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Oral Answers to Questions
(2 years, 1 month ago)
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Danny Kruger (Devizes) (Con)
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
His Majesty’s Government are committed to supporting small and medium-sized enterprises through exemption of new regulations where possible. This exemption was recently extended to businesses with up to 500 employees, potentially reducing red tape and bureaucracy for up to 40,000 more businesses. That means thousands of businesses will not have to comply with forthcoming regulations and, most excitingly of all, it will extricate them from hundreds of EU regulations during the process of review and repeal.
Danny Kruger
I thank my right hon. Friend for the support he has given to small businesses across the country in recent weeks. As a west countryman, he will know Wadworth Brewery based in Devizes, an important local employer with more than 150 pubs and probably 1,500 people employed in the brewery and the pubs. I am afraid to say that many of the pubs are in severe financial difficulties, with many saying that things are worse than covid. Does he agree that the very welcome energy relief scheme should be extended and that the Government should give consideration to reviewing business rates and the value added tax regime?
Mr Rees-Mogg
Wadworth is a very well-known west country brewer. I used to live not very far from a tied pub in Wadworth’s capable hands, and it is a distinguished company that serves fine products. However, I must tell my hon. Friend that, while VAT is a matter for the Chancellor, the British Business Bank is offering £12.2 billion of finance to more than 96,000 small and medium-sized businesses. On 20 July my predecessor introduced a new iteration of the recovery loans scheme, which helps smaller businesses to get loans and other kinds of finance up to £2 million per business, and the Government have reversed the national insurance rise, saving small businesses £4,200 on average. The energy bill relief scheme, which ought to get Royal Assent later today, will secure businesses over the winter, and there will be a review; it is one of the most generous schemes in the world and has been copied by foreign Governments.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Businesses in my constituency, including some of the fabulous small breweries, are struggling with the extra paperwork they now have to fill in in order to export to the European Union. The Business Secretary was a great exponent of Brexit, but even he must acknowledge that it is causing a huge burden to businesses and seriously affecting their profitability.
Mr Rees-Mogg
I look forward to the hon. Lady’s supporting the Retained EU Law (Revocation and Reform) Bill, which is coming later today and will get rid of lots and lots of dreadful EU regulations that are such a terrible burden on businesses. Is it not wonderful, Mr Speaker, that our socialist friends at last have this glorious zeal for deregulation? It is something we on the Conservative Benches have supported since the time of Noah.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
In recent weeks, having crashed the economy, the Conservatives have increased the barriers facing small firms, with spiralling costs making it harder than ever to do business. Last week, the Federation of Small Businesses reported business confidence falling to its lowest levels since the pandemic. Yet, as almost half of small businesses reported falling revenues this quarter, the Secretary of State spent the weekend saying it was “Boris or bust”. Surely recent Government chaos shows that, for small businesses, it is Labour or bust. If the Secretary of State really wants to reduce the cost of doing business, will he back Labour’s call to raise the small business rate relief threshold for this financial year, saving local firms up to £5,000?
Mr Rees-Mogg
The hon. Lady has been in this House long enough to know that rates are a matter for the Chancellor of the Exchequer. She is raising the question at the wrong Question Time. It is worth bearing in mind, with unemployment at its lowest level since 1973, that every single socialist Government, including their brief period in office in 1923, have led to higher unemployment. What are they talking about?
Patricia Gibson (North Ayrshire and Arran) (SNP)
Martyn Day (Linlithgow and East Falkirk) (SNP)
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
I am proud of the support the Government have provided to energy customers. His Majesty’s Government launched a Treasury-led review into how we support energy bills beyond April next year. The review will result in a new approach that ensures there is enough support for those in need while costing the taxpayer less than planned. The cost has come down significantly because of the fall in gas prices in recent weeks. Any support for non-domestic energy customers will be targeted at those most affected. This new approach will better incentivise energy efficiency.
Patricia Gibson
Citizens Advice Scotland has warned that it is already seeing huge demand for advice on the cost of living, energy bills and food insecurity. The uncertainty on the future of the energy price guarantee beyond April is frightening for consumers, not to mention the impact of insecurity faced by business. During the pandemic, the current Prime Minister kept U-turning on furlough extensions at the last minute. Will the Secretary of State offer reassurance and give at least some idea of when a post-April energy price scheme could be established?
Mr Rees-Mogg
Let me offer the reassurance that, if not for the United Kingdom, there would not be this level of support for businesses and individuals in Scotland. Scotland simply would not be able to afford it. It is the strength of the United Kingdom that allows this all-encompassing support to be provided. That is what the Government are doing. The package is one of the most generous that any country in the world has introduced. We are supporting people through the winter, and we will ensure there is focused support for the least well off in future winters.
Martyn Day
Just four days ago, the Scottish Chambers of Commerce issued the findings of its latest business survey and, to no surprise, energy costs were the main concern. The Scottish Chambers of Commerce stated:
“The signs of an economic bounce back don’t look promising as more and more firms are telling us that they have been forced to cancel contracts, projects or plans to expand, due to soaring costs and difficulty in hiring people.”
How exactly does having no certainty on energy costs beyond March help those businesses?
Mr Rees-Mogg
Mr Speaker, I assume it is orderly to say that I think the hon. Gentleman lives in a fantasy land. Energy prices varied before this Government came in and will vary in future. What His Majesty’s Government have done is provide enormous support for businesses. I say it again: just think how much worse off businesses would be if they were dependent on an entirely Scottish Administration with no money.
Martin Docherty-Hughes
It is good to see the Ministers still in their place for a wee while. Just six days ago, Martin Sartorius, the principal economist at the CBI, said:
“The prospect of household energy bills rising sharply again in April 2023 emphasises the need for Government to set out the details of any future targeted support sooner rather than later”.
The Secretary of State has repeatedly refused to clarify when households will receive clarity. Can I assume that he is also happy to leave businesses in the dark?
Mr Rees-Mogg
The hon. Gentleman cannot find a stick without picking up the wrong end. It has to be said that this Government acted with the speed of light.
“There was a young lady named Bright
Whose speed was far faster than light;
She set out one day
In a relative way
And returned on the previous night.”
We have returned on the previous night with a package that will receive Royal Assent today. The package has been worked out and thought through, with its budget provided, within a few weeks. We have some time between now and 1 April to establish what the scheme will be in future.
Dr Neil Hudson (Penrith and The Border) (Con)
I very much welcome the Government’s energy support measures, but my right hon. Friend will know that in rural areas, in Cumbria and in his constituency, many households and businesses are off-grid, relying on heating oil, liquified petroleum gas, biomass and so on. The measures do need bolstering, so will he reassure me and my constituents that the Government will keep this under review, and will support households and businesses that are off-grid?
Mr Rees-Mogg
I am entirely in agreement with my hon. Friend; this is an important part of the overall scheme. The £100 payment to domestic users who are off-grid is based on the rise in the heating oil price against the price of gas, to ensure that people are dealt with fairly. It is important that that is also done for businesses. The issue with the business scheme, which we are developing and will have developed shortly, is ensuring that it is not open to gaming, because we have to use taxpayers’ money wisely. However, there is support and there will be support, and my right hon. Friend the Chancellor is fully behind that.
Maria Caulfield (Lewes) (Con)
I welcome the £400 energy bill discount that is going out to most households across the country in the UK. Some park homes, such as those in Deanland Wood Park in my constituency, are not on the domestic supply, but equivalent support has been promised for them. They mainly have elderly residents, so will the Secretary of State outline the timescale and process as to how they will receive that money?
Mr Rees-Mogg
It is important that we support everybody who needs the support, and people in park homes are in a situation of which we are well aware. It is a question of working out how to get the support directly through to them, but I assure my hon. Friend that that is being worked upon.
Andrew Bridgen (North West Leicestershire) (Con)
Will my right hon. Friend outline to the House what role his Department will have, if any, in advising on and assisting with the Treasury-led review on the energy price guarantee during April?
Mr Rees-Mogg
I think the answer is in the name of the Department, which is the Department for Business, Energy and Industrial Strategy: any policy relating to energy is one the Department has a role in.
Stephen Flynn (Aberdeen South) (SNP)
As we have just heard, the CBI, the Scottish Chambers of Commerce and Citizens Advice Scotland have all expressed profound concern about the lack of certainty coming from the Government on their energy price strategy. But let us not stop there, because Age Scotland has produced a report in the past couple of days outlining that four in 10 older people in Scotland are now living in fuel poverty. Indeed, one of the respondents stated:
“The cost of living means I had to cut back on food shopping, and often go weeks with no food. It’s making me unwell.”
How does the right hon. Gentleman expect people to survive this winter?
Mr Rees-Mogg
The hon. Gentleman makes a very important point. Everyone in this House is concerned about their constituents, the least well-off constituents, which is why such a big package of support has been put together—not just the price cap, which for the average household would be £2,500, converted into units of electricity, but the additional support given for the least well-off. So there is a further £400 that everybody is getting and £800 that is available to people on certain benefits. He is right to raise the issue of their difficulties, and I always admire the work done by Citizens Advice, which receives a portion of its funding from BEIS and rightly so. As constituency MPs, we all know what a useful organisation it is. The whole purpose of this package is to support the least well-off and give them certainty over the winter. He does not help by creating fear and uncertainty.
Stephen Flynn
As ever, the Secretary of State is living on a different planet. The energy price guarantee, to which he refers, is of course a unit price cap, not a usage price cap. That means that average bills in Scotland are not going to be £2,500; they are going to be £3,300 and in rural areas they are going to top £4,000. That is despite the fact that Scotland produces six times more gas than we consume and that almost all of our electricity comes from low-carbon sources. On Westminster’s watch, Scotland is energy-rich but fuel-poor. Is it not the case that at this moment the solution to Scotland’s problems does not rest with his party and his incoming Government? Indeed, it does not rest with this Parliament at all, does it?
Mr Rees-Mogg
There is a certain eccentricity in the Scottish nationalists’ boasting of the amount of oil and gas they get when they have been opposing efforts to increase the licensing round. They really cannot have it both ways. They have this fantasy approach to politics where they spend money that they have not got, they rely on the UK taxpayer to support them and then they complain that it is all the fault of Westminster. I am afraid that without Westminster the hon. Gentleman and his merry band would be bankrupt.
Helen Morgan (North Shropshire) (LD)
The Minister for Industry (Jackie Doyle-Price)
We will publish a review by the end of the year which will consider how best to offer further support to those most at risk due to energy price increases. The review will consider which groups of non-domestic customers remain particularly at risk to energy price rises; and how best to continue supporting those customers, either by extending the existing scheme for some users, or by replacing it with a different one.
Helen Morgan
The Horse & Jockey pub in Northwood in my constituency closed before the Government’s assistance package was announced. It is one of many businesses that will not continue beyond April. Many others that have managed to remain open are struggling to secure bank facilities and to reassure suppliers and customers, because they need certainty to be able thrive. I would like to hear from the Minister what the Government are going to do to provide some certainty for these critical businesses beyond the winter period.
Jackie Doyle-Price
The hon. Lady is absolutely right—businesses deserve certainty, and we will give that to them as soon as we can, and well before the end of the scheme. It is important that we make sure, because this is a very expensive scheme for taxpayers, that we give that support where it is needed, at best value for the taxpayer. That means that we need to target it at those businesses that are at most risk of being damaged. I hope that that gives the hon. Lady some reassurance in the meantime—we are determined to give some advice before the end of the year.
Dr Alan Whitehead (Southampton, Test) (Lab)
The Minister has announced what will happen if businesses have fixed-term energy contracts running into the period of the support scheme, but she has not said anything about what would happen where businesses are forced to sign new fixed-term contracts during the term of the scheme that run on after it has ended. Many businesses and firms might face ruin if they sign new, sky-high fixed-term contracts for which they know that there is support only for perhaps a few months of it. They need assurances now, not at the end of April. What assurances can the Minister give that proper measures will be urgently put in place to support businesses under such circumstances?
Jackie Doyle-Price
I repeat that we will announce conclusions before the end of the year, which provides sufficient notice before the end of the scheme. The hon. Gentleman will appreciate that we need to give support that is as targeted as possible, given the cost of the scheme. In respect of the point that he made regarding contracts, Ofgem will play a key role in making sure that energy suppliers behave honourably in the scheme. It remains our intention that businesses should receive the support that they deserve and that pricing is fair.
Alison Thewliss (Glasgow Central) (SNP)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
Businesses are not subject to the energy price cap in the same way as domestic homes are subject, and are not eligible for the energy price guarantee. The Government are providing equivalent support to businesses through the energy bill relief scheme, which was launched on 21 September 2022.
Alison Thewliss
I have been inundated with calls from businesses, because those prices are not capped and they have soaring, runaway fuel costs. The latest was from Toryglen Community Base, whose bills are going up from £9,745 a year to £62,273 next year—a 539% increase. How does the Minister expect community organisations to pay those increased bills? They have to sign those contracts, whether they can afford them or not. The price is not going to go down. The community base has been quoted £50,000 a year for 2024. How does he expect community organisations to survive?
Dean Russell
I thank the hon. Member for raising her concerns, and I understand the points relating to her constituents and businesses. The Government are absolutely committed to supporting small and medium-sized businesses. I am very proud that, as the first point in my portfolio, small businesses are absolutely at the top of my agenda. Having worked with small businesses for many years, it is absolutely essential that we support them. We are looking at how we can best help to support businesses, and I will gladly write to her with further details.
Jeff Smith (Manchester, Withington) (Lab)
The Minister for Climate (Graham Stuart)
We currently have more than 3 GW of installed, operational onshore wind capacity in England and 14 GW across the UK—the most of any particular renewable technology. We do not believe that the Government should prescribe the proportion of energy from any particular technology, but of course we have transformed the level of renewables since the hon. Gentleman’s party left power—when I think the figure was less than 7% of electricity. [Interruption.] Opposition Front Benchers may well groan, but it is quite clear that Labour did not deliver. It is more than 40% today—and we are.
Jeff Smith
As a direct result of the Conservative Government’s decision to cut the “green crap” in 2015, every household’s bill is hundreds of pounds higher. Does the Minister regret that mistake, and is it not long past time to reform planning laws and to get on with building the quickest, cheapest, cleanest forms of power, such as onshore wind and solar, which would increase our energy security, cut bills and tackle the climate crisis—work that the Government have been blocking for far too long?
Graham Stuart
It was this Government who passed the net zero legislation. It was this party that was the first major party to call for the climate Act, which has driven this behaviour, and it was this party that took us from 6.8% electricity from renewables to more than 40% today. It is this party that brought in the contracts for difference, which have been copied all over the world, and which see tens of millions of pounds paid to reduce bills at the moment, with the last round driving 11 GW of additional clean energy into the system. It is this party that delivers on net zero and the environment and it is that party—the Labour party—that talks about it.
Bill Esterson (Sefton Central) (Lab)
Labour is committed to maximising the vast opportunities that exist in developing the UK’s onshore and offshore wind industries. In sharp contrast, the Conservative Government’s 12 years of low growth, low investment and low productivity saw the UK’s largest wind tower factory at Campbeltown close. Labour will increase onshore wind capacity. We will deliver jobs, lower bills and energy security, and we will set up a publicly owned Great British energy company. Is the truth not that Labour’s industrial strategy is the credible way forward for UK energy production?
Graham Stuart
If only Labour’s record in office was as good as the oratory that the hon. Gentleman uses today—less than 7% of electricity was from renewables then. We are also absolutely focused on developing green jobs. We have developed those green jobs, but, sadly, as my right hon. Friend the Secretary of State said, it is the fate of almost every Labour Government to come in with promises and end up with higher dole queues than when they started.
Rob Roberts (Delyn) (Ind)
Anthony Mangnall (Totnes) (Con)
The Minister for Climate (Graham Stuart)
I am delighted to say that, on 7 July, we announced that 40 MW of new tidal stream power was secured in Scotland and Wales through the contracts for difference round, and analysis has confirmed the predictability, resilience and potential cost-effectiveness of marine energy, which can play a key role in delivering energy security and net zero.
Rob Roberts
Over a decade ago, nuclear power was dismissed as it was too expensive, and it was said that it would not be online until 2022. How short-sighted has that proven to be? Does the Minister agree that marine energy must not suffer the same fate as nuclear? Does he also recognise that the cost will reduce over time with investment, and will he meet Jim O’Toole from Mostyn docks in my constituency to discuss his opportunities with tidal stream?
Graham Stuart
There is long-standing Government support for wave and tidal power research and development, with more than £175 million having been invested in the area over the past two decades. However, I agree with the hon. Gentleman that, where it can be shown that it is cost-effective, tidal and marine energy has a big role to play.
Anthony Mangnall
As is so often the case, local ideas can provide national solutions. Will the Minister meet me and Rev. Andrew Langley from my constituency, who is using his churches to look at using new tidal technology to power the town of Dartmouth? Those are the sort of schemes that we need to be looking at and then investing in and supporting the technology.
Graham Stuart
Rev. Andrew Langley sounds like a community hero. It is exactly that kind of grassroots approach that is at the heart of Conservative philosophy as we deliver these high-level targets, but we work with the whole community to see it delivered. Community groups have a big role to play in our efforts to eliminate our contribution to climate change, and of course I would be delighted to meet my hon. Friend and his local hero, Rev. Andrew Langley.
Nick Smith (Blaenau Gwent) (Lab)
A fortnight ago, I raised the Swansea bay tidal lagoon at Treasury questions. The Chief Secretary to the Treasury kindly offered me a meeting to discuss it. He was very positive, but then, unfortunately, he lost his job. The potential of the barrage for cheap renewable energy could really kickstart our green economy in south Wales. Will the Minister reopen the business case on this important project?
Graham Stuart
We consider a whole series of critical factors, including funding mechanisms, planning considerations, the environmental impact and whether the benefits of coastal and flood defence and energy security can be included. Like the hon. Gentleman, I hope that we can see a way forward and that tidal and marine energy can compete with other technologies, as we bring about the transformation that was talked about under his Government but is being delivered under this one.
Tim Farron (Westmorland and Lonsdale) (LD)
The United Kingdom has the highest tidal range on the planet after Canada, yet we use so very little of it, especially when we consider that a massive majority of the supply chain for marine, tidal and hydro is British. There are so many jobs to be made out of all this. Will the Minister look particularly at the potential for tidal energy in Morecambe bay? I know that his hon. Friends on both sides of the bay agree with me on this, so will he meet with me and others who are in favour of getting green energy out of Morecambe bay to see whether we can take this forward?
Graham Stuart
We are seeing these technologies mature, and the hon. Gentleman is right: tidal and floating offshore wind projects have won CfDs for the first time ever, which will help these industries grow and strengthen Britain’s homegrown renewables sector. As he says, we have tremendous tidal potential in this country. He mentioned a site further north, but the Severn estuary has the second highest tidal range in the world, so if we can get it right, there is huge untapped potential.
Virginia Crosbie (Ynys Môn) (Con)
Anglesey is known as energy island. We have wind, wave, solar, tidal, hydrogen and hopefully new nuclear. We have two excellent tidal marine companies, Morlais and Minesto. When will the Minister publish the parameters for the fifth CfD auction, which is opening in March next year?
Graham Stuart
As my hon. Friend says, the fifth round is very exciting. We are moving from two-yearly to annual rounds—of course, they were interrupted by the pandemic, so it became slightly longer than that. After 11 GW last year and with new technologies coming through, we will come forward soon with information on that. I look forward to seeing that yearly set-up leading to even more renewables coming onstream.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
My constituents do not like arrogance, and they do not like posh arrogance even more. Is it not the case that the guilty group here, most of whom were passionate Brexiteers, have done so much damage to our economy? That means that tidal power, energy from waste and a range of other alternatives have been languishing, because this Government have no sense of direction and will not recognise what the Bank of England Governor and previous Governors have said, which is that we have been impoverished by leaving the European Union.
Mr Speaker
I am not quite sure that that has got a lot to do with tidal energy.
Graham Stuart
Well, there was there an attempted linkage to the question, but I do not think that made it any less pompous or, indeed, irrelevant.
Elliot Colburn (Carshalton and Wallington) (Con)
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
We are providing a £400 discount through the energy bills support scheme over this winter, as well as the energy price guarantee, which will support millions of households and businesses with rising energy costs, and we will continue to do so from now until April next year. That is on top of a further £800 in one-off support provided to 8 million of the most vulnerable households to help with the cost of living, and of course pensioner households can receive £300.
Elliot Colburn
The cost of living, and especially energy, is of great concern to my Carshalton and Wallington constituents. I welcome the Government’s action on energy bills, but I know from talking to many of my residents while out delivering my cost of living advice guide that, apart from the energy price guarantee, they are sometimes unaware of the additional support they may be entitled to, including from their energy provider and the Department for Work and Pensions, or the Government support provided through local councils. Will my right hon. Friend outline what steps he is taking to ensure that people are aware of all avenues of support that are available to them?
Mr Rees-Mogg
My hon. Friend is quite right to raise this. Full details of the help available to consumers can be found on the Government’s Help for Households website, which people can get to from the gov.uk website. That covers my Department’s extensive energy support package and the additional help available, including through the Department for Work and Pensions, such as income support. In addition to the Help for Households site, we are communicating information on the support available to help with energy bills through suppliers, consumer groups and charities—and, it has to be said, through first-class MPs running events in their constituencies, who ensure that this happens—as well as through the media and
Caroline Lucas (Brighton, Pavilion) (Green)
When Chancellor, our new Prime Minister spent precious months dragging his heels on energy efficiency, and now our fourth Chancellor this year scrambles with a Treasury-led review of the issue. We do not need more reviews to conclude that a paltry £1 billion extension to the energy company obligation falls far short of what is needed. Will the Secretary of State accept that to keep the UK’s homes warm and bills affordable for the long term, we need at the very least a further emergency investment of £3.6 billion over the rest of this Parliament, to kick-start the hugely needed nationwide home insulation programme that people are calling for?
Mr Rees-Mogg
There are focused and targeted schemes to help with energy insulation. The hon. Lady pooh-poohs £1 billion, but £1 billion is serious money, and it is going to help the households in the greatest need. A lot of work is being done with social housing landlords, but there are things people can do that lower the cost of their energy without causing any lack of warmth, such as turning down the boiler flow temperature, which almost all households can do. That will be a saving for them on the cost of energy and will make their heating more affordable; it will save energy but also reduce bills.
Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)
The Minister for Industry (Jackie Doyle-Price)
The best way we can help deprived communities is by creating good jobs and growing the economy. By cutting red tape and boosting innovation, we are enabling more businesses to create more high-quality jobs. Cutting national insurance will encourage job creation and ensure that workers have more of their own money, but Government can also do their bit to help projects that will facilitate economic growth, and I am pleased that some £87 million is being spent in Sheffield at present.
Gill Furniss
According to recent polling, 69% of my constituents are worried about not being able to pay their energy bills. They are terrified for the future, with prices set to rise in April, but the latest new Prime Minister has shamefully boasted about taking money away from deprived areas like mine. Does the Minister agree that Britain needs a general election now, so that the public can have their say on their future?
Jackie Doyle-Price
The hon. Lady will not be surprised to hear that I do not share that opinion. She will appreciate my sincerity when I say that I am very concerned to do my bit to make sure that those in deprived communities feel reassured by the support they are getting from this Government. We will make sure that her constituents continue to get the support they need, but the best thing we can all do is give that message of reassurance, not seek to play party politics by calling for a general election.
Bob Blackman (Harrow East) (Con)
Despite being the engine room of Britain’s economy, London still has some of the most deprived areas in the country. Does my hon. Friend agree that the best way we can get people out of poverty is to create good, well-paid jobs, so that they can earn their own living and have the ability to contribute to the economy?
Jackie Doyle-Price
My hon. Friend is quite right. We seem to have got ourselves into a cul-de-sac of seeing deprivation as a result of geography, when actually the truth is far from that; we have deprived communities in all parts of our United Kingdom. It is important that we ensure that everybody has access to good, well-paid employment. We will achieve that by making sure that we are equipping people with the skills that employers need and taking away the red tape and tax barriers, to encourage firms to create new jobs. That is the Government’s approach, and that is how we will grow our way out of the problems we are facing.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
The Minister for Climate (Graham Stuart)
My right hon. Friend the Secretary of State and I work closely with colleagues across the Government on the cross-Government challenge of net zero. Only yesterday, the Climate Action Implementation Committee met and discussed our progress on meeting our net zero targets and the carbon budgets.
Emma Hardy
Tackling climate change is a win-win-win for Hull West and Hessle, and indeed for Beverley and Holderness. Labour’s plan for Great British Energy will provide good, green, local manufacturing jobs in offshore wind and carbon capture, help protect our planet and ensure our country’s future energy security, but the short-termism of this Government and, sadly, their high turnover of Ministers is not giving this crucial issue the focus it needs and is preventing our country from developing the long-term skills strategy that is needed to fill those jobs. When will the Government stop fighting themselves and match Labour’s ambition for our country?
Graham Stuart
In 2021 alone, £24 billion of new investment was committed across low-carbon sectors in the UK. I share the hon. Lady’s enthusiasm for what that can do for the whole country, particularly the Humber area. We estimate that just over 69,000 green jobs have been supported in the UK since the launch of the 10-point plan for a green industrial revolution in November 2020, many of which are in former industrial heartlands. It is important that Members on both sides of the House send out the message that the whole House is united in believing that net zero is the right place to go and the UK is the right place to invest. I am sure that hon. Members will send that message across the world.
Kerry McCarthy (Bristol East) (Lab)
I sincerely thank the Secretary of State and the Minister for Climate for helping to depose the Prime Minister last week with their insistence on bringing back fracking. They may have technically won the vote but, given the response of their MPs, it is obvious that they lost the argument. Can the Minister now confirm that the Government’s anti-green agenda has exited Downing Street along with the outgoing Prime Minister? Will he commit to bringing back the ban on fracking?
Graham Stuart
Perhaps it is the nature of being in Opposition that means that people misrepresent things, but it is of course this party and this Government who have driven the net zero strategy and are greening our economy. [Interruption.] The Opposition may grumble and they may not like it, but we can see it in all the numbers. Just 14% of homes had an energy performance certificate rating of C or above when Labour left office; that figure is 46% today. Whether on energy efficiency, renewables or low-emission gas, we are the party that has solutions.
Mr Richard Holden (North West Durham) (Con)
The Minister for Science and Investment Security (Ms Nusrat Ghani)
The Government published the critical minerals strategy last summer, which sets out plans to accelerate the UK’s domestic capabilities, collaborate with international partners, and enhance international financial and trading markets. We are expecting to publish a delivery plan by the end of the year to refresh the strategy and ensure that we understand the global race for critical minerals.
Mr Holden
I thank the Minister for her response. Northern Lithium and Weardale Lithium in my constituency received more than £1 million from the Department for their work looking at lithium, which is vital for battery manufacture, including on Wearside at Nissan. Will she commit to ensuring that those projects are proceeded with at speed, so that we are not reliant on global factors, as we have been with oil and gas in recent years?
Ms Ghani
Once again, my hon. Friend is a staunch advocate for North West Durham and its businesses, particularly Weardale Lithium. We are absolutely committed to ensuring that we have resilience and security of supply. The Government are committed to building domestic critical mineral supply chains and generating jobs and wealth across the UK—for example, by supporting lithium projects in County Durham via the automotive transformation fund. He has often spoken about China; resilience is key.
Sammy Wilson (East Antrim) (DUP)
The Government’s plan for net zero by 2050 is unplanned and uncosted. On top of that, we now have the difficulty of finding the metals that are needed for batteries, magnets and the required systems, because China controls 60% of earth metals. Only this week, a Finnish Government report indicated that there is not enough lithium in the world for the batteries that are required for motor cars and battery storage. How will the Government deliver on that unrealistic target?
Ms Ghani
There is indeed a race to secure critical minerals, especially when countries such as China own so much of them. By 2040, the world is expected to need four times as many critical minerals as we can access today for clean energy technologies, but there is work under way in collaboration with international partners and in the UK with the Critical Minerals Intelligence Centre.
Sir John Whittingdale (Maldon) (Con)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
The UK’s intellectual property framework and enforcement regime is widely recognised as world-leading. Our trade deals help UK businesses to get more from their rights overseas, and our ambitious counter-infringement strategy protects the value of investment in innovation and creativity.
Sir John Whittingdale
My hon. Friend will be aware of the critical importance of intellectual property protection to all the creative industries. Will he therefore reaffirm the commitment of his predecessor to look again at the proposal of the Intellectual Property Office to expand the exception for text and data mining, which would severely undermine intellectual property protection?
Dean Russell
I thank my right hon. Friend for his question. I think we have a shared love of the creative industries—definitely a love of film and music—and I understand the concerns he raises. When it comes to intellectual property, there is an absolute need to make sure that we are at the forefront of that around the world. On his specific question, the Government’s proposal on text and data mining supports their ambition to be a world leader in artificial intelligence research and innovation, but we recognise the concerns of the creative industries and want to make sure we get the balance right. That is why we will soon be launching a period of stakeholder engagement to consider the best way to implement the policy. I look forward to meeting him. He may want to bring some people from the industry along, too. I would gladly do that.
Andrew Gwynne (Denton and Reddish) (Lab)
We have seen an increase in research, sponsored by foreign countries, across the UK developing dual-use technologies that have benign civilian uses, but could be used for military purposes. Can the Minister provide assurances to this House today that IP developed on these shores will not be used against our allies for military purposes?
Dean Russell
I thank the hon. Member for his very important question. I will gladly follow up in writing to assure him of the position of the Government on the matter. What I would say is that the Government’s proposal to create a new text and data mining exception for copyright is part of their ambition to be a world leader in artificial intelligence research and innovation.
Michael Fabricant (Lichfield) (Con)
The Secretary of State for Business, Energy and Industrial Strategy (Mr Jacob Rees-Mogg)
The Department’s work is at the vanguard of this Government’s mission to go for growth. A secure supply of affordable energy is the foundation for economic prosperity. The energy price guarantee is bringing down bills for households, ensuring that Britain’s most vulnerable can stay warm this winter, and our energy bill relief scheme is cutting costs for schools, hospitals and businesses. We are stepping in to support consumers now, but we are focused on British energy security both for this winter and the future. We continue to work closely with Ofgem, National Grid and our international partners to secure our energy supply. That will be a challenge this winter, particularly if we have a cold winter, and is a matter of concern. The energy supply taskforce has been negotiating to help with that.
We will ensure that everything is done to provide long-term green growth, with new industries, new skills and new jobs. We are cutting red tape to help existing businesses, particularly small and medium-sized ones, saving thousands of pounds for tens of thousands of companies. This is a central Government Department.
Michael Fabricant
I thank my right hon. Friend for his answer. He will know that the west midlands is a major centre—if not the major centre—for car manufacturing. What discussions has he had with the Mayor of the West Midlands, who is a keen proponent for a gigafactory to assist electric car manufacture based in Coventry?
Mr Rees-Mogg
I was actually in Coventry last week because it is a centre for battery technology development, and my hon. Friend knows very well that Andy Street is one of the most effective campaigning advocates for the west midlands. What is needed is for companies to indicate that they want to invest in gigafactories, and the Government stand ready to support as much as we can.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
The Government’s economic crisis is now being paid for by every household and business in this country, but the Government’s failure goes well beyond the pantomime of the last few weeks. Twelve years of Conservative Government have given us the lowest rate of business investment in the G7, and that is with the lowest headline rate of corporation tax. So why does the Business Secretary believe the Conservative party has been so consistently unable to provide a platform for the UK’s fantastic businesses to invest in throughout the last 12 years?
Mr Rees-Mogg
What we have seen is the lowest level of unemployment in this country since 1973. That is real people and real jobs, and employment is the best route out of poverty. We have seen the most enormous advance in clean energy, with more offshore wind than any other country in the world. We have ensured that, during this difficult winter, we were one of the first countries to come forward with a comprehensive package to protect both domestic and non-domestic users to ensure that the economy could thrive. The hon. Gentleman complains that everything that has gone wrong is the fault of the Government. He seems to have forgotten about Ukraine and covid. Perhaps he should read the newspapers occasionally.
Mr Speaker
I think you have forgotten that topicals have to be short and sweet.
Jonathan Reynolds
That was an interesting answer on the 12 years of failure—it was perhaps an answer to a question, but not the one I asked. Our wonderful businesses want to expand, invest and grow, but they cannot do that with so much uncertainty hanging over the country. The Conservative party cannot be the solution to that instability because it is the cause of it. Will the Business Secretary give us his honest view and tell us whether he still holds the view he has expressed before—that what we should have, following a change of Prime Minister, is a general election?
Mr Rees-Mogg
Pots and kettles, Mr Speaker—that was neither short nor sweet. The greatest uncertainty of all is having socialists in office because the socialists ruin economies wherever they go. They create desolation, chaos and high taxes. As I said before, every socialist Government have left office with higher unemployment, including the short-lived one of 1923.
Peter Gibson (Darlington) (Con)
I thank the BEIS ministerial team for the investment of £10.65 million in the Centre for Process Innovation at Darlington, which is leading the way in ribonucleic acid technology. May I invite the Minister to visit that fantastic facility in Darlington on our amazing mile of opportunity?
The Minister of State, Department for Business, Energy and Industrial Strategy (Ms Nusrat Ghani)
The vaccine taskforce did indeed grant £10.65 million to fund the launch of the CPI’s new centre of excellence in Darlington, and my hon. Friend did a great job advocating for that investment. That is on top of the £26.48 million that the vaccine taskforce previously put in place at the centre. If time allows, and if I continue to be the Minister, I will be more than happy to come and visit.
Kim Johnson (Liverpool, Riverside) (Lab)
Mr Rees-Mogg
The UK is not dependent on the EU for its rights. We had better workers’ rights before we joined. We had longer periods for maternity leave, even while we were a member of the European Union. We are continuing to safeguard the rights of workers in this country in a proper way. We do not need to be told to do so by foreign Governments.
Mary Robinson (Cheadle) (Con)
Whether it is grooming gangs, hospital deaths or economic crime, it is often a whistleblower who highlights the criminal activity and wrongdoing. They then often rely on the Public Interest Disclosure Act 1998, which is not fit for purpose, to protect them. Will the Minister meet me to discuss the manifesto of the all-party group for whistleblowing, and its recommendations to repeal PIDA and bring in an office of the whistleblower?
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
I thank my hon. Friend for her question and her many years of work in this area. She is a staunch advocate for whistleblowing, and the chair of the all-party group for whistleblowing. I will gladly meet her to explore the issue further. I confirm that His Majesty’s Government are committed to the whistleblowing framework that the Department is still looking at.
Kate Osborne (Jarrow) (Lab)
Dean Russell
I thank the hon. Lady for her question and for meeting last week. The Horizon scandal was awful and I will gladly follow up with further meetings to discuss the matter further.
Sir Desmond Swayne (New Forest West) (Con)
Will the Minister expedite the track 2 process for carbon capture, usage and storage?
Wendy Chamberlain (North East Fife) (LD)
Mr Rees-Mogg
One of the things that we are doing in the Bill that is receiving Royal Assent pretty much as we speak, is ensuring that there are powers to deal with any inefficiencies in the market. I am very concerned that the wholesale price cuts provided by the taxpayer feed through to the retail market, and there are powers in the Bill to ensure that that happens.
Guy Opperman (Hexham) (Con)
Does the Secretary of State agree that we need to support UK forestry production, which supports companies such as Egger in my constituency, and that the best way to do that is to ensure a minimum of 1% forestry planting on public sector land?
Mr Rees-Mogg
Forestry is not one of the Department’s many responsibilities, but I will certainly take up my hon. Friend’s excellent point with the Secretary of State for Environment, Food and Rural Affairs.
Ellie Reeves (Lewisham West and Penge) (Lab)
Dean Russell
That is a matter for the management of the company and its workforce to resolve. Disruption due to strike action impacts on consumers, businesses and other users. We are monitoring the dispute and urge both sides to reach an agreement as soon as possible.
Ruth Jones (Newport West) (Lab)
Graham Stuart
We have an assessment process for all new licences to look at that and see its overall impact.
Barry Gardiner (Brent North) (Lab)
Graham Stuart
We are on track. [Interruption.] We are on track and we are focused on delivering that. The margins are tighter than we would like, but we are on track, we have delivered to date and we will deliver in future.
Geraint Davies (Swansea West) (Lab/Co-op)
Will the Secretary of State meet me and Swansea University to talk about using off-peak renewables to convert plastics into hydrogen and blending that in the gas grid, as his predecessor did, as part of the growth agenda? I appreciate that his predecessor did not do very well following that meeting.
Ms Ghani
I note that the hon. Member has raised the issue a number of times with BEIS. I am grateful that he has done so again. We are encouraged to hear about the development of new hydrogen technologies in Swansea. I know that the previous Secretary of State visited Swansea University. A range of Government support is already available for hydrogen production. The net zero hydrogen fund, the net zero innovation portfolio and the UK shared prosperity fund would help very much in Swansea.
Mr Speaker
I call the Chair of the Business, Energy and Industrial Strategy Committee.
Darren Jones (Bristol North West) (Lab)
British researchers are desperately waiting for an update on the UK’s association to Horizon Europe. The former science Minister pledged to publish the details for the replacement scheme, should our association not be concluded, before the summer recess, but they have still not been published. When will they be?
Ms Ghani
It is curious to respond to the Chair of the Select Committee of which I was once a member. We are waiting for the EU to make a decision on our association to Horizon. It is not within our grasp. We are still focused on securing association, but it would be irresponsible not to pivot if that was not forthcoming in the near future. [Interruption.] The hon. Member is gesticulating at me, but he knows very well that we are prepared to pivot and have guarantee schemes in place to help researchers and academics if needed.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
In addition to the life-changing innovations from Cancer Research UK, medical research charities make huge economic contributions. How are the Government supporting charities such as Cancer Research UK, and investing in cancer research more broadly, so that they can continue to be such a huge driver of economic growth?
Ms Ghani
One of the first meetings I had as the Minister with responsibility for life sciences was with Life Sciences Vision and the mission team, chaired by John Bell and Jon Symonds. This is done with the Department of Health and Social Care, and of course we are looking at this particular issue as well. The hon. Member will be aware of the £375 million grant, which is focused on investing in research into these sorts of diseases. We will shortly be announcing six new life science missions. The hon. Lady will no doubt be pleased to hear that they will cover dementia, cancer, mental health, obesity and addiction.
John Cryer (Leyton and Wanstead) (Lab)
Judging from the earlier answer, can the public now assume that the Government are happy for Royal Mail management to drive the company into the ground, sack 10,000 people and reduce ex-workers to poverty—and the Government do not even have a view?
Dean Russell
Decisions on staffing levels and workforce structure are for Royal Mail. Collective redundancy legislation requires employers to consult employees or their representatives within a 90-day period, and that must include consultation on ways to avoid redundancies, reducing the number of redundancies or mitigating their impact. We want a resolution as soon as possible.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The previous Secretary of State admitted that he had ignored looking at a price mechanism for pump storage hydro because he viewed it as a Scottish technology. It is actually a vital form of energy storage going forward, so can I get a commitment today on a timescale for BEIS officials to speak to SSE about a pricing mechanism for generating electricity at Coire Glas?
