of my hon. Friend for Warrington North, and in mine, that is what has happened.
Lee Rowley
May we have the documents? I would be very grateful to receive them separately, so that I can see the issues. I am sure that we are all extremely concerned about the things that are being asserted with regard to northern constituents and northern firms being unable to access those kinds of contracts. I would be very keen to see the written information.
Bill Esterson
The hon. Gentleman will know that commercial confidentiality would mean that I would have to ask first.
Bill Esterson
No, not yet, because I have not finished answering the hon. Gentleman’s first question. He really needs to wait, rather than intervene. We can certainly discuss the point further. I have raised it at length with officials and with the Ministers’ colleagues, and it needs to be addressed. It may well be that officials were speaking out of turn. I am prepared to believe that, and I have not made a big issue out of it previously. The bigger point is that we are losing out on expertise, and we have lost out on the potential during this crisis for better procurement and supply of PPE and, in the case of the firm in America, of testing capacity and capability. That is not sensible and it is not where we need to be. I am happy to discuss the matter with the hon. Gentleman later, but I suggest that we move on.
Greg Hands
I would not usually intervene on the shadow Minister, but perhaps I could bring this to a satisfactory resolution by inviting him and the hon. Member for Warrington North, who raised a similar issue, to write to me with the details of what has happened. I will get the Government to investigate what is alleged to have taken place, and will copy in members of the Committee. That is probably a reasonable way of seeking resolution. We would all be very concerned about companies in any part of the UK being discriminated against because of their geography.
Bill Esterson
I am grateful for that offer. It is something that we have already done with Ministers, but I am happy to revisit it. It may be that revisiting it would be helpful now that some time has elapsed since the response to my case—I do not know about that of my hon. Friend the Member for Warrington North—was received. It is important to recognise that we are trying to improve the situation so that we do not have such problems, whether they are authorised by Ministers or not. I am not going to stand here and say that the Minister and his friends authorised that kind of comment, but I am afraid that it happened, and I think the Minister’s offer is a good one. We need to find out why and ensure that it does not happen again, so I will take him up on that.
Matt Western
There is a broader point here. The geography may be one thing, but there may also be a cultural issue. I am not talking about the Government, but the machinery of government and the Departments. We recently found, through the crisis—this was a real revelation to me—that many businesses in my constituency and the region of the west midlands were being bypassed. They could have provided face masks, plastic visors and so much kit. Those were established manufacturing engineering businesses that had the capacity, the skills and the agility to do it, but for whatever reason—this is not a party political comment—cultural or otherwise, they were not looked at. It is almost as if we do not recognise the capacity of manufacturing in this country, but perhaps we should in the sense of procurement.
Maria Caulfield (Lewes) (Con)
On a point of order, Sir Graham. The debate is fascinating, but I ask your advice as to whether we are truly sticking to the scope of the Bill. I am aware that more than an hour has passed and we are on only the second group of amendments. Of course it is an important issue, but I would hate to reach a point next week where Opposition Members felt that we had not given proper scrutiny to the rest of the Bill.
The Chair
I am grateful for the point of order. I have listened carefully to the exchanges. I thought that they were being used to illustrate a point about the amendment, so, in my view, they were entirely in order, but the point has been made.
Bill Esterson
Thank you, Sir Graham. Am I allowed to respond to the intervention before the point of order?
Bill Esterson
Thank you. There is a wider point about making sure that we get these things right.
On amendment 27, we have heard examples of why the annexes to the GPA need to improve the way in which public procurement operates. They should address, or attempt to address, public health. The timing, because of the covid crisis, makes that all the more important. What I mean by “addressing public health” is that the public health value of a provider should be considered in addition to the price, rather than simply going for the cheapest provider. Some of the examples demonstrate where there have been problems in that regard.
In a public health sense, that includes, but is not limited to, ensuring that air quality is protected as part of projects; that the UK diet is not harmed, as we have discussed; that the cost of healthy diets does not increase; and that projects do not adversely affect UK mental health. In terms of UK procurement, when we talk about public health, we mean the health of the public in a wider sense as a result of the way in which public and private organisations operate.
Public health medicine is part of the greater enterprise of preserving and improving the public’s health. That is why procurement matters in that respect. We took evidence about the social impact—I mentioned the Public Services (Social Value) Act, which I will come to later—which includes, but is not limited to, wages, including the gender pay gap and workers’ rights. It covers the climate impact of emissions, deforestation and biodiversity and the economic impact of the government procurement agreement on UK businesses, including on job creation and skills, and, as I have described, on public health. That is what the amendments seek to address.
I turn to some of the challenges and the evidence that we took mostly from the TUC and Rosa Crawford. In the TUC’s written evidence, it described the threats of the government procurement agreement.
The evidence says:
“Currently the UK is part of the World Trade Organisation’s Government Procurement Agreement (GPA) through the EU’s membership. The UK government plans to accede to the GPA as an independent country once the transition period ends at the end of December 2020.
The GPA aims to liberalise and increase access to member states’ public procurement markets.
The TUC has concerns that provisions in the GPA are more limited than current measures included within the EU Procurement Directive 2014, which was transposed into the UK domestic law through the Public Contract Regulations 2015. These limitations centre on two areas:
The definition of most advantageous tender set out in Article X paragraph 9 of the GPA does not include reference to a price/quality ratio that includes qualitative, environmental and/or social aspects as currently set out in Section 67(1) to (3) of the Public Contract Regulations 2015—this should be a minimum requirement.”
I think the debate we have just had makes that point, with many examples.
Gareth Thomas
One cross-party concern in recent years has rightly been how to tackle the horrendous problem of modern slavery. Using public procurement to lock in the best possible defence against examples of modern slavery in procurement supply chains is surely a sensible thing for any Government to want to achieve. Is it not the case that the amendments my hon. Friend has tabled will make it easier to make the carve-outs that enable central Government, local government, the NHS and so on to put in place appropriate measures against modern slavery?
The Chair
Before I ask Mr Esterson to respond, I hope he is going to be very specific about which of the amendments relate to modern slavery, and not simply move on to that further aspect of policy.
Bill Esterson
Thank you, Sir Graham. My hon. Friend is right to raise this issue, because it is absolutely relevant to amendment 24, which deals with
“labour market interventions and compliance with ILO standards”.
The way that workers are treated in supply chains is an extremely important aspect of procurement, and a great deal can be learned from the Modern Slavery Act 2015, which was passed by this Government’s predecessor. The way that those at the top of supply chains are required to police those supply chains for evidence of modern slavery and exploitation more widely gives us a valuable lesson about how procurement might be used to achieve the goals set out in all these amendments, not least amendment 24, which deals with labour.
I mentioned defence security. Security is a carve-out of its own: Governments are allowed to procure domestically on the basis of security. However, we are all aware of the saga of the fleet solid support ship. Happily, it appears that the Government, having delayed taking decisions or making announcements, are heading to the point where there may be a domestic award of that or a similar contract. It is remarkable, and really quite scandalous, that we got to the point where there was a question mark over whether that contract would be awarded domestically. Security, and the way security contracts are let, gives us examples—in the same way my hon. Friend the Member for Harrow West did with modern slavery—of how the amendments might be applied by Government if we can negotiate them with our GPA partners.
Too many UK companies are not winning UK contracts—a point that was made by Nick Ashton-Hart earlier—and it would be a challenge for them to compete on price in other GPA markets with lower regulatory and labour standards, such as China, which I think my hon. Friend touched on earlier, other parts of south-east Asia, and even the United States. There is a massive question mark about whether that is desirable, which is one of the reasons I tabled amendment 24, which addresses labour market interventions and compliance with ILO standards.
I know that the Government are very keen on non-regression when it comes to labour rights and standards. That is one reason why amendment 24 matters—it gives the Government an opportunity to demonstrate, in the area of procurement, that they do what they say they believe in. Indeed, all these amendments give the Government an opportunity to support policies that were proposed in the manifesto that Conservative Members fought the December election on, or to support things like “buy British”. I am not advocating a similarity to Buy American, but that is the way the United States applies its GPA provisions and there is much we can learn from that, as I said earlier about support for smaller firms. Domestic procurement spending is an essential part of how we will recover from the economic crisis that has come alongside the covid crisis, and I hope the Government will act on that basis.
[Interruption.] It is always a good idea to come to a Bill Committee very well prepared. I could not help but enjoy the Minister’s description in this morning’s evidence session that he had not enjoyed a filibuster for a long time. I assure you that I have no intention of filibustering and I will not be reading out the entirety of what I have available, but in bringing my remarks to a close, I want to say this: the four amendments are tabled in the hope that we are supporting Government policy, as stated by the Prime Minister and Ministers and in the Conservative manifesto.
The four amendments are designed to support our domestic economy, and to balance the needs of our domestic economy with supporting the rules-based approach to international trade. They are designed to support the levelling-up agenda that the Government say they are keen to promote. I hope that the Minister and Conservative Members will take them in that context and consider the long-term economic, social, environmental and labour value to be had from this kind of approach to procurement. Unless we are prepared to use this moment to deliver the continuity that the Bill is about, it is hard to see how we will maintain the standards of procurement that we have at the moment, let alone enhance them.
Fleur Anderson (Putney) (Lab)
It is a pleasure to serve under your chairmanship, Sir Graham. This is my first opportunity to speak in a Bill Committee as a new MP, and what an honour it is to speak in such an important debate—an important debate for not only my constituents in Putney, who are very interested in this Committee, having been told all about it, but people across the country and across the world.
In bringing forward the Trade Bill, there is an opportunity to take back control. It is as if we were all in a car and we decided we would like to start driving, so we said to the driver, “Can we start?”. There were a couple of years of intense negotiations about who would drive the car, and we have taken back control of the car, but instead of doing something with that—driving better, maybe moving from the middle to the fast lane of the motorway, having a better car, or going further and faster—we have decided to chunter along in the same way and to just decide journey by journey. The Bill could give us a better journey every single time. This is an opportunity to have a much more modern and ambitious Trade Bill, and the amendments we have tabled seek to do that. Standards and scrutiny will improve the Bill enormously.
Turning first to the International Labour Organisation and amendment 24, the UK was a founder member of the ILO in 1919 and has been an active member ever since. It has ratified 87 conventions, including the eight core fundamental ILO conventions contained in the 1998 declaration on fundamental principles and rights at work, as well as two protocols. Amendment 24 absolutely aligns with that.
The ILO makes it clear in no uncertain terms that member states must treat the conventions with the utmost seriousness, and agreeing the amendment would do just that. The declaration states:
“all Members, even if they have not ratified the Conventions in question, have an obligation arising from the very fact of membership in the Organization to respect, to promote and to realize, in good faith and in accordance with the Constitution, the principles concerning the fundamental rights which are the subject of those Conventions”.
Since the 1998 declaration, it has become commonplace for the ILO conventions and instruments to be implemented in free trade agreements, so the amendment is absolutely within the remit of the Bill. For example, only recently, the free trade agreement between the European Union and Vietnam has been praised by the ILO for its commitment to labour standards. We could endorse that approach and lock it into the continuity and future agreements by passing the amendment.
Gareth Thomas
My hon. Friend is quite rightly setting out some of the reasons why the ILO standards are so important. In the context of how ILO standards benefit British workers, is there not a significant fear that by not including amendment 24 in the Bill, we might inadvertently encourage a race to the bottom? It might allow other countries with lower standards and pay arrangements to win procurement contracts that British firms could have won. In turn, that would encourage British firms to lower wages and standards to try to win those contracts in future.
Fleur Anderson
I thank my hon. Friend for that apposite remark. That is what we risk if we do not include the amendment. If it is not explicit in the Bill, it will have to be negotiated in every single agreement, so we might miss out on some.
The dangers have already been manifested through the continuity trade agreements that have been agreed. Trade deals have already been struck with countries where labour and human rights abuses pervade, such as Colombia and South Korea. In South Korea, trade union leaders have been thrown in prison for peaceful protest for workers to claim their rights, while Colombia remains the most dangerous country in the world for trade unionists, as around two-thirds of murders of trade unionists take place there. The risks are very real. The UK has also rolled over an agreement with Lebanon, which was criticised last year by Amnesty International for allowing the exploitation and abuse of many of the country’s 250,000 migrant domestic workers, most of whom are women.
None of those continuity agreements contains mechanisms to sanction Governments who fail to respect fundamental labour and human rights, yet every member of the Committee would agree that that is what we would want to do. All trade deals must contain mechanisms to enforce labour rights and decent work, so as to prevent trade deals from being used as a way to pressure labour standards to be lowered, causing a race to the bottom. To ensure that those mechanisms are effective, trade unions must be given a role to trigger investigations into abuses of workers’ rights. The Bill must therefore affirm that all UK trade deals will contain a mechanism to enforce International Labour Organisation conventions, so that trade unions are able to trigger investigations into suspected abuses. Amendment 24 will achieve that and assure that the UK upholds its responsibilities to the International Labour Organisation.
Amendment 25, on climate and carbon considerations, would put us firmly in line with sustainable development goal 13 on taking climate action, to which we have signed up. On 1 May last year, we in this place declared a climate emergency and, as has been mentioned, that was echoed by councils and devolved Governments. Wandsworth, in my own constituency, declared a climate emergency, and we want to see that reflected in the Bill. While our attention has rightly been on responding to the coronavirus crisis, we would all agree that the climate crisis has not gone away. That is why we feel it was important to table the amendment.
The rush to fill the gap created by leaving the customs union cannot be used as an excuse to undermine and circumvent our legally binding climate change commitments, made under the Paris agreement, or the Government’s own target of achieving net zero by 2050. That is why that issue is listed in new clause 2, along with a whole list of important issues, such as waste, water, quality and biodiversity.
In February, I was in the Court of Appeal when it ruled in a landmark judgment that the national policy statement underpinning a third runway at Heathrow airport was unlawful, as it was incompatible with the Paris agreement. The decision not to take the Paris agreement into account in that policy statement was deemed by the judges to be legally fatal to the national policy statement. If we do not accept this amendment, we risk having a contradiction between our environmental agreements and our trade deals.
To date, trade deals have been negotiated separately to climate agreements, but a joined-up policy would be far more effective for both. Not having a joined-up policy is a mistake, as current trade rules place trade promotion and liberalisation ahead of climate goals. The Trade Justice Movement, which we heard from this morning, has identified three ways in which current trade rules can do that. First, investment chapters in trade and investment deals allow companies to sue Governments for measures taken to support climate goals, such as the denial of a permit to construct an oil pipeline, and thus to undermine those goals. Secondly, WTO rules have been used regularly by states to challenge each other’s subsidies to renewable energy industries, and yet not one case has been brought against fossil fuel subsidies. Thirdly, no trade deal that is currently in force contains any binding commitments to ensure that international trade supports climate targets.
Trade agreements also impede Government implementation of climate commitments. For example, they prohibit the use of local content requirements, which can be crucial in producing domestic support for renewable energy. If trade agreements do not have an explicit commitment towards honouring climate commitments, they can hinder the sharing of green technology, for example by implementing far-reaching intellectual property provisions that threaten to hinder the sharing of green tech.
Trade rules can also threaten to increase fossil fuel use, which we explicitly decided not to do in declaring a climate emergency. Current trade and investment agreements foster a global culture of fossil fuel dependency, for instance by prohibiting export and import restrictions on fossil fuels, thereby depriving Governments of a tool to limit production of those fuels.
Unless it is properly regulated, trade can present a huge barrier to alleviating the climate emergency and achieving carbon reduction targets. Indeed, when trade agreements are done badly, they can accelerate a race to the bottom on environmental standards. Therefore, I echo the call of Greener UK in its evidence to the Committee, including its written evidence, that the Bill must include a lock and a legal commitment on carbon reduction targets.
The Bill is silent on climate issues and carbon reduction issues, and so misses a huge opportunity to enshrine our climate commitments and the SDGs in UK law. We have an opportunity to be world leaders in enshrining climate commitments in our trade legislation, but we are missing that opportunity.
Our new clauses and amendments would ensure that all trade agreements that the UK negotiates are climate-aware. The UK should use trade deals to show the world how trade and trade agreements can be made compatible with net zero ambitions, including by prioritising goods and services that are low carbon and environmentally sustainable.
We can push on from what already exists in the continuity agreements and show the rest of the EU what can be done. We could ensure that the UK’s trade negotiations and agreements are underpinned by high environmental standards. That would act as a safeguard against regression in standards, and not just those linked purely to economic advantages.
The Government have already shown that they are willing to backtrack on global environmental standards. For example, the Environment Bill fails to include a legally binding commitment to meet World Health Organisation guidelines for fine particulate matter. That is a very big issue for people in Putney, because Putney High Street has one of the highest levels of air pollution in the country, and we look to the EU to set that standard. My constituents would not be encouraged by trade deals that do not include an assessment of the impact on air quality, for example. Amendment 25 would also prevent trade agreements from impeding the UK’s ability to ratify and properly implement international treaties such as the Paris agreement, which would send a message to the world that compliance with international climate agreements are the norm—this is how we can do it.
Amendment 26 is about small and medium-sized enterprises. As has been said, SMEs have been hit incredibly hard by the coronavirus crisis. Since March, more than 60 businesses in my constituency have written to me in desperate need of help, and I am sure the same is true for other Members. The future of 39% of businesses in my constituency, the majority of which are SMEs, rests on the trade deals contained in this Bill. Many have fallen through the cracks of the Government’s economic support package. They are unable to secure grants, loans or even business rate support for different technical reasons, and they are staring down the barrel of liquidation.
SMEs are the lifeblood of the UK economy—the backbone, as was said earlier. Future trade agreements must be tailored to support the sector and give it the hand-up it needs, over and above the interests of large multinationals, which otherwise disproportionately win out. In particular, the Bill must establish a level playing field—we all love a level playing field—for procurement, and procurement rules must be simplified to encourage and enable bids from SMEs. The Bill must make it easier for SMEs to export. It currently offers very little for small businesses. Surely everyone on this Committee wants to support the SMEs in our constituencies and across the country. Our amendments would ensure that the needs of SMEs are met.
Amendment 27 is about public health. The covid-19 crisis has taught us some valuable lessons about the importance of our national health service. Through the PPE scandal and the EU ventilator scheme farce, the Government have learned the hard way about the importance of procurement and trade to public health. At the peak of the crisis, I called every major social care provider in my patch, and they were all experiencing shortages of PPE. We discussed earlier companies whose offers were not taken up. In Putney, local voluntary groups had to resort to 3D printing their own visors. There are 100 volunteers right now at their sewing machines making up packs of scrubs for local health providers. The Turkish shipment of 400,000 gowns that failed UK safety standards showed us the importance of high procurement standards in trade Bills for public health services. We learned the hard way, across the country, how important that is.
As the NHS Confederation noted,
“Health issues are often not high on the agenda (or on the agenda at all) in trade negotiations.”
Trade agreements often risk a trade-off between lowering standards and increasing the financial burden for patients and the health and social care system. Impact assessments must be carried out to ensure that trade deals do not prioritise commercial advantage over and above health.
Operating on World Trade Organisation terms will not force the NHS to open services to foreign providers. If the NHS is sold off bit by bit to foreign providers in trade deals, that will be a political decision made by the Government. Yesterday in the House, I asked the Secretary of State for International Trade about the trans-Pacific partnership and the risks to the NHS. She said that there is no risk that the NHS is on the table. However, if that is not explicitly written into the Bill, we run the risk of it being missed out and changed through negative ways of doing trade deals.