Mr Rees-Mogg
The hon. Gentleman is an effective campaigner for pump hydro storage and it is important to look at that. We are looking at all possibilities for maximising renewable energy.
Rachael Maskell (York Central) (Lab/Co-op)
Today’s news that an additional 10,000 people every single month are now on pre-payment meters, bringing the total to 7.5 million, is deeply troubling, not least as they are paying up to 27% more for their energy. What steps will the Secretary of State take to ensure that there is poverty alleviation on energy for the very poorest?
Mr Rees-Mogg
As I have said already, schemes are in place to support people during the winter. There is £800 available that has already been announced. There is the £400 that everybody will get. I also went through the additional schemes that are available to support people. I absolutely recognise—the hon. Lady is right to raise this on behalf of her constituents—that the price rises are difficult and worrying for people. That is why such a wide package of support has been brought forward.
Crisis in Iran
(2 years, 1 month ago)
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Bob Blackman (Harrow East) (Con)
(Urgent Question): To ask the Secretary of State for Foreign, Commonwealth and Development Affairs if he will make a statement on the current crisis in Iran.
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (Gillian Keegan)
We have all been in awe of the bravery of the Iranian people since the death of Mahsa Amini over five weeks ago. The Iranian people have taken to the streets to express in no uncertain terms that the sustained repression of their rights by the Iranian regime must end. Women should no longer face detention and violence for what they wear or how they behave in public. The Iranian regime’s use of live ammunition and birdshot against protestors is barbaric. There have been reports of at least 23 children having died and non-governmental organisations suggest over 200 deaths during the protests.
Mass arrests of protestors and the restriction of internet access are sadly typical of this oppressive regime’s flagrant disregard for human rights. These are not the actions of a Government listening to the legitimate demands of their people for greater respect for their rights. It can be no surprise that the Iranian people have had enough. This year, 2022, has seen a sharp increase in the use of the death penalty, a sustained attack on the rights of women, intensified persecution of the Baha’i, and greater repression of freedom of expression and speech online.
The UK has been robust in joining the international community’s response to holding Iran accountable for its human rights violations. The Foreign Secretary summoned the most senior Iranian official in the UK on Monday 3 October to express our concern at the treatment of protesters. On Monday 10 October, the UK imposed sanctions on Iran’s so-called morality police and seven individuals responsible for serious human rights violations in Iran.
The UK has consistently raised the situation in Iran in the United Nations Human Rights Council and through other multilateral fora. On 13 October, the UK issued a joint statement with European partners condemning the death of Mahsa Amini and calling on Iran to stop the violence and listen to the concern of its people. On 20 October, the UK joined 33 other members of the Freedom Online Coalition in issuing a joint statement condemning internet shutdowns in Iran.
We continue to work with our international partners to explore all options for addressing Iran’s human rights violations. Through the UK’s action on sanctions and robust statements with international partners, we have sent a clear message. The Iranian authorities will be held accountable for their repression of women and girls and for the shocking violence that they have inflicted on the Iranian people.
Bob Blackman
Thank you for granting this urgent question, Mr Speaker, and I thank the Minister for her answer. I also thank the Foreign Secretary for his letter yesterday advising me that I have been sanctioned by the Iranian regime.
Since the brutal murder of Mahsa Jina Amini by the morality police, there has been a nationwide uprising in Iran. Contrary to what the Minister advised, the National Council of Resistance of Iran advised that more than 400 mainly female protesters have been murdered and that more than 20,000 have been arrested over the past 39 days of nationwide protests. Does my hon. Friend agree that we must issue the strongest condemnation of those killings and mass arrests? In order to do so, is it not right that we recall our ambassador from Tehran and even consider closing our embassy in Iran, to demonstrate that this is unacceptable?
Does the Minister also agree that we need to recognise the Iranian’s people right to self-defence and resistance in the face of the deadly crackdown, which particularly targets women and their right to establish a democratic republic? I note the sanctions that have been issued by our Government against particular individuals in Iran, but does she not agree that now would be completely the wrong time to renew the JCPOA—joint comprehensive plan of action—agreement and give Iran the capability to establish nuclear weapons? Does she also agree that it is now time to proscribe the Islamic Revolutionary Guard Corps and—I say this to the Secretary of State—its assets in the UK?
Gillian Keegan
I thank my hon. Friend, and I probably ought to congratulate him on being sanctioned—that shows all the efforts that he and many colleagues in the House have made to call out the regime and the terrible actions that are taking place in Iran. The death of Mahsa Amini is a shocking reminder of the repression that women in Iran face.
We condemn the Iranian authorities and have taken very strong action. We condemn the crackdown on protesters, journalists and internet freedom. The use of violence in response to the expression of fundamental rights by women, or any other members of Iranian society, is wholly unjustifiable. We will continue to work, including with our international partners, to explore all options for addressing Iran’s human rights violations. However, as my hon. Friend knows, we will never be able to comment on possible future actions, sanctions or designations.
Bambos Charalambous (Enfield, Southgate) (Lab)
For the past six weeks, Iran has seen huge protests following the death of Mahsa Amini at the hands of its brutal morality police. Ms Amini was violently beaten following her arrest for breaching strict hijab rules.
Iranians in huge numbers have bravely said that they will accept this no longer. Women and girls are putting their lives on the line to lead a mass movement calling for nothing more than basic human rights and civil liberties. Braving severe state repression, hundreds of thousands of Iranians have joined protests. Over 12,500 have been arrested and, sadly, over 250 people have died at the hands of the security forces. Britain must support all those who stand up for basic freedoms, including freedom of conscience and religion and the freedom to live one’s life as one chooses.
It is clear that the Iranian regime is restricting information in an attempt to quash the protests. Internet access has been periodically blocked in the country, meaning that details of human rights abuses cannot be shared and protesters cannot organise. Freedom of information is integral to the success of any political movement. The UK must and can play a strong role in supporting an independent press in Iran. Reporters Without Borders has declared Iran one of the worst countries in the world for press freedom: journalists routinely face harassment, detention and threats to their family. What are the UK Government doing to encourage press freedom in Iran? What pressure is the UK putting on Iran to support fundamental human rights and freedom of speech?
The UK can and should lead calls for the UN Human Rights Council to urgently establish an international investigative and accountability mechanism to collect, consolidate, preserve and analyse evidence of the most serious crimes in Iran under international law. Can the Minister assure me that the UK will do so?
Gillian Keegan
There is much that we all agree on in this House, from our condemnation of what is happening in Iran to the actions we take and how we work with others. We are looking at all options to hold Iran to account for its human rights violations, and we are active participants at the UN Human Rights Council. On press freedom, last week we joined a statement of the Media Freedom Coalition condemning Iran’s repression of journalists. We will continue to do so, working with other countries and other groups to call out Iran, as well as taking firm steps, as I laid out in my statement.
Alicia Kearns (Rutland and Melton) (Con)
I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing this important UQ. What we are seeing in Iran is state industrialised femicide. We are also seeing Iran being increasingly aggressive abroad in support of terrorist states and terrorist organisations. Will we finally act to sanction the IRGC, which is sending surface-to-surface missiles to Russia, supporting proxies across the region and spreading harmful radicalising narratives online? Will the Minister also broaden our classification of terrorist content beyond Salafi-Takfiri extremist ideology to include Shi’a Islamist extremist materials? That is the only way in which we will protect our communities at home from their reach.
Gillian Keegan
Yes. We have an assessment, which we have shared with my hon. Friend, of Iran and its support for regimes including Russia. We will continue to work with others to call out what is happening, and of course we condemn its support of anything to do with Russia’s war in Ukraine.
Alyn Smith (Stirling) (SNP)
I am glad that you granted this urgent question today, Mr Speaker. I commend the hon. Member for Harrow East (Bob Blackman) for securing it and the Minister for her answer. The SNP and all of us stand in solidarity with the brave protesters in Iran in their actions against a brutal regime. I grew up in Saudi Arabia; I struggle to sound rational about any morality police anywhere. I am familiar with these men, I am familiar with what they do, and I stand shoulder to shoulder with the UK Government in their efforts to hold them to account.
The protests were triggered by the femicide—to our mind—of Mahsa Amini. There is a clear gender aspect, as I think we can all agree. Writing in The Sunday Times, Nazanin Zaghari-Ratcliffe, who has a greater familiarity than anyone with the Iranian regime’s brutality, put it best:
“Mahsa’s death is the latest blow to the people of a country long abused… Women in Iran are desperate. They are furious and restless. They cannot take it anymore.”
I commend the Minister for her statement, but what more can the UK Government do to ensure accountability for the perpetrators of femicide? Do His Majesty’s Government view the murder of Ms Amini as femicide? Further to the point that the hon. Member for Harrow East made about closing the UK mission, may I take another view and say that closing the mission would shut down dialogue when actually we need to continue those efforts in-country?
Gillian Keegan
Yes, we need to continue efforts and dialogue in-country. That also holds for continued discussion on the nuclear deal, which has been mentioned. We will always continue to work with our like-minded partners to ensure that Iran is held to account, including via the UN Human Rights Council in Geneva and the UN General Assembly in New York. At its 51st session, our permanent representative to the UNHRC in Geneva, Ambassador Simon Manley, raised the death of Mahsa Amini and called on Iran
“to carry out independent, transparent investigations into her death and the excessive violence used against subsequent protests.”
We have joined 52 other countries in issuing a joint statement to the Human Rights Council, urging restraint and accountability in Iranian law enforcement. The European Union, Canada and the United States have also sanctioned the morality police and certain individuals, and we will continue to work with those like-minded countries, but we cannot of course comment on any future designations or sanctions.
Harriett Baldwin (West Worcestershire) (Con)
I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing the urgent question and on his being sanctioned, and I send a loud and clear message from this Parliament that we stand with the women and girls of Iran as they fight for their civil rights. However, it is not just in their own country that the Iranian regime is causing repression and havoc; it is also selling drones which are being used to attack civilians in Ukraine. Given that sanctions on Russia are working and its missiles are running out, may I urge the Minister, with the greatest urgency, to look very closely at how we can sanction those who are arming others who would do the Ukrainians harm?
Gillian Keegan
I can assure my hon. Friend that we will continue to look at any possible measures that we can take. I think she understands that I cannot comment on any of them, but we are aware of these actions, and we are aware of Iran’s support for the Russian forces.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I congratulate the hon. Member for Harrow East (Bob Blackman) on securing the urgent question. I am delighted to join him in that select group whose members have obviously upset the regime by telling the truth about it.
I welcome the recent sanctions decisions, but I wonder whether there are any plans to extend them to other human rights abusers. Might the Minister consider the former technology Minister Mohammad-Javad Azari Jahromi and the IRGC commander Salar Abnoush, two people who would certainly merit being put on the sanctions list?
Gillian Keegan
I congratulate the hon. Gentleman on also being sanctioned. That is, of course, because of the work that he and other Members are doing in calling out these actions, and calling for more action from the UK Government as well; but I think he understands that we cannot comment on some possible future actions, or on individuals.
Stephen Crabb (Preseli Pembrokeshire) (Con)
Murder and brutal repression internally, sponsorship of terrorism overseas, selling deadly drones that target civilians to the invading Russian army—the list of the crimes of the Iranian regime is very long indeed, and when we look at all these activities, it is the role of the Islamic Revolutionary Guard Corps that comes up time and again. I do not expect the Minister to comment on specific sanctions measures, but will she at least pledge to the House that she will convey to the Foreign Secretary and her colleagues in the Foreign Office the message that it is the strong view of the House that the IRGC should be proscribed in full as a terrorist organisation?
Gillian Keegan
I congratulate my right hon. Friend on being another of the seven individuals who have been sanctioned, and I thank him for raising these concerns again and again. We have made clear our own concerns about the IRGC’s continuing destabilising activity throughout the region, and the UK maintains a range of sanctions that work to constrain that activity. The list of proscribed organisations is kept under constant review. I will take back that message, but, as I know my right hon. Friend is aware, we do not routinely comment on whether an organisation is or is not under consideration for proscription.
Layla Moran (Oxford West and Abingdon) (LD)
These brave women are inspirational, and how lucky we would be if they were able to get out of Iran and came here to obtain sanctuary. Is there any chance of a lifeboat scheme for them, should they be able to get out?
May I also ask about something very practical? The Minister will recall that earlier in the Ukraine-Russia conflict the BBC was given extra money to ensure that the World Service could broadcast in Ukrainian and also in Russian. Is there any chance that that could also apply to BBC Persian, which currently faces the chop?
Gillian Keegan
I thank the hon. Lady for her question and I join her in commending the bravery of the women in Iran. It is very easy for us to sit here, but what they are doing every day takes incredible courage and they really are showing huge strength. On BBC Persia, the BBC is operationally and editorially independent but we do provide funding, and the FCDO is providing the BBC with more than £94 million over the next three years to support the World Service. On any future actions we may do, obviously we keep everything under constant review but we do not have anything yet to announce in this area.
Dr Andrew Murrison (South West Wiltshire) (Con)
Sanctions glisten but they also cast a shadow. I am deeply envious of hon. and right hon. colleagues who have been sanctioned and I can only hope that mine is in the post. Can the Minister assure us that there can be no possibility of progress on the JCPOA while Tehran continues to export weapons of terror, particularly drone technology, to Russia to aid Putin’s war in Ukraine? Can she also assure me that, when the ambassador was called into the Foreign Office, that was made crystal clear to him?
Gillian Keegan
I am sure that my right hon. Friend’s letter could be in the post if he continues to raise his concerns so robustly. Iran’s nuclear programme has never been more advanced than it is today, and Iran’s escalation of its nuclear activities is threatening international peace and security and undermining the global non-proliferation system. If a deal is not struck, the JCPOA will collapse. In this scenario, we will carefully consider all options in partnership with our allies, but the JCPOA, while not perfect, does represent a pathway for constraining Iran’s nuclear programme.
John Cryer (Leyton and Wanstead) (Lab)
Like the right hon. Member for South West Wiltshire (Dr Murrison), I am a bit upset that I have not been sanctioned yet. I obviously need to try harder, so here goes. We are talking about a bunch of women-hating homicidal maniacs and clerical fascists. On that basis, surely it is now time to ban the IRGC. Some of us have been calling for it to be banned for some time; my right hon. Friend the Member for Warley (John Spellar) and I called for it on one of the last sitting days in July. Now that the Government have had time to think about it, can they not just get on and ban it?
Gillian Keegan
I congratulate the hon. Gentleman on his attempt to join his colleagues, and I am sure he will continue with that. As I said earlier, we have been clear on our concerns about the IRGC’s continuing destabilising activity, but we do not routinely comment on whether an organisation is under consideration for proscription. We will obviously maintain a range of sanctions that work to constrain the actions and some of the activities of the IRGC.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
I congratulate my hon. Friend the Member for Harrow East (Bob Blackman) on securing this urgent question and I thank you for granting it, Mr Speaker. I say to my hon. Friend the Minister that Iran is now quite clearly a pariah state, which means that all our policy towards it must be directed on the basis that we cannot deal with it in the same way as any other state. It supplies Russia with weapons, it is now linked to China, it is developing nuclear weapons and the brutality that we have seen meted out to those who are peacefully protesting—as their human rights would allow them to do here—is appalling. Can I urge my hon. Friend, in response, no longer to continue with the JCPOA, because it is giving Iran succour while it is still developing nuclear weapons? Also, importantly, will the Government now proscribe the IRGC once and for all, to tell it that its behaviour will no longer be tolerated and that there are more sanctions to come?
Gillian Keegan
We have always been clear that Iran’s nuclear escalation is unacceptable. It is threatening international peace and security and undermining the global non-proliferation scheme. As I said earlier to my right hon. Friend the Member for South West Wiltshire (Dr Murrison), while the JCPOA is not perfect, it does represent a pathway for constraining Iran’s nuclear programme. A restored deal could pave the way for further discussions on regional and security concerns, including in support of the non-proliferation regime. As I mentioned earlier in relation to the IRGC, we cannot comment on future sanctions, but we keep this constantly under review.
Holly Lynch (Halifax) (Lab)
Of course we welcome the fact that the Government have sanctioned key senior officers of Iran’s brutal morality police and the revolutionary guard, as well as those involved in the supply of drones to Russia, but the sanctions are primarily focused on those based inside Iran. What are Ministers doing to ensure that those with links to the Iranian regime who have visas allowing them to be based here in the UK understand our strength of feeling about the Iranian regime’s unacceptable conduct towards its people, and towards women and girls in particular?
Gillian Keegan
Even having these debates—this is the second one on this subject in the few weeks I have been in this job—is helpful, and we will continue to raise the pressure, to work with allies and to raise concerns via our participation on the Human Rights Council. We will constantly keep things under review.
Caroline Nokes (Romsey and Southampton North) (Con)
I congratulate my hon. Friend the Member for Harrow East on securing this important urgent question. There is a large Iranian diaspora in Southampton, and the women and girls who have been to see me have been clear that we must call out the murder of Mahsa Amini as femicide. It is the women and girls of Iran who are bearing the brunt of the repression. I would like to echo the comments about the BBC. Knowledge and information are power, and too little is coming out of and going into Iran to support those brave individuals. Will the Minister please go and talk to colleagues at the Department for Digital, Culture, Media and Sport to ensure that there is sufficient funding for the World Service so that the important work of BBC Persia can continue?
Gillian Keegan
I completely agree with my right hon. Friend about the bravery of the women in Iran, which I am sure those in the diaspora in her area are proud of. We will continue to work closely with our like-minded partners to ensure that Iran is held to account for the death of Mahsa Amini, including via the Human Rights Council in Geneva. As I mentioned earlier, the FCDO has put £94 million over the next three years towards supporting the BBC World Service, which is a vital lifeline for people both inside Iran and at home here.
Sammy Wilson (East Antrim) (DUP)
I, too, congratulate the hon. Member for Harrow East on securing this urgent question. I know from the discussions I have had with the various opposition groups that lobby us here in Parliament that the profile that these questions give to the issues that concern them is important and heartening. I say to the Minister that it is clear that the Iranian regime not only tortures and abuses its own citizens but is now an exporter of terrorism across the world. I do not expect her to comment on what she is going to do in relation to proscription and sanctions against the likes of the IGRC, but what I think this House wants, rather than a statement about what she is going to do, is for her to just do it. We do not need her to tell us, and we do not need information about it—just do it!
Gillian Keegan
I thank the right hon. Gentleman for his instruction, gently delivered as always. Of course we keep everything under review, but as he has identified, it would not be appropriate to discuss any future actions at this Dispatch Box right now.
Bob Stewart (Beckenham) (Con)
Could I ask the Minister to reassure the House that London will not become a place of safe refuge for the Iranian regime’s proponents? Can she assure me, for instance, that money from Iran that is funding pro-Iranian platforms in this country is closely looked at? There is also a substantial rumour that the families of the leaders in Iran are getting British passports, which is iniquitous.
Gillian Keegan
I can assure my right hon. Friend that I will look into the questions that he has raised. Obviously we have our own rule of law here in the UK. I have not heard the rumours about passports, but I will certainly look into that and write to him.
Barry Gardiner (Brent North) (Lab)
Why is it still possible to purchase a cheap tourist flight from London to Iran for £158?
Barry Gardiner
If the Government’s sanctions are strong enough, surely we should be stopping travel to and from that country.
Gillian Keegan
As the hon. Member for Strangford (Jim Shannon) points out, the price shows the popularity of the destination.
Mike Wood (Dudley South) (Con)
The brutal regime in Iran is being financed by up to $100 billion a year of sanctions relief, despite delivering almost no concrete action on nuclear non-proliferation. Will my hon. Friend press our international partners to ensure that such sanctions relief is tied to Iran’s delivering on its international obligations?
Gillian Keegan
A viable deal was put on the table in March, which would have returned Iran to full compliance with its JCPOA commitments and returned the US to the deal. Iran has refused to seize a critical diplomatic opportunity to conclude that deal, with continued demands beyond the scope of the JCPOA. We are considering the next steps with our international partners but, as I am sure my hon. Friend is aware, we cannot comment on them at this point.
Christian Wakeford (Bury South) (Lab)
I put on record my support and admiration for those girls and women who are not only protesting, but putting their lives at risk on a daily basis. The violent crackdowns against civilians by the regime in recent days are a reminder of the Islamic Republic of Iran’s attitude towards dissent at home and abroad. Crackdowns against dissent are led by the regime’s ideological terror army, the IRGC. In light of the horrific state violence, both in recent days and in 2019, we have had multiple instances in this Chamber of both sides and all parties calling for the IRGC to be proscribed. When is it going to happen?
Gillian Keegan
I am afraid I must refer the hon. Gentleman to my earlier answer: we keep things under review, but we cannot comment on any future actions.
Greg Smith (Buckingham) (Con)
I have listened carefully to my hon. Friend’s answers, but, considering that the IRGC finances and directs terror proxies across the whole middle east, including its Lebanon-based proxy Hezbollah, which has stockpiled more than 150,000 missiles on the Israel-Lebanon border, can she explain why we proscribe Hezbollah as a terrorist group, but not its financier and director the IRGC?
Gillian Keegan
There is obviously great strength of feeling on this subject, which, as I have said, I will take back to the Foreign Secretary. The list of proscribed organisations is kept under constant review, but we do not routinely comment on why or whether an organisation is under consideration for proscription, or the thought process behind those that are proscribed.
Wayne David (Caerphilly) (Lab)
I strongly support the sanctions the Government are imposing—indeed, I would like to see them go further—but will the Minister give a commitment that those sanctions will not have a negative impact on ordinary Iranian people?
Gillian Keegan
That is an important question; when we consider sanctions we always consider not only what can work, but the impact it will have on people. Our sanctions impose restrictions on the morality police as a whole and senior security and political figures in Iran, and will ensure that the individuals designated cannot travel to the UK and that any of their assets held in the UK will be frozen.
Anna Firth (Southend West) (Con)
The courage and bravery of those young women in standing up to the brutal and authoritarian regime in Iran is frankly incredible. They are superheroes and they deserve our full support and admiration. I am proud of what this country is doing to stand up for human rights in Ukraine, and we should be doing the same for those young women in Iran. I welcome the increased sanctions put in place last week on Iranian individuals and businesses responsible for supplying Russia with kamikaze drones used to bombard Ukraine. However, does my hon. Friend agree that as well as condemning the Iranian regime on human rights, we should also condemn its place on the United Nations Commission on the Status of Women? There can be no excuse for a regime that treats women with such contempt to sit on a commission that should be working to promote global gender equality and empowerment of women wherever they live.
Mr Speaker
Order. May I just remind hon. Members that these are meant to be questions, not speeches? It is an important point, but I need to get everybody in.
Gillian Keegan
Thank you, Mr Speaker. I congratulate my hon. Friend, because there will be people watching this urgent question and hearing what we are saying, whether among the diaspora or in Iran, and I am sure it gives them a great deal of strength and courage to know the strength of feeling in this place. The protests also send a clear message that the Iranian people are not satisfied with the path their Government have taken, and we urge Iran to listen to its own people, to respect the right to peaceful assembly, to lift all restrictions, to stop unfairly detaining protesters and, most importantly, to ensure that women can play an equal role in society.
Ruth Cadbury (Brentford and Isleworth) (Lab)
In the Minister’s response to my hon. Friend the Member for Caerphilly (Wayne David), she talked about sanctions against the elites, who often do not suffer the impact of broad-brush sanctions. What discussions has the Minister had with her counterparts in the Department for Education about removing study visas from the families of regime members, living here far from the restrictions in Iran, and particularly those imposed on women?
Gillian Keegan
I want to make clear that in addition to the sanctions recently imposed on 10 October, there are almost 300 sanctions on various activities, people and organisations within Iran. We continue to keep those under review, but I cannot comment on any potential future actions that may be taken.
Ruth Jones (Newport West) (Lab)
In recent months, the Iranian Government have systematically inflicted untold cruelties on the people of the Baha’i faith as the world looks on. As Baha’is across the world mark the twin holy days—I send them my best wishes—can the Minister tell me what precise steps the Government are taking to support and protect this important and targeted community?
Gillian Keegan
That question is very important and was the subject of a Westminster Hall debate not long ago. We condemn any actions that restrict freedom of religious belief.
Kim Johnson (Liverpool, Riverside) (Lab)
I send my solidarity and support to the women and girls of Iran fighting for their human rights. Does the Minister agree that, in the light of recent events and the attacks on human rights, the BBC’s decision to close down its Persian radio service is deeply unfortunate when so many rely on it as a lifeline? Will she undertake to speak to the BBC director-general to ask whether the closure can be reviewed and reversed?
Gillian Keegan
BBC Persian is a legitimate journalistic operation, which is still operating and is editorially independent of the UK Government. However, I am shortly meeting with representatives from BBC World Service and I will discuss the matter further with them.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
Security forces are demanding that teachers in Iran hand over the names of troublemakers, threatening arrest if they refuse. One teacher in Tehran has reportedly died trying to protect students. What support are the UK and our allies providing to protect teachers specifically from those terrifying abuses of their human rights?
Gillian Keegan
I thank the hon. Lady for bringing to light the plight of teachers. Many protesters are bravely protesting, knowing that they are putting themselves in danger. That is why I welcome the opportunity to put on record our condemnation of all the actions the Iranian regime is taking.
Jim Shannon
I thank the Minister for her strong stance and her answers. It is encouraging to have time dedicated to this important situation, which is escalating at pace in Iran, but it is regrettable that many other groups face oppression from the Iranian state, and we must not forget them amid the ongoing crisis. Can she assure me and this House of her support for other religious and belief groups in Iran, particularly the Baha’i and Christians, who have long suffered at the hands of the Iranian regime and, with thousands of others, have had their freedom of religion and belief violated?
Gillian Keegan
I believe the hon. Gentleman also took part in the Westminster Hall debate, as many of us did. I met a number of people after that debate who were delighted that hon. Members kept pushing their case, but urged us to keep the debate alive and active and to call out wrongdoing wherever we see it.
Avanti West Coast Contract Renewal
(2 years, 1 month ago)
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Cat Smith (Lancaster and Fleetwood) (Lab)
(Urgent Question): To ask the Secretary of State for Transport if she will make a statement on her decision to renew the contract for Avanti West Coast to provide passenger services on the west coast main line.
The Minister of State, Department for Transport (Kevin Foster)
On 7 October, a short-term contract was entered into with the incumbent operator for the West Coast Partnership. The contract extends the delivery of the West Coast Partnership and Avanti West Coast business for six months until 1 April 2023. This gives Avanti a clear opportunity to improve its services to the standard we and the public expect. The Government will then consider Avanti’s performance while finalising a national rail contract for consideration in relation to the route, alongside preparations by the operator of last resort should it become necessary for it to step in at the end of the extension period.
The primary cause of Avanti’s recent problems is a shortage of fully trained drivers. Avanti was heavily reliant on drivers volunteering to work additional days because of delays in training during covid. When volunteering suddenly all but ceased, Avanti was no longer able to operate its timetable. Nearly 100 additional drivers will enter formal service between April and December this year, and Avanti has begun to restore services, initially focusing on the Manchester and Birmingham routes.
From December, Avanti plans to operate 264 daily train services on weekdays, a significant step up from the circa 180 daily services at present. We need train services that are reliable and resilient to modern life. Although the company has taken positive steps to get more trains moving, it must do more to deliver certainty of service to its passengers. We will hold Avanti fully to account for things in its control, but this plan is not without risk and, importantly, requires trade union co-operation. The priority remains to support the restoration of services before making any long-term decisions.
In assessing options for a longer-term contract, the Secretary of State will consider factors including outcomes for passengers, value for money and the delivery of major projects and investment—in this case High Speed 2, given the links to its future delivery model. To put it simply, things must improve during this probation period for the contract to be further extended.
Cat Smith
I declare an interest, as I suspect many Members will, as a long-suffering traveller on the so-called rail service on the west coast main line.
By giving Avanti this six-month contract extension, after months of failure and rail chaos, this Government are frankly rewarding that failure. Avanti promised to improve services back in September, and instead it has gone and cut services, introduced this emergency timetable and almost entirely stopped selling tickets online.
The provision of reliable train services is essential for the economic growth and prosperity of more than half the UK’s population. I seek clarification on the metrics the Minister will use to assess improvement or, indeed, further failure, given that the bar is currently set so low. It is clear that the west coast franchise has been fundamentally mismanaged by Avanti. These significant failings mean that staff morale is at an all-time low, which is reflected in the industrial action taken by trade unions. Staff report being overworked and understaffed due to the company’s failure to recruit sufficient staff and fill vacancies. I understand that many station ticket offices are understaffed and, in many instances, the company is failing to meet its regulated ticket office opening hours. As the Government are so tightly managing this contract, what are they doing to resolve these industrial disputes and the issues affecting staff at Avanti?
It seems that the Government are intent on rewarding failure. Rather than bringing the franchise in-house, they have given Avanti an extension. The Government have given Avanti precisely the same management fee despite it running dozens fewer services. This means Avanti stands to receive fees, or profits, worth £6 million for this period. This profiteering is supported by the Government and paid for by taxpayers and passengers. Avanti is part-owned by the Italian Government, so why not the UK Government instead? We could then reinvest any surplus revenue in improving the network for passengers rather than seeing it seep out in profits. When will the Government stop rewarding Avanti’s failure and instead strip it of its franchise and bring the west coast main line back into public ownership?
Kevin Foster
What metrics will we use? As with all rail contract awards, the Government will act in accordance with the franchising policy statement made under section 26(1) of the Railways Act 1993, which is already publicly available, in assessing whether to award a new contract. As I have said a number of times from this Dispatch Box, we are clear that the current service is unacceptable and will look for significant improvements before April if we are to extend this contract any further.
I always say that bringing something in-house is not necessarily a magic bullet, as the hon. Member for Coventry South (Zarah Sultana) demonstrated with her recent tweet when travelling on London North Eastern Railway, which is operated by the operator of last resort. For example, there might be issues related to infrastructure, which is of course publicly owned.
Avanti has a plan for improvement and the significant restoration of services in December, and we are seeing new train drivers being trained. Of course, we are seeing the wider impact of industrial action on the network, on which we and the Opposition have very clear views. They support it one day and not the next.
We believe there is a credible plan. There is daily interaction between Avanti and the Department for Transport, with weekly interaction at the most senior level. Ministers are regularly updated, too. We are making sure that a firm eye is kept on this, and we receive regular representations from Members of this House on what needs to happen to ensure this line provides the type of service we all want to see.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
I have previously raised my concern about the capacity of FirstGroup, which is a partner of Avanti that also operates the TransPennine service that has been absolutely appalling over recent months, particularly for my constituents who use Lockerbie station. Is the Minister clear that FirstGroup has the capacity both to operate TransPennine and be part of the Avanti partnership and, in both, achieve improvements on the currently unacceptable levels of service?
Kevin Foster
I have met FirstGroup to discuss the overall position of its franchise. It should be remembered that FirstGroup is also involved in running the Great Western Railway franchise, which runs fairly successfully in the south-west and Wales. Other parts of its operation are going relatively well, are well managed, are delivering good outcomes for customers and are supporting our agenda of growing the rail network. For example, GWR operates the Dartmoor line that was opened last year.
On TransPennine Express, we recognise that a number of factors have affected performance. Again, quite a lot of training is needed following the backlogs caused by covid and related to the line upgrades. It is clear that TransPennine Express services need to improve quite substantially. Again, we look to work with FirstGroup to get the type of improvement plan we want to see.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
I thank my hon. Friend the Member for Lancaster and Fleetwood (Cat Smith) for securing this urgent question because Avanti West Coast’s continued abject failures are simply unacceptable. Over the course of its contract, Avanti has had the fewest trains on time, more complaints than any other operator and a wholesale failure to train new drivers, which has led to the mess we have to endure today. Despite this, Avanti has been rewarded with a contract extension. The Tories, as usual, are rewarding failure, yet there are gaping holes in the improvement plan announced alongside the contract extension, which will prolong passenger misery.
On the busiest main line in the country, at the busiest time of year, there is not a single bookable weekend service between November and Christmas—not one. The service reductions that the Government signed off were supposed to increase reliability, but they have done the exact opposite. Can the Minister explain today when services will be available to book and why the Transport Secretary failed to demand that as a condition of handing over millions in taxpayers’ cash? Avanti is being paid precisely the same management fee as under the previous contract, even though hundreds of services are not running—why? Travelling across the north is also becoming next to impossible. Today, more than 40 services on TransPennine Express have been cancelled. As my good friend the Mayor of West Yorkshire, Tracy Brabin, lamented to me:
“It’s chaos and the Government must intervene.”
So why are they planning to hand TPE an eight-year contract for this service in May? Perhaps the Minister can enlighten the House as to whether they are preventing a deal between TPE and the workforce which could improve services in the short term?
Today, what the public need to hear from the incoming Government—yet another Government—is a serious plan to get travel across the north back on track; they need to hear a plan to restore services. If the Government cannot get that, they must withdraw the contract, because passengers are sick and tired of excuses.
Kevin Foster
We have been clear that the current position with services is unacceptable and we expect significant improvements. Long-term contract award decisions will be affected if, as we approach them, the service day to day is not where it should be. The management fees that are paid are specified in the contracts for operating. That said, the performance fee, to which the hon. Gentleman was perhaps also referring, for Avanti for the period beyond the withdrawal of rest-day working and the current timetable reductions is due to be independently evaluated. That is not just done by the Government and it has not yet been done. I suspect that the independent evaluator will want to take on board quite a number of these points, but the hon. Gentleman will appreciate why I would not want to give too many comments from the Dispatch Box on what the independent evaluator should do.
As for the plans for improvement, the first point to make, which has already been touched on, is that we are seeing more drivers being trained by Avanti West Coast and there are plans to reinstate the vast majority of the timetable in December. Clearly, when deciding what comes next we will want to make sure that that has worked and it is delivering an acceptable level of service for ourselves and for passengers more widely. On TPE, although we are of course welcoming the fact that we are starting very large-scale investment into that route, the level of which that route has not seen for decades, we need to see significant improvement.
As for moving immediately to cancel the contract, I remind the hon. Gentleman of the quotes in the Manchester Evening News on 6 October that were attributed to Mayor Burnham about how that could bring more disruption in the short term. The idea that putting this situation into the hands of the operator of last resort would immediately resolve a driver shortage and other issues is not one that stands up to any scrutiny.
Aaron Bell (Newcastle-under-Lyme) (Con)
My constituents have been enduring a pretty terrible service from Avanti for many months, with only one train an hour from Stoke-on-Trent recently. But it is not just about the reliability and the cramped trains; it is also about the availability of tickets, as people are not able to book ahead, which is costing them more because they are having to buy on the day. When the Minister speaks to Avanti, will he make sure that he stresses not only reliability, but availability, so that my constituents can get up and down the west coast cheaply?
Kevin Foster
Yes, I will. In fact, I have already spoken to some of Avanti’s most senior management and made that point, particularly following representations from hon. Members. I also reinforced it in a meeting I had with FirstGroup more recently, and it has an overall interest in the Avanti operation.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
There are 14 trains scheduled this Saturday from Glasgow to Euston, but last Saturday only three actually ran, and yesterday saw more than 15% of Avanti’s Glasgow services cancelled. People in Scotland and the north of England are being treated as third-class citizens. I doubt that the laissez-faire attitude of the Department for Transport when it comes to industrial relations at Avanti would last five minutes if home counties commuter services were being slashed in the same way. When are Ministers going to roll up their sleeves and get involved? Was Mick Lynch not right when he said in evidence to the Transport Committee that Scottish Government politicians:
“have an attitude where they want to resolve the issue, whereas sometimes when we meet politicians down here they want to exacerbate the issue and make us their enemy.”
And that was before the Government tabled their utterly regressive Transport Strikes (Minimum Service Levels) Bill; Tory party ideology is impacting taxpayers and passengers yet again.
The six-month extension is seen by everyone as kicking the can down the road. What work is ongoing right now to ensure that the DFT and Directly Operated Railways Ltd are ready to “take back control” of a key piece of cross-border infrastructure, and we follow the lead of Scotland in ending the disastrous experiment of privatisation?
Kevin Foster
Work is ongoing to ensure that the operator of last resort would be ready in April to pick up the service. I will touch on some of the issues raised, but not all are within Avanti’s control; merely changing the franchise and who operates it would not resolve issues and problems that have been caused by infrastructure or engineering works, for obvious reasons—those sit in Network Rail’s purview. However, we are certainly not adopting a laissez-faire attitude. Every day, the DFT is engaging with Avanti and TPE about the services. Every week, there are senior-level contacts as well, and Ministers are actively involved with this process. I am a traveller on Avanti trains myself of a Sunday, and the idea that we are not interested in this or that we have some sort of laissez-faire attitude is completely for the birds. As for relationships with the trade unions, the Transport Secretary has met the general secretaries, but we make the point that we are not the employer in this circumstance, and it is for the unions and the operating companies to come to an agreement.
Simon Fell (Barrow and Furness) (Con)
On Saturday, I endured an almost 10-hour odyssey across the UK to go from Barrow to London, for an engagement that I then missed. No one is going to peel an onion for me, but many of us have to endure this twice a week and for our constituents it is many more times than that. They are missing trips to the airport and to see their families, and they are missing their commutes. This is simply unacceptable, and they cannot book ahead and their tickets are ridiculously expensive as a result. Will my hon. Friend confirm that if Avanti does not improve services quickly, it will be stripped of its franchise?
Kevin Foster
I hear the points my hon. Friend makes. Obviously, he will appreciate that I need to follow the due legal process in terms of any removal of franchise, but we have made clear the criteria that are set out and the need for improvement before April, which is when we would need to take the final decision on a longer-term principle. If the current situation continues, that will clearly be a very strong part of our consideration.
Christian Wakeford (Bury South) (Lab)
Two weeks ago, I told Avanti in the Select Committee that every train I had booked in the past month had been cancelled. Avanti told me that there had been improvements. Improvements appear to be moving about as fast as the 8.55 from Manchester Piccadilly to London Euston—that train was cancelled. We have seen a reduced service, half of all trains late and 60,000 complaints, yet the Government have handed Avanti more than £19 million, including more than £4 million in performance bonuses. What message does the Minister think it sends to the public to reward Avanti in this way for nothing but failure and letting down its customers?
Kevin Foster
The hon. Gentleman would be aware, had he heard some of what I said earlier, that the performance payments in relation to the period since the timetable reduction have yet to be evaluated independently. Clearly, the evaluation will take into account the actual situation of the delivery of the contract. As this is an independent evaluation, he will appreciate why it is not one I will personally do as a Minister and it is right that it is under that process. As we have touched on, the Government have made it clear to Avanti that significant improvements need to be made in its service. It has a plan to implement for December, which it is confident will deliver a major improvement in the service it is operating. We look forward to seeing it implement that.