Gareth Thomas
It is a pleasure to serve under your chairmanship, Mr Brady. I cannot do as much justice to these four amendments as my hon. Friend the Member for Sefton Central did from the Front Bench or my hon. Friend the Member for Putney did from the Back Benches, but I want to raise one or two slightly different points to try to underline some of the interventions I made. There is an understandable fear that at some future point the Government will roll back existing legislation that allows public authorities, the Government, devolved Administrations and local authorities to go beyond having to accept all the time the lowest price and instead to be able to think much more seriously about accepting quality concerns within contract offers. I am sure the Minister will have his most benevolent face on when he winds up and will say that the concerns that we have articulated, as have organisations such the TUC and good trade unions such as the GMB and Unison, are without any foundation. None the less, these concerns exist, because once we leave the protection of EU regulations, we will find that the provisions in the GPA are much more limited than those currently supplementing that under the EU procurement directive from 2014, which was transposed into UK domestic law under the Public Contracts Regulations 2015.
What these organisations understandably want to achieve is that little bit of extra protection against such an event happening, through the amendments that my hon. Friend the Member for Sefton Central has tabled. Indeed, they are seeking more ambition from the Government in terms of public procurement, and to move beyond the era in which big multinationals always win the big contracts. One thinks of the Sercos, the Carillions and the G4Ss, of which a little more anon.
I come back to the example that I gave in one of my earliest interventions on my hon. Friend: Hackney Community Transport, a local organisation that has managed to become much bigger in terms of the community transport offer that it makes. It depends on winning contracts from Transport for London to provide bus services, but has also been able to win contracts in many other local areas to provide transport services.
Hackney Community Transport provides a comparatively low offer because it has managed to get to a decent size where it can compete and, as my hon. Friend alluded to, it has a number of staff who are not just providing the service but thinking about how they win contracts. However, it has never lost its community roots. For the people of Hackney, it provides very cheap minibus hire and helps to train those from the local community who want to learn to drive a minibus. It employs ex-offenders and goes the extra mile, in a way that perhaps one of the corporate giants might not.
By comparison, Harrow Community Transport, which is a much smaller organisation but much valued by many of the most vulnerable people in my constituency—it uses its services to go to local day centres—struggles to survive. It has only one employee, and cannot imagine being able to win contracts from Transport for London given its present situation. There appears to be no sustained offer from central Government to change the situation for not only Harrow Community Transport but all those other community transport associations, or all those other local organisations, be they small and medium-sized businesses or small and medium-sized charities and co-operatives, that nevertheless provide commercial services that could be used effectively by public contracting organisations.
It is important that we build in that additional protection, so that procurement under the GPA does not inhibit local organisations that are determined to do something to provide good jobs with fair pay—not the kind of jobs that some individuals in my constituency have to do. Some of them have to work three jobs in order to make ends meet because the amount they are paid is so low. Businesses that want to help those who are disadvantaged in some way to get into employment must not be excluded as a result of our accession to the GPA. Amendments 24 to 27 help, very effectively, to give a little more protection against such exclusion.
I mentioned the Modern Slavery Act, which is a remarkable piece of legislation. The campaign for it was led by the Co-operative Group, to which I pay tribute for its work through its supply chain, and for the cross-party campaign that led to the Government passing that groundbreaking piece of legislation. Surely the last thing that we would want is not to build on it, and to inadvertently stop organisations that are committed to preventing modern slavery from getting into their supply chains winning the public contracts for which they bid.
My hon. Friend’s amendments seem to be about helping to prevent that from happening.
I served for a long time as chair of the Co-operative party. As a result, I have always wanted more co-ops growing and trading in the economy, and able to win government contracts, whether in local government, the NHS or central Government. I suspect that those of us of a certain generation remember Margaret Thatcher promising a world where owning shares would be as common as having a car. That grand promise of a share-owning democracy has long since disappeared, leaving economic power—according to some, certainly—concentrated in a few hands. That is why there are, I am pleased to say, organisations that champion the building of wealth in communities.
That brings me to the powerful demonstration that is taking place in Preston, where an inspirational council leader is seeking to use the public procurement tools that he and the local authority have available to them, working in partnership with other public bodies to try to contract locally. If we can reinforce those efforts that will surely help to tackle the anti-northern bias that we discussed earlier and allow imaginative council leaders to put extra support behind community organisations that want to do the right thing.
As to the failures of the Sercos, it is not only on test and trace that Serco’s performance has begun to be criticised. I remember it being accused and, so to speak, convicted, of false accounting and of breaching its responsibilities in handling radioactive waste. Carillion is another horror story, and the Public Administration and Constitutional Affairs Committee blamed the Government for outsourcing contracts based on the lowest price, and went on to say that that had caused public services to deteriorate. Surely, then, measures that would not stop us acceding to the GPA but would help us to get the best from our membership are sensible.
Matt Western
My hon. Friend makes some powerful points, but perhaps I may add some emphasis on public health and broaden that aspect of the argument. The emphasis on lowest price is mistaken. Perhaps we saw that with small and medium-sized enterprises—or more of a medium-sized to larger business in the case of De La Rue. However, on the public health side there has over the years been public anger, resentment and frustration at pressure for very low-cost meals to be provided in local authority schools, through companies such as Compass and others that source poor quality foods when they should think about the best value for public health and the health of children. That should be part of what we are talking about on this clause.
Gareth Thomas
My hon. Friend makes a good point. Part of the problem is that schools are not properly resourced. I am sure that he agrees about that. Other examples that we might point to are the difficulties that local authorities, whether Conservative or Labour-led, have had with refuse contracts. A number have had to bring contracts back in-house, or retender. Having gone for the lowest price, as my hon. Friend said, they have not got the value for money that local people rightly demand, and that councils expect from contracts.
Andrew Griffith (Arundel and South Downs) (Con)
I, too, would like to see a greater diversity of types of enterprise and we should do anything that we can in that regard. Co-operative, owner-managed and small businesses are all worthy of our support. I did not want to let the comments that are being made and the amendments that are being spoken to conclude without recording the fact that, if we look merely at the thrust of the amendments, one would conclude that the hon. Gentleman does not fully understand the benefits of free trade, or the substance of what we are trying to achieve in terms of creating wealth, prosperity and opportunities for people, lifting people out of poverty, making sure that our economy is competitive, and creating the tax and the wealth that will produce our public services and make us thrive. I just wanted, by means of an intervention, to give him the opportunity to place on record all those positive benefits of trade, as well as the opportunities that he is seeking to create through the amendments.
Gareth Thomas
I am very grateful to the hon. Gentleman. I will send him the Co-op party membership application form as a result of this exchange. It is very nice to find a new convert from the Conservative Benches to the need for a more diverse economy. I had thought that the hon. Member for Wycombe (Mr Baker) was the only such enlightened Member of Parliament on those Benches, but I am glad that the hon. Member for Arundel and South Downs is first up of the new intake to catch my eye.
Katherine Fletcher
The hon. Gentleman may have to get a larger book to tally up those of us who are interested in the Co-operative movement. I have worked with both the credit union movement and the co-operative movement, and my grandad was a Co-op milkman. The hon. Gentleman is right that the movement has a huge role to play in productivity. Co-ops should look forward to the opportunities to export to a greater range of markets within a free trade deal, such as the framework here.
Gareth Thomas
I am in danger of leaving tonight in a good mood, Sir Graham. I am delighted that a second convert to co-ops has emerged. I will have to send another membership form for the Co-op party to the hon. Lady.
Lee Rowley
Given that we are discussing this, I would just like to declare an interest as a former employee of the Co-op, so I look forward to more such discussions.
Gareth Thomas
There was once a Conservative Co-op movement, which in practice had only one member. Richard Balfe left our ranks, in a very misguided move, and set up the Conservative Co-op group. We appear to have three potential new members of such an organisation, which would be fantastic. Membership of the all-party parliamentary group for mutuals is definitely on offer to the three hon. Members who have intervened.
Matt Western
I tried to intervene a little earlier, and I thank my hon. Friend for giving way yet again. This serious, honest, and important point will probably be echoed across the room: the contract to provide food vouchers to schools over the Easter period and Whitsun was given to Edenred, which happens to be a French company, and an unproven business. I have had a huge number of issues with constituents who did not get vouchers on time, and those vouchers could have been provided by the Midcounties Co-operative, for example, which makes them—they are available. That could have been done locally, and I am sure it would have been done very cost-effectively.
Gareth Thomas
As ever, my hon. Friend makes a serious and important point about the contribution that co-operatives can make. If I may, I will return to the intervention from the hon. Member for Arundel and South Downs, who asked me to extol the benefits of trade. I will certainly do that, but I do not think our country should sell itself short, which is why we have tabled these amendments. In a former life, in happier times, I served as Minister for Trade Policy. As a result, I am an enthusiast for the benefits of trade, but there are caveats to that enthusiasm. If the hon. Gentleman stays awake and enthused, he will listen to examples of our enthusiasm for trade, as well as some of our concerns about the Bill.
I will conclude my remarks by noting the significant potential for co-ops to help deal with some of the issues arising from our ageing society. By 2030, the number of people who need help to wash, feed, or clothe themselves in this country will have doubled to some 2 million. That will place heavy burdens on local authorities and national Governments who seek to procure the support to help those vulnerable people. With a bit of imagination from procurement managers, co-operatives could help to meet those needs, and I suggest that they would also provide a good service. That will require imagination and proper Government support and thinking about procurement, so that co-operatives, and small and medium-sized businesses—they are mentioned in amendment 26 —can benefit from those procurement opportunities. That is another reason why the amendments tabled by my hon. Friend the Member for Sefton Central are spot on.
Greg Hands
We have had a far-ranging debate, but I will speak to amendments 24 to 27. The amendments seek to place a statutory obligation on the Secretary of State to enter into negotiations with GPA parties, with the aim of advancing policy objectives across labour standards, environmental protections, SME participation, and public health in UK procurement opportunities covered by the GPA, and—crucially—before making regulations under clause 1(1).
Let me remind Committee members of our approach to the UK’s GPA succession as a whole. As I have said, we intend to join the GPA as an independent party on substantially the same terms that we had as an EU member. That approach will support a swift accession at the end of the transition period, and preserve the access of UK businesses to procurement opportunities covered by the GPA, which are estimated to be worth £1.3 trillion annually.
Ensuring continuity in the terms of the UK’s participation will not prevent public procurers from taking into account a range of factors when conducting procurement. Social, labour and environmental considerations can continue to be taken into account, as they are today, so long as they are consistent with the UK’s international obligations, including, importantly, under the GPA, non-discrimination obligations. Those obligations already apply to the UK under our current GPA membership.
Indeed, the UK has an active procurement policy agenda on SME participation, sustainable procurement, social value, and labour considerations. As an independent party with our own voice, we will have the opportunity to engage other GPA parties on those issues—for example, via the GPA work programmes, other multilateral forums or bilateral channels. Unless we succeed in securing the UK’s independent accession, the UK will not be party to those discussions within the GPA. Parliament will be updated on developments across those areas through the Department for International Trade annual report, which will be published each year from 2021.
On amendment 27 on health, let me reassure the Committee that the UK’s GPA coverage does not cover healthcare services. It does cover goods and certain services above a specific value threshold procured by the NHS, such as medical equipment, cleaning and building management services, which keeps those types of opportunities open to overseas competition. That helps to ensure that the NHS can access vital resources at competitive prices. Contracting out such non-healthcare services—it is important to stress that—has been a long-standing practice within the NHS across successive Governments that frees up money to be spent on frontline delivery.
Greg Hands
I will take the intervention from a member of the last Labour Government, which played an active role in this aspect of the GPA when he was in office.
Gareth Thomas
I remind the Minister that we are not opposing accession to the GPA. We are merely seeking to make sure that our country benefits properly from GPA membership. He gave the example of cleaning, but I gently remind him that cleaners in the NHS and more generally are often very low paid, so anything that we can do, as amendment 24 sets out, to help to raise the quality of jobs in cleaning services must be sensible. Surely the Minister recognises that, given the covid emergency that we are all experiencing.
Greg Hands
The hon. Gentleman makes a good point about raising the quality of opportunities available, but that will not be done through the GPA.
Let me explain that. Overall, the effect of the amendments would be to place on the Secretary of State a statutory requirement to have entered into negotiations with the 20 parties to the GPA on each of the four areas before creating the ability to make the regulations, and then to report on the outcome of those negotiations to Parliament. It would be an unusual approach for the Secretary of State to enter into negotiations with each of the 20 before implementing the general regulations that could implement any changes to obligations that would result from acceding to the GPA.
I will deal with a few of the individual points raised. I was surprised when the hon. Member for Sefton Central mentioned something about a filibuster. He certainly made a comprehensive speech. When I was in opposition, I remember doing an actual filibuster; I spoke for one hour 49 minutes on beer duty.
Greg Hands
I certainly will not do that now, but I recall making an unlikely entry in the Manchester Evening News the next day. At the time—I think it was the Finance Act 2008 or 2009—the paper had something called the lads index; I am not sure that it would have that these days. As I recall, it took Hansard for the day and gave something like five points for every Member of Parliament who mentioned “Coronation Street”, three points for “Manchester United” and one point for “beer”. The next day, it reported a shock brand-new entry at No. 1 in the lads index, the Member for then Hammersmith and Fulham, Greg Hands, who with in excess of 300 mentions of the word “beer” had catapulted himself to the top of the lads index for that year.
Gareth Thomas
On a point of order, Sir Graham. Surely that is not within the scope of the Bill. I ask the Government Whip to intervene, and encourage you to restore order as well.
The Chair
I think that in the spirit of the latitude that was given to the Opposition, I should offer the same now.
Greg Hands
I thought, Sir Graham, that as a Manchester MP, you would enjoy that story.
The hon. Member for Sefton Central made an impressive oration, and had an impressive memory of our oral evidence earlier. He made some good general points on procurement. Alas, not all were relevant to the government procurement agreement, but let me try to deal with a few of them. First, he mentioned the EU public contracts regulations expiring in 2020; they date from 2015. To be clear, they will not expire in the UK; they are preserved in preserved EU law under the EU withdrawal agreement.
Secondly, the hon. Gentleman made comments about small business, and it is important to emphasise that the Federation of Small Businesses is absolutely right behind our GPA accession. It says that it is essential for the UK to become an independent member of the GPA; it will allow small businesses to have continued access to Government contracts and procurement opportunities.
Let me deal with the specific comments on procurement by the hon. Members for Warrington North, for Harrow West, for Warwick and Leamington and others. I was interested—in fact, I was shocked—to hear what they had to say about alleged discrimination faced by companies that they had reported. I was also shocked at the slight implication that the Opposition had some kind of monopoly on this Committee over northern voices. I looked around and counted more midlands and northern MPs on the Government Benches than on the Opposition Benches, so I thought that that was a bit unwarranted. On a serious note, I would be very interested in seeing significant evidence of discrimination. I will certainly get the Government to investigate those reports and I will copy the response to the whole Committee.
Overall, these amendments would be unhelpful. Each time there was a change to the UK schedule, we would have to produce the four reports. Let me give an example. The current schedule is through our membership of the EU. The EU schedule, which was last updated before 2010, includes names of Government Departments that no longer exist. I think the old BERR—Department for Business, Enterprise and Regulatory Reform—is on the list. DCMS is obviously the Department for Culture, Media and Sport. Every time we made one of those changes—if, for example, we changed DCMS back to its previous name—we would have to produce, as I understand it, the four reports and enter into negotiations, which would simply be an unrealistic and wasteful use of the Government’s time.
The hon. Member for Sefton Central talked a bit about a lowering of standards. To be absolutely clear, we are joining the GPA on the same terms as our current membership, so we are not reducing standards. The EU withdrawal Act preserves existing standards, and of course we already exceed or greatly exceed many EU standards in these spaces. The fact that we have rolled over continuity agreements demonstrates exactly that there has been no lowering of standards.
The hon. Member for Putney made a comprehensive maiden speech for a Bill Committee. As a constituency neighbour, I was delighted to hear her praise for Wandsworth Council. That is a fantastic thing. It is a very, very well-run local authority. She complained about the poor air quality on Putney High Street. If only the Labour council on the other side of the river, in Hammersmith and Fulham, could even monitor its air quality in the first place. Of course, one cause of the deterioration in air quality is Hammersmith and Fulham Council’s closure of Hammersmith bridge, so perhaps if she could join the lobby to reopen Hammersmith bridge, she would then realise that there is better air quality to be delivered on Putney High Street.
Fleur Anderson
Just to clarify, the air quality in Putney High Street was dreadful before the unfortunate closure of the beautiful Hammersmith bridge, due to years of neglect under previous administrations, so that is not the reason; it has been a long-term issue.
Greg Hands
I accept that, but the additional 4,000 cars a day going over Putney bridge into the hon. Lady’s constituency as a result of the closure of Hammersmith bridge has certainly not improved air quality—shall we put it that way?
The hon. Lady raised concerns and, I think, quoted the TUC in relation to continuity agreements with South Korea and Colombia. It is worth pointing out that both those agreements have been rolled over with largely identical wording on labour provision and workers’ rights, so those concerns are not valid. The UK takes labour rights extremely seriously, of course, and UK legislation already provides for robust measures to tackle such issues as human trafficking. Continued GPA membership will not affect that.
In September 2019, the Government announced new measures designed to ensure that Government supply chains are free from offences of slavery, servitude, forced or compulsory labour and human trafficking. The hon. Member for Harrow West, in what I think was an impromptu speech, made some good points on co-operatives. I am delighted to see that on this side of the aisle, we immediately trounced him with the commitment to co-operatives from my hon. Friends the Members for South Ribble, for Arundel and South Downs and for North East Derbyshire.
Gareth Thomas
I heard applications to join the Co-operative party and the all-party parliamentary group for mutuals; I did not hear any new commitments towards co-operatives. None the less, I do not wish to indicate in any way that I was not encouraged by the contributions of the three Conservative Members, but it would have been nice to hear from the Minister an offer of additional support for co-operatives.
Greg Hands
I accept that intervention, but I would say that my three hon. Friends have been here, I think, for six months, six months and about three years so far, and the commitment that they have shown in that time matches quite favourably with the commitment that the hon. Gentleman has shown over his 23 years of membership of this House.
I think the take-away was the hon. Gentleman’s praise for Margaret Thatcher’s share-owning democracy. I remember him as a Minister in the new Labour years, which he referred to; maybe he thinks it is now safe to return to those new Labour years and his view of those years before the right hon. Member for Islington North (Jeremy Corbyn) took over the party. We live in hope.
I hope I have persuaded the Committee that opening negotiations within the GPA will undermine our independent accession to the GPA and thus our ability to advance UK public procurement objectives. I therefore ask the hon. Member for Sefton Central to withdraw his amendments.
Bill Esterson
That was quite some debate. I was very impressed by the speech of my hon. Friend the Member for Putney, who made some formidable comments and demonstrated her knowledge of the subject matter in relation to environmental matters and the ILO. I certainly appreciated her reminding us all about the importance of ensuring that we follow the sustainable development goals in everything we do in this country. I look forward to more of her contributions in the remaining time this afternoon and in next week’s sittings.
My hon. Friend the Member for Harrow West spelled out in more detail some of what he said in interventions. He made a reference to my relationship with the co-op; I should tell him that, like him, I am a member of the Co-operative party—I think he knew that, but had temporarily forgotten—and come from a very proud family of co-operators. My mum, having been a director of the co-op for very many years, taught me well on that subject. I agree with everything he said in that respect, and he quite rightly referred to the sensible nature of our amendments.