Dr James Davies (Vale of Clwyd) (Con)
I am grateful to the Minister for meeting me a week ago today to discuss Avanti West Coast services to north Wales. He knows that those remain abysmal. Whereas there are normally six direct services a day, there is now just one, if it is not cancelled. What assurances has he received from the company that it will able to return to near normality by December, as promised?
Kevin Foster
The assurances that Avanti is giving are that its plans for December will restore the majority of direct services into north Wales. DFT officials are engaging daily with Avanti, as I have touched on, because we do not just want to accept an assurance that the service will be better. Clearly, we want to have verified plans for it to be better. We are seeing additional train drivers coming in and we are reassuring ourselves that Avanti’s plans for December do not include the use of driver rest-day working, because the withdrawal of that prompted the major issues in its timetable. Clearly, we would not want Avanti’s improvement plan to be based on that factor. That is where we are at the moment. We are assured that it has the plan to restore the majority of services in December, but clearly we are engaging with Avanti daily and will see what happens in December, and that will then prompt what we do on the long-term franchise.
Tim Farron (Westmorland and Lonsdale) (LD)
Avanti is currently able to run approximately 40% of the services out of Euston that its predecessor used to run, with a massive impact on my communities and all those people from London, the biggest destination in the country, who visit the lakes, the second biggest. Staff shortages are clearly the problem, along with a lack of good will in the staff body. There are wonderful people working for Avanti, but there are not enough of them and they are poorly managed. Will the Minister reflect on the fact that one reason why there is such low morale and low commitment to good will and working overtime is the Government-sanctioned programme of ticket office closures, not just on the mainline at Penrith and Oxenholme but in places such as Appleby, Windermere and Grange. Will he push Avanti to make sure that we keep those ticket offices open, and therefore perhaps do something about staff morale and train reliability?
Kevin Foster
We could have quite a session on the changes in ticket buying patterns in recent years. The number of people buying tickets at a ticket office has declined dramatically, and we are keen that staff should be deployed as much in helping passengers outside on the concourse as in sitting behind a glass screen waiting to sell a ticket.
As for the overall services, the hon. Gentleman corresponds with me regularly, I am afraid, about the issues that affect his constituents. We have made it clear that the current performance is not acceptable. We recognise that individual staff members work hard and deliver a good service, but overall the standard is not what we expect, and we expect significant improvement, particularly in the December improvement plan, which we will monitor closely.
Virginia Crosbie (Ynys Môn) (Con)
In the past year, daily flights from Ynys Môn to Cardiff have been scrapped by the Welsh Government, and on Friday came the appalling shock that they will close one of the two bridges—the Menai bridge—for up to four months. On top of that, we have a rail service that limps along with just one direct service to and from London. What assurance has the Minister been given by Avanti that at least one of Ynys Môn’s transport links will be fully functional by the end of the year?
Kevin Foster
I know that my hon. Friend is strongly committed to restoring the connections which her constituents have a right to expect. Certainly, the December plan includes the restoration of the majority of the services to Holyhead. As I have touched on in a number of my answers, there is daily engagement between the Department and Avanti, including at a more senior level, not just to study what is happening currently but to reassure ourselves about the plans going forward. We expect those to be in place by the end of the year. We have made it clear that we will then look at what happens after the plan has been implemented, and that will form the basis of the decisions that we make long term.
Taiwo Owatemi (Coventry North West) (Lab)
Across the west midlands and in Coventry, commuters face continued travel disruption due to the failures of Avanti West Coast. That has had a huge economic impact on my constituents in Coventry North West. There have been absolutely no consequences for the appalling service that Avanti has delivered to my constituents, so while the current Government may well continue to operate without accountability, will the Minister tell me when he will stop rewarding failure and stop wasting taxpayers’ money, and do the right thing by putting power back into the hands of passengers?
Kevin Foster
I have pointed out a couple of times that performance payments for the period since the cessation of rest-day working and the reduction in the timetable will be evaluated independently. To my knowledge, no such payments have been made so far, but we will wait for the result for the independent evaluation, which is specified under the franchise contracts. As has been touched on, simply changing the branding of the train or the name of the operator will not resolve many of the issues, but we are relatively confident that the plan that will be set out by Avanti in December will deliver. Of course, we will hold Avanti to account on that plan.
Mike Wood (Dudley South) (Con)
Many of my constituents in Dudley South have been let down badly by the inability of Avanti West Coast to operate an acceptable level of service. How many more chances will Avanti have before its faces the consequences of its failings?
Kevin Foster
As I have touched on, we have made it clear that we will follow due process. We have been clear in our comments to Avanti that the six-month extension is not an indication of what our long-term view is. It is effectively a probationary period, and we expect to see significant improvements in the services on the line before April. As I have touched on, the OLR is making preparations that would be necessary if it had to step in at that point.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
Does the Minister understand the depths of the rage of commuters in Birmingham and the west midlands that a company that is incapable of running a train service has just been rewarded with a six-month extension? Surely he can see that Avanti, having treated the public like fools, is now treating him like a fool, because all that it is seeking to do is maximise its profit for the next six months before the inevitable happens and the contract folds. He should get a grip and end this chaos now.
Kevin Foster
First, I am always pleased to note that the vast majority of commuters in Birmingham, Coventry and the west midlands have the benefit of Mayor Andy Street pushing their transport services forward, and we are delighted to work with him to ensure quality. As for Avanti, we have engaged directly with Mayor Street, because we want to see improvements and we want the service to change. We will have a plan to do so in December.
Jack Brereton (Stoke-on-Trent South) (Con)
In addition to the severe disruption and overcrowding of services through Stoke-on-Trent, commitments to improve stations have not been fulfilled. Will my hon. Friend look at what more can be done to ensure that those contractual obligations to improve stations such as Stoke-on-Trent are fulfilled by Avanti?
Kevin Foster
Certainly we are keen that Avanti should honour all its contractual obligations. The one on which we are most focused is ensuring that it improves the operation of the railway but, similarly, we would want to consider the other commitments that it made—the progress that has been made on them and how it is honouring them—as part of the longer-term decision.
David Linden (Glasgow East) (SNP)
I probably spend more time on the Avanti west coast main line than anyone in the Chamber. Its performance is simply appalling, and the Minister saying that it must improve is like me turning to my son and daughter and saying, “Don’t eat anything from the biscuit tin again”, then walking away and leaving the biscuit tin in front of them. The reality is that under the Avanti franchise, staff morale has been driven into the ground. The company has engaged in horrendous industrial relations with the trade unions, and it is running the service into the ground in the full expectation that it will lose it in six months’ time. Why does the Minister not just do the right thing, take the contract from Avanti, and follow the example of the Scottish Government and bring it back into public ownership?
Kevin Foster
My discussions with FirstGroup and Avanti, and particularly with FirstGroup, do not indicate that it is inevitable that they will lose the service in six months’ time, or that that is an outcome for which they hope and wish. Every day, the Department engages with Avanti on the December improvement plan and bringing in more train drivers. Again, that brings home the fact that we need to reform our railways to move away from the idea that services depend on rest-day working, which belongs to the services of the past.
Scott Benton (Blackpool South) (Con)
The situation with Avanti has been intolerable for many months. Not only has that caused significant problems for commuters but it has damaged the tourism industry in my constituency, as holidaymakers are reluctant to book ahead. What reassurances can the Minister give the House that he is holding Avanti to account on its recovery plan?
Kevin Foster
As I have said, departmental officials engage with Avanti on its recovery plan, as I touched on in an answer to a previous question: it is about not just accepting its assurance but going into the details of what the plan is. Every week, there is engagement at senior management level. Ministers are engaged through departmental teams with the progress that has been made on reassurance. As I have said, at the moment we are confident that Avanti can deliver its plan in December —there is a requirement for trade union co-operation as well, which we accept is slightly out of its control—and that is our key focus in ensuring that we manage this every day, as we are conscious that significant improvement is needed.
Graham Stringer (Blackley and Broughton) (Lab)
It is no accident that Avanti has reached the pinnacle of incompetence within the rail industry. It has done that by cutting costs and putting profit before service and people. It has damaged the economy all the way along the west coast main line. People who use that line do not want it to continue. I do not want it to continue. Why is the Minister giving this dreadful company a second chance?
Kevin Foster
As I have already said, we are clear that the six-month extension is to give Avanti the final opportunity to implement the improvement plans that it has put in place, which we are starting to see the benefits of—we are starting to see drivers coming through—and that will then allow us to take a final decision in the early part of next year about what happens. Alongside all that, we are already doing the relevant preparations in the OLR.
Mary Robinson (Cheadle) (Con)
The Avanti service between Stockport and London Euston is unacceptable and has been for some time. I am grateful to the Minister for his words on this, but cancellations and the inability to book a return ticket mean that people are not travelling on the train; they are choosing to get in the car instead. Will the Minister take to Avanti the clear message that it must improve and improve quickly or its contract will be in jeopardy?
Kevin Foster
My hon. Friend puts her points very well. We have been clear that improvements need to be made for this contract to continue beyond April.
Dan Jarvis (Barnsley Central) (Lab)
Yorkshire continues to be blighted by unreliable services, but it was very good to see Mayor Tracy Brabin in West Yorkshire telling TransPennine Express to come up with an immediate solution to the chaos that has left so many passengers deeply exasperated. One thing the Department could do is to make sure that negotiations on rest-day working are meaningful and deliver an agreement with the trade unions. Rest-day working, as the Minister will know, is separate from terms and conditions, and an agreement would make an almost overnight difference. The Secretary of State has indicated that she is open to an agreement. Can the Minister update us on what progress is being made?
Kevin Foster
Again, it is worth noting that, in the case of Avanti—I shall talk specifically about Avanti as it is the subject of today’s urgent question—agreement on rest-day working with the trade unions had been in place for some period of time, and that it suddenly ceased in those volunteering to undertake it. This is not a case of there not being an agreement. For example, if people started volunteering for rest-day working tomorrow, they could pick it up and do it again. That said, is it sensible to be having large parts of a key train line relying on rest-day working? The obvious answer is no, which is why we want to look at wider modernisation—we may have some difference of opinion on that, but it is a key point—and on how additional drivers are being trained so that the December recovery plan for Avanti does not rely on driver rest-day working.
Rob Roberts (Delyn) (Ind)
One of the biggest problems on the north Wales coast line is that when Avanti stopped its services, my constituents had to put up with Welsh Labour’s Transport for Wales service instead, which is just as unreliable. It is so overcrowded that it looks a bit like the tube at rush hour. With a little bit of sympathy for Avanti’s situation, I have been trying to schedule my own train travel recently, and it is just as difficult to get a train because of strike action going on as because of the problems with getting tickets. Does the Minister agree that the hardest part for the public is uncertainty and cancellations? Would it not be better for Avanti to run fewer services well, especially down the north Wales coast line, rather than making promises that it just cannot keep?
Kevin Foster
The hon. Member is right to suggest that this idea of a publicly owned transport service being some sort of panacea of great customer service is rather false. It is interesting to hear the examples that he highlights of the service offered by the Welsh Government, which his own constituents get to experience. On the balance between reliability and the number of services being run, the reduced timetable was put in place partly to ensure that services would run. That said, the service is clearly not at the level that we would wish. That is why more than 100 drivers will have been trained between April and November, which is when we look to bring back the main timetable. Ultimately, it is for Avanti to deliver the services that it is contracted to provide.
Kate Hollern (Blackburn) (Lab)
The west coast Avanti line has been dysfunctional for many months. The Minister is saying that we need to give Avanti the opportunity. Let me give him some recent examples. Today, 44 services have been cancelled on the TransPennine route. On Thursday, if people tried to purchase a ticket online, they could not. No tickets were available until 9.10 in the evening. If someone is travelling back to Lancashire, that is a long time to hang about in London and it gets them home very late. The Minister says that we have seen improvements, but we have not. He says that he will give Avanti another six months. Are we really saying that people in Lancashire have to wait six months for an improvement that is unlikely to come, while the Minister decides to continue to reward bad service?
Kevin Foster
I make the point that the TransPennnine Express is a separate franchise from Avanti, although FirstGroup is the overall operator. We are starting to see the reinstatement of some services as new drivers are being trained, but we are clear that the overall service is unacceptable and needs to improve. The idea that just sticking it into the OLR tomorrow morning will suddenly resolve all the problems is not practical, but we are very clear that if we do not see the significant improvements that we need to see post the December improvement plan being implemented, we will need to take a careful view of the long-term future of the franchise.
Robin Millar (Aberconwy) (Con)
Residents of Aberconwy know only too well the importance of the services that run on the north Wales main line. Indeed, the UK connectivity review reflected the strategic importance of that infrastructure, but, unfortunately, the Avanti emergency timetable does not seem to recognise that; it barely delivers a main line service. Effectively giving north Wales branch line status is causing real problems. Recently, I caught a Crewe to Chester connection. It was a single carriage that only left the station when six people had crammed into the toilet and it still left people behind on the platform. Will the Minister confirm that, in any future considerations of the franchise, it will bear the name the north Wales and west coast main line to reflect the strategic importance of north Wales to the rail service?
Kevin Foster
From my own time in the Wales Office, I am conscious of the vital economic role that the railway plays in north Wales in terms of economic performance. As my hon. Friend says, the current service is not acceptable. We look forward in December to seeing the restoration of the majority of direct services. I hope that he will appreciate why I am not going to commit to a rebranding exercise on the Floor of the House this afternoon, but I am sure many colleagues will have a view as to whether the current name that the line operates under is the best compared with some of the other names that could have been chosen, particularly the old LMS one.
Andrew Gwynne (Denton and Reddish) (Lab)
Why does this Minister insist on defending the indefensible? Avanti failing is nothing new. It has failed virtually since day one when it took over the contract from Virgin. The Minister says that it has daily meetings and his officials have meetings frequently with Avanti. Has he pushed Avanti on the fact that, for too many weekends and days of the week, my constituents cannot book advance tickets online? Has he pushed it on the fact that, for some inexplicable reason, a journey on the west coast main line between Stockport and Euston is far more expensive than the same journey on the east coast main line between Wakefield and King’s Cross? He talks about performance-related payments to Avanti. If he cannot get a grip on Avanti, do we need performance-related payments on the Minister?
Kevin Foster
It is always good to get constructive suggestions as to how we improve train services. On the service, I think I have said “unacceptable” more times at the Dispatch Box on this subject than on pretty much anything else. No one is arguing that the current service is acceptable as we go forward. However, simply chucking it into the OLR and giving it a new brand to resolve every problem is not a solution on its own. That is why we have engaged and worked with Avanti on the December improvement plan. We expect it to deliver and if it does not, clearly, there will be consequences when we come to the April contract extension decision.
Andrew Bridgen (North West Leicestershire) (Con)
The Minister says that he has given Avanti a six-month contract extension to allow it to deliver its improvement plan. What assurance can he give the House and commuters that services will not deteriorate again to their current, unacceptable levels if the Avanti contract is extended beyond then?
Kevin Foster
My hon. Friend is absolutely right to raise that. As part of taking a longer-term decision, we would want to see how the improvement was sustainable—for example, as I have touched on already, by moving away from a reliance on rest-day working for train drivers as the core of delivering the service. We want to look—in the same way, by the way, that the OLR would have to look if it took over operations—at ensuring that any improvement is sustainable and provides a long-term basis of confidence for the service and particularly the communities that rely on it.
Bill Esterson (Sefton Central) (Lab)
Does the Minister not understand that the public believe the Government, by extending the Avanti franchise, are taking them for fools? Does he not realise that the only way out of this for him and his ministerial colleagues, and the only way to end the public’s anger towards their Government, is to remove the Avanti franchise and do it now?
Kevin Foster
I have to say, that was not the universal reaction to the decision we took, when we were clear that this was a six-month probationary period. We look forward to seeing the implementation of the December timetable changes and the improvement plan, and to closely monitoring the progress being made towards it, including, for example, the training of new drivers to fulfil it. As I have said a number of times, simply repainting the engine and giving the franchise a different name will not solve many of these issues.
Kate Green (Stretford and Urmston) (Lab)
It currently costs £369.40 for a standard open return between Manchester and London. That would be excessive at the best of times. When the company is completely incapable of running a reliable service, it is downright unacceptable. The Minister has said repeatedly that there are already signs of improvement. That is not the experience of Avanti passengers. Can he describe exactly what signs of improvements he is talking about?
Kevin Foster
We have already begun to see the restoration of some peak-time services. It is also worth saying that very few people use the open return-price ticket—I certainly did not use it when I travelled down from Manchester on Sunday, and nor would many other travellers. We are starting to see improvements. We are seeing the profile of new drivers joining the service. Drivers already in training will be able to start driving trains before the December improvement plan is in place. However, we are clear that this is a probationary period and we look forward to seeing the outcomes.
Kim Johnson (Liverpool, Riverside) (Lab)
I and my constituents know only too well that the Avanti West Coast line is the worst performing on the rail network, although the workers do a great job and should be commended. My great city of Liverpool will be hosting the Eurovision song contest in my Liverpool, Riverside constituency next year. We need an efficient and effective service to get people to the city and support the local economy. Does the Minister agree that, instead of rewarding failure, it is time to terminate the contract and bring the service back in house?
Kevin Foster
We are all looking forward to the delivery of a successful Eurovision in Liverpool, or Lviv-erpool, as some people are deciding to call it—[Interruption]—although I understand that there is some disappointment from colleagues who were hoping that Glasgow would be the venue. Certainly, the rail network will need to play a key part in making sure that we can support that event fully.
As I have touched on a couple of times, just stripping Avanti of the contract today would not be a magic bullet to solve the problems we are seeing. Avanti has its improvement plan for December, we are working closely to monitor progress on it, and we are clear that we expect to see significant and sustainable improvements following that plan, ahead of taking a final decision in April.
Mrs Paulette Hamilton (Birmingham, Erdington) (Lab)
People in Birmingham are absolutely sick to the back teeth of Avanti West Coast—its cancelled trains and overcrowded carriages, the cuts to services and the lack of ticket availability. It is absolutely ridiculous that its contract was extended. If we are serious about levelling up and improving services, we need to have plans in place to end this chaos. So Minister, do you think that—
Madam Deputy Speaker (Dame Eleanor Laing)
Order. Not “Minister, do you think?” but, “Madam Deputy Speaker, does the Minister think?”
Mrs Paulette Hamilton
Madam Deputy Speaker, does the Minister think that rewarding Avanti with a contract extension was a mistake?
Kevin Foster
I do not believe it is a mistake to focus on an improvement plan that will come in in December and to carefully monitor progress. As I have said, DFT officials engage daily with Avanti on the progress it is making. We are not just accepting assurances; we want to see clear, concrete evidence—for example, drivers in training and drivers completing training are the core part of resolving some of these issues. That is where we believe our focus should be now. We will clearly look to see how the improvements are made in December. If they are not, and if the service is still as it is, clearly we will take a decision ahead of the main contract renewal in April. I also understand that Avanti accepts that the current service is not appropriate.
While we are talking about Birmingham, we should remember that this does not reflect on the whole rail network, as the hon. Lady knows. Chiltern runs a very effective service to Birmingham Moor Street, which provides a good option for many people looking to travel to London from Birmingham, and it has operated it successfully for many years.
Jeff Smith (Manchester, Withington) (Lab)
My constituents in south Manchester are contacting me, frustrated and angry about Avanti’s lack of service. They cannot book seats, and even if they can, the trains are ridiculously overcrowded or cancelled completely. The Minister is setting great store by this so-called December improvement plan, but how can we have any confidence in that plan, given the current terrible service, which by the way is actually getting worse? Avanti should have lost the contract already, but if we do not see massive and fast improvements in December, will he please commit to stepping in quickly, and long before April, to sort out this shambles?
Kevin Foster
As the hon. Gentleman will appreciate, we are constantly monitoring the performance. As for removing the franchise, we clearly have to go through a due process, as I am sure he would accept it. We believe that there is a credible plan for improvements in December. We are starting to see evidence of new train drivers actually qualifying, and we are seeing more in training. The December improvement plan has been launched without, for example, relying on driver rest-day working, the withdrawal of which has been the absolute core of the problems affecting Avanti trains. Certainly, we will continue to engage closely with Avanti beyond the implementation in December, and the company knows full well what is at stake ahead of the main contract renewal in April if the services do not significantly improve. In the meantime, we are being clear with Avanti that issues such as the availability of online ticketing also need to improve. Weekday availability has improved significantly, but I accept that we now need to see the same for weekends.
Mr Khalid Mahmood (Birmingham, Perry Barr) (Lab)
Avanti is having a huge effect on the economy of Birmingham and the region, because of the huge inward investments that Birmingham is drawing in from HSBC and other financial institutions, and because of the region making other investments—without the support of Andy Street, the Mayor. They are doing a fantastic job. We need to support the workers and the travelling public, who are having to suffer. For example, I could not change my ticket down to London and had to wait until the train came; I was told to do it on the train, because they could not guarantee the service arriving. That is not an effective way to manage the service. We should not be looking to extend the contract to April. The Minister should now put the contract into abeyance, and by December we should be training more people to get a new contract in place and have the service running properly for Birmingham and the west midlands.
Madam Deputy Speaker (Dame Eleanor Laing)
Order. What is the hon. Gentleman’s question?
Mr Mahmood
The question is that the Minister should not have agreed this six-month extension, but should start working on it now, and by December—
Madam Deputy Speaker
Order. That is a statement. Does the hon. Gentleman have a question for the Minister?
Mr Mahmood
Will the Minister put in place a programme now so that we can take charge of Avanti trains by December?
Kevin Foster
As I have touched on already, we do not believe that simply popping this into the OLR and changing the paintwork on the trains, as if that is a magic solution, will be an effective way forward. We believe that tackling the underlying issues, such as ensuring that there are an adequate number of train drivers to operate the service without using rest day working for drivers, is at the core of a successful operation, either under the current franchise or potentially under the OLR in future. We are clear that we will expect to see significant improvements following implementation of the plan put forward by Avanti in taking a long-term contract decision.
I am always pleased to hear of the investment being secured for Birmingham, particularly by Mayor Andy Street. Of course, one of the biggest drivers of investment in Birmingham now—this is one thing that there probably will be some agreement on—is Birmingham Curzon Street. That is being built and will be the main terminus for HS2, which has enjoyed cross-party support, and it is starting to drive investment in Birmingham, and we very much welcome it.
Justin Madders (Ellesmere Port and Neston) (Lab)
I am pleased to be able to speak to the Minister about this. We were due to meet yesterday, but unfortunately he cancelled at short notice, leaving me with a feeling not dissimilar to that of Avanti West Coast passengers. I have no criticism of him for that, because he had important business in the House. I hope we are able to meet soon, because I have been trying to meet him and his many, many predecessors for the last six months to discuss this issue. The state of direct services between Chester and London is appalling. We were promised improvements by Avanti, but the services have actually gone backwards. Having seen how Avanti has failed to deliver on its promises so far, I have no confidence that it will be able to pull this off in time for the renewal of the franchise. Does the Minister have confidence in Avanti?
Kevin Foster
It is worth pointing out what I was doing yesterday afternoon: I was in the Chamber answering an urgent question. Urgent questions seem to be a bit like buses; you wait a while for one, and then two come along fairly close together.
We have scrutinised carefully what Avanti is doing with its improvement plan for December. As I have said a number of times, we are not just going to accept assurances that it will work. DFT officials are engaging daily—weekly at more senior levels—to ensure that the company is hitting the milestones it needs to for this improvement plan. We all want to see the line operate and move forward successfully. However, we have been clear that if it does not, and if by April the improvements have not happened and been sustained, we will follow the due process, but that may well have a strong impact on the long-term decision.
Dan Carden (Liverpool, Walton) (Lab)
Extending Avanti’s contract by six months was the wrong thing to do. The travelling public have had enough of this company running their train service into the ground. Liverpool is a visitor economy. I represent both the city’s football clubs, and it is time for us to have a decent working service. That will also rely on Avanti staff. Avanti’s tactics of smearing its own workforce and making them a scapegoat for its mismanagement mean that it will not recover this service while doing that. What is the Minister doing to improve industrial relations between the workforce and the company, and will he consider acting today, not waiting months more?
Kevin Foster
We are already acting; there is daily engagement with Avanti on how it is progressing towards its improvement plan. As I have made clear, we are not just accepting assurances that it will make improvements in December, but looking for clear evidence that it is meeting the milestones to do just that. We are keen that there should be good relationships between employers and their employees in the sector. For all the problems that are well known about, rail sector management and employees worked closely together for the state funeral and the events following the death of Her late Majesty, with many going the extra mile and working into the early hours of the morning to ensure that people could attend the events and get home afterwards. Despite the idea that there are problems in particular parts, there was a real team effort for that event across the rail sector. We are engaging actively, and we look forward to seeing the improvements that the December plan will bring; if not, consequences will follow.
Madam Deputy Speaker (Dame Eleanor Laing)
And finally, from the east coast, Chi Onwurah.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
Thank you, Madam Deputy Speaker. Why does the Minister insist on rewarding private sector failure—Avanti or TransPennine Express—with more public money, while refusing to invest in transformative public transport services such as Northern Powerhouse Rail? Does he think that my constituents, deprived of an affordable or reliable means of getting to work, are pleased to know that their hard-worked-for taxes are being used by this Government literally to pay the private sector to profit from their misery?
Kevin Foster
I have covered a number of times the position on performance payments in the Avanti contract. The hon. Lady’s constituents will have seen the clear commitment we have made to investment in Northern Powerhouse Rail over the last few months. They will have seen the start of work on the trans-Pennine upgrade. They will have seen the integrated rail plan, and they will see the first new main line to be built in this country along the spine of it since the Victorian era, already moving from London to Birmingham and then on to Manchester after that. I think they will be slightly more impressed by that than whatever they can see from 13 years of investment under Labour.
Bill Presented
Ministerial and Other Pensions and Salaries (Amendment) Bill
Presentation and First Reading (Standing Order No. 57)
David Linden, supported by Drew Hendry, Gavin Newlands, Brendan O’Hara and Alan Brown, presented a Bill to provide that a person who ceases to hold a ministerial office is entitled to a grant only after holding the relevant office for two years or more; and for connected purposes.
Bill read the First time; to be read a Second time on Friday 18 November, and to be printed (Bill 172).
NHS Prescriptions (Drug Tariff Labelling)
Tuesday 25th October 2022
(2 years, 1 month ago)
Commons ChamberRead Full debate NHS Prescriptions (Drug Tariff Labelling) Bill 2022-23 View all NHS Prescriptions (Drug Tariff Labelling) Bill 2022-23 Debates Read Hansard Text
14:17 - The House having divided: - Ayes: 39 / Noes: 240 - Question accordingly negatived.
A Ten Minute Rule Bill is a First Reading of a Private Members Bill, but with the sponsor permitted to make a ten minute speech outlining the reasons for the proposed legislation.
There is little chance of the Bill proceeding further unless there is unanimous consent for the Bill or the Government elects to support the Bill directly.
For more information see: Ten Minute Bills
This information is provided by Parallel Parliament and does not comprise part of the offical record
Craig Mackinlay (South Thanet) (Con)
I beg to move,
That leave be given to bring in a Bill to require community pharmacies and other providers of NHS-funded prescriptions to show, on the patient label, the prevailing Drug Tariff value of the items dispensed; and for connected purposes.
I would like to declare that my wife is a community pharmacist and, as would be expected, she has offered me some assistance in considering this Bill. I would like to thank Mr Gurpal Singh Chaggar of Newington pharmacy in Ramsgate in my constituency for his help and support with some of the more technical aspects of how the published NHS drug tariff—amended monthly and, for some items, more frequently—interfaces with software used in all pharmacies. I also thank the House of Commons Library, as ever, for its professional assistance, which it can always be relied upon for.
This Bill has the benefit of elegance, simplicity and, quite rarely for this place, a cost and administration burden as close to zero as any measure could possibly have. Let me lay out the framework for the Bill with some facts. In 2021-22 there were 1.14 billion items dispensed through NHS England, serving a population of 56 million—I will leave Members to do the maths for how many prescriptions per person that amounts to. The cost of the items dispensed, which cover pharmaceutical products and more physical appliances and dressings, was £8.7 billion. Just 11% of all prescriptions bear the current £9.35 prescription fee. If we look at that the other way, 89% of all prescriptions are “free”, but of course, nothing is free. There are a multitude of exemptions—for example, the over-60s, those in receipt of benefits, the under-18s, those in education and those with certain medical conditions. We are all familiar with those.
The prescription fees received in 2018-19—the last year for which the Library could provide me evidence—when the prescription charge was £8.80, were £576 million. By extrapolation, given that people now pay £9.35 for a prescription, I estimate that that figure would be a little north of £600 million today. That means that the prescription system is recovering £600 million out of an overall cost of £8.7 billion.
The bulk of prescription charges comes from those paying for off-patent drugs, for which the cost price may sometimes, marginally, be less than the prescription charge. Such off-patent drugs—often the slightly cheaper generic products—make up about a quarter of all prescriptions in England and include blood pressure drugs, cholesterol-lowering drugs, antibiotics, anti-depressants, skin creams, drugs for rheumatism, oral contraceptives and analgesics.
The main purpose of the Bill is twofold. Primarily, it will allow everyone in receipt of NHS-provided prescriptions to be part of the efficiency measures that the nation needs now, and I think it is fair to ask us all to do our bit. For instance, no one keeps a window open on a winter’s day and then heats the room, or throws food away by design, so why should it be normal, reasonable and ongoing for perfectly good medication to be unused and thrown away?
The Government are working to prevent over-prescribing and assess whether regular medication is still needed or appropriate. Pharmacies receive an NHS payment for the medicines use reviews that they do and, increasingly, medicines optimisation plans are in place in doctors’ surgeries and practices to similarly prevent over-prescribing —but again, that comes at a staffing cost to the system. I will not expand on some of the obvious internal systems failures that could easily be addressed, but those in the industry are fully aware of them and I recommend that Ministers speak to them.
The Bill would allow patients to play a key part in the common-sense optimisation of our resources. My proposal is simple: to use the data field for the drug tariff value of the items prescribed, which already exists in the systems used in doctors surgeries and pharmacies, to be clearly printed on the patient label. That would provide an awareness of the value of often expensive items.
In preparing the Bill, I was not at all surprised by how many right hon. and hon. Members approached me to relate their own family stories, which follow a similar pattern. On the death of an elderly loved one in particular, cupboards and drawers are found to be full of unused drugs that were often issued under long-standing, repeat prescriptions and then have to be returned to pharmacies for complete and utter destruction and disposal. Those drugs are thrown away—valueless—but they all bear an initial cost to the NHS budget.
I attribute to older people—I am getting there—a great deal of common sense and an awareness of value for money. They could be part of the system of medicines optimisation by recognising the value of what they are receiving for free and by intervening themselves, if necessary, when they see high-value drugs, which they know will never be used, simply landing each month. I focus-grouped my plans with an older cohort in my constituency and they said that they agree entirely with my observations and that they would respond to such a sensible nudge.
The secondary purpose of the Bill is transparency, which is important in everything that we do. We accept that freedom of information is a right and benefit in the modern UK, so it follows that we should all be aware of the things that the state provides through taxpayer funding. Let me be absolutely clear for the avoidance of doubt: this is not an attempt to charge; it is a means to achieve transparency so that we all appreciate what we get for free, because we know that “for free” does not exist. Whether it is the provision of NHS services or the collection of our household rubbish, there is a cost behind all those transactions that we pay one way or another. The Bill aims to shine a light on that at no cost and no administrative burden. I hope that hon. Members will see the benefit of it and support it as it progresses through the House.
Question put and agreed to.
Ordered,
That Craig Mackinlay, Julian Knight, Alicia Kearns, Dr Kieran Mullan, Ben Bradley, Greg Smith, Royston Smith, Sir Robert Goodwill, Matt Hancock, Mr Mark Francois, Harriett Baldwin and Virginia Crosbie present the Bill.
Craig Mackinlay accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 3 February 2023, and to be printed (Bill 173).
David Linden (Glasgow East) (SNP)
On a point of order, Madam Deputy Speaker. Earlier today, His Majesty the King appointed the second unelected Prime Minister for these islands in seven weeks. Given that the Government have no democratic legitimacy over Scotland, I wish to invoke Standing Order No. 163.
Madam Deputy Speaker (Dame Eleanor Laing)
The hon. Gentleman takes the House by surprise, but if he moves the motion, I will be obliged to put the Question forthwith.
David Linden
I beg to move, That the House sit in private.
Question put forthwith (Standing Order No. 163).
The House proceeded to a Division.
Madam Deputy Speaker
Order. I draw the House’s attention to the fact that I have allowed extra time for this Division, because I am informed that the Division bell is not working properly at 53 Parliament Street. I have made sure that everybody there has had a chance to know that there is a Division, and I have allowed extra time for them to come and vote, which I hope has been sufficient.
Retained EU Law (Revocation and Reform) Bill
Tuesday 25th October 2022
(2 years, 1 month ago)
Commons ChamberRead Full debate Retained EU Law (Revocation and Reform) Act 2023 View all Retained EU Law (Revocation and Reform) Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts
Madam Deputy Speaker (Dame Eleanor Laing)
I inform the House that the reasoned amendment in the name of the Leader of the Opposition has been selected.
Patrick Grady (Glasgow North) (Ind)
On a point of order, Madam Deputy Speaker. I have the Bill in front of me. It states that it is presented to the House by “Mr Secretary Rees-Mogg”, but the right hon. Member for North East Somerset (Mr Rees-Mogg) is sitting on the Back Benches. Can you explain to the House how on earth we can possibly proceed with what was essentially a vanity project for that particular individual? Would it not be better for him to try his luck with a 10-minute rule Bill, or in the private Members’ Bill ballot?
Madam Deputy Speaker
The hon. Gentleman gets the prize for making the best point of order of the day, and possibly of the month or Session. His observation about what is printed in the Bill is correct, as is his observation that the right hon. Gentleman to whom he refers is sitting in his previous customary place on the Back Benches. At the point the Bill was printed, the Secretary of State was the right hon. Member for North East Somerset (Mr Rees-Mogg), but government is seamless. The name of the right hon. Gentleman, then Secretary of State, being on the Bill is of historical importance, but of no constitutional importance today. Other Ministers are now ready to speak at the Dispatch Box representing the Government, and all Government Ministers are Ministers—[Interruption.] I hear a sedentary interruption from somewhere of “for now”, but that is exactly my point: individuals are transient; government is permanent—[Interruption.] Permanent during the space of one Parliament. As we are in that same Parliament, the personal position of the right hon. Member for North East Somerset is, I am sorry to tell him, irrelevant for the moment. I call the Minister, who last week was a new Minister and is now a seasoned Minister, to move Second Reading.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Dean Russell)
I beg to move, That the Bill be now read a Second time.
News of my promotion to Secretary of State has been exaggerated, but as Minister I will do my best this afternoon. I pay tribute to—I will not say predecessor—the former Secretary of State, my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg). Without his staunch and hard work, and his passion to help families and businesses across the country to survive the difficult winter that is coming, and ensure that the energy support would be there, a lot of families would be very worried this winter. I pay tribute to him for his work. It is honourable of him to be here during this speech.
On 31 January the Government announced plans to bring forward the Retained EU Law (Revocation and Reform) Bill, which is the culmination of the Government’s work to untangle the United Kingdom from nearly 50 years of EU membership. Through the Bill we will create a more agile and innovative regulatory environment that would not have been possible were we still a member of the European Union. That will benefit people and businesses across the United Kingdom. The Government have achieved much since leaving the European Union and taking back control of money, borders, laws and our waters. We have created a world-leading covid vaccine programme, and signed 35 deals with 70 countries around the world. We accept that there is still more to do, and in January this year we set out our approach to becoming the best regulated economy in the world.
Sir Desmond Swayne (New Forest West) (Con)
How will the Minister answer the intemperate correspondence to which many of us have been subjected, announcing that the Bill will provide for the rape of the countryside and the destruction of wildlife? Will he be able to persuade people that this is a proportionate measure that will allow us to choose the regulations by which we wish to live, and judge them on their merits?
Dean Russell
I think that is the longest intervention I have ever heard my right hon. Friend make. He is absolutely right. The premise of the Bill is to ensure that we do what we have always done, which is to be the best place in the world to live, and that includes our environment. It is an absolute priority of this Government that the United Kingdom will be the best place to start and grow a business, to live, and to ensure that our environment around us is supported at all times. Within the Bill are powers that will allow us to make good on that promise.
Several hon. Members rose—
Dean Russell
I will give way in a little while; I want to make some progress. The Bill will enable outdated and often undemocratic retained EU law to be amended, repealed and replaced more quickly and easily than before. That will remove burdens on business, and create a more agile and sustainable legislative framework to boost economic growth.
Stella Creasy (Walthamstow) (Lab/Co-op)
Will the Minister be honest with the House? He says that the Bill will allow us to have the highest standards, but clause 15 formally confirms that we can only go down, and we can only have a race to the bottom, because it talks explicitly about not increasing burdens. Will the Minister tell the House who voted to lower our environmental protections in the referendum?
Dean Russell
I can be very honest in saying that the Bill will ensure that we have the highest standards, and within the process of this framework we will ensure that the burdens of delivering the best possible regulatory scheme are removed, while ensuring that we have the highest standards across all we do.
Several hon. Members rose—
Dean Russell
I will come back to the hon. and learned Lady shortly.
As has been alluded to, some naysayers have asked, “Why is the Bill needed?” As a consequence of the oddities created by our previous EU membership, there are currently insufficient powers to make subordinate legislation to enable the amendment or removal of retained EU law from the statute book. The practical result is that standards do not get updated when they should be. Regulation, rather than adapting to support the needs of businesses in stable and emerging markets, ends up holding British businesses back. That is simply wrong, particularly when businesses and consumers face high energy bills and food prices as well as the many other challenges that we know are down to world events, and in particular the awful actions of President Putin. With our new-found freedom, it is important that we take the necessary powers to bridge the gap and reform legislation in a timely manner.
Maria Caulfield (Lewes) (Con)
The Minister is doing a fantastic job at the Dispatch Box. At oral questions this morning, Opposition Members were complaining about red tape and bureaucracy hamstringing small businesses. Does he agree that that means they will hopefully support the Bill in the Lobby tonight?
Dean Russell
My hon. Friend is absolutely right. The Bill is about cutting red tape where it is not needed and ensuring that businesses can spend more time transforming their business than filling out forms. We have a great opportunity to deliver for them and for people across the nation.
Dean Russell
I will make some progress and give way in a while.
As I said, rather than adapting to support the needs of business, regulation has potentially been holding British businesses back, and we have an opportunity to deal with that. To ensure that the devolved Administrations can also seize fully the benefits of Brexit, we are providing them with the tools to reform retained EU law by extending the majority of powers in the Bill for use by devolved Administrations. It is a great opportunity—
Several hon. Members rose—
Dean Russell
I am sure that many hon. Members are standing up to say how pleased they are with that announcement.
Sammy Wilson (East Antrim) (DUP)
As someone who fought to free ourselves from the shackles of Brussels, I welcome the legislation. Does the Minister recognise that the passing of the Bill will make it even more imperative that the Northern Ireland protocol be removed, because those freedoms would not be available to the Northern Ireland Administration, which will still be bound by EU laws?
Dean Russell
The right hon. Member makes an important point. This is about the United Kingdom and making sure that every single person across this great nation, wherever they live, can do and be their best in all that they do.
John Redwood (Wokingham) (Con)
I strongly support the Bill and congratulate the Minister on his presentation. I hope that the Government will urgently reform the energy directives and regulations that have made us cruelly import-dependent such that we now have to buy excessively expensive energy on the world market when we should drive for self-sufficiency.
Dean Russell
I thank my right hon. Friend for his intervention. It is ultimately about ensuring that we are doing the right thing by people across the country. The truth is that the Bill is a framework, and this is not the time to debate the minutiae and the details as there will be plenty of opportunities for that in Committee, the future stages and statutory instruments. We should welcome the Bill’s framework, which is about taking back control for the country.
Joanna Cherry
The Minister said that the Bill is about doing the right thing by people. Earlier, I understood him to say that there will be no diminution in rights as a result of it. However, has he not looked at clause 15(5), which makes it clear that, far from creating higher standards, replacement legislation can only keep standards the same or lower them? That is the case, is it not?
Dean Russell
I very much enjoyed serving with the hon. and learned Lady on the Joint Committee on Human Rights and understand that she is incredibly focused on detail. There will be much time for her to explore that further if she makes a speech; I hope that she will. The point of the framework is to transfer EU law into UK law and make sure that it does what it should. If she is happy with EU law where that is retained, it will be written in UK law.
Dean Russell
I will come back to the hon. and learned Lady in a little while.
Dame Andrea Leadsom (South Northamptonshire) (Con)
Has my hon. Friend noticed, as I have, that Opposition Members seem to think that the only place that can possibly regulate, possibly have high standards and possibly deliver laws for this land is the EU? Does he agree that, actually, we have created much better regulation and far stronger standards that are much more flexible and suited to these islands than the EU and that we should carry on doing that?
Dean Russell
I thank my right hon. Friend—she is a very good friend—for her comments. The Bill is ultimately about making sure that we continue to do what we have done for decades, if not centuries: exporting high-quality products, exporting doing the right thing and exporting making sure that the world is a better place.
Several hon. Members rose—
Dean Russell
I will continue; I have taken quite a few interventions.
We have carefully considered how the Bill will affect each of the four great nations. We recognise the paramount importance of our continuing to work together as one on important issues, including environmental protections. The Bill will not weaken environmental protections.
Mr Robin Walker (Worcester) (Con)
My hon. Friend is doing a great job. It is right that, six and a half years after the referendum, we should get on with the process of taking control of our laws.
I served for two years in the Department for Exiting the European Union and gave many assurances in those years that, as we left the EU, our environmental standards and animal welfare regulations would be improved and strengthened, not weakened. Will he assure me that Ministers at the Department for Environment, Food and Rural Affairs will meet the Conservative Environment Network and our Wildlife Trusts to ensure that nothing is done in the process of the Bill to undermine our leadership in the nature protection space?
Dean Russell
I thank my hon. Friend and applaud the briefing that the CEN gave Members earlier today. Ultimately, this is about making sure that we are the best place in the world to live. On meetings, I assure him that we will engage widely—including with Opposition Members—and deliver on those promises. We will use the powers in the Bill to ensure that our environmental law is functioning and able to drive improved environmental outcomes, with the UK continuing to be a world leader in environmental protection.
Caroline Lucas (Brighton, Pavilion) (Green)
The Minister said earlier that the Bill was proportionate, but that is exactly what it is not, particularly given the sunset clause that means that DEFRA will have to go through revising and amending more than one piece of law a day between now and the end of next year. It is not proportionate; it is indiscriminate. It is also ideologically driven. Does he agree that DEFRA staff have better things to be doing, given that they are already late on the river basins management programme and the 25-year environment plan, and that the idea that the Department has the staff and resources to do that is irresponsible?
Dean Russell
I totally disagree, but I thank the hon. Lady for the intervention. Let me remind her that the Conservatives were the green party before the Green party. We are the party of the environment and will continue to be so. We were the party that made sure that businesses will not be able to put sewage in our waters, despite many Opposition Members making out that we voted for sewage. We did not—we made absolutely made sure that we are protecting our waterways. We are protecting our green fields and our land from top to bottom.
Several hon. Members rose—
Dean Russell
I will continue, because I have a lot to get through. I am sure that hon. Members have worked incredibly hard on their speeches, and I would like to listen to them.
As I said, we will use the Bill’s powers to ensure that our environmental law is functioning and able to drive improved environmental outcomes. The former Secretary of State did an excellent job recently meeting representatives of environmental groups alongside the environment Minister and assured them of the work that we will do. I am sure that that will continue.
As well as maximising the benefits of Brexit across the UK economy, the Bill will enable the Government to take the necessary steps to put our statute book on a sustainable footing by removing or replacing more than 2,500 laws derived from the UK’s membership of the EU, many of which are outdated and unduly burdensome. Earlier this year, the former Secretary of State—it irks me to have to say that—invited the House and members of the public to review the mass of legislation for themselves through the retained EU law dashboard, which was published in June and is available on gov.uk. That treasure trove of reform opportunities has acquired more than 100,000 views so far. I thank the public, businesses and civil society organisations for their invaluable views and input.
Together, we have identified where retained EU law must be excised from our statute book. Now, using this Bill, we will go further and faster to capitalise on the opportunities of Brexit. We will achieve that by addressing the substance of retained EU law through a sunset which means retained EU law will fall away on 31 December 2023 unless there is further action by Government and Parliament to preserve it. A sunset is the most effective way to accelerate reform across over 300 policy areas and will incentivise the rapid reform and repeal of retained EU law.
Hilary Benn (Leeds Central) (Lab)
What is the justification for allowing Ministers to scrap legislation that currently applies simply by doing nothing because of the sunset clause? I have never seen anything like it before. What is the justification for allowing law to fall away if Ministers decide, “Well, I’m not going to address it at all”?
Dean Russell
I thank the right hon. Gentleman for his comments. He was a staunch advocate of not leaving the EU, and I appreciate that that is his view. To answer the question, the goal here is that we are looking at all those laws. It is actually public on the dashboard; there is an opportunity for everybody to engage. On the framework of the Bill, there will be a Committee stage, and the ability to have parliamentary scrutiny is huge. I would make one other point, however. At what point were we able to scrutinise these laws when part of the EU? We were not. All those laws were put in without scrutiny and without the ability for us to do the work we needed to do. We are now taking back control to this country to deliver on the promises we made to the people and on the referendum they voted in.
Several hon. Members rose—
Dean Russell
I will not take many more interventions. I will continue for a short while.
Prior to 31 December 2023, the Government will determine which instruments should be preserved, which should be reformed and which should be revoked. I commend colleagues from across all Departments for their gallant efforts in establishing ambitious reform plans that will help to drive growth. We are already in the process of removing outdated retained EU law in financial services through the Financial Services and Markets Bill and have already repealed outdated rules, which has enabled us to capitalise on tax freedoms.
Patrick Grady
I thank the Minister for giving way. He is making the case for the constitutional importance of the Bill. As I asked him in Westminster Hall last week, will he not accept that the timetable proposed by the Government in the programme motion is wholly inadequate for the scrutiny of a Bill of such constitutional importance? If he will not commit the Bill to a Committee of the whole House, can he at least guarantee that we will have longer than a day on Report, so that it can receive the scrutiny it really deserves?
Dean Russell
I thank the hon. Member for his comments and for taking part in the debate last week. To be honest, we would have had more time today to debate if we had not played silly games earlier with votes and points of order, although I accept that they were important.
Several hon. Members rose—
Dean Russell
I will continue, if I may.
Prior to the date in the Bill, the Government will determine which instruments should be preserved, which should be reformed and which should be revoked. I repeat that because it is important. I commend colleagues across Departments for helping to ensure that we are driving growth. We are already in the process of removing outdated retained EU law in many areas. The Procurement Bill, for example, which is currently in the other place, replaces the EU procurement regime with a streamlined British approach, and of course DEFRA has made great headway over the past two years, taking us out of the common fisheries policy and common agricultural policy and pushing the boundaries of innovation thanks to Brexit, with two new pieces of legislation on gene editing.
The Bill will help us to sweep away outdated and obsolete EU legislation, paving the way for future frame- works better suited to the needs of the UK, including on energy, emissions trading, services and consumer law. Many in this House have claimed that changes to individual pieces of legislation will not make a difference. I could not disagree more. We must address the EU legislation holistically. By making marginal improvements across a whole host of regulation, we can foment a revolution in the margins and radically improve the UK’s competitiveness and productivity.
Several hon. Members rose—
Dean Russell
I have given way quite a lot today, and I want to at least get to the end of my speech while I am still in post!
For example, there are 33 individual pieces of retained EU law relating to eco-design requirements. I posit that it would be easier for business to comply if there was just one piece of legislation covering all relevant goods, providing a strong market incentive for businesses to increase energy efficiency. There are countless examples across Whitehall of where the Bill enables positive changes, from improving the clinical trial process to establishing sensible and proportionate artificial intelligence regulation, while still being very mindful of the rules around the impact on the culture sector and on many others.
Sir Robert Neill (Bromley and Chislehurst) (Con)
I am very grateful to the Minister for giving way and I congratulate him on doing such a sterling job under such difficult circumstances.
I recognise that it will be necessary to make changes to retained EU law that was never intended to be permanent, and there are good reasons for doing that, but there is a concern that doing it in the way proposed will add to legal uncertainty. The former Secretary of State, my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg), kindly wrote to me as Chair of the Justice Committee to say that officials from the Department had engaged with the judiciary on how the Bill will work in relation to the interpretation of retained EU law and changes to it. Can the Minister help me, having had the benefit of discussions with the judiciary, with how the proposed changes will improve legal certainty, which of course is itself important for business certainty?
Dean Russell
I thank my hon. Friend for his comments. One of the key things for certainty is having a clear date and a point when it will all happen. Uncertainty often comes by not knowing. We were going to have to make sure that the sunset clauses came in at some point. If I am still in post, I will gladly continue to meet him. If I am not, I will make sure that the person who comes in after me—a bit like “Doctor Who” and David Tennant emerging from the TARDIS this week—continues that work. I look forward to that.
After consideration of the retained EU law dashboard, the former Secretary of State took the decision to exclude Acts of Parliament and Acts of the devolved legislatures from the sunset. The content of those Acts largely concerns the operation of domestic policy. As they have all been properly scrutinised and reflect the will of the public as enacted through democratically elected representatives, we will make sure of that. Given the practice of qualified majority voting in the EU, the same cannot be said for most other parts of retained EU law. That is why it is right we have the review and make plans to amend that law now. I remind Members that our constituents voted for us to be here to make decisions on laws that affect them. The idea that we should not be doing that and the idea that we are trying to say, “Let us keep it as it is” feels very wrong to me.
I accept, however, that some retained EU law in the scope of the sunset is required to continue to operate our international obligations, including the trade and co-operation agreement, the withdrawal agreement and the Northern Ireland protocol. Therefore, I am very happy to make a commitment today that the Government will, as a priority, take the necessary action to safeguard the substance of any retained EU law and legal effects required to operate international obligations within domestic law. We will set out where retained EU law is required to maintain international obligations through the dashboard, so that the public can scrutinise it. However, the sunset and the powers in the Bill are not enough to fully reclaim our parliamentary sovereignty. That is why I am also delighted to confirm once again that the Bill abolishes the principle of the supremacy of EU law. It is just absolutely absurd that in certain situations foreign law takes precedence over UK statute passed before we left the EU.
Several hon. Members rose—
Dean Russell
I am afraid I will make progress, because I can see the Opposition Front Bencher itching to get up and speak and comment on my speech.
By ending this constitutionally outrageous and absurd provision on 31 December 2023, we will ensure that Acts of Parliament passed during our membership of the EU will be returned to being the highest law in the land. The will of those past Parliaments as expressed through primary and secondary legislation will no longer be secondary to the will of Brussels.
The Bill will unlock growth across the United Kingdom. As we seize the benefits of Brexit and restore a sovereign approach to law and regulation, we can again legislate in support of the UK’s interests, rather than those of Brussels. This is of particular importance now, as our country pushes forward to recharge our economy in order to make the UK the best place in the world to run a business—[Interruption]—whether you want to live here, whether you want to walk in a beautiful green field in a park in our wonderful, beautiful lands of the UK—[Interruption]—or whether you want to start a business or grow a business—[Interruption.]
Madam Deputy Speaker (Dame Eleanor Laing)
Order. I have let this run, but I have had enough now. The hon. Member for Lewisham West and Penge (Ellie Reeves) must stop shouting at the Minister. It is not appropriate behaviour and it gets us nowhere. She will have an opportunity to make a speech. If the Minister wishes to take her intervention, he will take it as he has taken other interventions, but she must stop shouting at him.
Dean Russell
Thank you, Madam Deputy Speaker. I have no issue with Opposition Members shouting, but I think that they perhaps sometimes do it a little too much. We want to make this country the best in the world; I have taken many interventions and hopefully that has been recognised. I commend the Bill to the House.
Madam Deputy Speaker
I call Justin Madders—[Interruption.] Forgive me—I was totally prepared for a change of personnel on the Government Front Bench, but I had no idea that there would be one on the Opposition Front Bench. I call Jonathan Reynolds.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move an amendment, to leave out from “That” to the end of the Question and add:
“this House declines to give a Second Reading to the Retained EU Law (Revocation and Reform) Bill because, notwithstanding the need to address the future status and suitability of retained EU law following departure from the European Union, the Bill creates substantial uncertainty for businesses and workers risking business investment into the UK, is a significant threat to core British rights and protections for working people, consumers and the environment as signalled by the wide body of organisations opposed to the Bill, could jeopardise the UK’s need to maintain a level playing field with the Single Market under the terms of the Trade and Cooperation Agreement, and contains powers which continue a dangerous trend of growing executive power, undermining democratic scrutiny and accountability.”
I thank the Minister for stepping in to do a speech at the last minute; that is not an easy task.
Before I turn to the detail of the Bill and the reasoned amendment that has been tabled in my name and those of my hon. Friends, it is important to revisit the grotesque chaos that we have had over the past few weeks, because it goes to the heart of why the Bill should not become law. The Bill asks the British public to place blind faith in the Government—to trust them with our rights at work, our environmental protections and our legal rights—but why would we trust a Government who have crashed our economy, driven up the cost of borrowing, dashed the hopes of homeowners across the country and hiked up mortgages for the rest? This is the Government who pledged to ban fracking and then voted for it, and who sacked their Chancellor, their Home Secretary and finally, their Prime Minister, only to try—but fail—to bring back the Prime Minister that they sacked before while he is still under investigation by the House. We find ourselves debating a Bill that would transfer vast powers to the Business Secretary, covering every part of national life, yet we do not even know who that Business Secretary will be. It is clear for all to see that where the Conservatives go—like a bull in a china shop—chaos follows. It is just not good enough.
I listened carefully to the Minister’s speech. He cannot assuage the concerns of any of us, on both sides of the House, about the Bill. I do not think he denied that the sunset clause will be a huge source of uncertainty for businesses and workers. Contrary to his claims, rather than taking advantage of the freedoms that Brexit could conceivably grant the UK, that reckless approach threatens many of the core rights and protections that the British people currently enjoy. Far from taking back control, the Bill risks diminishing democratic scrutiny and accountability in key areas of British law.
Ellie Reeves (Lewisham West and Penge) (Lab)
I thank my hon. Friend for giving way, unlike the Minister. Does my hon. Friend share my concerns about the lack of a reference to employment rights in the Minister’s speech? Limits on working time, the right to paid holiday, rights for temporary and agency workers and parental leave all derive from EU law. Those fundamental workers’ rights could all disappear under the Bill. Given that the previous Business Secretary, the right hon. Member for North East Somerset (Mr Rees-Mogg), stated that holiday pay is not an “absolute…right”, does my hon. Friend agree that we need confirmation that our hard-fought-for employment rights will be protected?
Jonathan Reynolds
My hon. Friend is an expert in such matters and she is absolutely right to highlight those concerns. That is what the Bill is about. It is not about Brexit—Brexit has happened; it is a fact. For most people, there is no appetite to revisit those arguments. Although many people have strong views on how it has been done and how the Government have not delivered on the promises that they made—I understand that—the task for us in the House is to get on and make it work. It is therefore important to recognise that the Bill is not about whether people think Brexit was a positive or negative thing. It is about whether we wish to give the Government the power to sweep away key areas of law that are of great importance to all our constituents with no scrutiny, no say and no certainty over their replacements. Put simply, do we wish to bring more Conservative confusion and chaos into the British economy?
Pete Wishart (Perth and North Perthshire) (SNP)
We now know that Labour is a party of Brexit, no different from the other major party of Brexit, but how on earth do we make something that is unworkable work in the way that the hon. Member describes? Brexit is not a political strategy; it is an ideological venture and mission. He may have given up on getting back into the European Union, but we on the Scottish National party Benches certainly have not.
Jonathan Reynolds
I understand the hon. Member’s position. I simply say that, if we were to lock ourselves into a permanent debate on this matter, it would produce many of the negative consequences that have already come from this process. I appreciate that, from an SNP perspective, it does not see uncertainty as a problem, because its plans would, in many ways, produce even more uncertainty. However, I do not think what he suggests is a serious way forward. I am happy to have that argument because I do not think that it is a practical set of proposals.
The past four weeks in British politics have been nothing short of a disgrace, but the UK’s problems predate the past four weeks. As we heard earlier in Business, Energy and Industrial Strategy questions, at the heart of the poor economic performance over the past 12 years is the fact that our business investment has been too low. Even before the mini-Budget set fire to the British economy, the UK had the lowest rate of business investment in the G7, despite having the lowest headline rate of corporation tax.
Business is crying out for stability, for long-term political commitment and for consistent policy. That is why we on the Opposition Benches have published our industrial strategy and why the chairman of Tesco recently said that only Labour is on the pitch when it comes to growth.
The Conservatives’ imaginary view of business leaders who want deregulated, unpredictable, pure market forces simply does not sit with the established facts. Business likes certainty, but the Bill throws thousands of pieces of legislation into the grinder with no idea which and how many of them will survive. Why would a business have any confidence in our country when it has no idea what the rules will be that govern every part of its operation in 12 months’ time? Once again, this is a matter of trust. After the chaos of the past few weeks, Government Members are foolish to think that any business leader would now trust them with this seismic task.
John Redwood
Can the Opposition spokesman name a single regulation or directive of the EU that he thinks should either be repealed or could be improved?
Jonathan Reynolds
I certainly can. I have always said, for instance, that Solvency II could be improved by having to do the regulation on a basis in this country. If we look at the Government’s approach to that area through the financial services and markets legislation, we see that they are taking exactly what might be termed a more sensible approach, going on a sector-by-sector basis, putting forward positive proposals, rather than following the sunset clause procedure, which is so reckless and uncertain. I say genuinely to the right hon. Gentleman: please have the humility to look at the damage done in the past four weeks, and the role of Government Members in that, and perhaps think, “What if we are wrong, and what are the consequences if we are?”
Stella Creasy
Might one of the reasons why businesses are so confused about the impact that the legislation will have be because the Minister is? He tried to claim to the House that all the laws affected are published on the dashboard and will have full transparency. However, 24 hours ago in answer to my written question, the Minister admitted that the dashboard provided an “authoritative, not comprehensive” list. Does my hon. Friend agree that, when businesses and consumers are already struggling with the cost of living crisis, the last thing that we need is to not even know what a piece of legislation is deleting?
Jonathan Reynolds
My hon. Friend is absolutely correct. The retained EU law dashboard, although useful, is not and never has been a comprehensive list of all the retained law that this Bill affects—[Interruption.] Government Members say that they never said it was. It does not clearly distinguish where retained EU law has been devolved, much to the frustration of the Welsh and Scottish Governments. However, it still lists more than 2,400 sources of law. If the Government want to put a blanket sunset clause on all of this, should they not be able to list exactly what is covered?
The practical case that the Government have put forward for the sunset clause is that they cannot find the time to use primary legislation to amend these laws. Why not? The Government have a majority of 70, at least for the time being. Where the law needs to be changed, what is preventing the Government from doing so? The fear is that what they really want to do is to reduce key regulations entirely, which brings me to my next point—that the Bill poses a threat to core British rights and protections.
There is no question but that the scale of the Bill is large. The policy areas affected cover not only employment law, but environmental protection, consumer protection, agriculture, fisheries, transport, data protection and much, much more. That is why a huge variety of organisations, from the TUC to the RSPB, have signalled their alarm. I am sure that Members on both sides of the House will raise their own worries about those issues during the debate.
The situation in relation to employment law is particularly alarming. Most of the UK’s core labour law protections are contained in regulations originally made under section 2 of the European Communities Act 1972, rather than in primary legislation. They are not cumbersome red tape; they are things that British workers expect, including the Working Time Regulations 1998, the Maternity and Parental Leave etc. Regulations 1999, the Transfer of Undertakings (Protection of Employment) Regulations 2006 and the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000. On all of them, the Government are saying, “Trust us.” Why should we?
This is a Government who have not kept their promise of an employment Bill to ensure workers’ rights post Brexit and who do not keep their manifesto promises at all. This is a Government in which we do not know who will be in each job from one week to the next—and I wrote that bit before the right hon. Member for North East Somerset (Mr Rees-Mogg) resigned as Secretary of State for Business, Energy and Industrial Strategy a few hours ago. I am afraid that we cannot in good conscience hand the Government powers to arbitrarily decide matters that are of fundamental importance to the lives of working people in this country, not least because we have no idea whether any Ministers will still be in position in 24 hours, let alone 12 months.
Under the terms of the Government’s trade and co-operation agreement, the UK must maintain a level playing field with the single market. Such provisions are important to the UK: they protect against a global race to the bottom in standards and protections. We can only guess how the Government will use these powers, but the powers in the Bill are clearly deregulatory in tone.
This goes to the heart of the Conservative party’s simplistic and inaccurate understanding of regulation. When I ask a business what attracts it to invest in the UK, good regulators are always on the list. Businesses simply do not want the fantasy deregulatory agenda that lives only in the mind of so many Tory MPs. After the events of the past month, in which the financial markets themselves rejected the Conservative party’s allegedly pro-market agenda, I would have hoped for a little more wisdom and insight from the Government, but unfortunately I doubt that that will be forthcoming.
Finally, there is the issue of how Parliament will go about changing the law in future. The Government have already been severely criticised for how little power they have returned to Parliament since we left the European Union, and the Bill continues that approach. The use of negative statutory instruments, so that MPs have to actively object to prevent something from becoming law, is very poor practice indeed. When it comes to future proposals, the use of a sunset clause to cover such a large and complex body of law effectively puts a gun to Parliament’s head. Anyone who wishes to scrutinise or object to any future legislation replacing retained law will be taking a gamble, because unless that legislation is passed in time, the current law in its entirety will simply fall away. That is not conducive to good laws being made.
The obvious question is “Why not proceed on a policy-by-policy basis or, if appropriate, a sector-by-sector basis?” As we have already discovered, the Financial Services and Markets Bill does exactly that. Why not bring forward positive replacement proposals where the law needs to change or where something can be done better?
The fact is that this Government are out of ideas. They are more intent on their own survival than on putting in place the positive changes that we need. At a time when the British people are crying out for stable, competent government by a Government who recognise that economic growth comes from working people and businesses and from stability and certainty, not from the fantasy economics of the Conservative party, the Bill is not just wide of the mark, but wantonly destructive.
Caroline Lucas
The hon. Member is giving a powerful speech. On environmental regulation, does he agree that this could be a very good test of the credibility of the Office for Environmental Protection? If the Government really are assured that there is no environmental risk, they should have no worries at all about referring the Bill to it. The OEP is already deeply worried about the workload in the Department for Environment, Food and Rural Affairs and about the number of pieces of legislation that should be coming forward but are not.
Jonathan Reynolds
The hon. Member makes a very good point. Unfortunately, we know that the Government do not like independent assessment of their choices. They believe that they can simultaneously deliver the promises made on net zero and bring back fracking. Some independent verification would be very welcome indeed.
Rebecca Pow (Taunton Deane) (Con)
It was actually this Government, through the Environment Act 2021, who set up the Office for Environmental Protection, knowing that it is so important to be seen to be doing the right thing on the environment. I think the hon. Member needs to be careful in what he says, because actually that is the purpose of the body. I know that it will be looking closely at the matter, but that is its role and that is what it was set up for.
Jonathan Reynolds
I think the hon. Member has agreed with the hon. Member for Brighton, Pavilion (Caroline Lucas), so we have cross-party agreement. The Government will struggle to resist such a powerful alliance.
The Bill is the same sorry tale of uncertainty, dogma and poorly thought-out initiatives designed to appeal to Conservative Members and no one else. At a time when we need solutions for the future, the Government are retreating to the failed ideas of the past. The Bill promises yet more Conservative chaos, driving a bulldozer through our hard-fought rights.
Britain is fed up with this nonsense, frankly. It is time for a fresh start. It is time for serious government. The sooner we get a general election to achieve that, the better it will be for everybody.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
May I say what a pleasure it is that normal service can be resumed, and that I am now able to speak slightly more freely than I may have done when I sat in a different place? I congratulate my hon. Friend the Minister on his particularly brilliant speech. I think it was particularly brilliant because I was involved in writing it; I may therefore be a rather prejudiced audience, but I thought it was delivered with panache and verve. He took so many interventions and put the case brilliantly.
I know that it is not orderly to mention people in the Galleries, but I do not know whether the officials’ Box counts for that purpose. Nevertheless, I would like to thank the officials who have been involved with the Bill. They have done a terrific amount of work to get it ready in a short time. I confess to the House that when I was Leader of the House, I thought that getting the Bill ready for Second Reading by this date would not be possible, but the work that has been done is absolutely terrific. Let me reassure those who may think that I have sometimes criticised the civil service that in this instance it is worthy of paeans of praise.
The Bill is of fundamental constitutional importance because it removes the supremacy of EU law. We have heard arguments about certainty. Certainty, certainty—everyone always wants certainty. In an uncertain world, I am not sure that certainty is ever possible, but in a legal context the Bill provides more certainty than the alternative, which would be to retain two different legal systems in these islands of ours that would apply in different circumstances. I know that we have Scottish law, English and Welsh law and Northern Ireland law, but we would have a separate law applying differently in each of those three jurisdictions. We are now removing that, so the law made and voted for by people in this country will be the supreme law. That is surely right.
The issue of supremacy is of constitutional importance. Anybody who opposes the removal of the supremacy of EU law is fighting the Brexit battle over again, saying, “We didn’t really leave after all. We’d like to pretend we’re still there. Isn’t it nice to allow this alien law to continue to tell us what we ought to do?” No, it would not be nice to do that. Let us clarify the law. Let us get as close to certainty as humanly possible, so that we have a sensible, intelligent and well-formulated statute book.
Richard Graham (Gloucester) (Con)
For some of us, the point is not the constitutional argument about which laws should be sovereign, which we may well happily accept, but the practical issue of how we convert literally hundreds of laws, for DEFRA and so on, within the timescale imagined. Does my right hon. Friend understand the severe doubts that many people have about the practicality of what is on offer?
Mr Rees-Mogg
I am afraid that my hon. Friend has never liked the decision to leave the European Union, and everything he says must be taken in that context. Otherwise, he would not have intervened—
Mr Rees-Mogg
I am not giving way again. Otherwise, my hon. Friend would not have intervened at this stage, because I was setting out the issue of supremacy before coming to the crucial point about why the Bill is now necessary and how it works in practice.
Madam Deputy Speaker (Dame Eleanor Laing)
Order. This is a point of order. It would have been simpler had the hon. Gentleman been facing the Chair in the first place, because while he was addressing the right hon. Member for North East Somerset (Mr Rees-Mogg) I could not see him, and it was therefore difficult for me to hear what he was saying. When I ask Members to face the Chair, it is not out of some kind of vanity; it is because if everyone faces in this direction, everyone can be heard.
Richard Graham
This is a very simple point of order, Madam Deputy Speaker. My right hon. Friend the Member for North East Somerset (Mr Rees-Mogg) just said that I have never accepted the decision of this country to leave the European Union. That is a quite extraordinary and entirely untrue observation, and I would ask him to withdraw it.
Madam Deputy Speaker
I appreciate the sensitivities. The hon. Gentleman knows that the content of the right hon. Gentleman’s speech is not a matter for the Chair, and not one on which I will comment, but he has made his point.
Mr Rees-Mogg
I now give way to my right hon. Friend the Member for South Northamptonshire (Dame Andrea Leadsom).
Dame Andrea Leadsom
I am grateful to my right hon. Friend for all the work that he has done. I was actually hoping to clarify the point that our hon. Friend the Member for Gloucester (Richard Graham) was making. Having myself held the role of Leader of the House during that attempt to leave the EU between 2017 and 2019, I recall that the House was able to get through some 800 or 900 pieces of secondary legislation. In my opinion, it is very much within the realms of possibility that this amount of legislation can and will be dealt with by the House very successfully.
Mr Rees-Mogg
I am very grateful to my right hon. Friend, who has made an excellent point. The ability of the House to get through its business is exceptionally good, and it is able to do so in an orderly way, as my right hon. Friend showed in dealing with the no-deal Brexit legislation.
Patrick Grady
Given his commitment to scrutiny by the House, the right hon. Gentleman, who said that he was involved in drafting of the Bill, must have had sight of the draft programme motion as well. The European Union (Withdrawal) Act 2018, which created retained EU law, was given eight days of scrutiny on the Floor of the House in Committee, and two days on Report. Does he really think that the time the Government are providing for scrutiny of this Bill is sufficient?
Mr Rees-Mogg
There is always a discussion to be had about whether a few days in a Committee of the whole House or upstairs in Committee provides better scrutiny. People sometimes reach different conclusions on that, but there will be a proper opportunity for a Committee stage upstairs, and I think that is perfectly reasonable.
I want to go back to the fundamental point about the supremacy issue. Let me reiterate that anyone who opposes the Bill is in fact re-fighting the Brexit battle.
John Redwood
I thank my right hon. Friend for all the great work that has been done on the draft legislation. Does he not find it an odd paradox, or contradiction, that many Opposition Members come to this place apparently to form laws but do not believe we can ever make a law that is good, and we need to rely on EU law in so many areas where I think we can actually do better?
Mr Rees-Mogg
I am grateful to my right hon. Friend, who is wise, as always. But it is even odder than that, because there is this very strange view that laws that came in without any scrutiny at all—regulations of the EU that became our law automatically—cannot be removed without primary legislation. That is just bizarre.
The laws with which we are dealing came in under section 2(2) of the European Communities Act. Either they came in with minimum scrutiny but could not be amended or changed, or they came in with no scrutiny at all. I know that my hon. Friend the Member for Stone (Sir William Cash) disagrees with me on this, but we are not using this procedure to repeal Acts of Parliament. Even though these measures have the effect of introducing EU law, an Act of Parliament has had full scrutiny in the House, and to be repealed it deserves full scrutiny to be taken away. That is the correct constitutional procedure.
Stella Creasy
Does the right hon. Gentleman recognise that some of us may be a little bit sceptical about the definition of democratic engagement that he has just set out? He is arguing that, for example, taking away laws that require cosmetics not to contain cancer-causing chemicals or laws on illegal trading—as well as maternity rights and TUPE—is a matter that does not require the scrutiny of the House, but only that of statutory instrument Committees. If he had been so wedded to restoring democracy, might he not have at least written the affirmative resolution procedure into these statutory instruments? Why he is taking back control, not for this House and the great democratic institutions—and he is now joining us on the Back Benches—but to No. 10?
Mr Rees-Mogg
I do not accept that construction of what is actually happening. The House will have the ability to focus on issues on which it thinks the Government are going in the wrong direction. Let me pick at random one of the retained EU laws that may be reformed or become redundant:
“a common methodology for the calculation of annual sales of portable batteries and accumulators to end-users”.
Does the hon. Lady really think that deserves primary legislation—a count of batteries? That is what is in the 2,400 statutory instruments on the dashboard, and, as has been pointed out, that is not necessarily the full list.
There are all sorts of minor and unimportant things that need to be dealt with. As for those that are of major significance, it was said clearly at the Dispatch Box that environmental protections would be maintained. That is fundamentally important. It is a commitment from His Majesty’s Government to this House. The Bill will allow those protections to become UK law—which I use as shorthand to cover the three different types of law in the United Kingdom—to ensure that they can be enforced logically and sensibly by our courts in accordance with our legal maxims. That must be a right and certain means of proceeding.
It is interesting that people, having been told this, are still opposing the Bill. I come back to the conclusion that those who are opposing it actually do not like Brexit altogether.
Jonathan Reynolds
I am grateful for the chance to put a question to the right hon. Gentleman. I was going to welcome him to his position, but I did not want to seem ironic. He says that we can take a guarantee from the Dispatch Box. Even the Conservative party’s manifesto commitments no longer hold: we have seen that. How can we take the word of Ministers when even manifesto commitments no longer bind this Government?
Mr Rees-Mogg
The hon. Gentleman knows that Dispatch Box commitments have a very high standing in our political system. As Leader of the House, I was concerned that we were not using legislative reform orders as comprehensively as the legislation seemed to imply. In fact, the reason for that was a Dispatch Box commitment given by Paul Goggins, in the last Labour Government, during the passage of the Bill that limited the application of LROs to non-controversial issues. Dispatch Box commitments are actually a fundamental part of the way in which our discussion works, as the hon. Gentleman knows only too well.
Sammy Wilson
The right hon. Gentleman is entirely correct. This is an issue of the supremacy of this Parliament, and this law will enforce, and reinforce, the point that when we left the EU we made Parliament sovereign. Does the right hon. Gentleman accept, however, that the Bill will also highlight the fact that Parliament is not sovereign across the United Kingdom? Some of this cannot apply to Northern Ireland, where EU law past and future will still apply. If anything, the Bill could drive a greater wedge between Northern Ireland, constitutionally, and the rest of the United Kingdom.
Mr Rees-Mogg
I am certainly concerned about that. In the last couple of days I had to sign off a couple of explanatory memorandums covering law that was going to come into Northern Ireland from the European Union. That is an unsatisfactory constitutional situation, which is why I am so supportive of the Northern Ireland Protocol Bill that is in the other place today. That is something we must push forward with, to ensure that we have a unified legal system across the whole of the United Kingdom.
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
The Bill creates several new powers that will not require UK Government Ministers to seek consent from the devolved Administrations, essentially retaining power over areas within devolved competence. Does the right hon. Gentleman recognise the impact of this Bill on the devolution settlement?
Mr Rees-Mogg
The Scottish Parliament has been reluctant to give legislative consent motions to any Brexit-related legislation because of the politics of the SNP. That is a view that it has taken because it wanted to remain in the European Union—as the SNP, to its credit, argues for firmly and clearly on these Benches. The SNP is rather clearer about this state of affairs than the socialist friends we have in here who like to run with the hare and hunt with the hounds. That inevitably means that, in my discussions with the devolved Administrations, there has not necessarily been a meeting of minds with the Scottish Parliament. But that is to be expected. This Bill in fact returns powers to the devolved Parliaments, because it gives them the authority to reform and repeal EU law too. They will be the decision makers over those areas that are devolved, so we are increasing devolution.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
The right hon. Gentleman will of course accept that the Welsh Government have similar concerns to those of the Scottish Government. The Welsh Government are run by the Labour party, which is a Unionist party. Indeed, the Counsel General of the Welsh Government, Mick Antoniw, has said:
“As currently drafted, this legislation could see UK Government Ministers given unfettered authority to legislate in devolved areas.”
These concerns are being expressed not just on the nationalist Benches but among Unionist colleagues.
Mr Rees-Mogg
I know from my previous experience that His Majesty’s Government will observe the Sewel convention in relation to this. There may be occasions on which, for simplicity, the devolved authorities want the Westminster Parliament to move ahead with something on which everybody agrees, but what is devolved is devolved and the devolved Administrations will have the right to pursue it.
This Bill is not only one of constitutional importance that will get our statute book tidied up but one of massive opportunity. It presents an opportunity, not necessarily to do any one big individual thing—like the Financial Services and Markets Bill, which can change Solvency II involving billions of pounds for the economy—but to go through every single individual issue in detail, one by one, so that we can see, bit by bit, those rules that have made our businesses less competitive, those regulations that have put our businesses under more pressure and those intrusions that have made people’s lives less easy. We will be able to sweep those away, and we will be doing so in a proper constitutional process.
Craig Mackinlay (South Thanet) (Con)
My right hon. Friend previously served on the European Scrutiny Committee, as I still do. Does he recall the inches-thick paperwork that used to land in front of us on a regular basis? Despite the pleadings of the Chairman, my hon. Friend the Member for Stone (Sir William Cash), that legislation never had any debate, and even if it had, there was little to nothing we could do about it. This is the true victory and the Brexit dividend that we can now face.
Mr Rees-Mogg
My hon. Friend is absolutely right. The ports directive was debated and debated, and opposed on both sides of the House, but it went through anyway. There was absolutely nothing we could do. This is why I challenge Opposition Members who say that this is not proper scrutiny. Why did they not object to the section 2(2) power? Why were they not joining my hon. Friend the Member for Stone on the European Scrutiny Committee to ask, week in and week out, why these laws were going through without anybody being able to gainsay them and why parliamentary sovereignty was not being upheld? We are restoring parliamentary sovereignty by ensuring that there is a parliamentary process, that Parliament will have its say and that we will have our own law for our own country.
Graham Stringer (Blackley and Broughton) (Lab)
The right hon. Gentleman will not be surprised to know that I agree with the core of his speech about returning supremacy to British law and getting rid of EU supremacy. The way in which statutory instruments and the negative procedure have been used in this House has not always been satisfactory. For instance, covid regulations, past the time they had been implemented, were brought into operation and were inappropriate in many cases. I could give many other examples. As somebody who campaigned to leave the EU and is glad to get back control of our laws, I am disappointed that the process will not see full transparency of debate, because our regulations and laws are better when they are transparent and when different people can bounce their ideas off each other. Does the right hon. Gentleman agree with me?
Madam Deputy Speaker (Dame Rosie Winterton)
We must not have such long interventions.
Mr Rees-Mogg
The hon. Gentleman makes a valid point. The scrutiny of statutory instruments in this House is not all that it should be. I actually think that the other place does it better. I think there are too many statutory instrument Committees that look at things for two minutes before they all go home, but that is an issue we must face as a House to decide how we want to improve it.
My final point is that those who oppose the Bill seem to think that British politics and the British electorate count for nothing. They stand up and say that we will have no employment law protections—practically arguing that we will be sending children up chimneys. Do they think the British voter was born yesterday? Do they really think the British electorate and the British people will accept or vote for a party that takes away the protections they already have and enjoy? Are they unaware of the fact that our maternity leave protections antedate the European Union’s regulations, and have always gone further than those regulations?