I will give the Minister credit for one thing. Unlike some of his parliamentary colleagues, he did not try to name any footballers at Manchester United and get them wrong, so I suppose that is in his favour. However, I think he might have got confused between this set of amendments and the next set. Having double-checked what he said, I should tell him that the reviews that we are requesting are in the next set of amendments.
The amendments in this set call for negotiations with our partners, so there is no suggestion that we would require the Government to look at Government Departments that no longer exist. We can assure the Minister that that is not a concern that he needs to consider. He mentioned what, I think, all hon. Members on this side referred to regarding the public procurement regulations. The issue here is that under UK retained law they were implemented in 2015 for a five-year period and therefore expire at the end of December this year. If the Minister will tell us that they will be reinstated when they expire, that would be undoubtedly helpful, but that is not what he said in his response to the debate, so I am still concerned.
We entirely support our accession to the GPA; we made that clear in the reasoned amendment, and we make it clear again this afternoon. The amendments are about trying to ensure that we retain the provisions in the GPA to ensure continuity, but we also ensure continuity initially by ensuring that there is continuity of what is in the public contracts regulations. That is the issue, because without the public contracts regulations continuing alongside our annexes in the GPA, procurement policy in this country will be significantly weakened. A big part of why we tabled the amendments in the first place was to ensure continuity.
The amendments attempt to ensure that we do not see that as a standstill situation, and that we are pushing the Government to enhance the regulations as much as possible in order to achieve the sorts of policy objectives that Ministers have set out, and that the Opposition have referred to in our contributions this afternoon. I do not think the Minister addressed the points made in the debate we have had on these amendments; some of what he said was about the next group. He made decent points about the difficulties of those reviews, but that comes next. I ask the Committee to support these amendments, and we will push them to a vote.
Question put, That the amendment be made.
The Chair
The shadow Minister has indicated that he does not wish to press the other amendments to votes.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 1—Regulations: review of social impact—
“(1) The Secretary of State must conduct reviews of the social impact of any regulations made under section 1(1).
(2) ‘Social impact’ shall include but not be limited to the impact upon—
(a) the exercise of any right for workers under the Employment Rights Act 1996,
(b) the exercise of any right for consumers under the Consumer Rights Act 2015,
(c) the exercise of any right under the Trade Union Act 2016, and
(d) the fulfilment of any obligation held by the United Kingdom by virtue of its membership of the International Labour Organisation.
(3) A review under subsection (1) must be laid before both Houses of Parliament.
(4) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
New clause 2—Regulations: review of climate and environmental impact—
“(1) The Secretary of State must conduct reviews of the environmental impact of any regulations made under section 1(1).
(2) ‘Environmental impact’ shall mean the impact upon—
(a) progress toward meeting the UK’s Net Zero targets,
(b) global emissions,
(c) producer responsibility,
(d) resource efficiency,
(e) management of waste,
(f) regulation and enforcement of waste management,
(g) air quality,
(h) the recall of motor vehicles for the purpose of protecting the environment,
(i) regulation of water and sewerage undertakers,
(j) water abstraction,
(k) water quality,
(l) land drainage,
(m) biodiversity gain in planning,
(n) biodiversity objectives and reporting,
(o) local nature recovery strategies,
(p) tree felling and planting,
(q) creation of conservation covenants, and
(r) the effect of conservation covenants.
(3) A review under subsection (1) must be laid before both Houses of Parliament.
(4) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
New clause 3—Regulations: review of impact on public health—
“(1) The Secretary of State must conduct reviews of the impact in England of any regulations made under section 1(1) upon—
(a) food safety,
(b) standards in food production, including the treatment of animals and impact on consumer choice, and
(c) any public health outcome within the definition used by Public Health England.
(2) A review under subsection (1) must be laid before both Houses of Parliament.
(3) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
New clause 4—Regulations: review of economic impact—
“(1) The Secretary of State must conduct reviews of the economic impact of any regulations made under section 1(1).
(2) A review under subsection (1) must be laid before both Houses of Parliament.
(3) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
New clause 10—Regulations: review of impact on SMEs—
“(1) The Secretary of State must conduct reviews of the impact upon small and medium-sized enterprises of any regulations made under section 1(1).
(2) A review under subsection (1) must be laid before both Houses of Parliament.
(3) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
New clause 14—Regulations: review of impact on equalities—
“(1) The Secretary of State must conduct reviews of the impact of any regulations under section 1(1) upon persons with a protected characteristic, as defined in Chapter 1 of Part 2 of the Equalities Act 2010.
(2) A review under subsection (1) must be laid before both Houses of Parliament.
(3) The first review under subsection (1) shall be laid by 31 December 2021, and subsequent reviews shall be laid at least once in each calendar year.”
It has already been noted that I was generous in allowing latitude in the debate on the previous group of amendments. I gently say that there is a bit of trade-off here in the usual way; we should not have repetition of all the same arguments on clause stand part.
Bill Esterson
As it is a clause stand part, I had thought the Minister was going to propose this group of new clauses.
Bill Esterson
You will be pleased to learn, Sir Graham, that I have no intention of repeating exactly the same debate. I will just repeat what I said in response to the Minister—I think he was referring to this group when he mentioned the reviews. I take his point, and these are probing amendments partly for that reason.
Greg Hands
I have already set out for the Committee the benefits of GPA membership. It is an agreement that mutually opens government procurement markets between its parties. Preserving the UK’s membership of the GPA will keep these markets open to UK businesses, ensuring that they continue to have guaranteed access to approximately £1.3 trillion per year in procurement opportunities, as well as delivering value for money to the UK taxpayer. I am slightly perturbed by the Opposition’s approach to the GPA, given that they voted against the provisions during proceedings on the 2017-19 Trade Bill. I do not believe that it is appropriate or sensible for UK businesses from across the country to be denied access to the procurement opportunities provided for by the GPA.
New clauses 1, 2, 3, 4, 10 and 14 would place a legal duty on the Government to carry out reviews of the social, environmental, public health, SME, equalities and economic impacts of any regulations made under clause 1(1). First, let me assure the Committee that a detailed impact assessment of these powers relating to the UK’s independent accession to the GPA has already been carried out and published prior to the introduction of the Bill. The Delegated Powers and Regulatory Reform Committee agreed with the assessment that the implementation of our independent accession to the GPA would have no direct impacts, since it simply ensures the continuation of existing arrangements after the transition period.
As I have set out, clause 1 will allow the Government to implement the UK’s independent GPA membership in domestic law, and therefore to respond appropriately to a limited set of circumstances within the GPA. The circumstances in which the powers could be used after accession are set out in the Bill and largely concern technical or administrative modifications—for example, to reflect changes in the names of Government entities as a result of machinery of government reorganisation, which all Governments engage in. The shadow Minister is right that my arguments have inadvertently drifted from being about this group of new clauses to being about the previous group, but it is an excellent argument, and no harm has been caused by making it twice. Such modifications will have no significant—if any—social, environmental, public health, SME, equalities or other economic impacts.
Aside from regulations relating to technical changes, the powers in clause 1 will also allow the Government to make the necessary amendments to domestic law to reflect new parties joining or withdrawing from the GPA. Without the power, we would be unable to meet our obligations in relation to those acceding to the GPA. As well as being unable to give rights of access to public contracts to bidders from joining members, we would also be unable to remove rights of access to bidders from those members who had left. I am sure the Committee will agree that that cannot be a situation we find ourselves in. Recognising concerns that regulations made to reflect new accessions could have material impacts, however, we will engage the International Trade Committee and the House of Lords treaties Sub-Committee in advance of any new party acceding to the GPA. This will provide ample opportunity to explore potential impacts before any regulations are made.
Stewart Hosie
May I ask a brief question? Is the Chair of the International Trade Committee aware of the obligation that he will have to consider this in advance?
Greg Hands
I thank the hon. Gentleman for that intervention. I do not know whether the Chair of the Committee was aware of that, but he is now and I think he will welcome the change. He is always somebody who likes to be consulted, as we well know, so I think he would agree with me that this is a welcome move for additional consultation.
I have set out that the powers in clause 1 can be useful, but I want to be clear with the Committee about what they cannot be used for. The clause 1 powers cannot be used to implement any wholesale renegotiation of the GPA, or of the UK’s market access offer. Any such changes would require further primary legislation.
I hope I have persuaded the Committee that there would be no benefit in carrying out extensive reviews after regulations under clause 1(1) have been made. I ask that hon. Members do not press their new clauses to a Division, and I commend clause 1 to the Committee.
Bill Esterson
I think this is the first time in the Minister’s parliamentary career that he has ever admitted he was wrong—[Laughter.] I give him credit for being gracious enough to do so. We may have seen history in the making.
The Minister does this a lot. He claims we are against something when we are not. We spelled out in our reasoned amendment last time, and we spelled it out in our reasoned amendment this time, that we support the accession of the GPA. We voted against the Bill as a whole because we oppose the Bill as a whole. That does not mean that we oppose everything in the Bill. He knows that, but he keeps saying it. I know he likes to have some fun.
I do not object to the suggestion of asking the International Trade Committee and the Lords treaties Sub-Committee to take on additional roles, although I share the slight surprise of the hon. Member for Dundee East about the fact that the Chair of the International Trade Committee was not consulted before the announcement was made. That is not the real issue, however. The issue is that the new clauses request a review of the regulations. They do not request a review of the membership or proposed new members, so that is a rather different point. I hope that the International Trade Committee would be asked to review any proposed changes to the regulations in discussions and negotiations with our partners. I do not object to the same thing for potential accessions, but that is a rather different point from the one we were making. Having said that, and as I said in my opening remarks, they are probing provisions and we will not be pressing them to a Division.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Implementation of international trade agreements
Stewart Hosie
I beg to move amendment 30, in clause 2, page 2, line 9, leave out “appropriate” and insert “necessary”.
I will be mercifully brief on amendment 30. The effect of the amendment would be to limit the scope of the powers to be delegated to an appropriate authority to what is actually necessary to achieve the implementation of international trade agreements. Clause 2(1) provides that:
“An appropriate authority may…make such provision as the authority considers appropriate”—
to implement a future agreement. However, the word “appropriate” is vague and subjective. A necessity test—I am sure I have heard the Minister make this argument in the past—is clearer and more objective. The power should be limited to making the regulations that are necessary to implement the agreement.
Gareth Thomas
I hope to be equally brief. I have some sympathy with the amendment. I recognise the appetite of the hon. Member for Dundee East to prevent overreach by the Government in adding to legislation via secondary legislation anything that they think is a “nice to have” rather than a fundamental and necessary consequence of a trade agreement. Our biggest concern is that the Bill will not deliver the effective meaningful scrutiny of either so-called roll-over agreements or the larger agreements to come, such as the US trade deal and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, on which the Government have begun negotiations.
Taken as a package with the Command Paper from February last year on parliamentary scrutiny of future FTAs, the Government’s failure to include in this Bill several amendments that were tabled on Report in the Commons in February 2018, and in the Lords, raises concerns about Government overreach. We hope to tackle those issues with further amendments that we have tabled to clause 2. I recognise that devolved Administrations will worry that the devolution settlements might be further undermined by Government overreach because of the use of the word “appropriate” instead of “necessary”. We have some sympathy with that concern, as indicated by one of our amendments further down the line.
The witness from the CBI made a striking intervention on Tuesday morning when he said that business was desperate for certainty. To get certainty, Parliament needs to have more say and involvement in future trade agreements, otherwise we risk the development of a situation of considerable mistrust, undermining the appetite of business to take up the opportunities offered by new trade agreements. Our amendments seek to prevent that from happening by locking in more opportunities for parliamentary scrutiny. I suspect the hon. Member for Dundee East does not intend to press this amendment to a vote. In that spirit, I have flagged up some of our concerns about the Bill, which we will address in the group that begins with amendment 4.
Greg Hands
Speaking to amendment 30, which was tabled by the hon. Member for Dundee East, I can assure him that all regulations made under the clause 2 power to implement international trade agreements will be both necessary and appropriate. The power is needed to implement obligations arising from continuity trade agreements into domestic law over time and in all circumstances. Our expectation is that the power will be mainly used for obligations relating to procurement or mutual recognition of product conformity assessments. To be clear, it cannot be used to implement tariff-related provisions. Without such an ability to make changes, the UK would be at risk of being in breach of our international obligations. It is the Government’s responsibility to ensure that that does not happen. The proposed amendment would prevent that by constraining the vires or scope of the regulations that can be made under clause 2, particularly when using the concurrent powers to legislate in areas of devolved competence.
I can assure colleagues that the powers in the Bill will be used in a proportionate way and that consultation with colleagues in the devolved Governments and elsewhere is a fundamental part of our approach. The Government view “appropriate” and “necessary” as synonymous, and our intent is only to make use of the regulation power where it is needed to fulfil obligations under agreements. I therefore ask the hon. Member for Dundee East to withdraw his amendment.
Stewart Hosie
I thank the Minister for his response and I will take his assurances at face value. I just say to him that the objective not to use this to change tariffs is not one of the exclusions in clause 2 in relation to the implementation of trade agreements. The Government might want to look again later in our proceedings at how exclusions to the use of this power are documented in the Bill. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Stewart Hosie
I beg to move amendment 31, in clause 2, page 2, leave out lines 13 and 14 and insert—
“(b) an agreement between two or more countries aimed at reducing the barriers to trade in goods or services between them”.
The Chair
With this it will be convenient to discuss amendment 15, in clause 4, page 3, line 26, at end insert—
“‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement, or an investment agreement”.
Stewart Hosie
The effect of this amendment is clear: to provide a more precise definition of an international agreement and achieve greater clarity in the Bill. The amended wording would provide a clearer definition of an international trade agreement than is currently provided for in the Bill. That is in line with the Government’s own intention, as set out in the explanatory notes. Paragraph 31 states:
“International trade agreements are agreements between two or more countries aimed at reducing the barriers to trade in goods or services between them.”
The principle of certainty is central to good law making. In clause 2(2), an international trade agreement means “a free trade agreement”, but that is further defined in paragraph (7). Subsection (2)(b), as it currently stands, refers to
“an international agreement that mainly relates to trade, other than a free trade agreement.”
We had a discussion on Second Reading about that. These modern trade agreements have little to do with quotas and tariffs and far more to do with other things, as I said in my introductory remarks earlier this afternoon. The phrase “mainly relates to trade” does not grant sufficient certainty in terms of interpretation.
As I have said, the explanatory notes give the following definition:
“International trade agreements are agreements between two or more countries aimed at reducing the barriers to trade in goods or services between them.”
I consider that definition to be clearer than the multi-part definition currently in the Bill. This amendment does not reduce the scope of what might be deemed to be in a trade agreement, but it provides it with a purpose: to reduce the barriers to trade in services and goods. In that sense, I think it a helpful amendment, which I am sure the Government will want to look at positively as we proceed with our deliberations.
Gareth Thomas
I rise in sympathy with the spirit of the amendment moved by the hon. Member for Dundee East, but I wish to speak specifically to amendment 15, which seeks to insert at clause 4, page 3, line 26:
“‘international agreement that mainly relates to trade, other than a free trade agreement’ means a strategic partnership agreement or mutual recognition agreement that is ancillary to a free trade agreement, or an investment agreement”.
I join the hon. Gentleman in wanting to see good law making and, therefore, proper definitions of what constitutes a trade agreement that would be covered under the Bill. The hon. Gentleman’s amendment refers just to an agreement on trade in goods and services. Our amendment includes the Government’s definition, but expands it to make it crystal clear that it includes a range of other trade related agreements, including investment agreements.
My hon. Friend the Member for Brent North (Barry Gardiner), speaking on an amendment similar to this one at the Committee stage of the Bill in January 2018, noted the lack of detail about what constitutes an international trade agreement and worried about whether trade agreements, or agreements that had substantial trade elements, would be brought to the House for even the limited scrutiny that the Minister proposes.
Mutual recognition agreements are crucial in terms of scrutiny; many of them help to minimise unnecessary regulatory non-tariff barriers. However, they potentially have implications for phytosanitary standards, food standards and environmental obligations. Strategic partnership agreements can add social and political conditionalities to accompany the more commercial aspects of trade agreements. For example, one wonders whether there might be strategic partnership agreements with some developing countries, perhaps to provide aid for trade support as they seek to implement new trade agreements with us.
Investment treaties are returning to being a UK competence, having left our responsibility in 2009. One of the most significant investment treaties that the European Union has been negotiating—the negotiations on it have not yet concluded—is with China, where there have been 28 rounds of negotiations. I suspect that there would be considerable interest in the UK, including within this House, if the Government sought an investment treaty with China. Surely, it is right to make sure that such an agreement would fall within scope, and it would also need to receive proper scrutiny.
Bill Esterson
I am glad that my hon. Friend has mentioned investment treaties; they absolutely should be part of the description given in clause 4. Does he agree that that is not least because of the fact that the 180 bilateral investment agreements that this country is party to have investor-state dispute settlement clauses, some of which are being used right now to prepare legal cases against our own Government?
Such clauses are a particular concern in areas such as construction. I suggest to my hon. Friend that in this crisis, given that they are being used along with construction contracts and procurement, we need to be very careful to ensure full scrutiny of everything of an international trade and investment nature.
Gareth Thomas
I was moving on to say where there might be concerns about an investment treaty that warranted the type of scrutiny that the Bill allows, and the Bill could allow even more of that type of scrutiny if the Government accepted later amendments. There are absolutely major concerns around the ISDS provisions in some investment treaties; I am sure that we will come to discuss those concerns when we debate other amendments.
The International Trade Committee has highlighted other aspects of investment treaties about which there are concerns, such as the question of sustainable development provisions in investment treaties so that developing countries can postpone investment liberalisation if they need to for various developmental reasons.
There have also been concerns in the past about performance requirements in investment treaties: conditions attached to foreign investors by host states, such as stipulating that a certain quantity of domestic inputs into goods that are being produced have to come from the host country.
For those reasons, therefore, we want to make sure that the Bill allows proper scrutiny in relation to any of those concerns that might or might not be raised by a future investment treaty. I look forward to hearing the Minister’s response.
Greg Hands
Amendment 31, which has been tabled by the hon. Member for Dundee East, seeks, as he pointed out, to modify the definition of an international trade agreement. Our definition of an international trade agreement is drafted so that it will sufficiently capture the range of agreements that we currently access through the European Union. That includes free trade agreements but also stand-alone mutual recognition agreements, or MRAs. By changing the definition, the amendment would limit important elements of trade that businesses and consumers rely on.
As Members know, provisions under free trade agreements are wider than simply goods and services; the point was made by the hon. Member for Dundee East. That is an essential fact of modern trade agreements that the hon. Gentleman’s amendment overlooks. The amendment would create an unnecessary risk that important agreements became out of scope of the powers, leaving us unable to ensure continuity of trading relationships for UK businesses and consumers. He drew attention to tariffs but, legally, we cannot use clause 2 for tariffs, as he knows, because that has to come under the Taxation (Cross-border Trade) Act 2018.
Amendment 15 seeks to limit the range of agreements that the UK will be able to sign outside FTAs. Specifically, again, that would have an impact on our stand-alone mutual recognition agreements. As Members will be aware, the UK has signed agreements that replicate the effects of existing EU arrangements for mutual recognition of conformity assessment. Those arrangements ensure continuity for UK manufacturers and businesses, meaning that they are able to continue having UK testing bodies certify that their products meet the regulations of other countries. The alternative would be to send our products for testing in other countries, significantly increasing costs and making many exports unviable.
The international trade agreement power enables continuity agreements to come into effect. That includes continuity MRAs. Amendment 15 therefore risks the UK being unable to fulfil obligations arising from continuity MRAs. If stand-alone mutual recognition agreements were taken out of the scope of the power, the UK would not be able to amend product-specific UK legislation to ensure that we were able to implement fully our obligations stemming from the continuity MRAs. Not only would that harm the UK’s standing on the international stage but, more importantly, it would materially impact on UK businesses and their employees at a time when they need to be able to maintain and grow their trading relations. No member of the Committee would want to see that.
An example of that power are the Electromagnetic Compatibility Regulations 2016 as covered by the mutual recognition agreement that the EU has with the United States, which reduces regulatory barriers to trade for goods such as microwave ovens. We seek to replicate the effects of that MRA, allowing businesses and consumers to continue to benefit.
I hope that I have been able to reassure the Committee about the reasoning behind the Government’s approach. I ask hon. Members to withdraw their amendments.
Stewart Hosie
May I make an observation? Clearly, my amendment was driven by the lack of clarity on the face of the Bill, compared with the more elegant phraseology in the explanatory notes. The hon. Member for Harrow West spoke about investment treaties and the Minister himself about MRAs, but the fact that investment treaties and MRAs are not included in the definition—although the Minister says that it is wide enough to capture everything—probably tells us that there is an issue of public understanding of the definition of a trade agreement in the Bill.
It might be that better can be done, however it is done, and more clarity provided as to what precisely the Bill intends to cover by way of treaties in the future. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
Again, that will come at a later stage in the Bill, so it cannot be moved at this point.
Ordered, That further consideration be now adjourned. —(Maria Caulfield.)
5.4 pm
Adjourned till Tuesday 23 June at twenty-five minutes past Nine o’clock.
Written evidence reported to the House
TB12 British Veterinary Association (BVA)
Finance Bill (Tenth sitting)
Thursday 18th June 2020
(4 years, 5 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 7 / Noes: 10 - Question accordingly negatived.
The Chair
Good afternoon. As Members are aware, social distancing guidelines are in place, so I remind them to sit only in marked seats. Tea and coffee are not permitted in Committee Rooms. Please will all Members ensure that mobile phones are turned off or switched to silent mode during the sitting? As Members are also aware, the Hansard reporters would be most grateful if speaking notes were sent to hansardnotes@parliament.uk.
New Clause 3
Review of impact of Act on nations and regions of the UK
“(1) The Chancellor of the Exchequer must conduct an impact assessment of this Act on the different parts of the United Kingdom and regions of England, and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider the impact on:
(a) Household incomes in each part of the United Kingdom and region of England; and
(b) GDP in each part of the United Kingdom and region of England;
(3) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and ‘regions of England’ has the same meaning as that used by the Office of National Statistics.”—(Wes Streeting.)
This new clause would require the Chancellor of the Exchequer to review the impact of this Bill on the nations and regions of the UK.
Brought up, and read the First time.
Wes Streeting (Ilford North) (Lab)
I beg to move, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 18—Assessment of impact of provisions of this Act—
“(1) The Chancellor of the Exchequer must review in parts of the United Kingdom and regions of England the impact of the provisions of this Act and lay a report of that review before the House of Commons within one month of the passing of this Act
(2) A review under this section must consider the effects of the provisions on—
(a) GDP
(b) business investment,
(c) employment,
(d) productivity,
(e) company solvency,
(f) public revenues
(g) poverty, and
(h) public health.
(3) A review under this section must consider the following scenarios:
(a) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are continued for the next year; and
(b) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are ended or changed in any ways by a Minister of the Crown.
(4) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact of the Bill in different possible scenarios with respect to the continuation of the coronavirus support schemes.
New clause 21—Sectoral review of impact of Act—
“(1) The Chancellor of the Exchequer must make an assessment of the impact of this Act on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of Royal Assent.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.”
This new clause would require the Government to report on the effect of the Bill on a number of business sectors.
Wes Streeting
It is a pleasure to move new clause 3, in my name and those of my hon. Friends, and to speak to new clauses 18 and 21, which will be put forward by the hon. Member for Glasgow Central.
As this is likely to be the last sitting for line-by-line scrutiny, I would like to take the opportunity to thank you, Mr Rosindell, and Ms McDonagh for so effectively chairing our proceedings in the course of that scrutiny. I thank the staff in the Public Bill Office for all their assistance in putting together various amendments and new clauses. I thank my own team in Westminster—in fact, not in Westminster but working from home—for the efforts that they have made in supporting me and other hon. Members throughout this process, and I thank staff working in the offices, or not in the offices, of other members of the shadow Treasury team. They have done a sterling job—it should be borne in mind that we do not have the resources of the civil service to support us through all this—and it is much appreciated.
Ours is a great country, full of promise and opportunity. One of the richest countries in the world, we are home to world-class universities, entrepreneurs, captains of industry, groundbreaking scientists and inventors, globally renowned artists and a vibrant civil society. However, as we will consider across a number of our debates this afternoon, this is also a country of staggering inequality, intolerable poverty and wasted potential—and that is before we consider the impact of coronavirus on our country’s economic prospects.
I am starting with new clause 3. The economic divisions in our country are not merely reflected through class inequality, but reflected and represented in our geography. Britain is home to nine of the 10 poorest regions in western Europe, but also the richest, in inner London. A child on free school meals in Hackney is still three times more likely to attend university than an equally poor child in Hartlepool. The gap in productivity between English regions is worth about £40 billion a year, with productivity in London and the south-east standing at 50% above the national average.
The past 40 years have seen a significant decline in our country’s manufacturing base, with serious social consequences in former industrial towns and profound consequences for people’s lives and livelihoods—and our politics. People have seen their jobs disappear as a result of one of the largest deindustrialisations of any major nation, with production exported to countries with cheaper labour costs through outsourcing, or being lost altogether to labour-saving technology.
That is why the so-called levelling-up agenda is so important, and it is made all the more pressing by the covid-19 pandemic. We know from the evidence emerging all the time that without an effective regional response from the Government, the economic crisis brought about by covid-19 risks entrenching existing inequalities in our country and creating new ones that, unchecked, might persist for decades.
According to the RSA, the Royal Society for the encouragement of Arts, Manufactures and Commerce, rural areas and coastal towns in the north and south-west of England are most at risk of covid-19’s impact on unemployment. This involves many coastal towns, national parks and tourist hotspots, with economies dependent on hospitality, retail and tourism. The RSA identified the district council of Richmondshire in North Yorkshire, which forms part of the Chancellor’s constituency, as the most at-risk area.
Meanwhile, KPMG’s chief economist in the UK believes that the west midlands could face the biggest impact. My right hon. Friend the Member for Birmingham, Hodge Hill (Liam Byrne) has been banging the drum for the west midlands economy, highlighting in particular the risks to manufacturing in the region. The weighting of the average sectoral impact, measured by the Office for Budget Responsibility against the distribution of each local authority’s gross value added by sector, concluded that the decline in economic output in parts of the midlands and the north-west could be as much as 50% and that nine out of the 10 worst affected local authorities will be located in those regions.
That is not to say that we should not be concerned about our major cities either. Edinburgh, in particular, has the highest level of exposure to the reduction in international tourist spending, with consequences for the city and surrounding regions. Indeed, I hope we can move away from the narrative of London versus the rest of the country. Our capital city is a truly global city, and its success is inseparable from our national success, but London’s political leaders and our business leaders recognise the need for a more balanced regional economic settlement and the benefits that that would bring to all of us, wherever we live and work.
As we think about the crisis that we are living through and the recovery that we hope will follow, let us take heed of the warning from the New Local Government Network and so many others that recovery cannot be a synonym for the resurrection of business as usual. It cannot be a coincidence that our country has one of the most imbalanced economies in the developed world and also one of the most centralised systems of government.
As TheCityUK has argued,
“the crisis should prompt policymakers to consider anew some long-standing potential solutions to the problem of regional inequality, such as devolution of political and potentially fiscal powers.”
It is important that, at every Budget, Finance Bill and fiscal event, the Treasury looks carefully at whether we are moving the dial in the right direction when it comes to tackling the gross regional inequality in our country. I think it is fair to say that, under successive Governments, the Treasury has had a much more centralising tendency and cultural mindset than other Departments. Of course, it is easy to understand why that is and the appeal of being able to make big decisions and pull big policy levers that have an impact across Government and the country. But the way in which decisions are taken in Whitehall has a direct effect on not just town halls but communities right across our country.
Stephen Flynn (Aberdeen South) (SNP)
The hon. Member is making a number of excellent points. He could perhaps go further, because what he is referring to could also be an emboldened and more powerful Scottish Parliament with further devolution to Scotland.
Wes Streeting
I am grateful for that intervention. I was very encouraged by the recent policy position published by the leader of the Scottish Labour party and excitedly relayed to the rest of us by the shadow Secretary of State for Scotland, my hon. Friend the Member for Edinburgh South (Ian Murray). Scottish Labour has come out with some really bold proposals for how devolution could go even further, extending to home rule in Scotland. I know that that is not a position shared by the separatists in the Scottish National party. We could spend the rest of the afternoon discussing the merits or otherwise of Scottish independence, but, to allow SNP Committee members to get back home at the end of the day, perhaps we should not dwell on that this afternoon.
The Financial Secretary to the Treasury (Jesse Norman)
It is too tempting for me not to ask the hon. Member to share a few of his views on Unionism in Scotland and whether he thinks that is a good idea.
Wes Streeting
I think that the economic benefits of the Union are so obvious and well rehearsed from the debate on Scottish independence and the referendum campaign, but for me this is not just a question of economics or a statistical debate about the merits of Unionism; it is also about the shared history, shared benefits, shared prosperity and shared identity of the United Kingdom.
I have a great affection for Scotland as a country, and indeed for its history, its separate identity and its separate strength where policy there is different. For example, thinking back to my experience before entering this House, I have always greatly admired the Scottish higher education system, and the way in which issues such as quality enhancement are approached in Scotland. I just think that we are stronger together.
I will now pick some wounds in the other direction, because just as I have never understood how the SNP can be pro-union at a European level but hostile to it at a UK level, so too have I never understood the Conservative party’s anti-unionism in relation to the EU and its pro-Unionism in a UK context. In fact, returning to the economic matters addressed by the Bill, I have as much belief in the merits of the single market of the United Kingdom as I have in the merits of the single market of the European Union. Unfortunately, these questions have already been settled—in one case favourably; and in the other unfavourably, in my opinion. But I shall dry my remainer tears and return to our consideration of new clause 3—[Hon. Members: “Hear, hear!”] Government Members are cheering in all the wrong places.
Finance Bills, Budgets and other fiscal events are not simply number-crunching exercises, or processes of bureaucratic tidying up, as much of the Bill is concerned with, important though those often are; they also reflect the political priorities of the Government of the day and send a message to the country about the things that the Government value and want to achieve. Every one of them should move the dial on the big challenges facing our country in the right direction. That is why new clauses 18 and 21, tabled by the hon. Member for Glasgow Central, are also so important.
The economic impact of covid-19 has been felt right across our economy but, as the ONS figures show, some sectors have been hit harder than others, and we know that some sectors will be hit harder for longer. If we take the gross value added figures and look at the percentage change from March to April, we see a fall of 5% in the financial sector, for example, or 6% in agriculture, forestry and fishing. Compare that with a fall of 88% in hospitality, 40% in construction, 40% in arts, entertainment and recreation, and 24% in manufacturing. Those figures are extraordinary.
What makes the country’s experience of this crisis so different from that of 10 years ago, in the aftermath of the global financial crisis, is that we are seeing that really significant variation. If we look at the GVA figures for the impact of the financial crisis sector by sector, and then we look at the OBR’s projected output figures, as the Resolution Foundation has done, we see such a stark contrast, sector by sector, between the standard deviation 10 years ago and the one projected now.
That is why a one-size-fits-all approach to our economic response to coronavirus simply will not cut it. We of course recognise the steps that the Chancellor has already taken, and my hon. Friend the shadow Chancellor has been keen to work constructively with the Government on the economic response, as indeed have we all, but we are concerned about what lies ahead and about how the Chancellor is proposing to handle the economic response and the long-tail effects. That is why this week we have called on the Chancellor to come forward with a full Budget in March—a back-to-work Budget focused on jobs.
What gets measured is what counts. The Treasury will make better decisions and Parliament will be able to scrutinise more effectively if we look more closely at the impact of Treasury decisions on the issues that matter most to our country. That is why is it so important to consider the impact of the Bill on regional inequality, so I commend to the Committee new clause 3. I also indicate the official Opposition’s support for new clauses 18 and 21, which would look at the impact sector by sector and across a range of other important economic factors.
Alison Thewliss (Glasgow Central) (SNP)
It is a pleasure to see you in the Chair, Mr Rosindell.
I will reflect on some of the issues raised by the hon. Member for Ilford North. The Government down in Westminster are doing such a cracking job of selling the Union that a new Panelbase poll at the start of the month put support for independence at 52%; it had 20% of no voters in 2014 now having swapped to be in favour of independence; and most people wanting to see a vote in the next five years. A great commendation of the UK Government on the job that they are doing is that people in Scotland are regretting at a greater rate than ever before how they voted in 2014.
Wes Streeting
Perhaps when the hon. Lady returns to her constituency, she might reassure her constituents who worry about policy making at a UK Government level that, hopefully, we will have a Labour Government again before too long.
Alison Thewliss
People can promise things in the never-never—perhaps that will happen, but we do not quite know. But how Scotland ends up getting governed should not be down to whether votes in England sway one way or the other. We would do a far better job of governing ourselves, as many small independent countries around the world do. Many small independent countries are also making a much better fist of dealing with the coronavirus crisis than the UK is—in fact, most countries in the world are, never mind small ones. Look at how well New Zealand has managed the crisis, and how well it has been able to come out of it, under the brilliant leadership of Jacinda Ardern. We have a lot to learn from other countries about how to do things better in so many ways.
We are very supportive of Labour’s new clause 3 and of the complementary new clauses 18 and 21, which I tabled. New clause 18 seeks assessments of the impact of the Bill within a month on various economic variables, comparing situations in which the Treasury ceases or continues its covid-19 support schemes for the next year.
The likely reality is that when the schemes are discontinued, as planned, the economy and people’s living standards will be sent reeling. We know that from the many studies that have been done of people who have taken up the coronavirus job retention scheme—the majority of uptake of the scheme in the hospitality and tourism industries is significant. YouGov polling out yesterday suggested that a huge number of people would lay off their staff if the schemes were withdrawn. The Government need to listen carefully to the experience of people in those sectors on the impact of withdrawing too early.
We feel it is important that that is looked at in the context of the Finance Bill. As everyone has seen, as the Finance Bill progressed from the Budget to where we are now, the world in which we are living changed—changed dramatically—for so many people and their living standards. For the Government to have such a review seems wise.
The schemes covered by new clause 18 are the job retention scheme, the business interruption loan scheme, the bounce-back loan scheme and the self-employed support scheme. We know that the Chancellor has said that he will do “whatever it takes” to protect jobs, but we also know—I am a member of the Treasury Committee, and we have found that from the evidence received from many—that more than 1 million people have fallen through the gaps in the schemes. We need to understand what impact that and the measures in the Finance Bill will have on those groups.
Earlier, the Office for National Statistics revealed that in April the UK’s economy suffered its biggest monthly slump in GDP on record—20.4%—due to the pandemic. We therefore think that it would be wise for the Government to expand the support schemes, rather than winding them down. That is also critical for the devolved nations, which are moving at a slightly different pace, due to the circumstances in which we find ourselves, hence why we want to look at the different nations as well.
In new clause 21, we ask the Government to report on the effects of the Bill in a number of different business sectors. Different sectors will be differently affected. The sectors mentioned in the new clause include leisure, retail, hospitality and tourism, all of which we know from our constituency experiences have been severely hit, with retailers having real problems and many in the leisure sector perhaps falling outwith some of the schemes and finding it very difficult to get started up again. As I mentioned earlier, some businesses in my constituency were unable to access the support for various technical reasons. Financial services, business services, health life/medical services, haulage and logistics and aviation have also been severely impacted. Many bus firms and tour firms are struggling to keep going, which will impact on schools as they return. Many are rural schools and so rely on the transport sector to move pupils around. Those factors need to be considered as well.
My hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) has spoken a great deal about the impact on the aviation sector, which, in turn, will have a huge impact on the behaviour of BA. The way it is currently treating its staff is absolutely appalling.
We also want to talk about professional sport and oil and gas, which my hon. Friend the Member for Aberdeen South covered so well earlier. Universities will be hugely impacted by the number and ability of foreign students to come here to work, study and live. Those universities have been in contact with me—indeed, several are based in my constituency and several neighbour my constituency —saying that they are very concerned about their future, which the Government have not really talked about to any great extent. Fairs, too, face problems. I have many show people based in my constituency, and they are also very concerned about the loss of their season and their ability to continue trading, because they do rely on that public-facing role—opening up the funfair to people, taking money and exchanging cash. Without that, they have no income at all. They have very few alternatives. Many may operate things such as snack bar vans, which, again, have not been operating to the same extent as previously.
We are keen to press the Government on these things and to understand the impact of what has been proposed here and to see what schemes are running. I am very happy to move these new clauses in my name and the names of my hon. Friends.
Jesse Norman
I rise to urge the Committee to reject these new clauses. Let me say a few things about them and then I will turn to the comments that have been made.
New clause 1 would require the Chancellor to conduct an impact assessment on the effect of household incomes on GDP in each part of the United Kingdom and in each region of England. New clause 18 would require the Government to conduct a review within one month of Royal Assent, of the effect of the Bill on the nations and regions of the United Kingdom if the Government’s main coronavirus support schemes continue for the next year—a hypothetical case if that be so—or if they were ended or changed in any way by a Minister of the Crown. The SNP’s new clause 21 would require the Chancellor to make an assessment of the impact of the legislation on a large number of different sectors and to lay a report of that assessment before the House of Commons within six months of Royal Assent.
We do not think that any of those clauses are necessary. I should remind the Committee that, apart from the provisions relating to the main rates of income tax, provisions in this Bill will apply across the whole of the United Kingdom and will directly benefit households and businesses in every part of the country. They have been developed with careful consideration of their impact on all regions and sectors of the United Kingdom. It is worth just saying that Ministers assess individual measures as well as the package as a whole for the differential impacts that they may have on each part of the UK throughout the policy development process, and they are under a statutory duty to assess the equalities impact of the provisions contained in the Bill, and those have been analysed and published.
In addition, the Treasury publishes extensive distributional analysis of the impacts of this Bill, together with the impact of the Government’s decisions on welfare and public services. What that amounts to is a rigorous and detailed record of the impact of the Government’s policies on households. The Office for National Statistics also publishes monthly estimates of GDP, and analysis of the impact of Government decisions on GDP is also carried out by the Office for Budget Responsibility, which is itself independent.
Therefore, between those checks and balances and that degree of inbuilt institutional consideration and the packages of support that we have offered, I think that it should be fairly plain that these new clauses are not required. We continue to monitor the impact of the coronavirus crisis closely as well as the response to the schemes that have been put in place. It is right that we should do so alongside the general continuous review of tax and the economy in relation to policy.
Let me remind the Committee that the Government have a commitment to consult—and they do consult—regularly on new tax policy and tax legislation in order to make sure that as wide a range of views and impacts as possible are captured during the tax policy-making process. We have touched on that matter in a previous discussion.
Let me come quickly to the points raised by the hon. Members opposite. The hon. Member for Ilford North rightly highlighted the levelling-up agenda, and he was fully justified in doing so. He said that London was a global city and should be understood as such, but that the Government’s attention should properly be on all the regions and nations of the country, and of course I share that view.