What sort of a country do opponents of the Bill think we are? Why do they have no confidence in our democracy? Do they think that right hon. and hon. Members on this side, when standing on a parliamentary platform and going before our constituents, will say that we are going to have a burning of everything they like? Of course we are not. We will stand up for people’s rights, we will stand up for people’s dignity and we will stand up for the rule of law. Most of all, we will stand up for that fundamental right, that overarching right, that right on which all our constitutional freedoms are built and on which all human rights depend—the right of the ballot box.
Brendan O'Hara (Argyll and Bute) (SNP)
It is a pleasure to follow the right hon. Member for North East Somerset (Mr Rees-Mogg). Little did I imagine when I arrived this morning that that would be the case, because it would mean that one of only two things could have happened: either the SNP had become the official Opposition, or he had been sacked, neither of which would give me great joy.
I rise to speak to the amendment tabled in my name and those of my right hon. and hon. Friends, in which we decline to give this ill-conceived, ill-timed, ill-judged and frankly dangerous piece of legislation a Second Reading. I had intended to start by saying that a week is a long time in politics and that events had overtaken the Bill since we first debated the matter in Westminster Hall with the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Watford (Dean Russell). However, the chaos that continues to engulf this place suggests that an hour is a long time, and so much can change.
Already, as we have heard, the former Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for North East Somerset, has resigned, just hours before he was due to lead on one of the most important and wide-ranging constitutional Bills to have come before this House in a long time, leaving the Government frantically searching for a replacement. The Government, having allowed him to take this Bill with him when he was reshuffled out of the Cabinet Office, now find themselves in the farcical, ridiculous position of having to find a replacement for the Secretary of State, with a Bill stuck in completely the wrong Department.
As my hon. Friend the Member for Glasgow North (Patrick Grady) said, this was always a pet project of the right hon. Member for North East Somerset, something that previous Prime Ministers were prepared to indulge him on. However, today’s resignation means that yesterday’s man is no longer available to introduce yesterday’s Bill on behalf of yesterday’s Prime Minister—yet the Government plough on regardless of this almighty constitutional mess.
Right now, this poisoned chalice has been passed to the hon. Member for Watford to pick up at short notice. I am sure he will be aware of the credible rumours circulating this place that the new Prime Minister is planning to break up the entire Department, leaving this Bill like an unwanted Christmas puppy, which no one really wanted in the first place, no one really cares for and no one is quite sure what to do with now that the person who pressed for it has flounced out of the front door.
The whole sorry episode speaks to the dysfunctionality and complete disarray at the heart of this Government. As I said in my letter to the now former Secretary of State on Friday, I believe that this House and the nations of the UK would have been much better served had the Government withdrawn this Bill, following the resignation of what I think was the last Prime Minister last week. Certainly, given what has happened today, they should have withdrawn it from the Order Paper.
I welcome the hon. Member for Watford to his place, but he will be aware that in the current circumstances, while he may last longer than the average lettuce, the smart money suggests that he may not have too long a shelf life in this role. He, like you, Madam Deputy Speaker, must be pining for the good old days of the ministerial carousel when we could expect a Minister to go around at least once before falling off. We now have a political bucking bronco, from which Ministers are propelled out of the hotseat almost immediately they get in the saddle. The right hon. Member for North East Somerset can testify to what happens in this particular rodeo if one picks the wrong horse, or indeed the wrong donkey.
This Bill is the first test of the new Prime Minister, who has a decision to make. Will he decide it is business as usual and that he will plough on with this scorched earth, far-right, ERG-inspired mess, confirming once and for all that the Conservative party is happy to be the handmaiden of an ideologically driven, UKIP-style deregulatory race to the bottom? Or will he signal a reset in Government policy, one that includes resetting the relationship between Westminster and our Government in Edinburgh? His two predecessors deliberately let that relationship deteriorate to such an extent that, in her 45 days, the previous Prime Minister did not even bring herself to pick up the phone to our First Minister.
This Bill gives UK Ministers unprecedented power to rewrite and replace almost 2,500 pieces of domestic law covering matters including environment and nature, consumer protection, water rights, product safety and agriculture, and to do so with the bare minimum of parliamentary scrutiny. Taken in conjunction with the United Kingdom Internal Market Act 2020, this Bill threatens to undermine and alter the devolution settlement by giving primacy to the law of the United Kingdom in areas that are wholly devolved, such as environmental health, food standards and animal welfare. This means that legislation passed by the Scottish Parliament to keep us in lockstep with EU regulations could be overruled by a Government here in Westminster that we have never elected.
Sammy Wilson
Does the hon. Gentleman understand the inconsistency of his argument? He objects to Ministers in the country to which he belongs being able to make changes to the law through this Parliament, yet he and his party would be quite happy to hand over all these lawmaking powers to Brussels, where he would have no say.
Brendan O’Hara
The right hon. Gentleman will be aware that Scotland, exactly the same as Northern Ireland, voted to remain in the European Union. What the Scottish people decide to do with our sovereignty is entirely our own decision. If we decide to pool and share that sovereignty with our European neighbours and friends, that is what we will do. He is asking me to accede to this Government, a Government we have never elected, riding roughshod over Scottish domestic policy in areas that are wholly devolved.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
My hon. Friend is making a terrific point. Is it not a fact that, if we were a member of the European Union, the European Union would not seek to take away our powers without consent? What is happening here, at every stage, is an attempt to take powers away from the Scottish Parliament without consent.
Brendan O’Hara
My hon. Friend is absolutely right. This is about consent, because the Scottish Parliament has never agreed to this. I am sure I speak for future Scottish Parliaments, while the SNP are in government, when I say that we will never consent to having our rights taken away by a Government we did not elect.
David Linden (Glasgow East) (SNP)
In answer to the point made by the right hon. Member for East Antrim (Sammy Wilson), the difference in how the European Union treats its members is that, in our current Union, Scotland has 59 out of 650 MPs, so we do not have a proportionate say. The European Union’s members are equal, so a country with the population of Malta has the same say as Germany.
Brendan O’Hara
Again, I thank my hon. Friend for that intervention, and I could not agree more with what he says. He is right to say that the way Scotland has been treated by this Government is disgraceful and it cannot continue, and this power grab will be called out for what it is.
Let me ask the Minister this: what would happen if the Scottish Parliament decides that we will remain aligned to the European Union and we ban the sale of chlorinated chicken, but this place decides that cheap, imported, chlorine-washed chicken is acceptable? Exactly what power will the Scottish Parliament have to stop lorryloads of chlorine-washed poultry crossing the border and appearing on our supermarket shelves? Similarly, what happens if the UK agrees a trade deal that sees the UK flooded with cheap, factory-farmed, hormone-injected meat but our Scottish Parliament decides to protect Scottish consumers and Scottish farmers by adhering to existing standards and protections? Can he guarantee that the Scottish Government will be able to prevent that inferior quality, hormone-injected meat from reaching Scotland’s supermarkets? What happens if the Scottish Parliament decides that it will stick by long-established best practice in the welfare and treatment of animals but Westminster chooses to deregulate? Can he give a cast-iron guarantee that the Scottish Parliament will be able to prevent animals whose provenance is unknown and whose welfare history is unaccounted for from entering the food chain?
Can the Minister guarantee that should this Government decide to “relax” the regulations on the labelling of food packaging but the Scottish Parliament decides to remain aligned to the EU’s rules, that this place, using the provisions in the United Kingdom Internal Market Act 2020, will not force labelling changes on Scotland and have Scottish consumers unwittingly subjected to chlorine-washed chicken, hormone-injected beef, genetically modified crops and animals of questionable provenance?
There is a genuine fear that this Bill and the power it confers on this place is a potential death sentence for the Scottish agricultural sector, which in my constituency requires a hefty subsidy to in order to manage the land, keep the lights on in our hills and glens, provide employment and stem the tide of rural depopulation, while producing high-quality, high-value beef, lamb, and dairy products. My Argyll and Bute farmers know that the lowering of food standards, the relaxation of rules on labelling and animal welfare, and the mass importation of inferior-quality products will be an unmitigated disaster for Scottish agriculture.
I know, as the Minister does, that Angus Robertson, the Scottish Cabinet Secretary for the Constitution, External Affairs and Culture, has already raised these serious concerns directly with the Government. The Minister knows that if the UK Government choose to act in policy areas that are wholly devolved, they will do so without the consent of Scottish Ministers or the Scottish Parliament, and that that will represent a significant undermining of the devolution settlement.
This Bill is the starting whistle on a deregulatory race to the bottom; one in which individual citizens will surely lose out to the spivs and the speculators and, no doubt, to the “politically connected”, who will be fast-tracked into making a quick buck at our expense. Because despite the Government’s assurances, which we heard earlier, that the UK will have the opportunity to be bolder and go further than the EU in securing consumer and environmental protections, there are clauses in this Bill that will prevent Ministers from imposing any new “regulatory burden” on anyone. To me, that suggests strongly that this is headed in one direction only: to deregulation. That deregulation will make it easier to circumvent our existing legal obligations on labelling food for allergens; to row back on safe limits on working hours; to change those hard-won rights on parental leave; or to avoid paying holiday pay.
The Government will be aware of the fury that will follow should they move to weaken the existing controls on polluting substances being released into the air or to lower existing standards for water and in any way dilute the protections and defences of our natural habitats and our wildlife. It seems that for some Conservative Members there is no price too high in their desperate, deluded pursuit of the mirage of Brexit. They are prepared to put at risk our natural environment, food quality, animal welfare standards, consumer protection, workers’ rights and even our natural environment in order to achieve it.
As I said earlier, this is not a road that Scotland has chosen to go down—rather, this is a road that Scotland has been dragged down. Our nation rejected this Tory Brexit fantasy, but our democratic wishes have been ignored at every turn. This is not Scotland’s doing, but because of the constitutional straitjacket in which we find ourselves, we are having this done to us by a Government we did not elect. Thankfully, Scotland has a way out and will, as soon as possible, rejoin the European Union as an independent nation. I sincerely wish the people of the rest of the United Kingdom well in finding their way back, too.
The Government should be under no illusion that SNP Members will oppose the Bill every step of the way. Not only are the Government coming for the rights and protections that we have all enjoyed for decades, but they are coming for our Parliament as well. I urge them, even at this late stage, to perform another of their trademark, almost legendary, U-turns and abandon this disastrous Bill. Not only does it undermine the devolution settlement, but it diminishes the role of MPs, with a plan to deal with everything via secondary legislation, conveniently avoiding scrutiny measures by Parliament. A former Secretary of State said that this was taking back control, but we have to ask who is taking backing control. It is not Parliament, as the Government have gleefully announced to the press that
“the amount of parliamentary time that is required has been dramatically reduced.”
Taking back control for this Government appears to mean finding a group of a hand-picked party loyalists and putting them on a Delegated Legislation Committee, which has a built-in Government majority, so that they can bulldoze through change after change after change, as required. In the history of DL Committees, in the past 65 years, only 17 statutory instruments have been voted down—and that has not happened since 1979. While there is a role for such Committees, it is not to make wholesale and fundamental changes to vast swathes of the law, covering everything from the environment and nature to consumer protection.
As we have heard, parliamentary scrutiny is being avoided because, in their desperation or fervour to rid themselves of any European influence, the zealots at the heart of this collapsing Government have arbitrarily included a sunset clause, meaning that 2,500 laws will be removed and not be replaced. Unless the Government grant themselves an extension, those laws will simply disappear from the statute book.
Jonathan Edwards
Is the hon. Gentleman aware of the Institute for Government’s view that the time between now and the date of the sunset clause is completely insufficient, so Parliaments and the Government will be consumed with trying to replicate those laws by 2023?
Brendan O’Hara
That is a very good point, and it is something that the Scottish Parliament and the Scottish Government are extremely concerned about, because doing something that is utterly unnecessary will take up a great deal of their time.
The tactic is fraught with danger, as it introduces another totally unnecessary Brexit cliff edge, which will be welcomed by no one outside the inner sanctum of the European Research Group. It is further evidence of panic at the heart of the Brexit project. They know the wheels have come off and their Government are disintegrating before their eyes.
Finally, I repeat: this Bill should be withdrawn. It is a throwback to different times, and if the new Prime Minister is serious about making a fresh start and resetting relationships with Edinburgh, Brussels and the people of these islands, then abandoning this ill-judged piece of UKIP-ery would show that he is serious.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. The debate is well subscribed. I do not want to impose a time limit, but my advice is that contributions should be around eight minutes, to make sure that everyone has equal time. I call Sir William Cash.
Sir William Cash (Stone) (Con)
I add my personal best wishes to my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg) following his resignation from his post. I commend the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford (Dean Russell), for his excellent opening speech that he delivered at such short notice, and for his dexterity in answering questions.
Over the past 45 years, before we left the European Union, we were governed by and subjugated to European laws that were made behind closed doors by majority vote and without any transcript, such as we have here every day in our own Hansard in our own Parliament. Manifestly, that was not democratic and it was rejected in a referendum of all the people in this country and in the general election of 2019. Nobody can now justify returning to that undemocratic system of Government and the EU system of law making. It does not work, as we can see from the political resistance and national democratic changes that are taking place now throughout the European community, such as in France, Italy and Poland and throughout the whole continent. President Macron’s bid to create European sovereignty in his recent elections has paralysed his Government.
The sovereignty of our democracy and of the United Kingdom is guaranteed by section 38 of the European Union (Withdrawal Agreement) Act 2020. This sovereignty is not theoretical or constitutional; it is our democracy and is in line with the referendum result of 2016, which was endorsed by the results of the general election of 2019. We were elected on a manifesto, which I am glad the Prime Minister emphatically endorsed this morning as being, as he put it, at the “heart” of our mandate, including embracing “the opportunities of Brexit”, encouraging competitiveness, investment, productivity and some deregulation and innovation, such as our world- beating roll-out of vaccines, including the AstraZeneca vaccine, which, by the way, the EU tried to stop altogether.
We now have the opportunity to deliver those commitments and to stabilise this country against the background of the £400 billion spent on covid, and the increases in inflation, interest rates and the cost of living brought about by President Putin’s energy deal with Germany, which I predicted would create geopolitical and European instability in an article in 2001, which was commended by The Times. Covid and Ukraine were external factors; they were not caused by this Government, and they are at the root of our current problems.
Most other countries in Europe are experiencing a worse cost of living crisis and economic downturn. Our unemployment rate, for example, is running at only 3.5% and our job vacancies, according to the latest figures, stand at approximately 1.2 million. There are those who claim that we need legal certainty—I have heard that argument—but what is certain is that it would be untenable and hopelessly uncertain to have two statute books and two systems of interpretation.
As the Government have said, retained EU law was never intended to remain on the statute book indefinitely, but was preserved as a temporary bridging measure following Britain’s exit from the European Union. This Bill is an essential component in resolving that. It gives us the opportunity to remove unnecessary laws that restrict our competitiveness and growth and enables us to realise our potential as a sovereign independent nation, making our own laws through our own Members of Parliament, from all parts of the House, who were elected by the voters of this country in the general election. This is the fundamental issue that we have to address. This EU-derived law did not have UK levels of parliamentary scrutiny, as our traditional domestic, sovereign legislation demands, and was made subject to goings-on in Brussels behind closed doors. It is right that we should have full control over our domestic legislation.
My right hon. Friend the Member for North East Somerset mentioned the ports directive, and I remember it terribly well. It was opposed by every single person in this House who had representative objections put to them by people from the trade unions, from the Government and from the ports employers. Every single sector involved in the ports legislation refused to accept it, but it made no difference; it went through anyway. Indeed, I can honestly say that, since 1972, and certainly 1984, since I have been in the House, not a single piece of European legislation passed under the auspices and direction of section 2 of the European Communities Act 1972 has ever been rejected by this House. This is an opportunity to put right that democratic absurdity. The simple fact is that retained EU law currently on the statute book lacks the legitimacy that we have in our Acts of Parliament. This Bill removes the supremacy of EU-derived law, much of which was created by the Council of Ministers, as I have pointed out, behind closed doors and without a transcript.
I was pleased to read in the Government response to our latest report, “Retained EU Law: Where next?”, that:
“The Government recognises the incongruous nature of Retained EU Law, particularly the principle of EU supremacy, which has no place in the legal system of an independent, sovereign nation”.
I am glad that that is clearly the basis on which the Prime Minister made his comments this morning, and I was actually encouraged, somewhat ironically—because I do not put too much trust in them, to say the least—by the remarks made about Brexit from the Opposition Front Bench.
The European Scrutiny Committee recommended that
“when retained EU law is modified by domestic legislation, the Government ensures that the amending legislation clearly indicates whether the modified legislation is to keep the status of retained EU law. We consider that the status should not continue.”
I am pleased that the Bill makes provision for that, and I welcome the inclusion of the sunset provisions to provide clarity and an effective timeframe for the repeal of all EU retained law, which is essential.
The director of the CBI on the “Today” programme this morning basically agreed that the Government have, as he put it, levers at their disposal that can support the growth push that we will need. He actually used the words:
“The growth imperative is bigger than before”.
He specifically mentioned, as part of that growth imperative, “different kinds of regulation”, and put growth at the heart of what he was talking about, because he knows it is true, Conservative Members know it is true and Opposition Members know it is true. We need growth and productivity. It is essential that we deploy these levers to achieve that growth, and in unity, to realise our potential and improve our competitiveness and our capacity for investment. I strongly support the Second Reading of this Bill.
Hilary Benn (Leeds Central) (Lab)
Here we go again: another piece of legislation introduced in the name of Brexit, which we were repeatedly told was about restoring Parliament’s sovereignty and supremacy, and yet one that gives Ministers absolute control over whole swathes of legislation that impact upon our national life by cutting Members of Parliament out of the process almost altogether, and the public as well. This is what the Hansard Society had to say:
“The Bill…Sidelines Parliament because it proposes to let all REUL expire on the sunset deadline unless Ministers decide to save it, with no parliamentary input or oversight.”
This is a shocking Bill. As I see it, one of the main purposes of the Bill is presentational: it is trying to remove the words “Europe”, “European” and “EU” from the statute book. It is a form of linguistic and legislative purge, which may make those who argued to leave the EU feel better, but it does not add to the sum total of human happiness. The former Business Secretary, the right hon. Member for North East Somerset (Mr Rees-Mogg), who has just left the Chamber, made it crystal clear what the aim was when he wrote to me on 13 October and said that the Bill will require Departments
“to remove unnecessary or burdensome laws which encumber business and no longer meet the Government’s policy objectives.”
I remind the House that one person’s burdensome law is another person’s safe working conditions; it is their right to take parental leave.
At a time of great uncertainty and economic difficulty, what the Bill does is simply add to the uncertainty. This point was brilliantly made by my hon. Friend the Member for Stalybridge and Hyde (Jonathan Reynolds). What businesses want to know is what the rules are and what the framework is, because that knowledge provides them with certainty, on the basis of which they can invest and carry out their work. The Government are doing the absolute opposite with this Bill. They are saying to every one of those businesses and would-be investors, “We just need to point out that the laws, regulations and rules that are in place today may not be in place in the same form after Christmas 2023 if we don’t get round to saving them.” I cannot think of an approach more calculated to undermine confidence in the British economy and to deter would-be investors than the one in this Bill. I point out that we are not doing very well on inward investment—we have the lowest level of inward investment in the whole G7.
Part of the problem is that we have no idea, and I do not think the Government have any idea, which bits of EU law the Government want to scrap, which bits they want to amend and retain and which bits they want to keep in their entirety. We know that there is a list; reference has been made to it. It is not a little list—it is a jolly big list, and it is found on the famous dashboard. I echo the plea made by other Members: I really hope that the Government have counted everything. To paraphrase Lord Denning’s famous phrase, now that the incoming tide of EU law has ebbed away, have Ministers and civil servants searched every estuary, every river, every tributary and every salt marsh to make sure they have found all the bits of legislation that will be subject to this Bill? It is really important that they have done so, because if they have missed anything, that bit of legislation will fall in December next year—it will disappear from the statute book, whether Ministers want it to or not.
The next thing that is objectionable about the Bill is that, for the first time I can recall, it allows Ministers to change the law of this country by doing nothing—by simply watching the clock move and the pages of the calendar fall until December 2023 comes around. Even if Government Members agree with the aim of reviewing these laws—and there is an argument to be had for that—it is extraordinary that Ministers are asking the House to give them this power. The Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Watford (Dean Russell), who is no longer in his place, did a good job of moving the Bill’s Second Reading having come to it very recently, but he had no answer to the point I put to him, and I have yet to hear one in the debate, about why Ministers should be allowed to get rid of law simply by sitting on their hands.
Sir William Cash
The right hon. Gentleman is rather avoiding the point that the legislation came in with exactly the same arrangements and was imposed upon us by the Council of Ministers, by majority vote behind closed doors, and he knows it.
Hilary Benn
Well, what I do know is that I sat on the Council of Ministers for seven years as a Cabinet Minister and took part in discussions and decisions about directives. That is a point the hon. Gentleman never, ever mentions; it is like everybody was locked out of the room. He makes that argument to avoid addressing what is in the Bill. Saying that something in the past was not perfect—I happen to agree with him about the fact that we were not allowed to watch the Council of Ministers at work—is not an argument for what is proposed in the legislation before us today.
What is more, are Ministers seriously arguing that, given all the pressures and the things that the new Prime Minister no doubt wants to do, civil servants should spend time going through 2,417 pieces of legislation? I say good luck to the new Secretary of State for Environment, Food and Rural Affairs, whose Department has 570 pieces of legislation—the Department for Transport has 424 and the Treasury has 374—and who will have between now and next Christmas to decide what on earth to do about them. While they are valiantly trying to do that, there is absolutely no provision in the Bill for public consultation and there will be no impact assessment on any changes that they are proposing to make. It takes a particular type of genius to make an enemy of worthy organisations such as the Wildlife and Countryside Link, the Green Alliance and others by threatening that which we and they value in pursuit of a headline.
What about workers’ rights? What exactly is the Government’s intention, in detail, when it comes to the working time directive? We have often heard Ministers complain about some of the consequences of the working time directive, but at other times we have heard them say, “Under no circumstances will we weaken workers’ protections.” The Minister acknowledged that we have entered into certain commitments as a country—although that does not mean that the Government will keep to them, if the Northern Ireland Protocol Bill is anything to go by—and that certain employment and environmental legislative commitments are engaged by the trade and co-operation agreement.
We all know that, if we act in a way that the EU thinks gives us an unfair competitive advantage, it can retaliate. How will it help economic growth if we are inviting the prospect of that happening? I listened carefully to the commitment that the Minister made from the Dispatch Box on environmental and employment laws, but I am sorry to say that it is still not clear what he means by that. It is the detail that matters, so what will be changed and what will be kept the same?
The Bill does its best to tell the courts what they can and cannot take into account when considering cases before them. The Government tried to do that previously with the European Union (Withdrawal) Act 2018 and they are back to have another go. One part in particular is extraordinary; clause 7(3) proposes to amend section 6(5) of the 2018 Act by substituting it with:
“In deciding whether to depart from any retained EU case law…the higher court concerned must (among other things) have regard to…the extent to which the retained EU case law restricts the proper development of domestic law.”
What on earth does that mean? Can any hon. Member explain what the proper development of domestic law is? I think that clause 7 is trying to kick the judiciary again into being more enthusiastic about Brexit, but Ministers know that in the end, the courts will take into account the things that they think are relevant.
I will say what I think will happen after this song and dance and all the chest beating about the wonderful new freedom. The Bill has not just one sunset clause, but three: 31 December 2023, 30 June 2026 and forever. Under clause 1(2), Ministers can decide to retain EU law in perpetuity or until such time as they choose to change it. I wager, therefore, that as next December approaches, many Ministers will find lots of reasons to use clause 1(2), because they will not have had time to decide what to do with the legislation.
In conclusion, this is a bad Bill. It threatens lots of laws that people value; it creates uncertainty; it takes powers away from the House; and it allows Ministers to repeal the law by doing nothing. For all those reasons, it should be rejected.
Rebecca Pow (Taunton Deane) (Con)
It is a pleasure to follow the right hon. Member for Leeds Central (Hilary Benn). I welcome the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford (Dean Russell), who is no longer in his place. He did a jolly good job of having to step in at short notice. I also pay my respects to the retiring Secretary of State, my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg), with whom I share Somerset in common.
I rise to support using our Brexit freedoms to design better regulation and unlock economic growth as appropriate. Regulations are obviously there for a reason, but it is right to periodically analyse them to ensure that they are doing what they were designed to do—or indeed, what we would like them to do as things change. We have that opportunity now, so as many hon. Members have highlighted, we need to ensure that the regulations that have been rolled over from the EU are bespoke to our nation. The Minister stressed this himself, saying that they really need to be working in the UK’s interests, and I agree. A lot of very sound points have been made by Conservative Members on that very matter, but I want to focus my comments on nature and the environment, which probably will not surprise Members in the Chamber.
I want to thank the Minister for meeting a group of us earlier to discuss how there are quite clearly concerns and to have open discussions. I, too, have met many outside organisations on these issues—the Green Alliance, the Wildlife and Countryside Link, the Better Planning Coalition, Greener UK—but also many businesses and farmers, because these issues affect all those categories. All of those people and, I believe, Conservative Members as well—particularly those of us from the Conservative Environment Network, which is doing really good work in this sphere—are just seeking assurances that the Bill will not weaken the UK’s environmental protections.
I was reassured by what the Minister did say at the Dispatch Box, because he openly commented that environmental protections will be maintained. I take that as a signal that he means it and, indeed, that the door is open to work on this—and maybe our Green party Member, the hon. Member for Brighton, Pavilion (Caroline Lucas), will be working on it, too—so that we get to a place that everyone is happy with.
Jonathan Edwards
I am sure the hon. Member will realise that some of us are less happy than she is about this approach. Would it not be better for the British Government to bring forward alternative proposals on a sector-by-sector basis, as the shadow Secretary of State, the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), said in his remarks, and then the whole House can discuss and scrutinise those alternative proposals, as opposed to giving the Government a blank cheque?
Rebecca Pow
I thank the hon. Member for that, but we have had assurances from the Minister that he is going to engage with us. I think it behoves us all to get involved in that, and to represent all the people who are coming to us, because there is a great deal of knowledge that I am sure the Minister will be open to discussing with us.
I particular want to set out for the House this Government’s record on the environment. We are the greenest Government we have ever had. We have moved further and faster on environmental issues than any Government, not least through our Fisheries Act 2020, Agriculture Act 2020 and Environment Act 2021, which is a groundbreaking piece of legislation. The rest of the world was watching us as we brought this through our Parliament, and they are still watching us now to see how we are going to implement all its measures, because it does put us on a sustainable trajectory for the future. Indeed, we on the Conservative Benches did all vote for it.
Deidre Brock (Edinburgh North and Leith) (SNP)
I have just heard the news that the COP26 President has lost his position in Cabinet. Does the hon. Lady agree that that suggests this is a Government who are not fully committed to supporting the environment?
Rebecca Pow
I am obviously not party to all these things, but I believe the COP26 President is just not attending Cabinet but is keeping his position, and rightly so.
I was touching on our environmental record, and I know that the Minister for Climate certainly understands the need to uphold this record. We are a global leader on this, which is very appropriate with COP27 coming up. We cannot be seen to be backtracking on things on which we are actually considered to be a global leader. That is why we need to show that we can uphold our environmental protections, while also being able to grow the economy, as is necessary in what are very challenging times. In my view, there should not be any kind of conflict between having a fully functioning ecosystem and a growing economy, with secure food supplies and, indeed, increasing food production. It is quite possible to make it all work.
We have set a legally binding target to halt the decline of species abundance—basically nature—by 2030 and to start to bend that curve, but I would be the first person to say, and perhaps the right hon. Member for Leeds Central might agree, that while we have had environmental protections, they have not actually done a great job in protecting our nature. We have had a massive nature crash in this country, and that is what we have to sort out. We need to look at some of our system of protection and make it work better. We do not need to undermine what we are doing; we need it to function better for the UK.
Rebecca Pow
I will press on because I think I will be under pressure—I will perhaps give way in a minute.
We have set a whole framework, and we need our protections to help that work to restore our nature. We must get those protections and the regulations enforcing them right. The Environment Act 2021 creates that framework, requiring Ministers to set long-term targets for environmental improvements, to set out policies to meet them, and to report annually on the delivery of those targets that relate to waste, air, nature, water and biodiversity. By the end of this week, on 31 October, the Government should be reporting back on the targets. Those have been widely consulted on, and I urge the new DEFRA team to publish them. They will be an important indication that we mean business on restoring nature, and business on our biodiversity net gain measures, which all developers know are coming down the tracks.
I mention that because it highlights the huge amount of work that DEFRA already has on its plate to tackle these things, and having to do a major review of hundreds of pieces of EU-derived legislation could put it under a great deal more strain. There are something like 572 laws relating to the DEFRA portfolio, whether that is sewage pollution, waste, water, air or pesticides. I know it is a good Department with some great officials, but fifteen months is a pretty short time to wade through that legislation. There is scope in the Bill to extend that sunset clause to 2026 if necessary, and I urge that door to be kept open, and for us to be realistic about this. If the right position has not been found by 2023—some of these things are pretty complicated—and if more engagement would be appropriate, I ask Ministers seriously to consider extending that sunset clause. No one is saying, “Don’t look at the regulations,” but we need that door to be open.
On the habitats directive, I urge Ministers to look at the nature recovery Green Paper that DEFRA undertook while I had the honour of being environment Minister. A whole team was considering proposals to streamline and consolidate site designations, to provide more certainty and predictability for developers—they had input into that—planners, and consultants. A whole range of people were asked to come up with some thoughts on getting a more strategic approach for tackling pressures on our protected sites. We have already done that for the infamous great crested newt, which is often cited as a reason for holding up planning applications. There is now a good plan for working strategically with our newts, with mitigations and compensations and so on, and it is working well. I urge the DEFRA team to look at the proposals in the Green Paper, as they are a basis for reform without weakening environmental protections. May we also have clarity on the Emerald network of areas of special conservation interest?
Finally, businesses need certainty and clarity, which is why we must ensure that they know there is a level playing field that will ensure high environmental standards. Our manifesto committed us to delivering the most ambitious environmental programme of any country on earth. The Minister mentioned that earlier, and it is something we should be proud of not just here but on the global stage. It is what we need to deliver for future generations. Let us give ourselves time for the assessment process. Do not rush the changes. We cannot grow our economy by weakening our environmental protections, but we can make a bespoke system that is better for us all.
Several hon. Members rose—
Madam Deputy Speaker (Dame Rosie Winterton)
Order. I gently remind hon. Members that, if we are to be fair to each other, I did say that speeches should last about eight minutes, as opposed to 11 minutes.
Stella Creasy (Walthamstow) (Lab/Co-op)
It is a pleasure to follow the hon. Member for Taunton Deane (Rebecca Pow). I hope she will appreciate that I listened to what she said and responded in my comments.
We have all done it: we have all accidently hit “Delete”, broken something or not saved a document that we meant to save. Or, even worse, we have been in workplaces where somebody has done that and all that institutional memory and knowledge has gone. Then we face a choice: either come clean that all that information is lost, or try to pretend that it did not matter. In taking the latter option, the Government are putting at risk thousands of rights that have been the fabric of everyday life for all our constituents.
In opposing the Bill, let me be clear that that is not talking about Brexit. It is not talking about rerunning a referendum. It is not to argue that we must go back. I am sorry that the right hon. Member for North East Somerset (Mr Rees-Mogg) is not in his usual place—I am not sorry, really—because it is also not about supremacy. It is about sanity and the business of doing government. In the time that I have, I want to set out that I and Opposition Members will oppose the Bill because of both what it does and how it does it. I urge Government Members to look at how the Bill operates, because all the powers, promises and ambitions in the legislation cannot be achieved.
We do not really know what the Bill does, because we really do not know what it covers. I am sorry that the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Watford (Dean Russell), is not in his place—who knows whether he is still a Minister and whether, when he comes back, he will be on the Front Bench or the Back Benches—because being honest about the fact that we do not know the levels of European law is critical.
It is not just minor changes, as the former Secretary of State tried to suggest; there are serious, important pieces of legislation that many in the House, and especially those who care about environmental issues, have discovered are not on the retained EU law dashboard. The conservation of habitats and species regulation does not appear on the Government’s dashboard. Therefore, as a starting point, we have literally no idea which rules are being abolished by the Bill because the Government do not know—they have not found them all. That is what the parliamentary question admitted yesterday with its authoritative but not comprehensive list. Call me an old- fashioned democrat, but I would quite like to know what I was voting to abolish and be able to tell my constituents about that before being asked to do so.
It is also not clear how the legislation will operate in the devolved legislatures. Of course, that matters in making sure that laws are tenable if they are to cross borders, let alone for our colleagues in Northern Ireland who face multiple legislative processes—all that red tape that we were told we could get rid of by leaving the European Union.
Above all, the Bill asks us to play the worst game of “Snog, marry, avoid” that I have ever seen for any piece of Government legislation; in deciding whether something is kept, amended or simply abolished. Let us have a go at that and see whether our constituents really want to play when they see what is at stake.
Let us talk first, nice and simply, about those things that we probably want to keep. I presume—maybe I have misread things—that there will be general agreement across the House that it is a bad idea to have cancer-causing chemicals in cosmetics, so we should retain rules that keep those out. Again, we all think that insider trading is a bad idea, but the legislation will rip up all the rules on that. On airline safety—by that I mean literally the rules that require a plane to be worthy to go in the air—we probably agree across the House that having rules that ensure that planes are safe is a good thing, so we could take a bipartisan approach. Again, we probably all agree on preventing food manufacturers from making false claims about the nutritional content of their food, and on tackling illegal firearms smuggling. One question from many of us might be: when we have a cost of living crisis and a Government who are in chaos, why on earth are we spending time rewriting laws that, on the whole, we all agree with?
That is where the rub is in the legislation: what the Government want to avoid and abolish. They need to come clean to our constituents. They are asking us to approve powers that would let them get rid of the rules around a whole plethora of issues, including those that require major sporting events to be free to air. I was very troubled to discover at the weekend that the Department for Digital, Culture, Media and Sport was trying to claim that was not the case. Clearly, Government Departments have not looked at the legislation on which they have depended. Disease control for bird flu is suddenly up for abolition, along with compensation rules for lost luggage and delayed trains. I guess if a Government are dealing with privatised rail industries and are unable to help them, they think that removing those basic consumer protections will somehow be good for them. However, they should be honest with our constituents if that is what they intend. The payout that comes if someone’s firm goes bust and the entitlement to 50% of their pension pot—let alone TUPE protections if their job is outsourced, paid holiday rights and maternity rights—are up for abolition through the Bill. I am sorry that the right hon. Member for North East Somerset is not in his place, because we could have a conversation about exactly how the EU protected women’s basic maternity rights against decisions by the UK Government.
On part-time workers’ rights, the hon. Member for Taunton Deane says she has had assurances from the Government. Well, I thought the Conservative manifesto was an assurance about what the Government were going to do, but that seems to have been ripped up. The Bill will give the Government carte blanche powers across 2,500 pieces of legislation and 300 policy areas. Can she really, hand on heart, be confident that all of those will be retained? She does not have in the Bill any recourse if those pledges come to nought, so she is taking a huge gamble.
Secondly, one might agree that all those things need to be up for grabs and that it no longer matters—I would love to see the referendum leaflet that said abolishing paid holiday leave would be a good thing; I will sit down if the Government can show me that—but the Bill hits delete through a sunset clause, abolishing everything all at once. As my right hon. Friend the Member for Leeds Central (Hilary Benn) says, that creates a power for Governments to abolish pieces of legislation just by doing nothing, with no judicial review powers if those rights are important.
I am sorry that the hon. Member for Stone (Sir William Cash) is not here. The Bill hands powers to those very Ministers who were in the Council meetings he objected to, to make those laws. In which case, we must all ask, “What help are they getting?” We have talked about 570 different pieces of legislation from DEFRA to be revised. At the moment, there are three DEFRA civil servants dealing with 570 pieces of legislation. It is the same across other Government Departments: two officials in the Department of Health and Social Care dealing with 137 regulations covering healthcare; nobody in the Department for Work and Pensions, which has 208 regulations to rewrite; and nobody in the Treasury, which has 602 regulations to review—snog, marry, avoid—in the next year and decide whether we will keep, or amend, them. The Department for Transport could not even confirm how many staff it had working on this issue. It does not even know who is responsible for it. That is not really a surprise. Of the 2,500 pieces of law that are being ripped up, on which we have been dependent for decades, 800 have no direct ministerial lead to even worry about whether we should keep them.
Ministers will decide what happens to those pieces of legislation—they can water down protections and any promises made to the hon. Member for Taunton Deane, or simply drop them without any form of scrutiny. I am disappointed that the right hon. Member for North East Somerset is not in his place, because those of us who are democrats believe passionately that the only people who are anti-democracy are those trying to take back control to Downing Street rather than to this place. It is simply not true to say to the British public that, through this Bill, Brexit is giving the House powers—let alone the trade war it could easily start, because we signed agreements in good faith with the European Union under the TCA that we would have a level playing field on areas such as food safety and employment rights. The Bill could lead to retaliatory tariffs.
What the hon. Member for Taunton Deane and her colleagues should reflect on most of all, perhaps, is clause 15, which enshrines deregulation. I would be with her in the Lobby on introducing higher environmental standards, but the Bill formally requires that that cannot happen. The direction of travel is only one way—to water down and reduce rights.
Joanna Cherry
The hon. Lady will have seen that I put that point to the Minister earlier and he said that clause 15(5) was just a minor detail. Does she agree that that is absolutely wrong and that it is absolutely central to the Bill?
Stella Creasy
Clause 15(5) is why the Bill is the anti- growth coalition. Businesses, consumers and environmental organisations alike are against no regulation. No regulation is a recipe for less competition. It is a recipe for a wild west. They want better regulation. Clause 15(5) rules that out and gives Ministers the responsibility not only of finding legislation, but then doing something with it without any scrutiny from this place. There are plenty of parliamentary mechanisms that could change that. There are many different ways that could work. It is not just about the sunset clause; it is about affirmative regulations. There are ways we could reduce red tape, but they are not written into the Bill.
The new Prime Minister says he will fix the mistakes of the past. He could do no better than to abandon the Bill and rethink it, because, as we all know, when we hit delete and do not save, it is a mess for all concerned.
Theresa Villiers (Chipping Barnet) (Con)
Having witnessed the EU legislative process at first hand as an MEP for six years, I can attest to the fact that it tends to be bedevilled by horse-trading, misunderstanding, ambiguity, vested interests and protectionism. My experience of that process and its often flawed results radicalised me and was a major reason why I decided, when the referendum came, to campaign to leave the EU. I believe that when it comes to regulation, we can do better in this country. We can and must retain our high standards—as every Government Member has said today, including the Minister—but deliver them in a way that is less cumbersome, less bureaucratic and less costly. We can ensure that our rules are properly targeted at the real problems that we want to resolve and that they are tailored to our domestic circumstances and our national interest. Delivering that change is a crucial means to making us more productive and more competitive and to growing our economy. It is a key benefit of leaving the European Union.