The hon. Gentleman talked about centralisation within the Treasury. I have been a trenchant critic of centralisation in the Treasury historically and on the public record, and I think it reached a bit of an apogee under the last Labour Government—I would say that, wouldn’t I? But I still think it is true—there was a tendency to view every problem as potentially soluble by tweaking the marginal costs and benefits of a system. In some respects, we have had to counteract that tendency in order to give us more of an inclusive view of what ultimately are a set of devolved settlements as well as a UK picture.
The hon. Member for Glasgow Central said something that I thought was quite bold: that the Scottish Government would do a far better job of governing Scotland than the UK Government do within a UK national framework. Of course, the UK does not govern Scotland; it has areas that are reserved and areas that are devolved, and many areas, including higher education, are devolved in Scotland.
I must say that I share the high regard that the hon. Member for Ilford North has for the history of higher education in Scotland. He will know that for many hundreds of years there were two universities in England and five in Scotland, which represented and reflected a high-quality orientation and a commitment to higher education. Unfortunately, it is in the record that Scottish higher education has not made the same kind of progress under the Scottish National party Government, particularly in relation to minorities and equalities, which is a terrible, terrible shame. I wish it were otherwise. So I would not accept the suggestion made by the hon. Member for Glasgow Central, but I will invite the Committee to reject these clauses.
Wes Streeting
Yes, Mr Rosindell.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss the following:
New clause 19—Review of impact of Act on UK meeting UN Sustainable Development Goals—
“The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting the UN Sustainable Development Goals, and lay this before the House of Commons within six months of Royal Assent.”
New clause 20—Review of impact of Act on UK meeting Paris climate change commitments—
“The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting its Paris climate change commitments, and lay this before the House of Commons within six months of Royal Assent.”
Wes Streeting
It is a pleasure to rise to move new clause 4, which asks that the Government review the impact of this Bill on the environment. As I said earlier in our discussions on the Bill, this is where the Government’s stated ambitions on tackling climate change are not yet matched by action.
Stephen Flynn
New clause 4 closely aligns with what the SNP seeks to promote in new clauses 19 and 20, and I will address each of them in turn. First, new clause 19 would require a review of the Bill’s impact on the UK meeting the UN sustainable development goals. The obvious thing that must be said to start with is, why would we not want to do that? Why would we not want to know whether our actions are complementing the UN sustainable development goals? We heard from the hon. Member for Ilford North, who helpfully stole some of my lines, about how important the UN sustainable development goals are. That perhaps suggests why the Government may be reluctant to agree to this new clause, although I hold out hope that the Financial Secretary to the Treasury will rise and show that my doubts are misplaced.
The first sustainable development goal is on ending poverty. Quite frankly, it is absurd that poverty exists in these isles. Unfortunately, the UK Government have been in charge for much of my lifetime, and during that period, poverty has been prevalent because of the actions and decisions that they have taken—we cannot escape that fact. Whether in more recent times through universal credit and the two-child cap, or regarding their inability even to provide free school meals to children in England, the consequences of their actions are great. We have heard that Marcus Rashford achieved more in a matter of days than the Government managed to achieve in a number of years, but that is not something the Government should be proud of. It should not take a footballer to change their direction; that is not how politics should work at the best of times.
The last UN sustainable development goal is on partnerships to achieve the goals. We heard from the hon. Member for Ilford North that the Department for International Development has been completely disbanded and is getting moved into the Foreign and Commonwealth Office. That is an absurd move by the Government, and it flies in the face of sustainable development goal 17, on partnerships to achieve the goals. DFID has done so much to foster good relations across the world, which has allowed us to play a leading role in trying to improve the lives of those whose life chances, quite frankly, are worse than anything we can possibly imagine.
The simple question is, why would the Government not wish to support the new clause? The answer is perhaps that their own record shames them from doing so. If they were to support it, they would be following the path of the Scottish Government, who embedded the sustainable development goals in our national performance framework—Scotland’s vision for national wellbeing—following consultation with the public, trade unions, business organisations, local government, voluntary organisations and wider civic society. It can be done, and in a positive and proactive way, with community groups from across the spectrum. Where Scotland leads, the UK Government have the opportunity to follow
The Exchequer Secretary to the Treasury (Kemi Badenoch)
New clauses 4, 19 and 20 would require the Chancellor to review the environmental impact of the Finance Bill and its impact on the UK’s meeting the UN sustainable development goals and UN Paris climate change commitments. The new clauses are not necessary and should not stand part of the Bill. Tackling climate change is a top priority for the Government, as demonstrated by the UK becoming the first major economy to pass legislation committing to reach net-zero emissions by 2050. The Bill builds on the UK’s existing strong environmental record and commitments by delivering new policies to reduce carbon emissions and enhance the environment, and it provides significant incentives to support the continued decarbonisation of transport.
Clause 83 establishes tax support for zero-emissions vehicles, exempting them from the vehicle excise duty expensive car supplement. From April 2020, vehicle excise duty and company car tax will also be based on a new, improved laboratory test known as the worldwide harmonised light vehicle test procedure, or WLTP, which aims to help reduce the 40% gap between the previous lab tests and real-world carbon dioxide emissions.
The Bill will ensure that HMRC can make preparations for the introduction of the plastic packaging tax, which will incentivise businesses to use 30% recycled plastic instead of new material in plastic packaging from April 2022, stimulating increased recycling. The Government are also reopening and extending the climate change agreement scheme to support energy-intensive businesses to operate in a more environmentally friendly way.
Clause 93, which establishes a UK emissions trading system, and clause 92, which updates legislation relating to the carbon emissions tax, ensure that polluters will continue to pay a price for their emissions once our membership of the EU and the emissions trading system ends following the transition period.
New clause 4 would require an impact assessment of the Bill on the environment to be laid before Parliament within six months of Royal Assent. Where tax policies have a particular environmental impact, the Government will take that into account during the tax policy making process and, where appropriate, publish a summary of the impact in the relevant tax information and impact note, or TIIN, as it is otherwise known. The Bill’s clauses demonstrate our progress towards tackling climate change as well as towards international deals and agreements, without the need for an additional environmental impact review.
The hon. Member for Ilford North made several comments about our spending more money on coronavirus than on climate change and about our not being on track to meet our net zero targets. All I can say to him is that many of the actions that we need to take to deliver our climate targets also help the UK’s economy to recover from the impacts of covid-19. We do not look at those issues separately. He must remember that between 1990 and 2017 the UK reduced its emissions by 42% while growing the economy by more than two thirds. It is simply wrong to say that we are not doing enough on climate change.
Building on our ambitious announcements in the Budget, such as the £800 million fund for carbon capture and storage, we are developing ideas for how we can go further using clean, sustainable and resilient growth as a guiding principle for our strategy to recover from the impact of the virus.
New clauses 19 and 20 would require a review of the impact of the Bill on the UK’s meeting the UN sustainable development goals and Paris climate change agreements. The UK published a voluntary national review setting out in detail our progress towards the sustainable development goals and identifying areas of further work in June 2019. We remain committed to supporting implementation of the sustainable development goals, including to help us build back better from the covid-19 crisis. By working to achieve the sustainable development goals, we will also be better placed to withstand future crises.
Under the Paris agreement, the Government must maintain and report on their emissions reduction commitments in the form of a nationally determined contribution. The UK’s legally binding commitment to reduce emissions to net zero by 2050 is among the most stringent in the world, and the system of governance implementing the commitment under the Climate Change Act 2008 is world leading.
The Committee on Climate Change, established under the CCA 2008, provides independent evidence-based advice to the UK Government on how to achieve the targets. It reports to Parliament annually on progress made in reducing greenhouse gas emissions and on preparing for and adapting to the impacts of climate change. The Government are committed to tackling climate change. The measures in the Bill already demonstrate that, as well as highlighting our progress towards achieving net zero emissions by 2050, which is one of the most ambitious climate change commitments in the world. In this context, a separate review of the environmental impact of the Bill and how it meets international agreement is unnecessary. I therefore ask the Committee to reject the amendments.
Wes Streeting
I am concerned by the complacency of the speech that we have just heard from the Exchequer Secretary. I do not think it is sufficient to say that the UK is doing enough to tackle climate change and to meet our net zero ambition when all of the evidence suggests that that is not the case. That reinforces even further the case to run a proper impact assessment on the Bill.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss:
New clause 17—Assessment of equality impact of measures in Act—
(1) The Chancellor of the Exchequer must lay before the House of Commons a report assessing the effects on equalities of the provisions of this Act within 12 months of the passing of this Act.
(2) The review must make a separate assessment with respect to each of the protected characteristics set out in section 4 of the Equality Act 2010.
(3) Each assessment under (2) must report separately on the effects in in each part of the United Kingdom and each region of England.
(4) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
‘regions of England’
has the same meaning as that used by the Office for National Statistics.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on equalities.
Wes Streeting
New clause 5 requires the Chancellor of the Exchequer to review the impact of the Bill on individuals or groups with protected characteristics defined under the Equality Act 2010. The Equality Act, passed by the last Labour Government, was one of the most important pieces of legislation that we passed. It aimed to accelerate the advance this country has made over successive decades in trying to eliminate the discrimination, prejudices and inequalities experienced by people on the grounds of race, ethnicity, gender, sexual orientation, gender identity, religious beliefs and so on.
Throughout my life, I have felt an almost certain sense of inevitability that Martin Luther King was right when he said that
“the arc of the moral universe is long but it bends towards justice.”
It implies the onward march of social progress. We have seen that in this country. On discrimination against people based on their race, the indicators have improved. Action has been taken to tackle gender equality and the role of women in our society. The Labour Government delivered historic changes in terms of the treatment of LGBT people and established such a consensus that the coalition Government built on that record with legislation on equal marriage. The Disability Discrimination Act 2005 improved the treatment of disabled people.
However, inequality is still present in our society and injustice is still too frequent. I am not sure we can say with the same sense of certainty I used to feel that the onward march of social progress is inevitable. Progress has to be defended otherwise it gets rolled back. Unless there is a relentless and genuine commitment to tackling inequalities, they continue to persist. It is not just that people are victims of deliberate and conscious bias and discrimination. Often they are victims of unconscious bias and discrimination, and that is why the evidence and the data are so important. It is not enough just to reassure ourselves that we are nice people and we like treating one another fairly. We have to look at, and be guided by, the evidence. Even those of us with deep personal convictions when it comes to tackling inequality and injustice can make mistakes. We are all affected by biases and preconceptions, and we have to remain constantly alive to them.
I do not think the picture painted in our country today is one we ought to be satisfied with. Women make up 69% of low-paid earners and the majority of people living in poverty, including 90% of lone parents, almost half of whom are living in poverty. Many of those women are disabled or face racial inequality, a reminder that although we understandably and rightly set out in legislation those protected characteristics one by one, the discrimination, prejudices and biases that people are subjected to are often intersectional. Sometimes people face discrimination, whether deliberate or otherwise, twofold, threefold or fourfold. Women are disproportion- ately likely to work in sectors that have been hardest hit by the lockdown we are experiencing as a result of coronavirus. Figures from the Institute for Fiscal Studies show that 36% of young women work in sectors that have been closed down, including restaurants, tourism and retail.
Almost half of people living in poverty today in the UK are disabled or live with someone who is. The Runnymede Trust has found that black African and Bangladeshi households have 10 times less wealth than white British households, and black Caribbean households have about 20p of wealth for every £1 of white British wealth. Around 18% of Bangladeshi workers are paid below the minimum wage, compared with 3% of their white counterparts. That is a reminder and recognition of the fact that although we use the term “black and minority ethnic” as a catch-all, there are many different experiences among people of different races and ethnicities. We have to pay attention to the different variables and factors that have an impact on people.
Alison Thewliss
I rise to speak to new clause 17 and associate myself with the remarks of the hon. Member for Ilford North, with which I broadly agree and support. We certainly support new clause 5, which chimes with our new clause. We live in a society where it is clear and evident that able-bodied older white men do better than almost everybody else, so what we want to see from the Finance Bill is who benefits from the measures within it and how we know that. We do not know that from how the Government have acted, as they have conducted a very light-touch equality impact assessment on the Budget.
The Women’s Budget Group has produced an excellent briefing, and it calls the Treasury out on failing to publish comprehensive equality impact assessments:
“The only impact assessment relating to protected characteristics in the Budget documents are the Tax Information and Impact Notes (TIINS) produced by HMRC. Only a few measures were recognised to have any equalities impact at all and even here the analysis is cursory, based on limited evidence and with a poor understanding of equality impact…In the absence of a meaningful cumulative equality impact assessment of the budget as a whole it is impossible to judge whether the Treasury has met its obligation under the Public Sector Equality Duty to have ‘due regard’ to equality.”
That is pretty damning on the equality impact assessments that Ministers say they have carried out.
Under the measures assessed as having an equalities impact in the equality impact assessment, the Women’s Budget Group notes that for the lifetime limit for capital gains tax entrepreneurs’ relief, the assessment recognises that
“claimants tend to be older, men, of above-average means, and include individuals who are selling their business or their company’s shares on retirement”,
and does not anticipate an impact on any other groups sharing a protected characteristic, but there is no working to show how the Government arrived at that. There is no further analysis as to why they think that no other groups will be affected. It is one thing to assert that, but the Government have to show their working, and they have not done that.
The Women’s Budget Group also notes that the equality impact assessment states that the measure on pensions tax income thresholds for calculating the tapered annual allowance will impact more on men than on women. The assessment states that it is
“not anticipated that there will be impacts on any other groups sharing protected characteristics”.
However, the Women’s Budget Group points out that the family resources survey could have been used to assess the impact by age, ethnicity, disability and various other characteristics, but that was not done. Again, it is not a full equality impact assessment; it is very light touch.
The WBG also mentions the changes to the disguised remuneration loan charge as referenced in the equality impact assessment. The analysis states that,
“broadly the measure is expected to affect more males than females”,
but that it is
“not anticipated that this measure will have a significant, or disproportionate, impact on groups with protected characteristics”.
However, there is no explanation for that. It might well be true, but we cannot tell because the Government have not shown their working.
The Women’s Budget Group analysis also discusses measures where no equalities impact is identified at all, when it really should have been. I do not want to go into all of these things, because they are multiple, and we would be here all afternoon, but I will touch on the changes to the van benefit charge and fuel benefit charges for cars and vans and the taxable benefits regime for measuring CO2 emissions, which primarily impact on
“individuals who use a company van or car which is available for their private use and/or who are provided with fuel for their private use by their employer”.
Those people are far more likely to be men. We might guess that, or we might anticipate that. The Government’s statistics on driving licences show that in 2018, 81% of men had a driving licence, compared with 70% of women. There are also issues of race, because 62% of people designated as Asian, 52% who are black, and 76% of people who are white have driving licences. That is a clear discrepancy and will have a clear differential effect as to who will or will not benefit from the measures. The Government already have those statistics but have not chosen to do an equalities impact assessment on them. There will be a differential impact because not everyone has a driving licence and those who do have one are predominantly white men.
The Government might want to look at the sectors that would benefit. There may be differences in the types of people who would do jobs with a company car or van. The Government might want to look at those sectors and say, “Actually, there is a disproportionate number of people of a particular background in there.” That has not been done. If we do not count those things we do not know what the impact is. We do not know who benefits and why, or what we can do to make sure that everyone benefits from the measures that the Government propose.
That, I suppose, is just a small example of why the impact assessment is needed. There are clear disparities across society and clear inequalities. If we do not count in the Finance Bill who benefits, why, and what can be done to redress the imbalances that we see in society in front of us, by taxation or other measures, we will never be able to address those inequalities and go to a more equal society.
Kemi Badenoch
New clause 5 would require the Chancellor to conduct and lay before the House an equality impact assessment of the Act within six months of Royal Assent. New clause 17 would require him to lay a similar report within 12 months. Those additional reporting requirements are not necessary. The Treasury considers carefully the equality impacts of the individual measures mentioned and announced at fiscal events on those sharing protected characteristics, including gender, race and disability, in line with its legal obligations and its strong commitment to equality issues.
The outcome of all fiscal events is published, and is subject to much parliamentary and public scrutiny. The Treasury also takes care to pay due regard to the equality impact of its policy decisions relating to the covid-19 outbreak, in line with all legal requirements and the Government’s commitment to promoting equality. There are internal procedural requirements and support in place, to ensure that such considerations inform decisions taken by Ministers.
In the interest of transparency the Treasury and HMRC publish tax information and impact notes for individual tax measures that include in summary form assessments of their expected equalities impacts. The system of accompanying tax legislation with TIINs was introduced under this Government, and the notes include headline summaries of equality impacts, as well as other important information that reflects internal assessments carried out as an integral part of decision making.
In addition, the Treasury already publishes analyses of the impacts of the Government’s measures on households at different levels of income, in the “Impact on households” report, which is published separately alongside each Budget, along with trends in living standards and the labour market, by region and income level. That is the most comprehensive analysis of its type available, and it shows that as a result of decisions taking in Spending Round 2019 and Budget 2020 the poorest households have gained the most as a percentage of net income.
That brings me to the comments of the hon. Member for Ilford North and the hon. Member for Glasgow Central. They keep talking about the Government not doing enough on inequalities. Actually the Government have done quite a lot, but the hon. Members refuse to acknowledge it. When we have commissions and recommendations the hon. Member for Ilford North complains about a new commission. We have carried out recommendations, and the hon. Members pretend that nothing has happened. The hon. Gentleman mentioned the shadow Justice Secretary. Did he ask him about the progress that we have made on the Lammy report? We have carried out many of those recommendations, but hon. Members stand up in Parliament and pretend that nothing has happened. They continue to use incendiary and inflammatory rhetoric. Is it any wonder that there are people out there who feel that the Government are doing nothing, when so many MPs in this House stand up and say so? It is a shame, and as Equalities Minister I think it is a disgrace.
Kemi Badenoch
No, I am not giving way; Opposition Members have had their time. I ask the hon. Lady, instead of trying to give me lectures, to take some time to learn a little more about what is going on. Even the phrase she talks about—“people with protected characteristics”—is wrong; we all have protected characteristics. The Equality Act is for everybody and not for specific groups of people.
On that note, neither of the new clauses would be useful in finding out more about the impact on equality, because the Government regularly publish in summary form the equality impact assessments for the legislation that we introduce. The reports required by the new clauses would not add any genuine value, so I ask the Committee to reject them.
Wes Streeting
That speech was really quite extraordinary and incendiary itself in response to what has been said. We are giving voice to the statistics and the data. Speaking for myself—I imagine this is also true for the SNP spokesperson—I am particularly giving voice to the concerns of my constituents. I represent one of the most ethnically and religiously diverse constituencies in the country. People who have written to me in recent weeks have not done so simply out of anger or emotion, and certainly not because they have read something that I have said in Hansard—that would be a novelty—but because of their own lived experiences. That is the frustration for me.
It would be one thing had the Government said this afternoon, “This is what we have done, but we recognise that there are big challenges, so this is what we still plan to do,” but their response to the protests of recent weeks has been tone deaf, for the most part, and actively irresponsible in other respects. It is regrettable that we do not seem to be seizing the moment, either in Government or as a Parliament, to reassure people throughout the country that we will leap on this moment. If we look throughout history, we see that sometimes events occur and there are big moments that can positively shift the dial in the most remarkable way. That is what we should be seeking to do here. I have actually seen a better response in that respect from the private sector than from our own Government. The private sector does not have a democratic accountability to the people—it has a commercial one and a profit motive; if companies are doing these things out of a sense of corporate social responsibility, that is good for them—but the Government have democratic accountability.
The Government’s efforts on equalities do not match the rhetoric we heard from the Minister. The Treasury has a particular leadership role to play, particularly on tackling economic inequalities that have an impact on people from a range of characteristics, for a range of reasons, and in different ways. With that in mind, I want to press new clause 5 to a vote.
Question put, That the clause be read a Second time.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
I beg to move, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss new clause 22—Review of effect of Act on tax revenues—
“(1) The Chancellor of the Exchequer must review the effects on tax revenues of the Act and lay a report of that review before the House of Commons within six months of Royal Assent.
(2) The review under (1) must contain an estimate of any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The estimate under (2) must report separately on taxes payable by the owners and employees of Scottish Limited Partnerships.”
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the Bill; and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
Bridget Phillipson
It is a pleasure to take over from my hon. Friend the Member for Ilford North, and to see you back in the Chair this afternoon, Mr Rosindell.
Throughout proceedings in Committee we have repeatedly touched on the changes that the Government wish to make to tax reliefs. The regularity with which we have discussed such matters is not surprising when we consider that the UK had 1,190 tax reliefs as of October 2019, including 362 so-called tax expenditures—in other words, reliefs that support specific Government objectives.
HMRC has identified that the cost of policy-motivated tax expenditures is large both in absolute terms—approaching 8% of GDP—and by international standards. That is the reason behind this new clause. As I argued earlier in Committee, we on the Opposition Benches would like to see a broad review of tax reliefs, to determine exactly who is benefiting from the hundreds that exist, whether they are fair, whether they represent good value for money and whether they are securing the policy outcomes originally intended.
We believe the Government could start improving the scrutiny of tax reliefs by supporting the new clause to ensure that those contained in the Bill are monitored properly and transparently and that Parliament can debate whether they are having the desired effect and represent value for money for the taxpayer. Points raised earlier in our debates demonstrate the merits of embedding such a practice.
On clause 21, we highlighted how changes to pensions tax relief around the tapered annual allowance will affect all pensions, not just those of the senior clinicians and other public sector workers who have been adversely affected by recent changes. We should therefore be reviewing the impact of that measure, not only to ensure that it reverses the worrying trend we have seen in the retention of senior medical staff, but to consider the overall impact on taxation revenue.
On clause 22, relating to entrepreneurs’ relief, I raised concerns that the measure had benefited a small number of wealthier claimants and had a negligible effect as an incentive for investment decision making. The Minister responded that the Government had conducted an internal review that had influenced the reform and that he would review and monitor the effects of the change as standard.
It is reassuring to know that there are reviews of some of these reliefs, but as the Minister will know from the National Audit Office’s report, the Government’s monitoring of tax reliefs is just not what it could be. Indeed, the Government are not reporting costs on more than two thirds of tax reliefs, and HMRC does not know whether most tax reliefs offer value for money. Furthermore, internal reviews, where they occur, do not go far enough and do not lead to an adequate level of debate or scrutiny.
I know that we have all enjoyed delving into the finer details of Government tax policy in recent weeks. Although we might return to this soon, we should accept that such opportunities are fleeting, and little is done to facilitate ongoing scrutiny of tax reliefs. Other countries do this much more regularly, and I will return to that point. No doubt the intention behind tax reliefs is often positive—namely, to incentivise a certain type of social or economic behaviour that is of some benefit to the country—yet the lack of adequate monitoring and oversight makes determining whether they are having the desired effect more difficult. In many instances, we have seen costs spiral out of control, differing substantially from initial projections.
Of course, cost is not the only metric by which we might want to measure the success or otherwise of a tax relief. There are other—particularly behavioural—impacts that we may want to consider. That is why proper parliamentary scrutiny of these policies, which takes into account the full picture, is so important. This new clause would enable that to happen. In addition, it would help to embed the processes being undertaken by HMRC and the Treasury, which have been noted by the National Audit Office.
Our concerns about the adequate scrutiny of tax reliefs go beyond those included in the Bill, and I would like to draw the Minister’s attention to the concerns raised in the NAO report. It notes that the estimated cost of tax expenditures was £155 billion in 2018-19. Some of that will obviously go to achieve worthwhile social or economic objectives, but the NAO says that
“it does not reflect the amount of tax that would be generated if tax expenditures were removed”
due to any corresponding behavioural change and the economic impact that would result.
There remains a concern that, for something that is such a cost to the Government, there is little in the way of evaluation to ensure value for money. Of the 362 tax expenditures that exist, 111 have been costed by HMRC, 63 have been assessed by the Treasury, and only 15 have had published evaluations since 2015. That is despite their cost having grown in recent years. In July 2019, the OBR reported that the known cost of tax expenditures had risen in the past decade. That is a 5% real increase in the summed estimated cost of tax expenditures from 2014-15 to 2018-19.
The mounting number and cost of tax reliefs adds complexity to our tax system and to evaluating fairness and value for money. Despite warnings, we have not seen enough progress on this front. The NAO stated in 2014 that there was little in the way of “a framework or principles” to guide the administration of tax reliefs. In 2018, the Public Accounts Committee concluded that HMRC did not know whether a large number of tax reliefs were delivering value for money. It should be acknowledged that both HMRC and the Treasury have since taken steps to increase their oversight of tax expenditures and actively consider their value for money, but that has not allayed concerns. In July 2019, the OBR identified the costs of tax reliefs as one of four new fiscal risks to the public finances. It stated:
“The Government does not seem to have a systematic way of evaluating the effectiveness of those tax reliefs and expenditures with a stated policy objective.”
The International Monetary Fund has also stated that tax expenditures require the same amount of Government oversight as public spending.
Despite those warnings and recommendations, we have simply not seen the necessary progress from Government in implementing the measures that would allow for the proper scrutiny of tax reliefs. This new clause would help us to turn a page on this, by establishing the principle that Parliament should play an ongoing role in this process. As I mentioned earlier, in relation to the annual allowance and entrepreneurs’ relief, we should be able to assess whether these reforms are having the right effect and debate this in Parliament.
Other measures in the Bill demand similar levels of ongoing scrutiny. As we heard in the debate on clause 27, many businesses are set to benefit from increases to the rate of relief for investing in research and development. In that debate, my hon. Friend the Member for Ilford North noted:
“We have to ensure that any uplift in innovation investment also ensures value for money, and that we are more ruthless about returns for the taxpayer and our economy.”––[Official Report, Finance Public Bill Committee, 9 June 2020; c. 90.]
Such a warning is pertinent, given the NAO’s observation that R&D tax credits have been subject to increased levels of abuse, including by companies with a limited UK tax presence. As the OBR states, when a tax credit becomes more generous,
“it increases incentives to re-badge existing expenditure as qualifying R&D or to engage in fraudulent claims.”
It is welcome that the NAO has found that HMRC has been working to better understand factors affecting the cost of R&D reliefs and others, including entrepreneurs’ relief. Rigorous parliamentary oversight would ensure that any abuse of tax relief measures is properly investigated.
The wider point about the potential abuse of tax reliefs is worth exploring further. I am grateful to the research of TaxWatch UK, which highlights the troubling extent of these practices. For example, it points out, in relation to the video games tax relief, that some companies claiming significant amounts in tax credits were not even paying corporation tax. The relief was initially estimated by the Government to cost £35 million a year. Ministers committed to reviewing the relief after three years of operation to determine whether it had been effective. However, it is not clear whether a review has taken place, and in the meanwhile the cost of the relief has substantially exceeded what was forecast, reaching £108 million in 2017-18.
Alison Thewliss
I agree wholeheartedly with the hon. Member for Houghton and Sunderland South. She has gone into extensive detail, and I am sure everybody will be glad to know that I do not aim to repeat what she said, but the notion of the tax gap, and the fact that money is not coming in that our public services desperately need, particularly at this time, is very serious. The UK Government should be seized of the significance of this, and should do everything they can to eliminate the tax gap.
In many cases, the tax gap arises because of the complexity of our tax system. Those who are looking for loopholes—who are looking not to pay their taxes, and to divert and dodge—find ample opportunity to do so. It is not acceptable that this and successive Governments have played whack-a-mole with all these tax schemes as they have appeared. As soon as one appears, the Government shut it down, and then another one, or several more, emerge. A whole lot more needs to be done on anti-avoidance, rather than our being reactive to all this. A comprehensive anti-avoidance rule, and measures to make sure that the tax that is supposed to come in does so, ought to be a priority for the Government.
Our new clause—it is similar to Labour’s new clause, which we fully support—states:
“The Chancellor…must review the effects on tax revenues”
of the measures in the Act and bring that review before the House of Commons. It asks that
“any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid…and the amount paid”
be reported on.
However, I want to touch more on Scottish limited partnerships, because this issue is not going away. The Government have failed to deal with it comprehensively. There is a continuing problem, both in respect of Companies House and in respect of how the partnerships are dealt with; that includes fines not being enforced and collected. Again, that money should be in the Government’s bank account, but if they are not going to enforce the rules, they will not get the fines. The fines would have been quite substantial had they been enforced since the measures came into place a couple of years ago.
The system allows those with an intent to conceal or deceive to do so easily by registering in secret as an SLP. These vehicles have a legal personality that makes them quite different from English limited liability partnerships. It means that individuals can make agreements in the name of the financial product without ever having to name the person or the people who control it. They have been used for years to funnel millions of pounds of dirty money created by illicit business activities, and this is still ongoing.
I can quote headlines to the Committee. There is, “How a Scots council house was secret base for criminals busting Putin sanctions”. There is one about Scotland’s firms and bribes to Argentina and Uzbekistan. There is, “Russian gang leader jailed for faking metal exports to Scotland”, and “Ukrainian mercenaries are using Scottish ‘tax haven’ firm as front”. There are headlines about money coming through Baltic banks, the effect on issues in Peru and a private war in Libya funded by Scottish funds. These are all current or previous issues in which Scottish limited partnerships have been involved. As I said in a previous debate, this is having an impact on Scotland’s reputation in the world. Most recently, just last month, David Leask and Richard Smith, who have been brilliant campaigners on this issue, revealed that more than 700 British firms have been blacklisted in Ukraine for suspicious activity related to money laundering across the former Soviet Union, and all involve Scottish limited partnerships.
That is why we in the SNP keep pushing on this issue; that is why it is so important to us. There is dirty money going around the world, fuelled in part by SLPs and the way in which they work. Also, the Government are not collecting tax on any of this money, and that contributes to the tax gap—the money that is not going to the Exchequer—as well as to global criminality.
If the Minister will not accept the new clause—given all the new clauses that the Government have not accepted, I suspect that they will not accept this one either—I urge him, at the very least, to listen to my concerns and those of campaigners about SLPs, and to take action to close the loopholes, including by fining the companies that are still flouting the rules, which the Government are not doing, and making sure that the money collected goes to the Exchequer, where it can be spent for the benefit of all our constituents.
Jesse Norman
I thank the hon. Members for Houghton and Sunderland South, and for Glasgow Central, for their comments, which I will respond to in due course.
New clause 6 would require the Government to review all tax reliefs in the Bill within a year, while new clause 22 would require the Government to review the effect on tax revenue of the Bill within six months of it being passed into law. These amendments are not necessary. Let me deal first with new clause 6 and then turn to new clause 22.
As Members will know, the Government keep all tax reliefs under review, to ensure that they strike the right balance between simplicity, effective targeting and overall yield. When a new tax relief is announced at a fiscal event, the Government publish estimates of the Exchequer impacts of the policy change in the Budget document.
The Government also consult on new tax reliefs and proposed changes to tax reliefs, bringing in external expertise as part of the policy-making cycle. Officials are constantly working on ways to improve policy development and administration, and management of reliefs.
The Government also conduct evaluations, including of a number of quite significant reliefs, such as research and development expenditure credit, or R&D tax credits, and entrepreneurs’ relief. In 2015, Her Majesty’s Revenue and Customs published an evaluation of R&D tax credits. In 2017, it commissioned an evaluation of entrepreneurs’ relief that led to a series of reforms—most recently, in Budget 2020, a significant reduction in the lifetime limit. HMRC will continue to monitor and evaluate reliefs, and it will bring forward a pipeline of further evaluations in due course.
HMRC is also considering—very much at my insistence—a proposal for a more systematic evaluation programme for tax reliefs, which would respond to the concern raised by the hon. Member for Houghton and Sunderland South, and it already monitors the effect of tax reliefs on taxation revenue.
HMRC issues an annual tax reliefs statistics publication, which includes estimates of the costs of tax reliefs. It is also undertaking a project to expand its published cost information, and I am pleased to remind the Committee that in May HMRC published cost estimates for a further 47 previously uncosted tax reliefs.
New clause 22 would require the Government to review the impact of the Bill on tax revenues within six months of it receiving Royal Assent. As I have said, the Government keep all taxes under review, and will continue to measure and publish annual statistics on the tax gap.
HMRC’s annual “Measuring tax gaps” report estimates the difference between the amount of tax due to be paid to HMRC and what is actually paid. It provides a breakdown of different kinds of behaviour, taxpayer groups and changes over time. However, the tax gap report is retrospective, with some time lag, due to the dates on which data become available. For example, estimates for 2018-19 are due for publication in July 2020, with some components projected in this year.
In addition, data limitations mean the tax gap is not suitable for evaluation at a granular level. For this reason, it would not be possible to disaggregate the impact of the compliance, for example, of SLPs. Furthermore, the tax gap may rise or fall due to a number of external factors that are unrelated to the actions of the Government.
HMRC also publishes annual reports and accounts, which include detailed information on revenue collection and on additional yield from compliance activity. It is committed to providing transparency to taxpayers about its activities, and these publications are important in demonstrating that commitment.
I now come to some of the points made by the hon. Members for Houghton and Sunderland South, and for Glasgow Central. The hon. Member for Houghton and Sunderland South, who I welcome back to the Committee after her period of absence, is absolutely right that tax reliefs can play a valuable role. However, she is also right that there are reliefs that can and should be reduced. That is, as I have said, a matter on which the Government are closely focused.
Bridget Phillipson
I welcome the Minister’s suggestion that the Government will look more systematically at the whole range of tax reliefs that are available, but it is not clear to me that, without the sterling work of the National Audit Office, we would have seen much progress at all in this area. The Government must seek to do a lot more. We believe that there is a strong case for additional parliamentary scrutiny in this area, so I would like to test the will of the Committee on new clause 6.
Question put, That the clause be read a Second time.
The Chair
With this it will be convenient to discuss
New clause 15—Review of effects on migration of measures in Act—
“(1) The Chancellor of the Exchequer must review the effects on migration of the provisions of this Act in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects on—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects in each part of the United Kingdom and each region of England.
(5) In this section—
‘parts of the United Kingdom’ means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”
This new clause would require a Government review of the effects of the measures in the Bill on migration levels.
Stephen Flynn
New clauses 14 and 15 together provide for a review of the effects of measures in the Bill on migration. Has there ever been a more apt time to assess the impact of the Finance Bill on migration, as the UK steams ahead with dragging Scotland out of the European Union against its will and, in doing so, removes the ability for us to move freely across the continent of Europe and for Europeans to move freely into Scotland to take on the jobs that we so desperately need them to take, as well as providing the cultural and economic support that our society needs and deserves?
The debate about migration has been had on many occasions in the Chamber and in many Committees in Parliament, but it is particularly important in relation to the Finance Bill, given the fact that migration is unequivocally a positive thing for our economy, in particular in Scotland. I will reflect briefly on an example from my constituency. A company called John Ross Jr makes smoked salmon so good—the kilns are good—that even the Queen enjoys it. It is a world-renowned company. When the company had sight of the UK Government’s plans for immigration, it wrote to me describing as “catastrophic” the impact of removing free movement of people into Scotland.
That company’s labour force has been heavily dominated by people from fellow European nations. They have driven that organisation forward, which is a positive thing that we should welcome and encourage. It is good for Scottish business, it is good for the Scottish economy and therefore it is good for the wider UK economy.
However, for some reason, the UK Government seem intent on dragging Scotland away from that situation, which is deeply disappointing, because Scotland faces a wider demographic challenge—a demographic time bomb, so to speak. Our working-age population continues to decrease and migration is one of the easiest solutions to that problem.
The Scottish Government have sought to be pragmatic in that regard. They came forward to the UK Government in good faith, with proposals for a Scottish visa that would not be different from what is being put in place by the UK Government, but with an additional element that which would allow us to attract the workforce that we need. It would perhaps replicate what is in place in Canada and Australia, but it was rejected out of hand— in fact, I think that it was rejected out of hand within 20 minutes—despite the fact that it is in Scotland’s best interests.
Earlier, we heard—I think it was from the Minister—how the UK Government do not have control over all aspects of life in Scotland. However, where they do have control on immigration, they are doing severe damage, which will not be forgotten by Scottish business nor by the Scottish people, and when the time comes for us to make our own decisions once again and we go to that vote on whether Scotland should be an independent nation, it is the likes of the UK Government’s immigration policies that will weigh heavily on the minds of Scottish voters.
I will just conclude, because I am conscious of time, given the desire for everyone to be able to get home, by saying that the reality—the big question, as I have said before—is: why not? Why would someone not support this proposal? Why would they not want to know what the impact of the Bill will be, because ultimately we will have a situation where UK tax policies fail to boost immigration and falling immigration hits the Treasury. This proposal is a sensible one, which would hopefully protect the interests of Scotland.
Wes Streeting
Based on how the pattern of voting is going this afternoon, we can guess how the discussion of this proposal will turn out, unless the Government Members have a Damascene conversion and decide to swing behind it.
I am conscious of the clock, but we have had plenty of opportunity recently to debate Government immigration policy; I think the Opposition’s views are very well known. The economic debate about immigration is an important one, and it is important to remind people not just in the House but across the country that it remains a positively good thing for this country that the UK remains a destination to attract talent from around the world to come and work and study on these shores. That is a national strength. Of course, it is also important that we have immigration rules that are widely understood and fairly applied, and enforced where necessary.
Jesse Norman
I will keep my remarks brief, in keeping with the spirit of Opposition Members’ comments. These clauses would require the Chancellor to review the effect of measures in the Finance Bill relating to changes in migration under several different EU exit scenarios.
I must emphasise that those scenarios are entirely hypothetical; that in itself is a highly questionable aspect of these new clauses. However, in any case, these new clauses are not necessary. I agree entirely with the hon. Member for Ilford North that immigration policy should be fair and seen to be fair. It is absolutely right that the Government have committed to ending free movement by January 2021; that will not change. The Immigration Bill delivers on that commitment but, in the spirit that the hon. Gentleman identified, it also lays the foundations for a firmer and fairer immigration system that welcomes people—the best and the brightest, to use the phrase in vogue—wherever they come from, and that is a good thing.
The Government commissioned the independent Migration Advisory Committee to advise on the role of the future immigration system and the appropriate salary thresholds for the policy, and the Migration Advisory Committee recommended against regional variation across the UK. As I have said, and given that recommendation, it would be disproportionately burdensome to create additional reporting requirements focused specifically on the migration impacts of policies in the Bill.
The Chair
With this it will be convenient to discuss new clause 23—
Review of impact of Act on poverty—
“(1) The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on poverty and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider—
(a) the impact on absolute poverty;
(b) the impact on relative poverty; and
(c) whether such a study should in future be a regular duty of the Office for Budget Responsibility.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on poverty and consider whether the OBR should conduct such assessments as a regular duty.