That point was made clearly in the report of the taskforce on innovation, growth and regulatory reform, of which I was a member. We highlighted the need to return to the principles of common law after nearly five decades in which the Napoleonic code-based approach had found its way into such a wide range of our laws in the UK. I therefore welcome the Bill’s proposal to remove the special status of retained EU law. I also believe that it is important to take a fresh decision on each item of law that we have inherited from our period of EU membership to determine whether it should be retained, amended or repealed. But—this is an important “but”—I am concerned that the hard-stop sunset clause, which kicks in at the end of 2023, may not give us time to conduct the in-depth, evidence-based review of regulation that is needed.
The Bill provides a mechanism in certain circumstances for that deadline to be extended to 2026, but, as many have said, that still leaves an immense amount of work to be done in a brief period of time. We do not know with certainty, for example, how many laws there are within DEFRA’s food, animal welfare and environmental remit, because that has not yet been comprehensively counted on the Government’s dashboard. However, groups such as Greener UK point out that it includes at least 570 pieces of legislation. Reviewing those 570 enactments is a mammoth task. I well recall, during my time as Environment Secretary, the huge bandwidth needed to prepare and take through the statutory instruments needed for the initial exit process, and that was only 122 SIs.
It is worth looking at our experience with the deposit return scheme. That is a popular move and businesses believe that it can be made to work well, yet it is not expected to be in operation until 2024 at the earliest—six years after it was announced. If an uncontroversial bit of regulation takes that long to get right, my fear is that the process of reviewing environmental, animal welfare and food regulations might not be completed prior to either the 2023 or 2026 deadlines.
Retaining strong environmental rules and protections is absolutely crucial if we are to meet our commitment to halt species decline by 2030 and become a net zero economy by 2050. The perils of any gaps in food safety regulation are illustrated by the fact that, 30 years after the BSE disaster, there are still countries that ban British beef.
In conclusion, I would be the first to acknowledge that there are aspects of EU environment and food rules that could, and should, be made to work better. The habitats regulations are perhaps the most important example of that. As the former Environment Minister, my hon. Friend the Member for Taunton Deane (Rebecca Pow), said, important work has already gone into potential changes and reforms, but we must avoid the situation where sunset clauses leave us with a period without legal rules on crucial environment, food safety and other issues.
This Conservative Government have shown the strongest commitment to environmental goals. They have led on the world stage and have enacted a groundbreaking new Environment Act. I now look forward to working with Back-Bench colleagues and with Ministers to improve the Bill and deliver legislation that seizes the economic opportunities provided by regulatory reform and ensures we achieve the historic goal that ours will be the first generation to hand on the natural environment in a better state than we found it.
Joanna Cherry (Edinburgh South West) (SNP)
I listened to the new Prime Minister’s speech this morning, in which he promised to fix “mistakes”, acknowledged that work was needed to “restore trust” in the Government, and said that his Government would be marked by “integrity, professionalism and accountability”. One problem with the Bill, however, is that it will hugely remove the Executive’s accountability to Parliament. That is one of the mistakes that need to be fixed by the new Prime Minister, because it was prompted by ideology and desperation to point to some so-called Brexit benefits, when the overwhelming body of opinion—from business to the trade unions—says that it is a mess that will lead to legal uncertainty and more chaos. The author of the Bill has gone; I think the Bill should go with him.
Let us make no bones about it. The departing Prime Minister has left an almighty mess behind her because she pursued an economic policy that the vast majority of people, including the incoming Prime Minister, advised her against. The vast majority of people are advising against the Bill, including the majority of parties in this House, business, the trade unions, legal experts, all sorts of third-sector bodies and the devolved Governments. My plea to the Prime Minister, given the promises that he made this morning, is not to make the same mistake with the Bill that his predecessor made with the economy.
There are so many problems with the Bill that it is hard to know where to start. Other hon. Members have outlined some of them, but there are seven that I want to raise.
The first problem is that the Bill represents a huge transfer of power from Parliament to the Executive. That is hardly taking back control. Taking back control was supposed to be about the people of the United Kingdom and this Parliament, not the Executive. The Bill will give Ministers incredible powers to legislate on areas that affect our everyday lives without any meaningful democratic input.
The second problem is that the Bill means that if Ministers want retained EU law to fall away, they need take no action at all. The decision to take no action is not subject to parliamentary scrutiny, meaning that very important rights and protections could be lost, including the right to equal pay as between men and women—a pivotal change in our society—as well as food safety standards, which other hon. Members have mentioned, and workers’ rights such as a certain amount of paid holiday per year and a 48-hour maximum working week for road hauliers. Those are not the sort of rights that should just fall away, perhaps even by accident.
The third problem, which I raised in my intervention early in the debate, is that far from creating new high standards in our regulatory frameworks, the replacement legislation cannot increase standards; it can only leave them as they are or lower them. That is what clause 15(5) says. [Interruption.] The Minister shakes his head, but in my opinion that is what it says, and many other legal experts think so. It is not a minor detail; it is a major problem with the Bill.
The fourth problem is that reducing standards or allowing key pieces of legislation simply to lapse could risk the UK’s trading relationship with the EU at a time when we can ill afford it. I know that it was several Prime Ministers ago, but will the Government please remember the trade and co-operation agreement and their obligations under it?
The fifth problem is the fact that the proposed speed and scale of these changes—as we have heard, the Government’s retained EU law dashboard includes more than 2,400 pieces of legislation in 300 policy areas across 21 sectors of the UK—are completely unrealistic, and will inevitably result in mistakes.
The sixth point concerns the problems that the Bill poses for the devolution settlement. My hon. Friend the Member for Argyll and Bute (Brendan O’Hara) went into those in some detail so, given the constraints of time, I will not go into them in the same detail myself. The fact of the matter is, however, that in its current form the Bill will allow UK Government Ministers to act in policy areas that are devolved, and to do so without the consent of the Scottish Ministers or our Parliament, because secondary legislation does not need consent. Primary legislation needs consent, but that rule is more honoured in the breach than the observance.
Jonathan Edwards
As usual, my hon. and learned Friend is making a forensic speech. She will be interested to learn that more than 10,000 people marched for independence in Cardiff recently. I never thought that that would happen in my lifetime, but it is happening because of Bills like this. The people of Wales are seeing the British Government supplanting the devolution settlement, and are concluding that they have a choice between direct Westminster control and independence. That is what is happening in Wales, and I am sure it is what is happening in Scotland.
Joanna Cherry
Indeed, and I am pleased to say that I spent the weekend in Cardiff. It was my first visit, and I found it to be a beautiful city. I was attending the FiLiA feminist conference. I will certainly go back to Cardiff, and I should quite like to join one of those independence marches some time. Whether one is a Unionist or a nationalist, the fact remains that the mess that the Bill will create will only cause problems between Westminster and Holyrood.
That brings me to my seventh point, which concerns Northern Ireland and the impact of the Bill on the Protocol on Ireland/Northern Ireland. The Government have not yet conducted a full and comprehensive assessment of retained EU law, and they have also failed to analyse which areas of retained EU law interact with or have an impact on the commitments made in article 2(1) of the protocol or, as I pointed out earlier, on the level playing field provisions of the trade and co-operation agreement. The removal of key frameworks for interpreting retained EU laws and settlement agreement legislation—including EU general principles, in clause 5, and retained EU case law, in clause 7—may have an impact on the “keeping pace” commitment associated with article 2(2). That is another area in which the Government need to go back to the drawing board.
As Chair of the Joint Committee on Human Rights, I can say that we will be scrutinising the Bill very carefully for its rights implications, and will table amendments. However, I must add that I think it is pretty much beyond amendment, and that, as I have said, the Government need to go back to the drawing board. I say to them, “Please do not pursue another dangerous ideological experiment at the cost of our constituents’ rights, and at the cost of their livelihoods.” The Bill will have a big impact on business and a big impact on workers’ rights. This is absolutely not about people, or this Parliament, taking back control; it is about executive fiat, and the sidelining of democratic scrutiny by this Parliament.
In his speech when he took office this morning, the Prime Minister said that he would put the country’s needs above politics. Well, the country does not need this, and, in fact, there is more than one country in our Union. The Government need to respect the wishes of Scotland’s voters, the wishes of Welsh voters and the wishes of Northern Ireland voters, as well as the devolved settlement.
My message to the Government is that the Bill is a mess. Yes, it is embarrassing to ditch Bills, but let us face it, the Government have had a lot of embarrassment recently and they are getting used to it. They have already ditched one Bill, the Bill of Rights; I believe it may be bouncing back soon as a result of the Cabinet reshuffle, but it is certainly possible to ditch a Bill at this stage. This Bill needs to be ditched, and the way in which we deal with retained EU law needs to be revisited completely.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
The UK is party to many international legal arrangements, many of which do not enjoy a great deal of scrutiny in this House. Having heard several Members raise points about scrutiny in respect of EU law, I think it is important for us to acknowledge that there are a number of Members here with direct experience of that scrutiny process. We have heard about the Council of Ministers, in which UK Ministers signed EU law into the laws of all the member states. We have heard from former Members of the European Parliament, where the directly elected representatives scrutinise that law during the law-making process. I can speak as a former member of the Committee of the Regions, where the indirectly elected representatives of the United Kingdom authorities, including the Scottish Parliament and the Welsh Government, scrutinised those laws in that law-making process.
I can also speak as having chaired one of the employer organisations in the social dialogue, which were part of the cross-industrial sector process of working up the detail of what those laws and regulations should contain. So while it is absolutely the case that that law, once it was signed into the law of the United Kingdom by our Ministers, did not enjoy further scrutiny here, the UK was well known as a leader in designing good regulation across the European Union. I recall my experiences in the education sector, where in neighbouring conference rooms organisations such as chemical engineers, veterinarians, pharmacists, clinicians and representatives of the aviation sector were having similar discussions seeking to design better law and regulation, which sits in this retained body of EU law today as part of Margaret Thatcher’s single market.
A weakness of that process that we must acknowledge is that it was easy for big industrial organisations and corporates to engage with, but in a country where around 70% of our workforce are in enterprises with fewer than five employees, it was challenging for those types of organisations to have a voice. They will not have had the input that the UK industrial sector had in the designing of these regulations. This should remind us of the importance of our scrutinising the detail of what this Bill means when it comes to deciding what pieces of law we might wish to keep and which we might not. Ministers and Members across the House have acknowledged this.
For example, it is easy to dismiss the value of regulations around batteries, but those pieces of regulation were designed to ensure that the ambition set out in this House by British Governments that all batteries would be recycled was achieved. We will wish to ensure that if we continue to support that ambition, which we clearly do, we will have an equivalent form of UK regulation, appropriate for our market, that will ensure that that outcome can be achieved, as was the intention of those European Union rules.
This seems to be a good moment to take stock of what is in this wide body of legislation. I welcome the fact that our former Prime Minister but one made a number of clear public statements that the Government’s ambition would be to go beyond what was set out in the EU legislation, especially in respect of environmental protections and animal welfare, and that it was the aspiration of the United Kingdom, just as we encouraged higher standards in the EU when we were a member of it, that we would use the freedom from those standards to seek to have still have higher welfare standards and higher levels of environment protections than those that previously legally applied. I hope we are going to hear that this is not simply a matter of maintaining a minimum, or indeed of going back, and that it is going to be a considered process of looking at where we can go beyond what we have, because that is good for our economy, good for our environment and good for our people.
It is positive that several Members have recognised that there are opportunities to make this legislation better. We know that the European Union, much criticised sometimes for the slowness of its law making, would have been unlikely to be able to implement changes to the financial market legislation, for example. I have to acknowledge, having been involved in some of the EU discussions about online safety, that the UK’s Online Safety Bill goes well beyond what was envisaged as part of the EU law-making process. It sets a higher standard for online protection in the United Kingdom than was likely to have been achievable across that greater body of member states. There are opportunities for us to do things better as a result of these changes.
That said, like my right hon. Friend the Member for Chipping Barnet (Theresa Villiers), I welcome the fact that there is scope within this Bill, as we go through the process of looking line by line at what the implications of those legal changes would be, to extend the life of those protections, indefinitely if necessary. I suspect the right hon. Member for Leeds Central (Hilary Benn) is correct that there will be a number of areas where we will decide that the regulations work just fine as they are, thank you very much, and we will consider them to be implemented at UK level. However, we will undoubtedly wish to change or reshape some elements in the light of our UK circumstances.
I have had a clear message from constituents, especially those with an interest in the environment and animal welfare. They recognise that some of those pieces of EU legislation have been cumbersome and that they have not always been as helpful, as sharp and as enforceable as we would like to see when it comes to things such as habitat protection; but they note that we have had the highest level of wildlife loss of any nation in the G7. There are reasons for that, and it happened under EU regulation, so there is a need to ensure that within this context of “taking back control”, the promise of higher and better standards and more flexible legislation that was made to the British people is met in full.
I urge colleagues on the Government Benches to keep that at the forefront of their minds. This Bill is not about deregulation; it is about showing that we in the United Kingdom will have the ambition to have the highest possible standards and the best possible regulation as a country outside the European Union.
John McDonnell (Hayes and Harlington) (Lab)
I will speak as a trade unionist, taking up the point made by the hon. Member for Ruislip, Northwood and Pinner (David Simmonds). From the trade union point of view, I have been inundated with briefings from individual unions, including my own, which is Unison, the TUC, etc. All of them have the wishful hope that any legislation that comes before this House would be about improving standards and moving to the best possible, as he said. Unfortunately, all the briefings I have received are about the risks, rather than the benefits, that accrue from this legislation.
The list is almost endless; other hon. Members have mentioned them, but I will run through a few: risks to the right to paid annual leave, limits to working time, health and safety protections, prevention of less favourable treatment for part-time workers, guarantees and protections for parental leave, TUPE rights, discrimination laws, equal pay and maternity, paternity and adoption protections —it goes on and on. There is fear out there about what this legislation can do.
Many trade unionists voted for Brexit. They will have voted on the basis of the slogan “taking back control”—that is the reality of it—and they will have been convinced by some of the arguments about reasserting national sovereignty and the argument that decisions should be taken by this Parliament rather than the EU. However, I do not by any means think they voted for a massive transfer of powers to Ministers on the scale seen in this legislation.
This Bill asks trade unionists for a leap of faith. It asks them to put trust in Ministers on both the sunset clause, to be able to include continuation of or improvement on all the existing legislation, and the scrutiny process in this legislation, which is largely based on delegated legislation. Even in the best of worlds, particularly when the Government are revoking the Lords’ amendments to the European Union (Withdrawal) Act 2018 on the use of the super-affirmative process by which delegated legislation can be amended, that is a leap of faith too far.
That leap of faith relies on trust in a Government and a party that has been attacking trade union rights for 40 years and now seeks to introduce a new wave of anti-trade union legislation to undermine the right to strike itself. It also asks trade unionists to put their confidence in Ministers who in many instances do not survive a fortnight in office, and to put trust in Government and Ministerial decisions in the current industrial climate, with the Government cutting trade unionists’ pay and about to introduce another round of austerity.
In all the briefings I have received, there is a complete lack of trust in the Government’s competence to administer that transfer of legal powers. Mention has been made time and again of the 2,700 individual instruments. I agree with hon. Members who spoke of their lack of confidence in the Government even being able to survey the full range of instruments comprehensively. To put it in context, this is a Government who have announced the cutting of 91,000 civil service jobs in the coming period. It is very difficult to have confidence in the Government administering this whole process when they are decimating the civil service and removing that administrative expertise.
I urge the Government to think again about the detail of this Bill. I will vote against it today, because it is just not viable at the moment. Concern has been expressed on both sides of the House about the unrealistic sunset clause. The hard and fixed deadline of the sunset clause will not work. Even with the elements of flexibility contained in the Bill, it is hard to see how we can give assurance to our constituents that all their individual rights will be protected.
I have mentioned the concern within the trade union movement. I cannot see it having any confidence in this Government meeting those deadlines without some element of either malevolently undermining trade union rights or, following the cock-up theory of history, missing individual pieces of needed legislative reform.
We now need to look clearly at the legislative scrutiny process. I am sure the House of Lords will introduce amendments, as it did on the European Union (Withdrawal) Bill in 2018. We want this House to be able to have thorough scrutiny, with not just the ability to reject but the ability to amend and, in answer to the hon. Member for Ruislip, Northwood and Pinner, the ability to improve legislation through delegated legislation. That means the super-affirmative process included in the EU withdrawal process.
I re-emphasise what others have said: this Bill is transferring from Parliament to Ministers a scale of decision making, authority and sovereignty that we have not seen happen in this country’s peacetime history. This is fundamental to the rights of Parliament. Members on both sides of the House should take it extremely seriously and say to the Executive, “This is too far. You need to think again.”
Claire Hanna (Belfast South) (SDLP)
As other Members have outlined, this Bill should not be before us. The chaos that has characterised the Government’s past few months has distracted from the scale and scope of the Bill. By moving the Bill on day one, the Government are undermining the more stable and cautious approach that the new Prime Minister told us they would be taking. There might be a different name over the door, but this is very much the same approach. The idea that Parliament could address all these issues in the next 14 months is for the birds. Members have outlined the vast number of regulations—we are talking more than one a day, in addition to all the other priorities of sponsoring Departments—and the closest we have come to reassurance from the Government is that it is within the realms of possibility, which does not give much comfort.
We have predictably heard quite a lot about sovereignty and supremacy. Actually, retaining these laws, as we decided to do a few years ago, was an act of sovereignty. It was a rational act by a Parliament taking the necessary action to protect its people and the economy, but the Government are now proposing to whip off the tablecloth as a posturing tactic for no real reason, just because other countries—“aliens” we are told—were involved in their shaping. That is petulant and reckless. The Institute for Public Policy Research described it as creating
“extraordinary uncertainty for businesses and workers.”
And it ignores the fact that the vast majority of these regulations, far in excess of 90%, were agreed with the UK’s full consent and, in many cases, with the UK as a driving force.
Handing these powers to Ministers, whoever they may be tomorrow or in the next few months, also undermines the concept of parliamentary sovereignty, which was a core platform of the Vote Leave campaign. Frankly, this race to the bottom stuff—that is what this is really about—would not have flown so well on Facebook in 2016, when that campaign was being run.
As other Members have pointed out, it is for exactly that reason that people do not trust the Conservative party with the scale of these plans. What is at stake is the protection of workers, consumers and the planet. As people have said, maternity, paternity, adoption and parental leave, equal pay, TUPE rights, holiday pay and many other things are at risk of just sliding off the books, with some of the Britannia unchained crew in the driving seat. Unison has called this:
“An attack on working women”.
It is hard to disagree.
As clause 55 makes clear, the only way is down. At no point has there been anything stopping this Government raising standards for workers or for the environment, but they have not done so. The risk to the environment and nature is even more acute. Just in the lifetime of this Parliament, with the Trade Bill and the Agriculture Bill, the Government have had many opportunities to legislate to protect standards and they have absolutely dodged them. So nobody has any confidence that with this Bill things will be any different.
Of course, my key concern is for Northern Ireland, including the impact on the non-diminution of rights provisions in the trade and co-operation agreement and the protocol. Our region is already one of the most nature-depleted on the planet, with more than 10% of species at risk. We only just agreed in the dying days of the last Assembly very basic climate targets. The absence of an Assembly now because of the veto of the Brexit fans and vetoholics who usually sit in front of me means that there is no opportunity for Northern Ireland’s elected representatives to try to design replacement legislation. Even if and when the Assembly returns, this Bill makes good governance all but impossible for Northern Ireland, because the ability to know precisely which legislation applies to us, which is still to be spelled out, and which gaps might suddenly appear in law, is not available to us.
Furthermore, the replacement of retained EU law using delegated powers means that new legislation that could have profound impacts on intra-UK divergence can be made without consulting this House, let alone Stormont or any other devolved Assembly. So the Bill would compound the difficulty we already have of ensuring commonality across the UK and across these islands, including between north and south on the island of Ireland, in the areas that are required by the Good Friday agreement and in the many more areas that have emerged, which we now know need protection and regulation; two and a half decades have passed since that agreement. All the borders that this Government have spent the last few years hardening do not see the environmental problems that this Bill could create.
Unfortunately, the Government have shown themselves to be quite ignorant of the basket of shared norms and regulations that keep these islands together and keep us relatively safe. The Bill will have unknown consequences, with various different Ministers, dozens of them, re-weaving that basket with different threads and different colours, and without any real adherence to any particular pattern or scheme. The concept is bad, the content is bad and the timing is bad. Northern Ireland, once again, appears to be an afterthought. We will be opposing the Bill and we hope others will, too.
Paul Blomfield (Sheffield Central) (Lab)
In last Thursday’s business questions, there was some discussion about whether the Bill should be proceeding at this time. It is a good question not simply because of the uncertainty caused by the latest episode in the Tory leadership soap opera, which of course reflects the deep divisions that have torn that party apart in recent years, for which the country has paid the cost, but because the Bill comes from the same thinking that drove the mini-Budget. It puts ideology before common sense, ignoring evidence, refusing advice, dismissing experts, and causing huge damage to the economy and to families, in pursuit of what Conservative Members described as a libertarian experiment. That approach was honed in the referendum campaign. Let us remember the way the Office for Budget Responsibility projection of the hit on our GDP was dismissed. However, as the former Governor of the Bank of England pointed out last week, in 2016, Britain’s economy was 90% the size of Germany’s and now it is less than 70%. That is where putting ideology before common sense leaves us.
The point is not to reopen the Brexit debate, despite the best attempts of some Government Members to frame every discussion on the EU in that way. We are not rejoining the EU. We are not rejoining the single market or the customs union, although major Tory donors have made that case this week. The point is that we should learn from our mistakes, but the Bill doubles down on putting ideology before common sense, and which side he falls on will be a real test for the new Prime Minister.
Let us remember why we have retained EU law—it is because the Conservative Government proposed it as a sensible way of dealing with the practical problem of the legal vacuum that we would face if we left the EU without it. Hundreds and hundreds of laws that are part of the fabric of our lives would otherwise have fallen without proper consideration. We should remember —and the hon. Member for Ruislip, Northwood and Pinner (David Simmonds) made this point—that often those laws were driven through the EU by the UK; they were shaped by us; they were laws we needed.
The principle of retained law was that, over time, we could review the legislation and, if we chose, update, amend or drop it, but there are 2,400 laws. The madness of this Bill, but also its central purpose, is the sunset clause, which will see all retained law expire next December if it has not been incorporated in UK law. Of all people, the right hon. Member for Chipping Barnet (Theresa Villiers) warned about that quite forcefully as an ardent Brexiteer.
The Bill is the brainchild of a Secretary of State who is no longer in government. We know he faced significant opposition in Cabinet when he proposed it, and for good reason: it forces every Government Department to prioritise, above everything, the review of retained law over the next 14 months, or lose it. Is that really the priority for Government? We have an economy that is tanking as a result of their actions, a cost of living crisis that will break thousands of families, a war in Europe and a climate emergency, but in the face of all of that, the Bill tells every Department that its priority is to review retained EU law. It is complete madness.
What is at risk? In a cost of living crisis, with prices rising and businesses struggling, uncertainty will push costs even higher. The regulations and standards that we risk losing at the end of next year, as civil servants are stretched with the real business of government and struggling with the issues, are necessary for confidence in businesses, purchases and markets. They provide the certainty needed for growth. Without them, we are deliberately damaging investment—who would want to bankroll ventures that might lose their viability or access to markets as regulations are set to change significantly? How do British standards remain high and of good quality if we risk their simply dissolving without consideration either by Ministers or by the House when the sunset clause is triggered?
The legal chaos unleashed by this process is wildly unproductive. By tearing up all these regulations at a time of huge pressure on our public services and Government, the potential for things to be missed, late, or poorly executed is huge. How can businesses be sure of the obligations they need to fulfil in this situation? How can they ensure health and safety standards for their employees? How can they be certain that there will not be legal repercussions for their activities if these frameworks are binned in favour of a Daily Mail headline?
The head of the Government Legal Service from 2014 to 2020—the crucial period in which we debated our departure from the EU—said this weekend that this is
“absolutely ideological and symbolic rather than about real policy...there is no indication of which areas the government is thinking of retaining and which it is getting rid of. So there is no certainty about what laws we will have and what will replace them. It is a very, very bad way to change and make law...It creates…uncertainty within a very tight, and completely self-imposed timescale.”
Business is clear too—it has enough to be getting on with, protecting jobs and livelihoods, without the Government creating more barriers to their work. The Federation of Small Businesses has said that the Bill adds
“an extra burden to already very difficult trading conditions.”
It continues:
“A year just isn’t long enough for small businesses”—
the hon. Member for Ruislip, Northwood and Pinner made that point well too—
“to work out how their operations will need to change in response to a fundamental shift in the regulatory environment, such as the one proposed by the EU revocation and reform bill.”
As a member of the UK Trade and Business Commission, chaired so well by my right hon. Friend the Member for Leeds Central (Hilary Benn)—
Sir Robert Neill
Will the hon. Gentleman give way? I will not be speaking later in the debate.
Sir Robert Neill
The hon. Gentleman refers to business uncertainty. Has he seen the detailed briefing that has been prepared by the Bar Council about its concerns over the creation of legal uncertainty in relation to certain clauses of the Bill? Those clauses leave doubts as to how retained law should be interpreted, and doubts as to its status and what discretion judges will have in its interpretation. Surely those things should be put right before the Bill goes any further.
Paul Blomfield
I have not seen that briefing, but I will now look because the hon. Gentleman makes a very strong and forceful point, as he so often does in this House.
As I was saying, through the UK Trade and Business Commission, which draws representatives from every single party in this House, we have heard many frustrations from businesses over the past two years. Those businesses have asked for many things to improve the environment in which they are operating. Not one has said, “Please, ditch EU retained law.” Laws make sense—laws that we have helped to shape, laws that we have often played a key role in creating. Laws, as described by my hon. Friend the Member for Walthamstow (Stella Creasy), protect pensions, prevent carcinogenic materials in cosmetics, protect part-time workers’ conditions and so on. They are not bureaucratic red tape, but basic laws that underpin a civilised society and a good quality of life.
Why chuck everything in a bin and set it alight? Over the past few weeks, in particular, have we not had enough of disrupters in Government? I listened to the new Prime Minister this morning. He talked about placing economic stability and confidence at the heart of the Government’s agenda. He set out priorities in which this Bill does not figure. He said that his Government will
“have integrity, professionalism and accountability at every level.”
If he is serious, he will drop this Bill. Let us legislate with purpose, not for a headline in the Daily Mail. Let us reject this Bill today.
Layla Moran (Oxford West and Abingdon) (LD)
To state what is so obvious to my struggling constituents, we are in the middle of a cost of living and an economic crisis—a crisis made worse by this Conservative party’s cack-handed handling of the country’s finances and economy. I am talking not just about the past few days either, but about the decisions that the Conservatives have made in the sort of agreement that we struck with the EU following Brexit.
This Government have put up many barriers to trade over the past few years. They have created enough business uncertainty. We do not need any more of it, but that is what the Bill does. As others have said, I am amazed to see the Bill being brought forward—today of all days. It is indeed the brainchild—the baby—of the right hon. Member for North East Somerset (Mr Rees-Mogg). Minutes after Business, Energy and Industrial Strategy questions this morning, he then resigned, so it was left in the capable hands of the Minister, the hon. Member for Watford (Dean Russell), who I guess in this case would be the nanny—but that would be appropriate, would it not?
This is also the first day of the Prime Minister’s new tenure. People say start as you mean to go on. Well, I am sorry, but this is a very, very bad start indeed. What the Minister has failed to fully answer is why the Government are introducing this Bill. Why do they have to introduce it when there are so many other things that we need to get done, post pandemic, to get out of this mess? Why this? Why are the Government taking forward legislation that will make life harder for businesses in my constituency and across the country? Why do they want to make it harder for them to trade with businesses in France, Germany and Spain? Every time we diverge in standards, businesses face more red tape to export into the EU. This legislation would mean divergence en masse. That is not a pragmatic way to approach trading ties with our largest trading partner.
Then there is the cliff edge. Why on earth do Ministers think this is wise? I think back to 2019—I can see many Members who were here then—because if there is one thing that can unite the House, it is that we do not like cliff edges in Parliament. They are corrosive, including incidentally to inward investment, because they are damaging to business. They create a fog of uncertainty and put undue pressure on Parliament. Indeed, Members have been wise to raise that point, in thoughtful contributions not just from the Opposition Benches but from the Government Benches. This cliff edge is entirely unnecessary and, let us face it, will probably not survive the Lords, and quite rightly. I urge the Government to think again.
The Prime Minister told us yesterday that the country faces a profound economic challenge. Actually, on that we agree—who doesn’t? Yet one of his first acts as Prime Minister was to bring in this Bill. If he was serious about putting the economy right, he would pull this Bill. He would act in the national interest and put businesses up and down the country first, but instead he has chosen to put his party first. This Prime Minister, who no one voted for, has decided on his first day in office to push ahead with a massive undemocratic power grab that tries to wrest control of scrutiny away from Parliament, preventing us from having any meaningful say on future changes, and with no clear steer on how exactly the Government are to achieve this mammoth task in the timeframe they have set themselves.
Incidentally—this bit is even worse—Ministers can choose to do nothing. They do not have to lift a finger, and the termination of these standards, regulations and rights becomes the default, and settled areas of law become uncertain and contested, as the Chair of the Justice Committee has rightly pointed out. I am sure that other Members’ inboxes will have been inundated, as mine has, with emails from constituents who are outraged at the whole suite of vital protections that could now be struck down by this Conservative Government —I dare say that the Prime Minister was right to say that trust is not there, because, boy, do they not trust this Government, and nor do I.
Environmental protection is top of my constituents’ list of concerns—I remind the Prime Minister that we are also in a climate crisis, as well as an economic one. The RSPB has described the potential revocation of environmental laws in the Department for Environment, Food and Rural Affairs policy space as “an attack on nature” and has expressed particular concern about the regulation of air and water quality, and the prevention of pollution. Ruth Chambers, a senior fellow at Greener UK, a coalition of conservation groups, has said that the Government are
“hurtling towards a deregulatory free-for-all where vital environmental protections are ripped up and public health is put at risk.”
The approach to employment law is the same, as others have said. A host of rights, such as holiday pay and agency workers’ rights, face being downgraded or eliminated. The Institute for Public Policy Research has said that the cliff edge would create
“extraordinary uncertainty for businesses and workers”,
and the same is true in many different areas: justice, data protection, protections for consumers, and a whole host of others.
It is clear that this Bill is simply not fit for purpose. It is a Tory vanity project, replaying and harking back to an old record, played in happier times, and designed, frankly, to keep their fanatical right from their door. All of this will, in return, result in chaos, confusion and yet more consternation for our constituents and all those businesses, which deserve so much better. It will therefore surprise no one to hear that I and the Liberal Democrats will act in the national interest tonight by opposing this reckless Bill.
Patrick Grady (Glasgow North) (Ind)
Some 78% of voters in Glasgow North voted to remain in the European Union in 2016, but now in this Bill they find out what “Brexit means Brexit” really means: not just moving away from European directives and regulations, but an attempt to literally erase from history the fact that the UK statute book was ever influenced by them at all. It was this Government who invented the concept of retained EU law with the European Union (Withdrawal) Act 2018, and now they want to abolish it.
I was going to say that the former Secretary of State for Business, Energy and Industrial Strategy, the right hon. Member for North East Somerset (Mr Rees-Mogg), like some even more terrifying version of the Borg queen from “Star Trek”, would decide which regulations would become assimilated and which would be ejected into the cold vacuum of space, but he has ejected himself to the cold vacuum of the Conservative Back Benches.
The rejections being imposed by the Government start with the core principles of European law: the equality principle and the protection of fundamental rights. That is what Brexit really means in the minds of the hard Brexiteers: getting rid of all the protections that have improved the safety and wellbeing of people and nature, and putting the drive for profit, externalising responsibilities and the race to the bottom back at the heart of trade and the economy.
Can the Minister name a single stakeholder, even among the former Secretary of State’s friends in the City of London, who genuinely think this Bill is a sensible, pragmatic approach to reforming retained EU law? As we have heard from Members across the House, there is a list as lang’s my arm of groups and organisations who think it is the precise opposite. They call it dangerous, a cliff edge, a power grab and more. Workers’ rights, environmental rights, consumer protections, health and safety standards, the Northern Ireland protocol, the devolution settlement and the building blocks of parliamentary scrutiny and democracy are all at risk from the provisions of the Bill. Yes, there are suggestions from some of the stakeholders for reform, amendments or changes, but the overwhelming consensus is that the Bill should be stopped and scrapped outright.
In Westminster Hall last Wednesday and in the debate today, Ministers have been unable to give a coherent or compelling reason as to why the provisions of the Bill are necessary at all. If Parliament genuinely is sovereign, and if we really have taken back control as a result of Brexit, surely the approach to retained EU law should be the same as to the rest of the statute book: propose policies, engage with our constituents, consult stakeholders and then legislate as necessary through the usual processes of political debate and deliberation in Parliament— but no.
The irony is that the Bill was proposed by a Secretary of State who carved out a role for himself as a defender of Back Benchers, the rights of the House and parliamentary sovereignty, and now from the Back Benches he cheerleads a power grab of unprecedented proportions, even in a world where unprecedented events seem to be taking place on a daily basis. The Brexiteers’ logic was that the EU had become all-consuming and stood in the way of this Parliament’s freedom to consider and legislate for the allegedly unique challenges facing the United Kingdom. Faceless Brussels bureaucrats and unaccountable commissioners were standing in the way of hallowed British parliamentary sovereignty, but now faceless Whitehall mandarins and out-of-touch Tory Ministers will essentially be given all the powers that were once held by the whole suite of EU institutions—its Executive, its legislature and its courts. All those processes will be wrapped up into this one piece of legislation.
That is to say nothing of the total disrespect being shown by the Government to the devolved legislatures on these islands. Tory Ministers sometimes like to ask Members from Scotland to name one devolved power that is being taken back by Westminster after Brexit, and now we know the answer: pretty much all of them. Anything previously regulated by retained EU law can be changed across the whole of the UK at the stroke of a ministerial pen, even if it is in a devolved area. The whole edifice of devolution is being undermined faster than you can say “Sewel convention.” That is particularly important because the Scottish Government have committed to remaining aligned with EU regulation wherever possible.
Alignment makes trade in goods and services easier and more beneficial to all. It will also make the process of Scotland rejoining the European Union as an independent country that much more straightforward, so perhaps it is not surprising that the UK Government want to ensure that as much of the UK diverges as much and as quickly as possible from the EU acquis.
If that was not bad enough, as I have said in interventions, we need to look at how the Bill is being scrutinised. The European Union (Withdrawal) Act 2018, which created retained EU law, was scrutinised for two days on Second Reading, eight full days in Committee on the Floor of the House, a further two days on Report and then two rounds of ping-pong with their lordships’ House. But this Bill is getting whatever time we have been able to squeeze in before 7 pm today, with a bog-standard programme motion kicking it upstairs to a Committee full of hand-picked Government loyalists to rubber-stamp. A Bill of such constitutional significance should have been debated in a Committee of the whole House, and the Minister and his former boss, the right hon. Member for North East Somerset, know that. I hope that Ministers can commit to a supplementary programme motion for a Report stage that allows proper time for debate and for amendments to be discussed by the House as a whole.
As many hon. Members have said today, this Bill is not about efficiency; it is about ideology—the ideology of a Secretary of State who has now returned to the Back Benches. In reality, as hon. Members have also said, the Government will have to come crawling back to the House, either through the statutory instrument provisions or perhaps even with primary legislation, because what is proposed in the Bill will simply prove unworkable. It is not possible or necessary—let alone safe or secure—to sunset thousands of regulations at the end of next year.
As the right hon. Member for Leeds Central (Hilary Benn) and other hon. Members have said, there will have to be extensions, whether to the next arbitrary date of 2026, or perhaps a broader kind of continuation, much like what was established under the European Union (Withdrawal) Act in the first place. In the meantime, there will be uncertainty, confusion and a further erosion of any pretence of democratic scrutiny and accountability in the House. In among the Westminster chaos, people in Glasgow North and across Scotland can see what is happening, and they want no part of it. Their chance for a different kind of repeal Bill—the repeal of the Act of Union 1707—is coming very soon.
Rachel Hopkins (Luton South) (Lab)
I rise to speak in support of the Opposition’s reasoned amendment. Many of us voted to leave the European Union to see a strong, democratic, sovereign state working, facilitating UK business growth and decent jobs, and ensuring the delivery of public infrastructure and services in the interests of its citizens. Contrary to the assertions made by Conservative Members, I, too, believe that the UK can thrive outside the EU. I support the supremacy of our Parliament, as many hon. Members have put forward already, but this rushed, dog-ate-my-homework legislation presents a future of more chaos and uncertainty under this Conservative Government.
As we all know, at the end of the transition period, the European Union (Withdrawal) Act 2018 incorporated most EU law on to the UK statute book as “retained EU law”, so there is a need to resolve its future status and relevance in terms of how applicable it is and whether and where it should be placed in a hierarchy relative to UK primary legislation. Indeed, setting out a future sovereign state after Brexit requires a legislative process to establish the future status of laws—I believe that people expect that.
The Government’s Bill, however, gives enormous powers to the Executive to repeal and amend—but not improve—vast swathes of rights and regulations. In doing so, the Government are flying blind, as they have not bothered to publish an exhaustive list of the retained EU law that is in scope. That is as disrespectful to all citizens and businesses, whatever view they took of our membership of the EU, as it is to the House, which in effect, is not being informed about how many pieces of legislation are affected.
While the retained EU law dashboard is helpful, it is not an comprehensive list, as we heard earlier. The Commons Library has said that the Bill will apply to at least 2,400 pieces of legislation, so will the Minister commit to publishing in the Library, as a matter of urgency, a comprehensive list of the legislation that would be in scope of clause 1? This is an important point of principle; democratic parliamentary scrutiny must not be ridden over roughshod by the Government.
Further to not being certain about the full details of the EU retained law that is in scope, it is absolutely chaotic to then pursue a sunset clause that simply removes it all from the statute book by 2023. That just smacks of a Government shying away from scrutiny and lacking any sense of accountability, in a chaotic pursuit of a free-market race to the bottom of workers’ rights and environmental protections.
The Conservatives have shown that they cannot be trusted on the economy, and while they are hellbent on causing more chaos and uncertainty for the British people, Labour will act in the national interest and make Brexit work. We just need a general election to offer the certainty and leadership that our economy needs.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
I was elected to this place on a prospectus for Scotland’s independence, which is a completely legitimate argument. When the right hon. Member for North East Somerset (Mr Rees-Mogg), who is no longer in his place, made his remarks about the value of democracy, they rang rather hollow in my ears. Although I respect England’s democratically expressed right to vote for Brexit and withdraw from the EU, I do not accept, as the Government and Opposition Benches do, that holding Scotland’s democracy hostage is somehow acceptable—it is absolutely not. The legislative process being considered this evening has been conducted without the consent of the Scottish people. It has not been consented to by our Parliament and it was not consented to in the referendum that was held. Although I do respect the right of withdrawal from the EU, it is disingenuous, at the very least, for the very people who embraced withdrawal from the EU to deny Scotland the right to withdraw from this Union.
Secondly, part of the agreement between the Kingdom of Scotland and England that led to the treaty of Union was that any law change should be to the “evident utility” of the people of Scotland. That is set in the articles of Union, and I see nothing in the Bill that is for the evident utility of the people in my Kirkcaldy and Cowdenbeath constituency. Scotland entered this Union through the coercive influence of the English Alien Act 1705 and the financial enticements of Scottish MPs who were bought and sold for English gold, to the outrage and consternation of the Scottish people. There was rioting in the streets and the Act of Union was burned in various towns.
Scotland’s 62% vote in the EU referendum in 2016 is often dismissed, as our history is often dismissed, as irrelevant to the modern era because we voted as one country. But the Act of Union 1707 created one state; it did not create one nation. Scotland is a country, and it has always maintained its identity as a country, even with the UN. From the declaration of Arbroath to the claim of right, it is the people of Scotland who are sovereign, not a Parliament and not a regent. That is a fundamental difference between Scots law and English law. Scots law is underpinned, in the common law, by the claim of right, whereas English law, and many other jurisdictions, is underpinned by Magna Carta. There are two Unions—there was the Union of the Crowns and, 100 years later, there was the political Union—but there was never a territorial union. Scotland is a separate and distinct people and country. The importance of the claim of right was best demonstrated most recently when King Charles acceded to the throne and had to swear to uphold the claim of right.
Despite some of my former colleagues being elected in 2016 on the basis of offering an independence referendum if Scotland were taken out of the EU against its wishes, subsequent elections have happened and no referendum has been brought forward. Despite pronouncements in this place and tough words in other Chambers, no referendum or preparations for a referendum have been forthcoming. Scotland has now been taken out of the EU against her wishes.
Pete Wishart
I do not know if the hon. Gentleman is not paying attention, but has he not noticed, and does he not recognise, that there is going to be a referendum in November next year? I know that Alba represents about 0.7% of all voters across Scotland, but at least they could start to pay attention.
Neale Hanvey
I thank the hon. Gentleman for that intervention, and if he paid attention he would know that the last poll put us on considerably more than 0.7%, which I know he loves to trot out on Twitter along with his usual offensive messages.
This legislative programme gives nothing to Scotland, and it will undermine the preparations that the Scottish Government are supposedly making to rejoin the EU. We now know what the United Kingdom Internal Market Bill was for. It was to facilitate the destruction of the devolution settlement, and that cannot stand. Alba’s position is that Scotland should join the European Free Trade Association immediately after our Parliament acquires the competencies to sign international treaties and abide by them. That would give us access to the European economic area immediately, and give us free trade with the EU. It would also solve cross-border trade with the UK, because the UK already has an arrangement with EFTA. EFTA membership could be negotiated in weeks rather than the years that it will take for the EU process to complete, and which would leave Scotland in the wilderness. It is essential that EFTA is back on the table for the Scottish people to consider.
We would also bring forward a written constitution by which Scotland will govern itself, and work with the variety of groups that have already brought forward developmental pieces of work on that. We consider that a series of citizens’ assemblies would be much better placed than a Committee Room upstairs to consider the laws that apply to the Scottish people. When the people are free and independent, they must fashion the instruments with which they are to govern: the divisions of powers, the extent of those powers between the Parliament and the Executive, the franchise, the electoral system, the judiciary and its appointment, the relationship between Government, police and people, and the principles and values that describe us as the nation we want to be seen to be on the international stage.
The written constitution should start from the principle that the people are sovereign, in keeping with Scottish constitutional tradition. That would offer us greater economic and social stability than being shackled to a failing, visionless political Union and this tawdry Bill. It is incumbent on all independence-supporting MPs to act in concert through a constitutional convention, to define the means to take us out of this dreadful Union.
Alex Cunningham (Stockton North) (Lab)
As we have heard, the Bill threatens environmental, health and industrial protections by casting an enormous shadow of uncertainty. During an economic crisis caused by the current period of Tory turmoil, the Government claim that they seek to promote growth, but the Bill would cause major disruption for businesses and, as the Chair of the Justice Committee said, put even more pressure on an overstretched legal system in settling uncertainties in the law.
There is also a huge cost to people and business, and I will concentrate on the tremendous pressure on the chemical industry, such as the one on Teesside, in complying with Government demands for UK regulations as perfectly workable EU ones are ditched. I am told that implementing the British REACH regulations, which has been demanded by the Government, will not now cost the industry £1 billion because, according to the Chemical Industries Association, the final bill is expected to be several times greater. Given that there is no clarification from Ministers about which laws and regulations they intend to retain, amend, or allow to expire, industries are left in a state of precariousness. Will EU regulations be retained, will they be amended, or will they just be ditched?
An incoming black hole left from the ditching of EU-derived legislation is increasing anxieties for businesses, including those in the chemicals industry. Many Members will know of the REACH—registration, evaluation, authorisation and restriction of chemicals—regulations, which regulate the majority of chemical substances that are manufactured in, or imported to, the country. They are vital for improving the protection of human health and the environment from hazardous chemicals, and for facilitating trade in chemicals across borders. Businesses that make chemical products and solutions are integral to some 96% of all manufactured goods and key ingredients, including for food and life-saving medicines, as well as material for mobile phones and electric vehicle batteries. The industry is calling for an alignment with EU REACH regulations that does not duplicate the efforts and costs already incurred by British businesses. Indeed, it would be unthinkable to do anything that reverses steps towards a better environment.
Alex Cunningham
No, I will leave it, thanks.
Rather than scrapping any chemicals regulation, the industry wants to ensure that the system for managing chemicals is both risk and science-based to ensure a high level of protection for our environment and society. Furthermore, the Bill places at risk the UK’s fulfilment of legal obligations outlined by the trade and co-operation agreement. Should there be a breach of that agreement, the EU could seek to impose tariffs on UK goods, increasing the impact on consumers during a cost of living crisis. The Bill in no way delivers the frictionless trade and consistency that the industry desperately needs. Instead, it creates barriers to trade and is loading billions of pounds in extra costs on an industry that is already under pressure due to the energy crisis.
I also fear the Bill’s impact on investment. It saddens me to say this, but why on earth would a multinational company opt to invest in Britain where business life is so much more complicated and expensive when it could be on the continent of Europe where such impediments do not exist? That is not what people on Teesside who voted in large numbers to leave the EU wanted or expected. I seek assurance from the Minister that he will think again about ditching and minimise any deviation from the EU REACH regulations to protect our chemical and other industries.
The Bill also poses a significant threat to workers’ rights, as the TUC made clear. EU-derived law—we have heard this several times—currently delivers: holiday pay; agency worker rights; data protection rights; protection of terms and conditions for outsourced workers; protection of pregnant workers; rights to maternity and parental leave; and rights relating to working time. In many areas, it is unclear what will happen to the protections that workers currently rely on as a basic necessity.
The legal system could very much do without untold chaos. Where EU-derived legislation is restated by Parliament, previous judgments relating to those instruments will no longer be binding. Issues will have to go through the judicial system yet again. The result will be workers and employers spending more time in court to establish what the law now means.
It is worth reporting that, at the weekend, Sir Jonathan Jones KC, the former head of the Government Legal Department, said:
“I think it is absolutely ideological and symbolic rather than about real policy”.
That is shown particularly by the failure of Ministers to provide answers on which areas will be affected.
The Bill also undermines the sovereignty of Parliament, removing the necessary opportunity for scrutiny and giving unwarranted powers to Ministers to revoke, modify or replace laws through secondary legislation. When people voted to leave the EU and take back control, they did not expect to be handing that control to a small bunch of Tory Ministers to do what they liked. We cannot allow Ministers to commandeer the parliamentary process for untold control, enabling them to change vast swathes of our law. Businesses, environmental groups, legal experts and unions are united on the desire to avoid the complications that the Bill will create.
The fundamental flaw on which the Bill rests is that well-established laws currently offering crucial protections on workers’ rights, businesses and the environment can essentially disappear. The former Business Secretary would have all forms of rights and regulations axed, but his days are over. It is important that the right hon. Member for Welwyn Hatfield (Grant Shapps) takes the opportunity to review this madness before it causes unbounded chaos and focuses instead on tackling the real problems that our country faces.
Pete Wishart (Perth and North Perthshire) (SNP)
It is like the old days, is it not? I was going to say the good old days, but they were not all that good. Remember the endless blue-on-blue, Tory-on-Tory Brexit wrangling with nobody being able to make up their minds about the way forward. We have had a little of that, and I thought it was going to get quite serious when the right hon. Member for North East Somerset (Mr Rees-Mogg) seemed to be squaring up to the hon. Member for Gloucester (Richard Graham)—I almost saw top hats at dawn. Thank goodness that they were able to back down and come to some sort of a reasonable conclusion.
Here we are once again debating Brexit: the issue that never goes away. You would expect nothing else, Mr Deputy Speaker, but I will put my cards on the table: I think that this is an awful Bill. It is a dreadful Bill. In fact, it is a Bill conceived, drafted and prosecuted in their ongoing ideological Brexit frenzy, ridding the UK of any vestiges of their hated EU. In fact, I would call it a vindictive Bill—more of a vendetta than a piece of legislation. And like all desperate ideologues, all traces of the ancient regime must be obliterated. Everything must be erased. Year zero must be established. We are getting three year zeros, but I think the one at the end of 2024 is the year zero for when all of Brexit is finally banished and we have the sovereignty that they claimed we were always going to have but never actually quite aspired to.
And so, this Brexit exercise in self-harm goes on and on and on. It is the ideological battle that never ends. I get the sense that nothing will ever satisfy them. Their insatiability for things Brexit and EU will never actually be met. They are almost like the Bolsheviks in the 1920s prosecuting their permanent revolution. I suspect that once we are concluded with this Bill and it is on the statute book, they will get around to digging into the earth’s core and start to geologically separate this island just that little bit further from mainland Europe.
The thing is that everybody is coming to the conclusion that their Brexit is a disaster. Anybody and everybody is beginning to tell them that. Even their friends are telling them that. I never knew anything about this guy, Guy Hands, but he is extolling them to
“admit the public was lied to”.
He is saying that they should renegotiate a new deal with the European Union. He says:
“The first thing to do would be to admit that the Brexit negotiations were a complete disaster”.
I do not know this Guy Hands, but I suspected he might have been some sort of tofu-munching Liberal Democrat, with all due respect to my Liberal Democrat friends, but apparently he is the Tories’ biggest donor and even he is saying that Brexit must be renegotiated.
As this disaster unfurls, is it not so disappointing to see the Labour party embracing it? The Labour party is becoming another party of Brexit. But it is okay, Mr Deputy Speaker, because it is going to make Brexit work! Are we not all relieved about that, then? The thing is, and I say this candidly to my colleagues on the Labour Front Bench, is that they cannot make Brexit work. In fact, it is designed not to work. Brexit was never a political strategy, so it cannot work. Brexit is an ideological venture driven by those guys over there on the Conservative Benches, founded by and predicated on British exceptionalism, the exclusion of others and an almost pathological hatred of everything European. But Labour is going to make it work! It is actually going to make it work without revisiting the single market or reinstating freedom of movement. It is going to make it work almost identically to the Brexit ideologists.
Labour may have given up on getting back into Europe, but those of us on the SNP Benches will never give up on our European ambitions. We will lead an independent Scotland back into the European Union. We are a European nation which values our EU membership, which voted to remain and aspires to return. With Scottish independence, we will put Scotland back into the heart of Europe in line with the wishes of the Scottish people.
This is the first day of the third Government in three weeks or four weeks—a few weeks, anyway. Was it not just a perfect opportunity for them to reconsider, pause, rethink and assess whether all of this is working? I went online the minute I got up very early in the morning to have a look to see if the Second Reading debate on the Bill was still on the Order Paper. To my great surprise it was, because I thought they would have taken this opportunity to reset and have a think about their European relationship. But not a bit of it. What we find is that the Sunak Government are the same as the Truss Government, the same as the Johnson Government and the same as the May Government. They are all Brexit—
Mr Deputy Speaker (Mr Nigel Evans)
Order. Not only is the hon. Gentleman going a bit wide of the Bill, but he is mentioning current serving Members by name which he must not do. He has been here long enough. He knows.
Pete Wishart
I heard, Mr Deputy Speaker, from a sedentary position, “Too long!” I am trying to resolve that—help me out. I want to be part of an independent nation. The hon. Gentleman and his friends could help in that ambition.
Simon Hoare
I am told that the Chiltern hundreds are beautiful at this time of year.
Pete Wishart
I hear the Scottish highlands are even more beautiful, but we might debate that one at some other point.
This Bill will drive a coach and horses through the devolution settlement. Combined with the United Kingdom Internal Market Act 2020, we are beginning to reach a crescendo in the assault on Scottish democracy and our parliamentary democracy. The joint pincer movement of the internal market Act and the Brexit regulations means that the Government are now almost entirely free to legislate at their leisure on Scottish devolved issues—issues that are the responsibility of Scottish Government Ministers and within the purview of the Scottish Parliament. The fact that the Government can legislate at leisure and at will is a threat to our Parliament.
I say gently to Government Members that what has happened has been a disaster for them. The idea of aggressive, muscular Unionism having any sort of resonance with the Scottish people has not worked. If there is an early general election—let us hope that there is—they will find that out to their cost with the loss of nearly all their Scottish Members.
I can see you exhorting me to finish, Mr Deputy Speaker, but let me say this about the Bill. I do not think that we have ever seen such a nasty, awful piece of legislation come before the House. Given that 2,500 pieces of legislation have to be looked at, doing away with all the EU regulations means that the House will be endlessly debating this stuff. Why not leave it alone? Take this opportunity to reset and rethink. Dump this dreadful Bill. Let Scotland become an independent nation—and then everybody will be happy.
Caroline Lucas (Brighton, Pavilion) (Green)
It is a positive delight to follow the hon. Member for Perth and North Perthshire (Pete Wishart), and it was refreshing to hear that strong defence of his position—to say that we will make Brexit work is frankly ludicrous for all the reasons he set out.
In the midst of a climate emergency, a nature crisis and a cost of living scandal, this reckless Government are introducing a Bill that is not only a bureaucratic nightmare, sucking away limited time from civil servants who should be able to address the critical issues that the country faces, but is purely ideological and can set alight vital environmental, worker and consumer standards in a bonfire of regulations.
All of this is happening because the former Secretary of State, the right hon. Member for North East Somerset (Mr Rees-Mogg), was so obsessed with purging our statute book of the European Union, but that is legislation that UK MEPs will have scrutinised, amended or supported. I know that because I was a Member of the European Parliament for 10 years. I can tell the Government that UK MEPs will have had a big part in shaping that legislation. After listening to two of the Government Members who spoke, I am not sure where they have been over the past 20 or 30 years, but it is almost as though they do not know that we had UK Members of the European Parliament. It is almost as though they did not know that environmental legislation, for example, was made through co-decisions, so we had a real say, or that the UK was a leader in some of this stuff and that we had a big role to play in the Council of Ministers, too.
All of that is now being thrown out. REACH, for example, controls or restricts the use of hazardous chemicals and ensures that manufacturers and importers not only understand, but manage the risks associated with their use. Although those regulations are directed at businesses, they are crucial for protecting human and environmental health while also setting rules on, for example, animal testing. What is more, REACH has already been amended through secondary legislation to make it operable in a domestic context. It has already received huge input from the UK through its MEPs and the Council of Ministers. The Bill fails to recognise the importance of that regulation. The Government are prepared to see it fall. That threatens public health, diverges from the EU system of approval and could lead to yet more, for example, animal testing in proving the safety of chemical products for export. This is bad law-making.
The former Secretary of State said in his ministerial statement on the Bill that it would
“fully realise the opportunities of Brexit”.
If he were here, I would ask him, in all seriousness, to tell me for whom those opportunities would be, because all I can see from where I am standing is the opportunity for Ministers to unilaterally strike out legislation that offends their sensibilities—potentially taking us back decades—without giving any indication of which laws will stay and which will go, underlining all the uncertainty for business, which others have mentioned. Simply being derived from the EU does not make laws bad, so this is irresponsible lawmaking of the highest order.
First, as other hon. Members have said, the sunset clause at the start of the Bill will automatically revoke legislation on 31 December next year if it is not already explicitly being retained, replaced or amended. That will create a totally unnecessary cliff edge and could lead to significant gaps in our legislative framework if laws fail. In other words, it is legislative vandalism. I assume that the Government do not actually intend a legal vacuum come January 2024, although who knows? However, that is what will happen as a result of this clearly unreasonable timeline, as many of the Government’s own Members have emphasised. It is simply not a sensible approach to mobilising Departments to act.
Furthermore, although the Bill sets out that there can be a later deadline of 2026 for some laws, neither the threshold nor the process for arriving at that point has been outlined. It is not clear, for example, whether it will be a decision for Secretaries of State to make for themselves. Worse still, the power appears not to be available to the devolved Administrations.
Secondly, clause 15 will allow Ministers to revoke or replace legislation with similar or alternative provisions that they consider “appropriate”. These are far-reaching provisions that have been described as conferring a “do whatever you like” power on Ministers. The Bill will fundamentally undermine parliamentary scrutiny because its role in revoking secondary legislation will essentially become discretionary. As hon. Members have eloquently said, if the Government choose to do nothing, the legislation will simply drop off the statute book.
Thirdly, there are wide-ranging impacts of the Bill that we simply do not yet understand because the Government have utterly failed to produce an impact assessment on the environment, on workers’ rights, on businesses or indeed on devolved competences.
Fourthly, as I have said, the Bill will come at a huge cost to the Treasury and create a massive burden for Departments at a time when they are already under enormous strain to provide basic services and are being warned by the Chancellor that they will have to make so-called efficiency savings when we know that there is nothing left to cut.
In that context, it is hard to imagine how the Secretary of State can possibly think that launching this deeply complex and totally unnecessary programme makes any sense at all. As other hon. Members have said, the Government’s retained EU law dashboard contains more than 2,400 pieces of law across 300 distinct policy areas and 21 sectors of the economy. This is an enormous piece of work that will take a herculean effort to deliver. The Government seem to be relying on a “trust us” mantra, but giving huge powers to Ministers on a “trust us” basis is a bad way to legislate.
The Bill will entrench the Government’s move towards deregulation. Although Ministers can replace laws with alternative provisions, the Bill states explicitly that they cannot increase what it calls “the regulatory burden”. I simply point out that one person’s regulatory burden is someone else’s protection of human and environmental rights. “Burden” is defined as including
“a financial cost…an administrative inconvenience…an obstacle to trade or innovation…an obstacle to efficiency”
and so on. An administrative inconvenience? I mean, come on! The protection of people, our environment, animal rights and human health has to be more important than something that the Government themselves define simply as an administrative inconvenience.
I was reflecting, as one does, on the 2019 Conservative manifesto, which included a clear commitment to “maintain high standards”. Hon. Members have repeatedly reassured us in this place that the Government will not weaken those standards post Brexit. Our concerns have been dismissed, brushed aside and ridiculed, yet the famous clause 15 absolutely makes the thrust of the Bill clear. Eroding regulations, or at least not increasing them, is built into it because they are not allowed to be strengthened, for all the reasons I have set out.
These are laws that have a very real impact on the lives of our constituents, ensuring that they are safe at work, that they are not subject to discrimination, and that they are able to spend time with their children—time that we know is fleeting and precious. The former Secretary of State has often made known his disdain for workers’ rights, but I think he has failed to understand the meaning of rights in the sense that they are universal and for everyone to enjoy, whatever their job is. It is not, as he has said, about some rights for some people but not for others.
The Bill constitutes the most significant threat to environmental law in recent history. As I have said time and again in this place, nature is at crisis point. The latest “Living Planet Report”, published just a few weeks ago, reveals that wildlife populations have plummeted by almost 70% globally in the past 50 years, a decline so severe that the World Wildlife Foundation warns that it
“puts every species at risk, including us.”
In the UK, we have lost almost half of our biodiversity since the industrial revolution—more than any other G7 country. That horrifying decline is blamed on our kick-starting intensive agriculture and industrialisation, or what Professor Andy Purvis describes as
“the mechanised destruction of nature in order to convert it into goods for profit.”
Hundreds of species are at risk of disappearing from our shores altogether. It is essential that we change that picture as a matter of urgency and restore our natural world, on which all life depends, but the Bill is going in the opposite direction.
I want to say a few final words about animal welfare, because it has not been mentioned much today. I am deeply concerned about the status of our major animal welfare laws, 80% of which are EU-derived and which the UK played a leading role in negotiating. These laws include bans on rearing hens in battery cages, the use of hormones in cattle and the import of products made from dog and cat fur, as well as covering the hunting and trapping of wildlife. Those are all deeply emotive issues about which we know our constituents feel hugely strongly.
Henry Smith (Crawley) (Con)
I am glad that the hon. Lady is raising the issue of animal welfare, which is extremely important. I hope that the Minister, when he sums up the debate, will assure us that the Animal Welfare (Kept Animals) Bill will return to the House, and that some of the other Brexit commitments that were given—for instance, that we would ban the export of live animals for slaughter and fattening—will indeed be realised.
Caroline Lucas
I entirely agree with the hon. Gentleman. I hope very much that the Minister will give us that guarantee.
The Environment Secretary reportedly told the Conservative party conference that his Department would become an “economic growth” Department. That, I think, is a ludicrous statement, because it fails to understand that the economy is reliant on and embedded within nature, not external to it. Indeed, as the Treasury-commissioned Dasgupta review makes clear,
“Our economies, livelihoods and well-being all depend on our most precious asset: Nature.”
In the light of that, I urge the Government not only to drop this dangerous Bill, which prioritises deregulation and reducing administration for businesses above our environment, but to drop their entire attack on nature. What we need right now is positive action. The leaders’ pledge for nature needs to be honoured, and the COP26 presidency needs to go forward into COP27 with positive measures, not the kind of aggressive policy that is summed up in this Bill.
Hywel Williams (Arfon) (PC)
The chaos recently visited on our constituents is yet another episode in the Conservative party’s extended Brexit fugue state. Many Conservative Members saw the last Prime Minister’s accession to Downing Street as an intoxicating chance to shrink the state, to deregulate, and to cut taxes for the very rich. We now know how that ended, when their cravings collided with reality. This bad Bill is a morning-after hangover.
Equally delusional was the idea, peddled hard, that the UK could risk trashing trade with our nearest neighbours while also growing the economy. Brexit is the driving force behind a 5.2% fall in GDP, a 13.7% fall in investment and a drop of 16% in UK-EU trade from what was projected—to which the Bill adds uncertainty and its disincentive effects. One might have thought that that would provoke a change of policy, and from both large parties, given that some on this side of the House dream of making the Tories’ hard Brexit work. Were they ever to find themselves in office, however, they too could not evade the contradictions that are implicit between Brexit and wider economic and social aims.
Another Brexit claim that is crumbling on meeting reality is the claim that leaving the EU was about giving power back to the people. This Bill will transfer large legislative powers from Parliament to Ministers. Earlier, the Minister claimed that the Government’s aim was to co-operate with devolved Governments, but the Bill is yet another assault on our Senedd’s powers, and the powers of the Scottish Parliament and the Northern Ireland Assembly. It gives UK Ministers powers to revoke, replace or update secondary retained EU law in devolved areas, subject only to the negative procedure in the House, and in many instances the test for use of these powers will simply be whether a Minister considers it appropriate. Indeed, as was said earlier, the Wales Counsel General has already warned that the Bill would give UK Ministers
“unfettered authority to legislate in devolved areas”,
and inevitably lead to lower standards.
The UK Government have refused a Welsh request for the dashboard of retained EU laws to be updated to identify which legislation is reserved and which is devolved, and how Welsh legislation might be affected. That was a practical suggestion. I recall the pre-devolution days and the structural confusion when every LAC—local authority circular—from Westminster was a WOC, or Wales Office circular, but every WOC was not a LAC. The Government are insisting on further trouble, further chaos and further uncertainty with this Bill. Will the Minister tell us whether that refusal to update the dash- board will be revisited?
Further, that approach undermines the principle that the UK Government should not legislate in devolved areas without the Welsh Government’s consent. In this regard, I draw the House’s attention to an important Bill tabled in the other place by my colleague, Lord Wigley: the Government of Wales (Devolved Powers) Bill. That Bill would enshrine in law the principle that powers devolved to the Senedd should not be amended or withdrawn without a super-majority vote of Senedd Members. Unfortunately, such protections are desperately needed in the face of a Westminster Government who are openly hostile to devolution. In contrast to the Bill before us, protecting the devolution settlement it is not about posturing; it is about powers for a purpose.
This Bill risks creating a regulatory ceiling that would prevent the Welsh Government from strengthening our rights as citizens, as consumers and as workers. Indeed, it only allows for the status quo or a diminishing of those rights. We are at risk of losing hard-won health and safety rights and employment rights derived from, or reinforced by, EU law. Westminster could abandon or modify laws that are crucial to conserving and restoring the natural environment, protections relating to the safety and standards of baby foods, protections for pregnant workers and rights relating to working time, including rights to a maximum weekly working time and paid annual leave. There is much more, and all this is the Government’s Brexit spree. If they are so confident that the Bill is wanted by the people of Wales, why don’t they just call a general election?
Stephen Farry (North Down) (Alliance)
I too am strongly opposed to the Bill. We can be wishful in our thinking that we are simply going through the motions today and that the Bill will never see the light of day again, but surely any Government who are serious about economic growth and doing the right thing by the UK as a whole would not allow it to proceed any further. Wide-ranging protections around the environment, climate change, employment rights, consumer protection and data protection are under threat from the Bill. We cannot separate this from the context of a Government with a stated objective of deregulation and trying to become Singapore on the Thames.
If the Government are serious about investing in growth, the lessons from around the world are that they should invest in skills, in infrastructure and in research and development. Crucially, they should also address the trade barriers that have been erected with our nearest trading partner, the European Union. That is where the biggest impediment to growth is coming from. I urge the Government to wake up and address that reality, rather than being blinkered around the ideology they have adopted. But even if there were no overt agenda and this was just a change of approach, the approach that has been taken is hugely reckless. Rather than simply adopting or amending each regulation or directive as they go along and as circumstances change, they are upending everything in one go. That is an accident waiting to happen, because gaps will be inevitable in that respect.
A few Members have referenced the pressures on the civil service, and there are precious few civil servants working on this already. This is an impossible timescale to get it done correctly, and next week we will see further announcements of spending cuts to Government Departments, including to staff, which will create further barriers. Frankly, this Bill is at best a huge distraction from what the Government should be doing, and at worst a sinister development that could undermine devolution in the three devolved nations and regions of the UK.
There are also particular threats both to the level playing field protections of the trade and co-operation agreement and, in particular, to the Northern Ireland protocol. Although the Under-Secretary of State for Business, Energy and Industrial Strategy, the hon. Member for Watford (Dean Russell), spoke about the UK observing its international obligations in that respect, there is none the less a danger that these obligations will be unpicked, particularly at the interface where it is not entirely clear where responsibilities lie or how different commitments are interpreted.
The classic example relates to the Northern Ireland protocol. Although it may be clear that annex 2 takes legal precedence over anything else, that is not the case for article 2 on the non-diminution of rights, which touches on a whole range of equality and employment rights protections that could well be unpicked because it is open to a certain degree of interpretation.
It is also fair to say that the more divergence there is between Great Britain and the European Union on a whole range of regulations, the greater the barriers will be to trade. The classic example is data protection. If the UK diverges on data protection, it will create barriers to UK companies dealing with the European Union. Companies often want to ensure that they have access to the European market, so it is in their self-interest to align with EU regulation. We have to recognise that few powers in the world have the mass and weight to be de facto arbiters of what regulation looks like. One is the United States and another is the European Union. I have to say, the United Kingdom is not at that level outside the European Union.
The Bill also creates an even bigger cliff edge for what is happening inside the UK with regard to the Northern Ireland protocol. The closer that Northern Ireland and Great Britain are aligned, the softer the protocol will be, but if Great Britain diverges further in the areas covered by the protocol, it will create more tensions in the Irish sea interface at a time when, notionally, the Government are seeking negotiations with the European Union to overcome those tensions.
The final area is the Bill’s overall impact on the devolved settlements. I agree with the many opposition Members, from a range of political parties, who have said that the Bill is a major threat to the devolved settlements, as it upends the balance between the UK Government and what happens in Edinburgh, Cardiff and Belfast. The Bill builds on the precedent of the United Kingdom Internal Market Act 2020 and the repeated breaches of the Sewel convention.
Although we may have some protection in Northern Ireland through the protocol, we will potentially see as many as 500 pieces of regulation upended. In the devolved regions we have a cliff edge of 2023, as we do not have the option of extending it to 2026. That will place huge pressure on civil servants. I do not need to remind the House that Northern Ireland does not currently have an Assembly or an Executive, much to my regret. Frankly, those who pulled the plug are in dereliction of their duty and were asleep whenever this happened to our devolved settlement.
Civil servants will have precious little time to put this in place, which will potentially leave consumers, businesses and workers in Northern Ireland in an extremely vulnerable situation. I urge Members to reject this Bill today. If they do not, I hope we are going through the motions and that wiser counsel prevails, as this dead end is utterly counterproductive to the UK as a whole.
Kim Johnson (Liverpool, Riverside) (Lab)
This is a Government operating without a mandate. We have had three Prime Ministers in less than two months and no general election. The new Prime Minister was appointed only a few hours ago, having been crowned with the support of fewer than 200 MPs and without a single ballot cast. This Government now want us to entrust them with sweeping powers to rewrite thousands of vital workplace protections. Let us not forget that it was the Tories who brought in the most draconian trade union legislation across Europe. This Government have been a disaster for workers, with a long history of opposing rights and standards at work, as we have seen from fire and rehire to the explosion of in-work poverty, precarious work and zero-hours contracts. They are currently undertaking a bonfire of basic rights, from the Public Order Bill to this Bill. Many years of struggle in the name of progress are being wiped out in the blink of an eye, and all with next to no scrutiny or accountability.
Matt Rodda (Reading East) (Lab)
One of the most pernicious aspects of this Bill is the threat to maternity and paternity rights. In my constituency, and across the country, parents are already under enormous pressure because of the very high cost of childcare. My hon. Friend may well be moving on to this point, but I just want to ask the Minister or his colleagues to write to our shadow Front-Bench team to reassure them about the Government’s intentions in this important area.
Kim Johnson
I thank my hon. Friend for his intervention and I will be touching on that point. Others have mentioned today the rights that will be attacked. With all that in mind, how could this Bill be anything other than an unmitigated disaster? Equal pay, maternity and paternity rights, the 48-hour working week, minimum rest periods and holiday pay, to name but a few, are all on the table to be put on the scrapheap—and that’s not even the half of it. Can the Minister tell us where in the 2019 Conservative party manifesto it says that the Government intend to scrap all that? People in this country did not vote for this. Work will become more dangerous and yet more insecure.
This Bill is being driven forward by a small number of ideologues who are hellbent on discarding basic rights and protections, driving a reckless race to the bottom for workers. Hidden in this Bill are sunset clauses: provisions to create a countdown for the expiry of vital workplace protections by December next year. That means that by the time the festive season comes around next year, holiday pay could be off the table.
Margaret Greenwood (Wirral West) (Lab)
My hon. Friend is giving a powerful speech, as she always does. She is talking about the sunset on retained EU law, causing most of it to expire by the end of 2023, handing over to the Executive immense powers to do whatever they wish. She is making a powerful case about the impact of that on workers’ rights. The Institute for Public Policy Research has raised the concern that this will create extraordinary uncertainty for businesses and workers, as well as the prospect of legal chaos. Does she agree that in recent weeks the Conservative Government have caused huge uncertainty for businesses and that this simply will not help?
Kim Johnson
My hon. Friend makes a valid point about the disruption that this Government have caused in the past couple of weeks and months. This is a zombie Government clinging to power in order to push through their destructive agenda. They are running scared from the people they are supposed to represent. They have no mandate, no plan to meet the challenges of the cost of living crisis and nothing to offer working people.
The Bill places our rights at work, our environment and our hard-won equal rights on a cliff edge, left to the mercy of Tory Ministers. The economy is on the floor, with the cost of living crisis set to cost thousands of lives this winter. We need a stable economy with a significant redistribution of wealth and power more than ever. I wish to appeal to the Conservative Members opposite: it is within your gift to stop this deeply destructive Bill and the threats it poses to your constituents. You are facing some of the lowest polling your party has ever seen. Your economic credibility is in the bin. After 12 years of Tory austerity—
Mr Deputy Speaker (Mr Nigel Evans)
Order. You should not use the word “your”—that refers to me.
Kim Johnson
Apologies, Mr Deputy Speaker. As I was saying, we have seen Tory austerity, attacks on working people and a concentration of wealth and power. It is time to face reality. People in this country are saying, “Enough is enough.” [Interruption.]
Mr Deputy Speaker
I am sorry, there were some noises there but I was not saying anything.
Kim Johnson
Okay, Conservative Members can make a lot of noise, because that is all they ever do. Thanks.
Is now really the time to decimate rights and standards at work, environmental protections, and health and safety? Conservative Members should consider just how destructive this will be, and just how angry people will be with this wholesale attack on their basic rights and protections. This Bill is not fit for purpose and it should not go ahead.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
On a point of order, Mr Deputy Speaker. At noon, the new Prime Minister promised “integrity, professionalism and accountability”. At 5 pm, he reappointed the former Home Secretary, who resigned from the post just one week ago, saying that she had broken the ministerial code and admitting that she had sent confidential documents outside Government from a private email.
In the urgent question last week, I raised a series of questions about whether there had been an official audit to check what other documents the former, and current, Home Secretary might have circulated from personal emails, because there were suggestions in the media that there had been others; and whether the right hon. and learned Lady’s resignation letter was in fact factually correct, because her account was different from briefings to the media and the statement by the Minister for the Cabinet Office last week.
May I ask you, Mr Deputy Speaker, to help us to get urgent answers to these questions? The Home Secretary has access to the most sensitive information of all, relating to our national security. We cannot have someone careless and slapdash in that job. How on earth does it meet standards of integrity and professionalism to reappoint someone who has just broken the ministerial code, and has just breached all standards of professional behaviour in a great office of state? It looks as if the new prime minister has put party before country. Our national security and public safety are too important for this.
Mr Deputy Speaker (Mr Nigel Evans)
I thank the right hon. Lady for her point of order. While she will clearly have opportunities to address those matters in Home Office questions, I fully appreciate that the next Home Office questions will not be until 14 November. Those on the Treasury Bench will have heard her point of order, and I am sure that they will pass it on to the Home Office.
Royal assent
Mr Deputy Speaker
I have to notify the House, in accordance with the Royal Assent Act 1967, that His Majesty the King has signified his Royal Assent to the following Acts:
Supply and Appropriation (Adjustments) Act 2022
Social Security (Special Rules for End of Life) Act 2022
Health and Social Care Levy (Repeal) Act 2022
Energy Prices Act 2022.
Retained EU Law (Revocation and Reform) Bill
(2 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate
18:51 - The House divided: - Ayes: 223 / Noes: 277 - Question accordingly negatived.
19:04 - The House divided: - Ayes: 280 / Noes: 225 - Question accordingly agreed to.
19:15 - The House divided: - Ayes: 270 / Noes: 45 - Question accordingly agreed to.
19:26 - The House divided: - Ayes: 265 / Noes: 44 - Question accordingly agreed to.
19:37 - The House divided: - Ayes: 260 / Noes: 4 - Question accordingly agreed to.
Justin Madders (Ellesmere Port and Neston) (Lab)
There have been more than 20 speakers today, and there have been some really important speeches, particularly by Labour Members. My hon. Friends the Members for Luton South (Rachel Hopkins), for Sheffield Central (Paul Blomfield), and for Liverpool, Riverside (Kim Johnson) have spoken extremely well. My hon. Friend the Member for Stockton North (Alex Cunningham) spoke, as he always does, as a powerful advocate for the chemical industry, and it was alarming to hear about the increased costs that it faces. I hope that the Government are listening and act accordingly.
My right hon. Friend the Member for Hayes and Harlington (John McDonnell) made an important point. He was right to link the Government’s actions and anti-trade union legislation that we have seen, and will see again, with what might happen with the Bill. There is a very good reason why working people have a lack of trust that the Government will protect employment rights. My right hon. Friend the Member for Leeds Central (Hilary Benn) gave a superb speech about why the Bill was bad for democracy. He was right to quote the Hansard Society, which said that the Bill sidelined Parliament. He also said—and I agree entirely—that one person’s burdensome law is another person’s right to safe working conditions.
My hon. Friend the Member for Walthamstow (Stella Creasy) made the important point that the Government had admitted that the list of laws covered by the Bill is not comprehensive. She said that, even in the past week, a Government Department has claimed that a rule on free-to-air coverage of sporting events was not covered by the Bill, when in fact, she says, it is. If we cannot even agree what is covered by the Bill, what confidence can we have that things will not slip through the net? That is the position in which we now find ourselves with the Bill.
We do not know what the Government will do, when they will choose to do it, and, now, even who will be doing it. I appreciate that, over the past few weeks, this has become a familiar feeling for us all, but this will be the first time that the institutional dysfunction that is currently engulfing the Conservative party will be put onto the statute book. We agree that there needs to be a legislative solution to the issue of EU influence on UK law, but that should be in a Bill that has some coherent and underlying vision about what type of country we want to be moving forward, beyond the simplistic deregulation mantra. A proper Bill that looks to recast our country should include a considered view on what rights and protections we want to retain, what we want to enhance and what rules we want to see the end of, but this Bill runs away from that debate. It is sweeping in its effect, but timid in its narrative. We left the EU so that this Parliament and the people whom we represent could be put back in charge of our own destiny, but the Bill does the opposite. It reduces scrutiny, it reduces transparency and it reduces accountability. If we are not careful, it will also reduce working people’s rights, environmental protections and our rights as consumers, and there will be not a thing that this Parliament can do to stop that.
The powers that the Bill gives to Ministers mean that they can make sweeping changes to just about every facet of people’s lives with minimal or no recourse to parliamentary scrutiny. This type of grasp of power is simply unprecedented, and the potential consequences of it have concerned many groups, such as the Royal Society for the Protection of Birds, the TUC and, that stalwart of the anti-growth coalition, the Bar Council.
Environmental groups have called this legislation an attack on nature and have warned against the dire effects that not retaining the legislation could have on the UK’s environment—potentially less wildlife and wild spaces, less protection for bats, otters, dolphins, kingfishers and salmon, and more polluted rivers. What about employment rights? What is to become of them? With the abolition of the TUPE regulations, will we be going back to the dark ages of employment rights where getting a new business owner means a P45 for all the staff? Will it once again be permissible to discriminate against people just because they work part-time, or are an agency worker?