Alison Thewliss
We had the debate on child poverty earlier in this debate, and it is important that the Government are held to account for the measures in the Bill and their impact on child poverty. They affect many of my constituents and, as others have said, it should not take a footballer to tell the Government that their child poverty measures are inadequate. Public sector reporting duties on sustainable development goals and the importance of action to tackle poverty were mentioned earlier, and the Government have an obligation to deal with that. They are failing so many of our constituents all the time when it comes to child poverty, so it is important that we use all the measures that we can possibly can. I appreciate that the measures to amend the Finance Bill are limited by the way in which the Bill is put through the House, but it is incredibly important that the Government are held to account. They could match the Scottish Government’s tackling child poverty delivery plan 2018-22, which has at its heart the Scottish child payment for low-income families for children under six. We are prioritising child poverty in Scotland because we know how important it is for the life chances of every young person in Scotland.
Without the measures to hold the UK Government to account on child poverty, we fail in the measures that we do not have control of in Scotland. The vast majority of the social security budget and measures are controlled from Westminster, as is the vast majority of tax and spend. We will do everything that we can within our power to mitigate that. The UK Government deserve to be held to account for their record, which is in many respects appalling.
Wes Streeting
I rise to speak to new clause 23 that I tabled with my hon. Friends and to support new clause 16. I do not want to disrupt the cross-party consensus among Opposition parties on this particular issue, but I will point out that almost one in four—230,000—of Scotland’s children are officially recognised as living in poverty. That figure is from the Child Poverty Action Group, who used Scottish Government data. It observed:
“In the absence of significant policy change, this figure is likely to increase in the coming years, with Scottish Government forecasts indicating that it will reach 38% by 2030/31. Analysis by the Resolution Foundation suggests the Scottish child poverty rate will be 29% by 2023-24—the highest rate in over twenty years.”
Let us hope that the Scottish Government’s child poverty strategy is a success—children are counting on it. Of course, the Scottish Government—here represented by the Scottish National party—are right to point to some of the impacts of UK Government policy on poverty in Scotland, and we would support them in that, but we also urge them to use their powers under the existing devolution settlement, taking responsibility for the fact that significant numbers of children in Scotland live in poverty. That is on the watch of an SNP Government who have been in power for a significant period now. I hope that next years’ Scottish parliamentary elections shake out some of the complacency that we see in Nicola Sturgeon’s Government.
Alison Thewliss
I disagree with what the hon. Gentleman has said. Also, bodies such as Sheffield Hallam University have pointed to the fact that Scotland mitigated the bedroom tax. Child poverty in Scotland has been mitigated because of such actions—where we can take action, we have taken action—while children in his constituency still have to face the bedroom tax.
Wes Streeting
Children in my constituency suffer under a Conservative Government—the hon. Lady will get no disagreement from me on that. Of course, where the Scottish Government take steps to mitigate the impact of Westminster Government decisions, I have no doubt at all that they will receive cross-party support from my Scottish Labour colleagues, but the point about the Scottish Government accepting responsibility for what happens to people in Scotland has to be a feature of the debate. One of the reasons why I admire Nicola Sturgeon as a politician and political leader is the skilful way in which she always manages so eloquently to pass the buck down to London.
Stephen Flynn
Does the hon. Gentleman not agree that that money, rather than having to be spent by the Scottish Government to mitigate the actions of the Conservatives, would be better spent on addressing some of his concerns? Is that not the way a Parliament should function? It should not be for a Scottish Parliament or Government to mitigate these things.
Wes Streeting
I am grateful for that intervention because, having had our knockabout between the Labour party and the SNP, we can now unite in common cause against this terrible Tory Government in Westminster.
Turning briefly to the facts, we know that wealth and income inequalities in the UK are stark: the richest 10% of households own 45% of the nation’s wealth, while the poorest 50% own less than 10%. The average FTSE 100 chief executive is paid 145 times more than the average worker, and Britain’s top 1% have seen their share of household income triple in the past four years, while ordinary people have struggled. Over the past decade, when Governments have been led by the Conservatives, we have seen the slowest growth in living standards since the second world war.
Shockingly, hard work does not necessarily guarantee even a basic standard of living. Wages have failed to keep up with living costs, and 14 million people live on incomes below the poverty line, including 4 million children. It should never be the case that where people are going out to work, doing the right thing and earning money for themselves and their families, they should still find themselves living in conditions of poverty, and yet that is the situation we find in our country today.
Inequality and the poverty it creates have led to an increasing number of what economist Sir Angus Deaton called “Deaths of Despair”, caused by drug and alcohol abuse due to financial hardship and hopelessness. The rate of such deaths among men has more than doubled since the early 1990s, so the human consequences of economic inequality are clear in Government statistics. People are dying needlessly as a result of the inequality that blights our nation.
Earlier this week, I was struck by the exchange at Prime Minister’s Question Time between my right hon. and learned Friend the Leader of the Opposition and the man who tries to the give the impression that he is our Prime Minister. Extraordinarily, the Prime Minister did not seem to recognise the description offered to him of child poverty in our country. I do not expect the Prime Minister of the country to have instant recall of every piece of data held by his Government, but on something as fundamental as the number of children living in poverty—or the trends of those numbers, at least—I would have expected that the Prime Minister might have some understanding of what is going on.
When my right hon. and learned Friend described poverty in Britain, he was not talking about forecasts or future expectations of growth in child poverty; he was talking about the situation today, and he was citing the Government’s own Social Mobility Commission. On page 17 of its June 2020 report “Monitoring social mobility 2013 to 2020: Is the government delivering on our recommendations?”— a question that lends itself to quoting the title of John Rentoul’s book, “Questions to which the answer is ‘No!”—it says very clearly:
“In the UK today, 8.4 million working age adults live in relative poverty; an increase of 500,000 since 2011/12. Things are no better for children. Whilst relative child poverty rates have remained stable over recent years, there are now 4.2 million children living in poverty—600,000 more than in 2011/12. Child poverty rates are projected to increase to 5.2 million by 2022. This anticipated rise is not driven by
forces beyond our control”.
That is the significant point: this is not about population changes or even, until very recently, the conditions in the economy, but is a direct result of Government policy. The commission notes on page 8 of the report:
“There is now mounting evidence that welfare changes over the past ten years have put many more children into poverty.”
Of the many great achievements of the last Labour Government, the thing I am most proud of is the number of children they lifted out of poverty. That was the result of a deliberate political choice—of public policy pulling in the right direction—and it is a stain on the conscience and character of this Government that their own Social Mobility Commission says:
“There is now mounting evidence that welfare changes over the past ten years have put many more children into poverty.”
On the same page, the commission says:
“Too often also there is little transparency concerning the impact spending decisions have on poverty. The Treasury has made some efforts in this direction, but has so far declined to give the Office for Budget Responsibility…a proper role to monitor this. There should be more independent scrutiny to help ensure policy interventions across Whitehall genuinely support the most disadvantaged groups.”
Because of the limitations on what we are able to do to amend the Finance Bill, new clause 23 does not go so far as to give the OBR formal responsibility for measuring the impact of fiscal events and policies on poverty and child poverty across the board, but at least it makes a start by asking the OBR to look at the impact of the Finance Bill. Regrettably, that is wholly necessary. When the Government’s own independent Social Mobility Commission point to the need for this, Government Members should take that seriously. When their own Prime Minister does not seem to have a clue about what is going on in terms of child poverty, it might be good to produce at least a fresh and independent set of numbers to wake him up.
Just in case Government Members are not alive to the challenges of child poverty in our country, let us look at the latest statistics from HMRC and DWP, via Stat-Xplore. In Saffron Walden, the number of children aged from zero to 15 who are in poverty is 2,261, which means the child poverty rate is 10%; in West Worcestershire, the figure is 2,176, which means a child poverty rate of 14%; in South Cambridgeshire, the figure is 2,051, which means a child poverty rate of 9%; in Kensington, the figure is 1,731, which means a child poverty rate of 9%—those children are not going to Harrods. In Penistone and Stocksbridge, 2,010 children live in poverty, which means a child poverty rate of 13%. In Harrogate and Knaresborough, 1,699 children live in poverty, which means a child poverty rate of 9%.
Jesse Norman
Could the hon. Gentleman tell the Committee what the rate is in Ilford, North?
Wes Streeting
The Minister asks a very good question; I do not have instant recall of that—[Laughter.] I will hold my hands up and say that he has got me there. However, I will tell him that in Aberconwy, the figure is 1,469, which means a child poverty rate of 16%. In Hereford and South Herefordshire, the figure is 3,054, which means a child poverty rate of 17%. In Macclesfield, it is 1,749, which means a child poverty rate of 11%. And in Montgomeryshire, it is 2,046, which means a child poverty rate of 20%.
I do not really need persuading of the need to act on child poverty in my constituency. It has been a campaigning issue that I have taken up since I was first elected to this House. However, it is a deep source of regret that, even when the Government’s own Social Mobility Commission highlights the impact of Government policies on child poverty, the Government still refuse to act.
Jesse Norman
I thank Opposition Members for their comments. This Government will always be committed to reducing poverty and child poverty. There is no difference in our view and the Opposition’s view of the importance of these issues: they are very, very important.
The hon. Member for Ilford North has been free with statistics. Let me give him a couple that he might find of interest regarding households with a below average income. The Department for Work and Pensions has shown that 200,000 fewer people were living in absolute poverty in 2018-19 than in 2009-10, including 100,000 children. The record also shows that Government policies continue to be highly redistributive. Distribution analysis of the most recent Budget shows that the poorest 60% of households receive more in public spending than they contribute in tax. In 2021, households in the lowest income decile will receive more than £4 in public spending for every £1 that they pay in tax, on average.
No one thinks that the present situation is such that a Government of any stamp could rest easy. We need to continue to press for lower poverty and greater equality in our society. That is an important theme for this Government. I remind the Committee that, in the past few months, the Government have been focusing on supporting lower income families through the pandemic outbreak—through the schemes that we have discussed and through increases to universal credit and working tax credit. Much of the information that the new clauses ask for is already in the public domain, including with regard to the distributional effects of tax, welfare and spending policy, and data on poverty rates, as the hon. Member for Ilford North highlighted.
I hope that the Committee enjoyed, as I did—how sharper than a serpent’s tooth—the moment when the hon. Member for Ilford North turned on his erstwhile partner and highlighted some of the weaknesses in the Scottish National party Government’s own activity. The hon. Member for Glasgow Central said that the Scottish Government will do everything they can to take action in this area. They now have a significant amount of devolved power, through the tax system and other means, and we will look at what impact they make on the issue. How they exercise that responsibility will be a very interesting matter for further scrutiny.
Stephen Flynn
The Scottish Government announced a £10 per week child benefit supplement for the poorest families in Scotland, which is expected to lift 30,000 children out of poverty by 2023-2024. Will the Minister’s Government do the same?
Jesse Norman
We will look at the effects of that and at whether it will be adequate to meet the challenge the Scottish Government have laid down for themselves.
We have now reached the end of this process. I have found it very exciting, and I thank all colleagues for the work that they have done. With that in mind, I reject the new clauses.
Alison Thewliss
I wish to press the new clause to a vote.
Question put, That the clause be read a Second time.
Jesse Norman
On a point of order, Mr Rosindell. On behalf of the Exchequer Secretary and myself, I thank you and your co-Chair, the excellent folks at Hansard, our Whips, our Parliamentary Private Secretaries and the officials who have supported us throughout the Committee. Of course, they wrote this note, so I hope they will be aware of the generous terms in which I single out, in particular, Edward Ferguson and Charlie Grainger; our Bill team at the Treasury, consisting of Kate O’Donoghue, the Bill manager, as well as Helena Forrest, Nye Williams-Renouf and Samuel Fenn; and a host of other people. The Opposition do not have access to the same level of resources; it would be astonishing if they could replicate the expertise to which we have access, and I am profoundly grateful for that expertise.
I thank all the members of Committees, on both sides of the Chamber, for making this such an energised and productive Committee, especially considering the great difficulties under which it has had to operate.
Bridget Phillipson
Further to that point of order, Mr Rosindell. I would also like to put on record my thanks to you and Ms McDonagh for being so fair and generous in allowing us to speak at some length about our concerns on the Finance Bill. You were exceptionally generous—at times, and arguably today, a little too generous—when it came to some of the wider conversations we had around interesting and irrelevant matters around Scottish separatism. Doubtless we will return to that at a later stage.
I put on record our thanks to the Clerks for all the help that they have offered us, particularly around amendments and the order of proceedings—their expertise at this time is particularly appreciated by us—and to the Hansard reporters.
This is the first opportunity I have had to lead on the Finance Bill in Committee. It has been made much easier thanks to the wonderful support of Members on the Opposition side, not least our wonderful Whip, my hon. Friend the Member for Manchester, Withington.
I thank all members of the Committee for their contributions. I am sure the Financial Secretary has enjoyed talking to more technical aspects of the Bill, although he did particularly relish opportunities to elucidate on Adam Smith and Edmund Burke, and on the transcendental nature of what might be regarded as temporary, or otherwise, when pressed by my hon. Friend the Member for Streatham.
I also thank those individuals and stakeholders who have been very generous in providing advice and information to the Opposition, and, of course, the House of Commons Library, whose staff are, as ever, very prompt and professional in their response to all research requests.
Although this is a small Finance Bill, compared with some recent efforts, I thank my staff and those in the office of my hon. Friend the Member for Ilford North for their dedication and hard work, and for allowing us to hold the Government to account. We have had a wide-ranging debate, and I look forward to returning to some of these issues on Report.
Alison Thewliss
Further to that point of order, Mr Rosindell. I echo others in thanking you and Ms McDonagh for your excellent chairing; the Clerks for all they have done to keep things moving smoothly; my hon. Friend the Member for Aberdeen South for signing up to come and do the Finance Bill with me, which was much appreciated; and our small research team, Scott Taylor and Jonathan Kiehlmann, who have worked incredibly hard to bring a range of amendments and new clauses to the Committee, and who have had even more pressure than the other parties and the Government have had. I am incredibly grateful to them.
Finally, on independence, as long as we are here in this House—hopefully it will not be too much longer—we will press our cause if we can. I am sure all hon. Members will miss us once we have independence.
The Chair
Does the hon. Member for Glasgow Central wish to move any of her remaining clauses?
The Chair
Does the hon. Member for Houghton and Sunderland South wish to move new clause 23?
Bridget Phillipson
No, Mr Rosindell.
New Schedule 1
“Workers’ services provided through intermediaries
Part 1
Amendments to Chapter 8 of Part 2 of ITEPA 2003
1 Chapter 8 of Part 2 of ITEPA 2003 (application of provisions to workers under arrangements made by intermediaries) is amended as follows.
2 For the heading of the Chapter substitute “Workers’ services provided through intermediaries to small clients”.
3 (1) Section 48 (scope of Chapter) is amended as follows.
(2) In subsection (1) for the words from “, but” to the end substitute “in a case where the services are provided to a person who is not a public authority and who either—
(a) qualifies as small for a tax year, or
(b) does not have a UK connection for a tax year.”
(3) After subsection (3) insert—
(4) For provisions determining when a person qualifies as small for a tax year, see sections 60A to 60G.
(5) For provision determining when a person has a UK connection for a tax year, see section 60I.”
4 (1) Section 50 (worker treated as receiving earnings from employment) is amended as follows.
(2) In subsection (1) before paragraph (a) insert—
“(za) the client qualifies as small or does not have a UK connection,”.
(3) After subsection (4) insert—
(5) The condition in paragraph (za) of subsection (1) is to be ignored if—
(a) the client concerned is an individual, and
(b) the services concerned are performed otherwise than for the purposes of the client’s business.
(6) For the purposes of paragraph (za) of subsection (1) the client is to be treated as not qualifying as small for the tax year concerned if the client is treated as medium or large for that tax year by reason of section 61TA(3)(a).”
5 After section 60 insert—
“When a person qualifies as small for a tax year
60A When a company qualifies as small for a tax year
(1) For the purposes of this Chapter, a company qualifies as small for a tax year if one of the following conditions is met (but this is subject to section 60C).
(2) The first condition is that the company’s first financial year is not relevant to the tax year.
(3) The second condition is that the small companies regime applies to the company for its last financial year that is relevant to the tax year.
(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company’s accounts and reports for the financial year ends before the beginning of the tax year.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60B When a company qualifies as small for a tax year: joint ventures
(1) This section applies when determining for the purposes of section 60A(3) whether the small companies regime applies to a company for a financial year in a case where—
(a) at the end of the financial year the company is jointly controlled by two or more other persons, and
(b) one or more of those other persons are undertakings (“the joint venturer undertakings”).
(2) If the company is a parent company, the joint venturer undertakings are to be treated as members of the group headed by the company.
(3) If the company is not a parent company, the company and the joint venturer undertakings are to be treated as constituting a group of which the company is the parent company.
(4) In this section the expression “jointly controlled” is to be read in accordance with those provisions of international accounting standards which relate to joint ventures.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60C When a company qualifies as small for a tax year: subsidiaries
(1) A company does not qualify as small for a tax year by reason of the condition in section 60A(3) being met if—
(a) the company is a member of a group at the end of its last financial year that is relevant to the tax year,
(b) the company is not the parent undertaking of that group at the end of that financial year, and
(c) the undertaking that is the parent undertaking of that group at that time does not qualify as small in relation to its last financial year that is relevant to the tax year.
(2) Where the parent undertaking mentioned in subsection (1)(c) is not a company, sections 382 and 383 of the Companies Act 2006 have effect for determining whether the parent undertaking qualifies as small in relation to its last financial year that is relevant to the tax year as if references in those sections to a company and a parent company included references to an undertaking and a parent undertaking.
(3) For the purposes of subsections (1)(c) and (2) a financial year of an undertaking that is not a company is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.
(4) For the purposes of this section, a financial year of a company is “relevant to” a tax year if the period for filing the company’s accounts and reports for the financial year ends before the beginning of the tax year.
(5) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60D When a relevant undertaking qualifies as small for a tax year
(1) Sections 60A to 60C apply in relation to a relevant undertaking as they apply in relation to a company, subject to any necessary modifications.
(2) In this section “relevant undertaking” means an undertaking in respect of which regulations have effect under—
(a) section 15(a) of the Limited Liability Partnerships Act 2000,
(b) section 1043 of the Companies Act 2006 (unregistered companies), or
(c) section 1049 of the Companies Act 2006 (overseas companies).
(3) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60E When other undertakings qualify as small for a tax year
(1) An undertaking that is not a company or a relevant undertaking qualifies as small for a tax year if one of the following conditions is met.
(2) The first condition is that the undertaking’s first financial year is not relevant to the tax year.
(3) The second condition is that the undertaking’s turnover for its last financial year that is relevant to the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.
(4) For the purposes of this section a financial year of an undertaking is “relevant to” a tax year if it ends at least 9 months before the beginning of the tax year.
(5) In this section—
“relevant undertaking” has the meaning given by section 60D, and
“turnover”, in relation to an undertaking, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.
(6) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60F When other persons qualify as small for a tax year
(1) For the purposes of this Chapter, a person who is not a company, relevant undertaking or other undertaking qualifies as small for a tax year if the person’s turnover for the last calendar year before the tax year is not more than the amount for the time being specified in the second column of item 1 of the Table in section 382(3) of the Companies Act 2006.
(2) In this section—
“company” and “undertaking” have the same meaning as in the Companies Act 2006,
“relevant undertaking” has the meaning given by section 60D, and
“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived.
60G Sections 60A to 60F: connected persons
(1) This section applies where—
(a) it is necessary for the purposes of determining whether a person qualifies as small for a tax year (“the tax year concerned”) to first determine the person’s turnover for a financial year or calendar year (“the assessment year”), and
(b) at the end of the assessment year the person is connected with one or more other persons (“the connected persons”).
(2) For the purposes of determining whether the person qualifies as small for the tax year concerned the person’s turnover for the assessment year is to be taken to be the sum of—
(a) the person’s turnover for the assessment year, and
(b) the relevant turnover of each of the connected persons.
(3) In subsection (2)(b) “the relevant turnover” of a connected person means—
(a) in a case where the connected person is a company, relevant undertaking or other undertaking, its turnover for its last financial year that is relevant to the tax year concerned, and
(b) in a case where the connected person is not a company, relevant undertaking or other undertaking, the turnover of the connected person for the last calendar year ending before the tax year concerned.
(4) For the purposes of subsection (3)(a)—
(a) a financial year of a company or relevant undertaking is relevant to the tax year concerned if the period for filing accounts and reports for the financial year ends before the beginning of the tax year concerned, and
(b) a financial year of any other undertaking is relevant to the tax year concerned if it ends more than 9 months before the beginning of the tax year concerned.
(5) In a case where—
(a) the person mentioned in subsection (1)(a) is a company or relevant undertaking, and
(b) at the end of the assessment period the person is a member of a group,
the person is to be treated for the purposes of this section as not being connected with any person that is a member of that group.
(6) In this section—
“turnover”, in relation to a person, means the amounts derived from the provision of goods or services after the deduction of trade discounts, value added tax and any other taxes based on the amounts so derived, and
“relevant undertaking” has the meaning given by section 60D.
(7) For provision determining whether one person is connected with another, see section 718 (connected persons).
(8) Expressions used in this section and in the Companies Act 2006 have the same meaning in this section as in that Act.
60H Duty on client to state whether it qualifies as small for a tax year
(1) This section applies if, in the case of an engagement that meets conditions (a) to (b) in section 49(1), the client receives from the client’s agent or the worker a request to state whether in the client’s opinion the client qualifies as small for a tax year specified in the request.
(2) The client must provide to the person who made the request a statement as to whether in the client’s opinion the client qualifies as small for the tax year specified in the request.
(3) If the client fails to provide the statement by the time mentioned in subsection (4) the duty to do so is enforceable by an injunction or, in Scotland, by an order for specific performance under section 45 of the Court of Session Act 1988.
(4) The time is whichever is the later of—
(a) the end of the period of 45 days beginning with the date the client receives the request, and
(b) the beginning of the period of 45 days ending with the start of the tax year specified in the request.
(5) In this section “the client’s agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in paragraph (b) of section 49(1).
When a person has a UK connection
60I When a person has a UK connection for a tax year
(1) For the purposes of this Chapter, a person has a UK connection for a tax year if (and only if) immediately before the beginning of that tax year the person—
(a) is resident in the United Kingdom, or
(b) has a permanent establishment in the United Kingdom.
(2) In this section “permanent establishment”—
(a) in relation to a company, is to be read (by virtue of section 1007A of ITA 2007) in accordance with Chapter 2 of Part 24 of CTA 2010, and
(b) in relation to any other person, is to be read in accordance with that Chapter but as if references in that Chapter to a company were references to that person.
Interpretation
6 In section 61(1) (interpretation), in the definition of company, before “means” insert “(except in sections 60A to 60G)”.
Part 2
Amendments to Chapter 10 of Part 2 of ITEPA 2003
7 Chapter 10 of Part 2 of ITEPA 2003 (workers’ services provided to public sector through intermediaries) is amended as follows.
8 For the heading of the Chapter substitute “Workers’ services provided through intermediaries to public authorities or medium or large clients”.
9 (1) Section 61K (scope of Chapter) is amended as follows.
(2) In subsection (1) for the words “to a public authority through an intermediary” substitute “through an intermediary in a case where the services are provided to a person who—
(a) is a public authority, or
(b) qualifies as medium or large and has a UK connection for a tax year”.
(3) After subsection (2) insert—
(3) For the purposes of this Chapter a person qualifies as medium or large for a tax year if the person does not qualify as small for the tax year for the purposes of Chapter 8 of this Part (see sections 60A to 60G).
(4) Section 60I (when a person has a UK connection for a tax year) applies for the purposes of this Chapter.”
10 In section 61L (meaning of “public authority”) in subsection (1)—
(a) after paragraph (a) insert—
“(aa) a body specified in section 23(3) of the Freedom of Information Act 2000,”,
(b) omit the “or” at the end of paragraph (e), and
(c) after paragraph (f) insert “, or
(g) a company connected with any person mentioned in paragraphs (a) to (f)”.
11 (1) Section 61M (engagements to which the Chapter applies) is amended as follows.
(2) In subsection (1)—
(a) omit paragraph (b),
(b) omit the “and” at the end of paragraph (c), and
(c) after paragraph (c) insert—
“(ca) the client—
(i) is a public authority, or
(ii) is a person who qualifies as medium or large and has a UK connection for one or more tax years during which the arrangements mentioned in paragraph (c) have effect, and”.
(3) After subsection (1) insert—
(1A) But sections 61N to 61R do not apply if —
(a) the client is an individual, and
(b) the services are provided otherwise than for the purposes of the client’s trade or business.”
12 (1) Section 61N (worker treated as receiving earnings from employment) is amended as follows.
(2) In subsection (3)—
(a) after “subsections (5) to (7)” insert “and (8A)”, and
(b) after “61T” insert “, 61TA”.
(3) For subsection (5) substitute—
(5) Unless and until the client gives a status determination statement to the worker (see section 61NA), subsections (3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to section 61V.
(5A) Subsections (6) and (7) apply, subject to sections 61T, 61TA and 61V, if—
(a) the client has given a status determination statement to the worker,
(b) the client is not the fee-payer, and
(c) the fee-payer is not a qualifying person.”
(4) In subsection (8) (meaning of “qualifying person”) before paragraph (a) insert—
“(za) has been given by the person immediately above them in the chain the status determination statement given by the client to the worker,”.
(5) After subsection (8) insert—
(8A) If the client is not a public authority, a person is to be treated by subsection (3) as making a deemed direct payment to the worker only if the chain payment made by the person is made in a tax year for which the client qualifies as medium or large and has a UK connection.”
13 After section 61N insert—
“61NA Meaning of status determination statement
(1) For the purposes of section 61N “status determination statement” means a statement by the client that—
(a) states that the client has concluded that the condition in section 61M(1)(d) is met in the case of the engagement and explains the reasons for that conclusion, or
(b) states (albeit incorrectly) that the client has concluded that the condition in section 61M(1)(d) is not met in the case of the engagement and explains the reasons for that conclusion.
(2) But a statement is not a status determination statement if the client fails to take reasonable care in coming to the conclusion mentioned in it.
(3) For further provisions concerning status determination statements, see section 61T (client-led status disagreement process) and section 61TA (duty for client to withdraw status determination statement if it ceases to be medium or large).”
14 In section 61O(1) (conditions where intermediary is a company) for paragraph (b) substitute—
“(b) it is the case that—
(i) the worker has a material interest in the intermediary,
(ii) the worker has received a chain payment from the intermediary, or
(iii) the worker has rights which entitle, or which in any circumstances would entitle, the worker to receive a chain payment from the intermediary.”
15 In section 61R (application of Income Tax Acts in relation to deemed employment) omit subsection (7).
16 For section 61T substitute—
“61T Client-led status disagreement process
(1) This section applies if, before the final chain payment is made in the case of an engagement to which this Chapter applies, the worker or the deemed employer makes representations to the client that the conclusion contained in a status determination statement is incorrect.
(2) The client must either—
(a) give a statement to the worker or (as the case may be) the deemed employer that—
(i) states that the client has considered the representations and has decided that the conclusion contained in the status determination statement is correct, and
(ii) states the reasons for that decision, or
(b) give a new status determination statement to the worker and the deemed employer that—
(i) contains a different conclusion from the conclusion contained in the previous status determination statement,
(ii) states the date from which the client considers that the conclusion contained in the new status determination statement became correct, and
(iii) states that the previous status determination statement is withdrawn.
(3) If the client fails to comply with the duty in subsection (2) before the end of the period of 45 days beginning with the date the client receives the representations, section 61N(3) and (4) has effect from the end of that period until the duty is complied with as if for any reference to the fee-payer there were substituted a reference to the client; but this is subject to section 61V.
(4) A new status determination statement given to the deemed employer under subsection (2)(b) is to be treated for the purposes of section 61N(8)(za) as having been given to the deemed employer by the person immediately above the deemed employer in the chain.
(5) In this section—
“the deemed employer” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment;
“status determination statement” has the meaning given by section 61NA.
61TA Duty for client to withdraw status determination statement if it ceases to be medium or large
(1) This section applies if in the case of an engagement to which this Chapter applies—
(a) the client is not a public authority,
(b) the client gives a status determination statement to the worker, the client’s agent or both, and
(c) the client does not (but for this section) qualify as medium or large for a tax year beginning after the status determination statement is given.
(2) Before the beginning of the tax year the client must give a statement to the relevant person, or (as the case may be) to both of the relevant persons, stating—
(a) that the client does not qualify as medium or large for the tax year, and
(b) that the status determination statement is withdrawn with effect from the beginning of the tax year.
(3) If the client fails to comply with that duty the following rules apply in relation to the engagement for the tax year—
(a) the client is to be treated as medium or large for the tax year, and
(b) section 61N(3) and (4) have effect as if for any reference to the fee-payer there were substituted a reference to the client.
(4) For the purposes of subsection (2)—
(a) the worker is a relevant person if the status determination statement was given to the worker, and
(b) the deemed employer is a relevant person if the status determination statement was given to the client’s agent.
(5) In this section—
“client’s agent” means a person with whom the client entered into a contract as part of the arrangements mentioned in section 61M(1)(c);
“the deemed employer” means the person who, assuming one of conditions A to C in section 61N were met, would be treated as making a deemed direct payment to the worker under section 61N(3) on the making of a chain payment;
“status determination statement” has the meaning given by section 61NA.”
17 (1) Section 61W (prevention of double charge to tax and allowance of certain deductions) is amended as follows.
(2) In subsection (1)—
(a) in paragraph (b) for “a public authority” substitute “another person (“the client”)”, and
(b) in paragraph (d) for “that public authority” substitute “the client”.
(3) In subsection (2)(b) for “public authority” substitute “client”.
Part 3
Consequential and miscellaneous amendments
18 In section 61D of ITEPA 2003 (managed service companies: worker treated as receiving earnings from employment) for subsection (4A) substitute—
(4A) This section does not apply where the provision of the relevant services gives rise (directly or indirectly) to an engagement to which Chapter 10 applies and either—
(a) the client for the purposes of section 61M(1) is a public authority, or
(b) the client for the purposes of section 61M(1)—
(i) qualifies as medium or large for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received, and
(ii) has a UK connection for the tax year in which the payment or benefit mentioned in subsection (1)(b) is received.
(4B) Sections 60I (when a person has a UK connection for a tax year), 61K(3) (when a person qualifies as medium or large for a tax year) and 61L (meaning of public authority) apply for the purposes of subsection (4A).
(4C) It does not matter for the purposes of subsection (4A) whether the client for the purposes of this Chapter is also “the client” for the purposes of section 61M(1).”
19 After section 688A of ITEPA 2003 insert—
“688AA Workers’ services provided through intermediaries: recovery of PAYE
(1) PAYE Regulations may make provision for, or in connection with, the recovery of a deemed employer PAYE debt from a relevant person.
(2) “A deemed employer PAYE debt” means an amount—
(a) that a person (“the deemed employer”) is liable to pay under PAYE regulations in consequence of being treated under section 61N(3) as having made a deemed direct payment to a worker, and
(b) that an officer of Revenue and Customs considers there is no realistic prospect of recovering from the deemed employer within a reasonable period.
(3) “Relevant person”, in relation to a deemed employer PAYE debt, means a person who is not the deemed employer and who—
(a) is the highest person in the chain identified under section 61N(1) in determining that the deemed employer is to be treated as having made the deemed direct payment, or
(b) is the second highest person in that chain and is a qualifying person (within the meaning given by section 61N(8)) at the time the deemed employer is treated as having made that deemed direct payment.”
20 In section 60 of FA 2004 (construction industry scheme: meaning of contract payments) after subsection (3) insert—
(3A) This exception applies in so far as—
(a) the payment can reasonably be taken to be for the services of an individual, and
(b) the provision of those services gives rise to an engagement to which Chapter 10 of Part 2 of ITEPA 2003 applies (workers’ services provided through intermediaries to public authorities or medium or large clients).
(3B) But the exception in subsection (3A) does not apply if, in the case of the engagement mentioned in paragraph (b) of that subsection, the client for the purposes of section 61M(1) of ITEPA 2003—
(a) is not a public authority, and
(b) either—
(i) does not qualify as medium or large for the tax year in which the payment concerned is made, or
(ii) does not have a UK connection for the tax year in which the payment concerned is made.
(3C) Sections 60I (when a person has a UK connection for a tax year), 61K(3) (when a person qualifies as medium or large for a tax year) and 61L (meaning of public authority) of ITEPA 2003 apply for the purposes of subsection (3B).”
21 For the italic heading before section 141A of CTA 2009 substitute “Worker’s services provided through intermediary to public authority or medium or large client”.
22 In the heading of section 141A of CTA 2009 for “public sector” substitute “public authority or medium or large client”.
23 (1) Part 13 of CTA 2009 (additional relief for expenditure on research and development) is amended as follows.
(2) In section 1129 (qualifying expenditure on externally provided workers: connected persons) after subsection (4) insert—
(4A) In subsection (2) the reference to the staff provision payment is to that payment before any deduction is made from the payment under—
(a) section 61S of ITEPA 2003,
(b) regulation 19 of the Social Security Contributions (Intermediaries) Regulations 2000, or
(c) regulation 19 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.”
(3) In section 1131 (qualifying expenditure on externally provided workers: other cases) after subsection (2) insert—
(3) In subsection (2) the reference to the staff provision payment is to that payment before any deduction is made from the payment under—
(a) section 61S of ITEPA 2003,
(b) regulation 19 of the Social Security Contributions (Intermediaries) Regulations 2000, or
(c) regulation 19 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.”
(4) After section 1131 insert—
“1131A Sections 1129 and 1131: secondary Class 1 NICS paid by company
(1) This section applies if—
(a) a company makes a staff provision payment,
(b) the company is treated as making a payment of deemed direct earnings the amount of which is calculated by reference to the amount of the staff provision payment, and
(c) the company pays a secondary Class 1 national insurance contribution in respect of the payment of deemed direct earnings.
(2) In determining the company’s qualifying expenditure on externally provided workers in accordance with section 1129(2) or section 1131(2) the amount of the staff payment provision is to be treated as increased by the amount of the contribution.
(3) In determining the company’s qualifying expenditure on externally provided workers in accordance with section 1129(2) the aggregate of the relevant expenditure of each staff controller is to be treated as increased by the amount of the contribution.
(4) But subsection (2) does not apply to the extent that the expenditure incurred by the company in paying the contribution is met directly or indirectly by a staff controller.
(5) “A payment of deemed direct earning” means a payment the company is treated as making by reason of regulation 14 of the Social Security Contributions (Intermediaries) Regulations 2000 or regulation 14 of the Social Security Contributions (Intermediaries) (Northern Ireland) Regulations 2000.”
Part 4
Commencement and transitional provisions
Commencement
24 The amendments made by Part 1 of this Schedule have effect for the tax year 2021-22 and subsequent tax years.
25 The amendments made by Part 2 of this Schedule have effect in relation to deemed direct payments treated as made on or after 6 April 2021.
26 The amendment made by paragraph 18 of this Schedule has effect for the purposes of determining whether section 61D of ITEPA 2003 applies in a case where the payment or benefit mentioned in subsection (1)(b) of that section is received on or after 6 April 2021.
27 The amendment made by paragraph 20 of this Schedule has effect in relation to payments made under a construction contract on or after 6 April 2021.
28 The amendments made by paragraph 23 of this Schedule have effect in relation to expenditure incurred on or after 6 April 2021.
29 Sections 101 to 103 of FA 2009 (interest) come into force on 6 April 2021 in relation to amounts payable or paid to Her Majesty’s Revenue and Customs under regulations made by virtue of section 688AA of ITEPA 2003 (as inserted by paragraph 19 of this Schedule).
Transitional provisions
30 (1) This paragraph applies where—
(a) the client in the case of an engagement to which Chapter 10 of Part 2 of ITEPA 2003 applies is not a public authority within the meaning given by section 61L of ITEPA 2003 (as that section had effect before the amendments made by paragraph 10 of this Schedule), and
(b) a chain payment is made on or after 6 April 2021 that can reasonably be taken to be for services performed by the worker before 6 April 2021.
(2) The chain payment is to be disregarded for the purposes of Chapter 10 of Part 2 of ITEPA 2003.
31 (1) This paragraph applies where—
(a) the client in the case of an engagement to which Chapter 10 of Part 2 of ITEPA 2003 applies is not a public authority within the meaning given by section 61L of ITEPA 2003 (as that section had effect before the amendments made by paragraph 10 of this Schedule), and
(b) one or more qualifying chain payments are made in the tax year 2021-22 or a subsequent tax year (“the tax year concerned”) to the intermediary.
(2) A chain payment made to the intermediary is a qualifying chain payment if it can reasonably be taken to be for services performed by the worker before 6 April 2021.
(3) A chain payment made to the intermediary is also a qualifying chain payment if—
(a) another chain payment (“the earlier payment”) was made before 6 April 2021 to a person other than the intermediary,
(b) the earlier payment can reasonably be taken to be for the same services as the chain payment made to the intermediary, and
(c) the person who made the earlier payment would, but for paragraph 25 of this Schedule, have been treated by section 61N(3) and (4) of ITEPA 2003 as making a deemed direct payment to the worker at the same time as they made the earlier payment.
(4) Chapter 8 of Part 2 of ITEPA 2003 applies in relation to the engagement for the tax year concerned (in addition to Chapter 10 of Part 2 of ITEPA 2003), but as if—
(a) the amendments made by Part 1 of this Schedule had not been made, and
(b) the qualifying chain payments received by the intermediary in the tax year concerned are the only payments and benefits received by the intermediary in that year in respect of the engagement.
32 (1) This paragraph applies for the purposes of paragraphs 30 and 31 where a chain payment (“the actual payment”) is made that can reasonably be taken to be for services of the worker performed during a period that begins before and ends on or after 6 April 2021.
(2) The actual payment is to be treated as two separate chain payments—
(a) one consisting of so much of the amount or value of the actual payment as can on a just and reasonable apportionment be taken to be for services performed before 6 April 2021, and
(b) another consisting of so much of the amount or value of the actual payment as can on a just and reasonable apportionment be taken to be for services performed on or after 6 April 2021.
33 For the purposes of section 61N(5), (5A)(a) and (8)(za) of ITEPA 2003 it does not matter whether the status determination statement concerned is given before 6 April 2021 or on or after that date.
34 For the purposes of section 61T of ITEPA 2003—
(a) it does not matter whether the representations to the client mentioned in subsection (1) of that section were made before 6 April 2021 or on or after that date, but
(b) in a case where the representations were made before 6 April 2021 that section has effect as if the reference in subsection (3) to the date the client receives the representations were to 6 April 2021.”—(Jesse Norman.)
This new schedule alters the tax treatment of certain engagements under which a worker provides services to a client through an intermediary.
Brought up, read the First and Second time, and added to the Bill.
Bill, as amended, to be reported.