There is no doubt that the removal of many of these rights would disproportionately impact women in the workplace. What about rights to paid annual leave? Introducing the right to paid holidays was one of the proudest achievements of the last Labour Government. Let us be clear: there is no appetite among the public, and certainly no mandate, to scrap it. Let us be clear as well: holiday pay is not red tape. Daily rest breaks are not red tape. Parental leave is not red tape. These rights are basic tenets of a civilised society.
I have already referred to the lack of clarity from the Government about which elements of retained EU law will be assimilated, but it is worse than that. As we have heard, the Government themselves do not even know whether they have found all the laws that will be covered by the Bill. I hope that, at the very least, it will be acknowledged that the Bill does not contain an exhaustive list of retained law that is on the chopping block. It would have been helpful for everyone to have such a list so that Members would know exactly what they are voting potentially to abolish. Instead, we are directed to a dashboard, which even the Government admit, may not be complete, and from there we have to enter search terms that may come up with affected regulations, but even that does not tell us what the Government intend to do with those regulations. It is almost as if a list of all the laws that will be chopped is something that the Government do not want us to know. It is almost as if they are worried that people might see such a list and say, “Well, I didn’t vote for this.”
Let us be clear: huge risks flow from a sunset clause that will come into effect probably just seven or eight months after the Bill becomes law. I would call it a precipice rather than a sunset. Of course, the legislative framework should be updated to recognise the new world we are in, but, given the chaotic nature of Government, it is not unreasonable to assume that things will be missed. Indeed, things have already been missed. More importantly, the chance for this place to have a real say on what is retained and what will be sacrificed for the easy headline of an arbitrary date by which all laws will be gone. We are talking about more than 2,400 pieces of legislation. It will simply not be possible for Ministers, let alone Parliament or even the people who might be affected by these rules, to have a proper say in these timescales. I do not accept the analogy made earlier about transposing EU laws; the Bill goes far beyond that and will potentially change those rules, as well as revoking and amending them.
It would be remiss of me not to mention the bespoke consultation on which red tape the public would like dropped, which the Department, under the former Secretary of State, conducted via the Daily Express. Apparently there were over 2,000 responses, which prompted the Department to publish the top nine ideas—yes, just nine. Maybe they could not find 10 that were printable. I am sure we are all eager to hear what was first on that list, so I can reveal that the No. 1 benefit identified by the Department was: “Encourage fracking”, by shortcutting “rules on planning”. I am not sure whether Government Members will be keen to have another debate on fracking, given the chaos we saw last week. However, we know perfectly well that planning rules are nothing to do with the EU, so the Department has hardly demonstrated a firm understanding of what EU law actually does.
More worryingly, that list also included a proposal to give agency workers lesser rights than permanent employees. I suspect that one was sent in by the chief executive of P&O—not that he waited for a change in the law. That is important, because the Bill makes no reference to protecting workers’ rights. It instead bakes in a race to the bottom by putting rocket boosters under the deregulation agenda, in direct contradiction to the Tory party’s pledge on page 5 of its manifesto:
“we will legislate to ensure high standards of workers’ rights, environmental protection and consumer rights.”
This Bill does the opposite. Worse still, there will be no warning before these laws fall off the statute book. No consultation, no engagement, no reference to Parliament—Ministers simply have to sit on their hands and these rights disappear.
It has been made clear by many who have spoken that the Bill does not take back control. Indeed, it was never designed meaningfully to take back control; it is designed to give it away. But the Bill does not just relinquish control; it heralds a new age of uncertainty. We were in one anyway but, like the chaos of the last few weeks, that uncertainty is entirely ideologically driven. At a time when this country needs as much political and economic certainty as it can muster, we are instead served up a diet of ambiguity. We all know that businesses need certainty to make investment decisions and commit to the long term, but we are instead entering a period of at least a year when everyone will have to guess what the regulatory environment will be in 12 months’ time. Why do Ministers not avoid that quagmire and just tell us what laws they want us to keep?
This Bill presents the House with a choice. If Members vote for it, it will be their choice to strip powers away from our democratically elected Parliament, undermine parliamentary sovereignty and throw away much-valued rights and protections. What has been proposed today does not take back control; it gives away control. It adds even greater uncertainty and risks jettisoning rights that many people thought were secure. Government Members should think carefully about whether they wish to troop into the Lobby to support the Bill and hand over such sweeping powers to a select few. If they do, and if their constituents come back to them in 18 months’ time and ask why they voted to end holiday pay, daily rest breaks or protections for wildlife, it will not be good enough to say that that was not what they wanted to happen, because that is what their votes today could lead to.
Today we are being asked to sign a blank cheque. We are being asked to agree a Bill that puts some of our most important environmental, employment and social protections on a cliff edge and place our trust in a Government that change their Ministers and Prime Ministers as often as most people change their socks. No self-respecting defender of democracy can sign up to that. To conclude, with all the talk of sunset clauses in the Bill, perhaps the one thing that it shows is that we do need a sunset, and we need it as soon as possible. We need a sunset on this Government once and for all.
The Minister for Climate (Graham Stuart)
It is a great pleasure to wind up this debate, and to see how much this legislation has wound up Opposition Members. The way they tell it, there seems to be almost no area of our life that this enabling piece of framework legislation will not negatively affect. Exaggeration, hyperbole—collectively, they have managed not to use any form of understatement whatever. The only thing stinkier than the arguments coming from the Opposition would be the hon. Gentleman’s socks, if he really does wait that long to change them.
As my hon. Friend the Minister for Enterprise and Markets said, the Bill is a crucial part of the Government’s growth agenda. This is at the heart of the opposition to the Bill. The good thing about the separatists is that they do not hide their detestation of the fact that British people take part in referenda, and they do not like the results. They never like the results when the people have their say, do they? They just cannot accept it. The Bill will enable us to reassert the legislative sovereignty of the United Kingdom—a country that they do not approve of—and to improve the nimbleness and competitiveness of the UK economy. That is what the Bill is all about.
I thank Members for their contributions regarding the constitutional importance of the Bill. Ending the supremacy of EU law and restoring an Act of Parliament as the highest law in the land is of paramount importance. I am proud that the Bill will build upon the European Union (Withdrawal) Act and ensure that no Act of Parliament is subordinated by retained EU law, which we heard again and again that Opposition Members detest—they hate the idea that we should be a sovereign Parliament, and they detest the fact that British people voted to leave the European Union.
Let me deal with some of the arguments that have been made. I would like to reassure you, Mr Deputy Speaker, and Members that environmental protections will be enhanced, not diminished. It is worth saying that again: environmental protections will be enhanced, not diminished.
Graham Stuart
We have heard quite enough from Opposition Members, with their exaggerated declarations and scaremongering, and I will answer the points that have been raised.
I am deeply proud of the Conservative tradition of supporting the environment, supporting high standards of food safety and animal welfare, which my hon. Friend the Member for Crawley (Henry Smith) rightly raised, and supporting clean water. As a Minister, I can no longer be a member of the Conservative Environment Network, but as a former member and supporter, I am delighted that it has looked at the Bill and that we are engaging with those members and ensuring that any questions are responded to. The whole of the UK, not just England, is a green and pleasant land, and this Government’s policies for the environment will keep it that way. We will ensure that environmental law works for the UK and improves environmental outcomes. That is why we are committed to reviewing retained EU law, to ensure that the UK regulatory framework is appropriate and tailored to the UK.
The Bill does not change the Environment Act 2021, and we remain committed to delivering our legally binding target to halt nature’s decline by 2030. It was us who put that into law. The hon. Member for North Down (Stephen Farry) suggested that we are some sort of regulatory inferior to the US and the EU. It is this country that brought forward the Climate Change Act 2008. It is this country that brought forward contracts for difference for renewables, for instance. It is this country that has cut its emissions by more than any G7 nation. It is this country, this party and this Government who have delivered that, and I will not allow the hyperbole, the exaggerations, the mistruths and the untruths from Opposition Members to remove that fact.
Similarly, it was claimed by the right hon. Member for Hayes and Harlington (John McDonnell) that the Bill will lead to a bonfire of workers’ rights. That could not be further from the case. We are proud of the UK’s excellent record on labour standards. It was a Conservative Government that raised domestic standards over recent years to make them some of the highest in the world. We have a long-standing track record of ensuring that workers’ rights are protected, which we will continue. It is, frankly, craven of Opposition Members to suggest that this country, this Parliament and this Government cannot be trusted.
Graham Stuart
I understand why the hon. Member for Stalybridge and Hyde (Jonathan Reynolds) points his finger and tries to attack my party, but we are the party that has delivered those environmental protections. It is this party that has delivered improved workers’ rights. In line with the UK’s track record, we will seek to modernise our regulations, including on workers’ rights, ensuring that unnecessary burdens are minimised and that vital protections continue to be upheld.
I will now turn to devolution. A number of Opposition Members have, predictably, declared that the Bill is some form of Westminster power grab. That is not the case. The six powers in the Bill are conferred on the devolved Governments, so they will be able to exercise powers to amend retained EU law within their existing devolved competence.
Graham Stuart
I urge the devolved Governments, including that of the party of the hon. Member for Argyll and Bute (Brendan O’Hara), to seize that opportunity and look at creating better regulations that are better suited to Scotland, Wales, Northern Ireland and England —to the whole of this United Kingdom.
Graham Stuart
My hon. Friend the Under-Secretary of State for Business, Energy and Industrial Strategy was generous in giving way earlier. If the hon. Gentleman sits down and stops shouting, he may get a response to the points that he and his colleagues raised.
This Bill is the opposite of a power grab. It empowers the devolved Governments to make the most of the opportunities that Brexit provides; it is a shame that the hon. Gentleman’s party insistently tries to make out that there are none. It is my sincere hope that his party now uses the Bill to focus on improving the lives of its constituents rather than—
Graham Stuart
The hon. Gentleman may shout—well, he may not shout, under the rules, but he shouts anyway. If he and his—
Mr Deputy Speaker (Mr Nigel Evans)
Order. The Minister is not giving way. If he wishes to give way, he will let the hon. Member for Argyll and Bute (Brendan O’Hara) know.
Graham Stuart
I am normally generous in giving way but—am I allowed to use the word “hogwash”?—I have heard so much hogwash from Opposition Members during the debate that I feel that it is necessary to put straight the misrepresentations and, frankly, scaremongering that they have engaged in.
It is my sincere hope that Opposition Members, including those in the hon. Gentleman’s party, focus on improving the lives of their constituents—not on rehashing the debates of 2016 or indeed 2014. In both cases, as I remember, he saw a referendum result that he did not like and that, therefore, he has refused to accept.
The UK Government remain committed to respecting the devolution settlements and the Sewel convention. There are provisions in the Bill that engage the legislative consent motion process. In the light of that, we have sought legislative consent for the provisions from the Senedd, the Scottish Parliament and, if possible, the Northern Ireland Assembly. To that end, the former Secretary of State, my right hon. Friend the Member for North East Somerset (Mr Rees-Mogg), and his officials met frequently with their devolved counterparts to discuss the Bill’s scope and overall policy and to address any concerns that they may have had. We will continue to do so throughout the Bill’s passage through Parliament.
Several hon. Members raised specific concerns about the impact on Northern Ireland. I reassure the House that we will stand by our international commitments. We will preserve, restate or reform retained EU law to uphold those international obligations.
On sunsetting, some hon. Members, including the right hon. Member for Leeds Central (Hilary Benn), questioned the need for a sunset and, again, used fairly hyperbolic language about its impact. A sunset is the quickest and most effective way to reform retained EU law. It provides a straightforward way for outdated retained law to be repealed, and provides Whitehall—not always the swiftest moving bureaucracy, as he knows as well as I do—with an incentive to review the law on its books. I am pleased to say that that will not start after the passage of the Bill; it is already going on. The sunset will ensure that retained EU law does not become an immutable legal category—much as some EU aficionados among the Opposition, who lost in that referendum, may wish it to be. Instead, it incentivises the genuine reform of retained EU laws in a way that will work best for the United Kingdom.
This does not, however, mean that we are removing all retained EU law. Retained EU law that is deemed desirable by the Government or, indeed, the devolved authorities will be preserved using a power in the Bill beyond the sunset date as “assimilated law”. Moreover, as my hon. Friend the Parliamentary Under-Secretary of State said at the beginning of this debate, retained EU law that is primary legislation is not within scope of the sunset. I am therefore happy to confirm that the Civil Aviation Act 1982, which the hon. Member for Walthamstow (Stella Creasy) was so concerned about— I do not know if she is in her seat—
Graham Stuart
Great. I am pleased to give the hon. Member the reassurance that that Act will not be in scope of the sunset.
It has also been suggested by the hon. Member for Stalybridge and Hyde that sunsetting risks creating a legal vacuum. I do not believe this is the case. We are thoroughly reviewing all retained EU law, and establishing plans of action to ensure that the regulatory environment is substantially improved for the UK. The Bill and the use of its delegated powers will ensure there are no legal vacuums. Where it is desirable to do so, we will introduce new regulatory frameworks, and where the current laws and regulation work well, we will ensure their ongoing function. Finally, where it is necessary, we can utilise the extension power to allow more time for review.
Graham Stuart
I will—[Hon. Members: “Oh!”] I will give way to my hon. Friend.
Sir William Cash
Does my right hon. Friend agree that the worst possible degree of uncertainty would be the case if we had two separate sets of law? The most important thing is to have one statute book, governed by the same principles and by the same methods of interpretation by our courts.
Graham Stuart
And that, after all, is what UK sovereignty is all about.
I do urge Opposition Members to recognise that this is a framework Bill. It is not going to deliver any of the negative outcomes they have been predicting. Indeed, it will do the exact opposite. It will enhance our animal welfare, it will enhance our environmental protections and it will enhance workers’ rights.
Question put, That the amendment be made.
Business without Debate
Mr Deputy Speaker (Mr Nigel Evans)
With the leave of the House, we will take motions 12 to 14 together.
Business, Energy and Industrial Strategy Committee
Ordered,
That Richard Fuller, Ms Nusrat Ghani, Paul Howell and Mark Jenkinson be discharged from the Business, Energy and Industrial Strategy Committee and Ruth Edwards, Mr Jonathan Djanogly, Robert Largan and Bim Afolami be added.
Defence Committee
That Stuart Anderson and Sarah Atherton be discharged from the Defence Committee and Andrew Bowie and Robert Courts be added.
Education Committee
That Dr Caroline Johnson be discharged from the Education Committee and Andrew Lewer be added.—(Sir Bill Wiggin, on behalf of the Committee of Selection.)
Mr Deputy Speaker
Now we come to motion 15 —not moved. With the leave of the House, we will take motions 16 to 22 together.
Health and Social Care Committee
Ordered,
That Marco Longhi and Dean Russell be discharged from the Health and Social Care Committee and James Morris and Helen Whately be added.
Levelling Up, Housing and Communities Committee
That Darren Henry and Sara Britcliffe be discharged from the Levelling-up, Housing and Communities Committee and Paul Holmes and Mrs Natalie Elphicke be added.
Northern Ireland Affairs Committee
That Scott Benton be discharged from the Northern Ireland Affairs Committee and Mr Robin Walker be added.
Science and Technology Committee
That Katherine Fletcher and Dehenna Davison be discharged from the Science and Technology Committee and Stephen Metcalfe and Iain Stewart be added.
Transport Committee
That Simon Jupp be discharged from the Transport Committee and Jack Brereton be added.
Women and Equalities Committee
That Jackie Doyle-Price be discharged from the Women and Equalities Committee and Victoria Atkins be added.
Committee of Public Accounts
That Anthony Higginbotham, Craig Mackinlay and Shaun Bailey be discharged from the Committee of Public Accounts and Anne Marie Morris and Jonathan Djanogly be added.—(Sir Bill Wiggin, on behalf of the Committee of Selection.)
Eastern Link Undersea Cable Electricity Generation
(2 years, 1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate
Kenny MacAskill (East Lothian) (Alba)
The Eastern High-Voltage Direct Current Link is a multibillion-pound project, taking up to 4 GW of clean power from Scotland to England via HVDC subsea cables. That is enough to power 2.8 million homes. In cost and scale, it is the largest electricity transmission investment in the UK’s recent history.
Two undersea cables will run—one from Peterhead to Selby, and another from Torness, in East Lothian, to Hawthorn Point, County Durham. Preparatory work can already be seen on and offshore in my constituency, as a transmission station is constructed and soundings are taken for subsea cabling. What can possibly be wrong with that? Of course, it makes sense. Scotland has a surfeit of electricity and power. Scotland has been bestowed with a great natural bounty. Already, almost 97% of Scotland’s domestic electricity supply comes from renewable energy. In the north of Scotland, it has been 100% on many days.
For all its history, Scotland’s geography has been an impediment—distant from markets and with a climate that Scots have more often cursed than blessed. The four seasons in one day is sometimes the reality, not just Billy Connolly’s humour. Now, though, location and climate are of great advantage. Scotland has 60% of Britain’s onshore wind capacity and 25% of Europe’s potential offshore wind. Talk about the “Saudi Arabia of wind” largely refers to Scotland or Scottish waters. Those wind assets are in addition to existing hydro schemes, along with tidal and wave projects that are still largely to be commercialised. But as with floating offshore wind, concept will become reality.
One offshore site alone—Berwick Bank, at the mouth of the Firth of Forth, between East Lothian and Fife—will provide enough power for almost 3 million households. Scotland only has 2.4 million households. That field alone could provide for all of Scotland’s needs, and there are many more.
Jim Shannon (Strangford) (DUP)
Ever mindful of the surplus that the hon. Gentleman has referred to, and given that Northern Ireland cannot generate its own electricity, we fully understand the value of sharing and maintaining good connections across the United Kingdom for electricity use. Does he agree that there must be good connectivity across the whole of Great Britain and Northern Ireland, and that that merits UK-wide investment? We in Northern Ireland deserve equal choice as well.
Kenny MacAskill
I am sure that the Minister will probably concur. We are not just in a UK market, but in a European market, as I will set out.
Transmitting the surplus energy south is sensible and would provide the supply required there from the surplus produced in Scotland, while also allowing access to the European network—and no doubt to Northern Ireland as well. Energy supply, as we have been finding from the Ukraine war, is transnational. Accessing European markets is an economic opportunity for Scotland and a necessity for other lands, as Putin switches off Russian gas. It also provides for the transition that all nations require to make, as global warming threatens our planet.
However, there is a problem, and that is grid capacity. Scotland’s renewable resource cannot get to market, as the transmission system cannot cope with the volume produced. As offshore comes on stream, that will only worsen, and it has resulted in the absurdity of 17.6% of turbines being switched off on an annual basis, the majority in Scotland. Turbines are curtailed not due to a lack of wind, but due to a lack of grid capacity. That absurdity is compounded by the perversity of paying energy suppliers more to switch off than to provide power, and the highest rates are paid in winter. As the House of Commons Library has confirmed, the figure has approached £1 billion over the last five years.
Debates on the debacle of privatising national infrastructure and the urgent need to provide for battery storage, along with those on the opportunities from green hydrogen, are for another day, but these are locally-based solutions that must be progressed urgently. Simply cabling 40% of the Berwick Bank energy directly south is another. Doing so without any compensatory payment to Scotland is theft of a nation’s natural resource —but that, too, is a debate for another day.
James Cartlidge (South Suffolk) (Con)
There is huge interest in this debate in East Anglia, which is another part of the UK that produces an enormous amount of offshore wind. I can confirm to the hon. Member that we would very much like that new capacity to be undersea, not overground. Does he accept that one of the great benefits of the Eastern Link for Scotland and the north of England is protection of the countryside, which will not be despoiled by huge overland pylons, as would otherwise be the case in East Anglia?
Kenny MacAskill
I think many would concur with that, which I also think is a matter for Ofgem, although no doubt the Minister will reply.
Scotland’s natural bounty and the grid constraint clearly show the need for the Eastern Link. That my own constituency has been chosen is also logical. The site near Torness is on the national grid, with the nuclear power station. It is there, and also up the coast at Cockenzie—the site of the old coal power station, which is also on the national grid—that major offshore fields will come ashore. The site in Aberdeenshire has been chosen for similar reasons, and destination points in England are near existing power stations.
The project will ease the capacity issues on the existing grid. It is a sensible project and one that everyone should support. Its construction is not the issue. What is at issue is the benefit to Scotland and to communities both there and south of the border who should gain from offshore wind. Where is the windfall for Scotland from this natural bounty? Where is the wealth that should flow, along with the energy, from this vital resource? Where is the benefit for communities such as my own, which will be able to see the turbines on their hills and off their shores?
Scotland is energy-rich, yet Scots are fuel-poor. It is no comfort to those unable to heat their homes in my constituency that they may see the turbines turning either onshore or offshore. Indeed, that just adds insult to injury. Where is the payment or financial compensation for our renewable energy, which is being taken south or even sold abroad? Where are the jobs in Scotland and its communities from the industry that should follow, never mind the supply chain to maintain it? Where are the businesses that should be locating next to this clean and cheap energy, along with the technology for it and springing from it?
Of course, this is not Scotland’s first natural bounty. There was an earlier one in the 1960s and ’70s: Scotland’s oil and gas. As the McCrone report, commissioned by a British Government, showed, Scotland should have been one of the richest countries in Europe. No wonder they hid it. Across the North sea, Norway, likewise, accessed that bounty. She has prospered and now has a sovereign wealth fund for future generations that Scotland can only look at and weep. Our blessing was used by Thatcher to smash the trade unions and by Blair to wage war in Iraq. The oil and gas remain, though transition we must. What remains and can be used must benefit the Scottish people. That, too, is a separate debate. However, what it shows and why it is relevant to this debate is that we have been blessed once again, but we must not lose out this time.
The Eastern Link project is sensible and required, but it must benefit Scotland. The turbines that are coming off our shores should see our current yards vibrant and almost every estuary in Scotland utilised for their construction, yet BiFab and Arnish lie dormant, and work is going south or abroad, whether to the Netherlands or even Indonesia. That is simply unacceptable, and with energy policy largely reserved, the UK Government must take the blame. That is compounded by the Scottish Government’s incompetence in the ScotWind auction. Scottish fields have been sold off cheap, netting £700 million, while New York garnered $4.3 billion for a quarter of what was on offer in Scotland.
Those mistakes can and must be reversed, but the Eastern Link project is in danger of compounding that. Where are the wealth, jobs and businesses? Where is the payment for the resource being transmitted south? What cash has been received or compensation made for the asset taken? It seems that payment to the Scottish Government amounts to precisely zero. Nothing has been paid in either regular payments or even a lump sum. The only payment will be a very modest remittance to Crown Estate Scotland for the cabling landing on the foreshore. A few bawbees to Scotland is hardly what Saudi Arabia or Norway receive for their natural bounty.
That is nationally, but what about locally? Where is the payment that should accrue to East Lothian and to other communities both north and south of the border from offshore wind coming ashore? The only area that really benefited from Scotland’s discovery of oil was Shetland. There, payments from oil and gas coming into Sullom Voe were negotiated by the island’s council. It was largely down to one man: the council chief executive, Ian Clark. It was not a huge figure, and it certainly was not a disincentive for investment, but the funds it produced allowed Shetland to flourish and to provide facilities that even larger mainland councils could only look at and envy—public and sports facilities in small communities, ferry and bus services operating from early to late, local schools staying open or even expanding. That is how it should have been with oil and gas across all of Scotland. It must be how it is in communities where the second natural bounty is arriving.
The benefits for Shetland from oil and gas must be available from offshore wind in East Lothian, Yorkshire, East Anglia or wherever it is landing. Chief executives in authorities like my own would love to replicate Mr Clark, but they cannot, because while there is legislative provision for community benefit for onshore wind farms, there is no equivalent for offshore. That needs to be fixed. It need not be a sum that would discourage investment, but it would still benefit communities significantly. It should be levied on the producers and paid to local authorities. It should be set by the Government and subject to review to allow for the standardisation of rate and for production cost factors and energy prices to be factored in if required.
Of course, energy providers do make voluntary payments to local communities, but the right to community benefit should be statutory, not discretionary, and it should not be used by the companies for pet projects or simply increasing their profile. It should accrue to the local authority, as in Shetland, so that it benefits the entire area rather than simply a few communities or organisations. It is essential that offshore wind benefits local communities north and south of the border, as well as those in Scotland.
Where are the jobs in those communities that should be flowing from this bounty? As with the turbines, they are largely heading south or abroad. The construction contracts for the transmission station have gone to big corporates, so local business and labour are excluded. Filling a few hotel rooms or hiring a few security guards should not be the only work available in East Lothian as a result of this bounty.
What about the businesses that should be locating to where energy is flowing ashore? There should be an incentive—indeed, it should be common sense—to locate there, but they too seem to be heading south with the energy that is arriving. There will be only four permanent jobs at the transmission station at Torness. That is perhaps understandable, but what about the businesses that should be opening and clustered near it? That is why the battery storage and hydrogen projects mentioned earlier are essential, as is ending the absurdity of higher energy prices being levied in Scotland where the energy is being produced.
Scottish businesses should be booming and not constrained by higher energy costs. Jobs should be flourishing across Scotland, especially in the communities where the energy is landing. It looks remarkably like our bounty is being taken with no payment being made—let alone any benefit accruing to our country or communities. The Eastern Link project deserves support, but there must be compensation for Scotland for the energy flowing from it, and it must benefit the communities where it lands. Following its first natural bounty in oil and gas, Scotland has been blessed with a second in offshore wind. It is essential that our country and our communities now benefit from it, and that we do not get fooled again.
The Minister for Climate (Graham Stuart)
I congratulate the hon. Member for East Lothian (Kenny MacAskill) on securing this important debate. The Government are leading the world on offshore wind. We have the most installed capacity in Europe. In our energy security strategy, we aim to go much further with an ambition of 50 GW of offshore wind and 5 GW of floating wind by 2030. As he knows and has set out, Scotland has a vital part to play and there are many green jobs around that work in Scotland.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
That suggestion simply does not stand up. The organisation Scottish Renewables has frequently told me that the best that the Scottish people can hope for from the renewables boom is to become service engineers for heat exchangers, which is simply not good enough. There are no meaningful jobs in construction or offshore maintenance in my constituency, which looks out at the Seagreen development off the Fife coast, so the Minister’s assertion is not borne out by the facts or the numbers.
Graham Stuart
I have a lot of offshore wind off my constituency as well. What we have done with the contracts for difference, and leading the world in the deployment of offshore wind, has been tremendous for increasing renewables and for transforming the economics of offshore wind. There are benefits not only domestically but globally, and there have been many jobs.
Given our global leadership, I share with the hon. Member for East Lothian the question of whether we have created as many jobs and as much of the industrial capability and community benefit as we would like; I leave that question in the air. My feeling is that in the expansion of offshore wind and the coming technologies, such as hydrogen and carbon capture, we must not just deploy at the lowest cost, but capture their wider value in the right way that balances and gives the best possible value for our constituents.
Scotland is home to Hywind Scotland and Kincardine—the world’s first and largest commercial floating wind farms, respectively—and Scotland’s plentiful supply of stormy skies holds vast promise. The Scotland Crown Estate’s recent ScotWind licensing round kick-started 20 new projects totalling around 28 GW of installed capacity—a frankly enormous figure. This is all sterling stuff, but increasing our renewable energy capacity is key for delivering on our net zero 2050 target, which I am sure the hon. Gentleman and the hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey) would strongly support. It is also crucial for guaranteeing security of supply at a time when Putin’s appalling invasion of Ukraine threatens to drive up prices and drive down thermostats, because wind energy is not just renewable, but secure and increasingly affordable.
However, installed capacity is only one part of the story. One of the challenges we have to address is how to get the electricity we are generating to the households who need it. The stakes are high, because it is not just households; it is schools, hospitals and businesses too. Right now, there are significant network constraints between Scotland and England, and no matter how many kettles are boiling across Yorkshire, when the network is at full capacity, Scottish renewable energy generation, as the hon. Member for East Lothian laid out, has to be curtailed.
With more projects coming online each year, it is all the more vital that we transform our electricity network to unlock Scotland’s potential. That is why transmission links on the east coast joining our two countries are so crucial, particularly for projects such as Berwick Bank, off the coast of the hon. Gentleman’s East Lothian constituency, with connections in both England and Scotland. In July, Ofgem approved two of these links in their final needs case—one between Torness in East Lothian and Hawthorn Pit in County Durham, and the other between Peterhead in Aberdeenshire and Drax in north Yorkshire. These links will ensure that, before 2030, no Scottish renewable energy potential will go to waste, and they will reduce any potential constraint costs caused by limited capacity.
James Cartlidge
The fact is that these two connections —the Eastern Link—will cost £3.4 billion and carry 4 GW. At the same time, National Grid is insisting on going ahead with pylons from Norwich to Tilbury, which will despoil our countryside. It refused to consider offshore alternatives. We had to force it, kicking and screaming, to look at such options, and it finally came up with a cost assessment that is for 6 GW—not the 4 GW on the Eastern link, but for 6 GW—that would cost £3.1 billion undersea, which is less than the Eastern Link. Why are we not going to get the same sort of investment in East Anglia, given the huge delivery we are giving, from offshore wind?
Graham Stuart
My hon. Friend is truly an expert in this area and, working with colleagues, is working very hard to ensure that these arguments are heard and that the case is made to ensure that minimum disruption for the maximum facility and benefit is brought to his constituency and those around it.
The Government are working closely with Ofgem, the independent regulator, and industry to ensure our electricity network is ready to harness the power of renewables to deliver for consumers. Our approach is threefold. First, we are working to ensure that transmission infrastructure is planned in a co-ordinated way. In July, the National Grid Electricity System Operator published the holistic network design. This is the first ever strategic plan for the infrastructure needed to bring energy from offshore wind onshore. This streamlined approach will reduce the cost of construction for networks, which also means lower bills for families, including in Scotland. Consumers will save £5.5 billion in costs from 2030 over the network lifetime. By reducing the amount of infrastructure required, it will minimise disruption to communities and the environment too.
We are not just changing the way we build; we are also speeding things up. The Government have committed to reducing end-to-end timescales for the construction of transmission infrastructure by three years. To get to this goal, we have appointed Nick Winser as the Electricity Networks Commissioner to review the development process and identify where it can be made faster. Ofgem recently consulted on speeding up regulatory approvals of network projects, and we expect it to publish a decision later this year. Officials in my Department are working with those in the Department for Levelling Up, Housing and Communities to reduce planning timeframes as well. We will consult on how communities should best benefit from hosting grid infrastructure in their local area.
We are making the way we do things smarter and faster, but we are also exploring new solutions to storage, which the hon. Member for East Lothian mentioned, that promise to alleviate capacity constraints.
Kenny MacAskill
Does the Minister accept that there is a difference between how community benefit is dealt with regarding onshore and offshore wind? I assume that came about through a failure to appreciate that wind would ever go offshore. Is he prepared to meet me and representatives from East Lothian, and perhaps even Aberdeenshire, to discuss how we may accrue some benefit from that offshore energy, which currently applies only to onshore?
Graham Stuart
Like the hon. Gentleman, I have a vision of us leading the world, as we are, and continuing that up to 2030 and beyond, by greening our energy supplies and our whole society, and developing the industrial capability that I mentioned, together with the benefits of coming up with a holistic system that brings maximum benefit and thus carries everybody with us. Every community should be proud to host these developments, but should also benefit from them. I would be delighted to meet the hon. Gentleman were I to continue in this role, and if I do not he can try to hold my successor to that. He has made a powerful case and is, quite reasonably, looking to do the right thing.
One of the most genuinely exciting technologies in this area is long-duration storage, which, as the name suggests, stores electricity when it is not needed by users, and releases it slowly over time when demand is higher than generation. That could enable us to reduce costs by maximising our consumption of cheaper domestic renewable generation, enabling a more efficient seasonal balancing of the system. There is a real chance to save tens of billions of pounds between 2030 and 2050, and we can make sure that those Scottish storms keep Yorkshire’s kettles warm in winter, hopefully within a system that benefits all.
To do so, the Government are developing policy to secure investment by 2024. With that investment, we will be able to deploy enough long-duration storage to balance the whole UK system. We are moving full speed ahead to deliver a clean, secure, and affordable energy supply for all. Today’s debate has highlighted the critical importance of infrastructure in achieving that aim, and for ensuring that the interests of all communities that host or are near to energy production and transmission are understood and met. We want all to feel positive about the outcome of the world-leading effort that we are collectively making in England, Scotland and other parts of the United Kingdom.
Question put and agreed to.
Draft Merchant Shipping (Safety Standards for Passenger Ships on Domestic Voyages) (Miscellaneous Amendments) Regulations 2022
(2 years, 1 month ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Minister of State, Department for Transport (Lucy Frazer)
I beg to move,
That the Committee has considered the draft Merchant Shipping (Safety Standards for Passenger Ships on Domestic Voyages) (Miscellaneous Amendments) Regulations 2022.
It is an honour to serve under your chairmanship, Ms McVey. The purpose of these regulations is to raise the safety standards of older passenger ships such that they are consistent with the safety standards with which modern ships must comply. The regulations are made under sections 85 and 86 of the Merchant Shipping Act 1995. The draft regulations were laid before the house on 11 July.
The regulations are the last of several measures that Governments have introduced over a prolonged period following the Marchioness tragedy in 1989, when 51 lives were lost—a figure that could so easily have been higher. Since that disaster, we have seen published Lord Justice Clarke’s Thames safety inquiry into that incident, a marine accident investigation branch report on the same, and a more general, formal safety assessment study into domestic passenger ship safety. All of them have driven measures to improve safety. The recommendations covered a wide variety of situations, and although not seeking to address a carbon-copy Marchioness-type scenario, they have driven a number of safety improvements between then and now, culminating in the regulations before us today, which will give older ships a similar chance of survival as a newer ship in an incident.
Early safety developments following the Marchioness covered the categorisation of inland and inshore waters according to risk, the creation of a boatmaster’s licence, and qualifications and higher bridge visibility standards to make navigation safer. The Government have under- taken extensive—for maritime, almost unprecedented—engagement on the regulations. In addition to being developed within the main Government industry safety group, the Maritime and Coastguard Agency has conducted two public consultations and five interactive workshops on them with industry, and discussed them in other meetings with industry generally over several years. There has also been engagement in both Houses.
Although there is still a vocal minority associated with older vessel operators that have concerns about the regulations, I am grateful to the Port of London authority, which has been extremely supportive of the measures and considers them to be a vital step to minimise the risk of tragedy on the Thames. That engagement has been important, despite the inevitable additional delays that have arisen because of it. Every person, whether native or tourist, using passenger transport in the UK has a right to expect—and does expect—that whichever vehicle they choose to carry them meets consistent safety standards fit for the 21st century.
With these regulations, the Government have continued a proportionate approach by applying the more demanding aspects of the standards only to ships operating in the more hazardous waters. The regulations uplift the lifejacket carriage requirements and life raft capacity for ships operating in all but the safest waters. The assumption of passengers is that there are enough lifejackets for everyone onboard and enough space in life rafts for all, but that is currently not the case in many older vessels.
While these regulations cover a number of safety features, including fire protection measures, life-saving appliances and bilge pumping and warnings, one of the most important aspects of the standards for applicable ships is damage stability—perhaps more easily understood as survivability—which must be sufficient to keep the ship afloat long enough after a hull breach incident for passengers and crew to escape in an emergency, which might not be possible in a rapidly sinking vessel.
Tracey Crouch (Chatham and Aylesford) (Con)
Will my right hon. and learned Friend the Minister join me in congratulating and thanking the many volunteer crew in the Royal National Lifeboat Institution, for which Tower lifeboat station is one of the busiest of all the lifeboat stations around the country?
Lucy Frazer
I am very pleased and happy to join my hon. Friend in that tribute.
I was touching on the safety measures and how they apply in relation to older vessels. Some will argue that older vessels should not have to meet modern safety standards, because of historical interest, and some may say that this is an attack on Dunkirk “little ships”, although the overwhelming majority of them are unaffected. We in this House have a responsibility to ensure that all passenger transport meets modern safety standards. Older vessels that cannot be adapted to meet the updated standards will be limited to operating in safer waters. Some older ships, if holed below the waterline, can sink in seconds, not giving those onboard time to ascend to the upper deck, let alone put on lifejackets. In that type of situation, there is barely time to make a call to the emergency services, let alone wait for them to arrive. We must ensure that vessels stay afloat long enough that people are not cast into fast-flowing water or trapped inside a submerged vessel. Our society cannot afford another tragedy on the scale of the Marchioness disaster. The safety of passenger transport is paramount and we must not neglect our responsibilities.
I have highlighted the importance of these regulations to fulfil our duty as a Government to ensure that appropriate safety standards are in place for maritime passenger transport. I hope and believe that this issue transcends party politics. I commend the regulations to the Committee.
Mike Kane (Wythenshawe and Sale East) (Lab)
It is a pleasure to serve under your chairmanship today, Ms McVey. You are not just my parliamentary neighbour, but a well known Liverpool fan, and there is a well known Manchester United fan right behind me—my hon. Friend the Member for Salford and Eccles. This humble Manchester City fan is going to have a smug smile all the way through—
Mike Kane
I recall discussing this issue at the height of covid—on St Patrick’s day during lockdown in 2021, some 18 months ago. That seems an extraordinarily long time ago. On doing further research, I was amazed to see that this statutory instrument addresses the final piece of the jigsaw recommended in the 2001 report by Lord Justice Clarke. There were 30 recommendations in that report, and all were accepted by the then Deputy Prime Minister, now Lord Prescott. The report followed an inquiry, as the Minister rightly said, into the sinking of the Marchioness, which was hit by a dredger in 1989. As she said, this caused the death of 51 innocent souls. To put it in context, I was 20 years old when that report was published. These measures are long overdue, and we will be supporting them today.
The regulations aim to provide suitable regulation for existing domestic passenger vessels to bring them in line with modern regulations, while being proportionate and practical. The Thames, which we overlook, is home to a large variety and number of passenger boats, which are a real draw for tourists and visitors to London and help to deliver tourists to places such as Kew gardens and Hampton Court, as well as being available for private charter. They employ many people in skilled jobs. It is because of the popularity of these boats that we must take action to improve safety standards for all. Every vessel must be safe, regardless of its age.
The River Thames, a water highway that we are all familiar with, is the busiest inland stretch of waterway in the country. The Port of London authority closely monitors ship movements on the Thames using modern systems not dissimilar to those used by air traffic controllers. Crew are better trained in safety drills and better certified now. Any ship built in the past 30 years must meet modern safety standards in relation to damage survivability, whether that is to keep it afloat should it start to take on water long enough to evacuate or rescue crew and passengers, or enable it to make its own way back to shore. However, those modern safety standards were not retrospectively applied to older ships, and that is where the concerns that we seek to address today lie.
This instrument covers life-preserving equipment such as lifejackets and lights for lifejackets, equipment to detect and extinguish fire, the availability of life rafts, alarms to warn when a ship is taking on water, and stability equipment. It feels unthinkable to me that in 2022, some 33 years since the Marchioness tragedy, we are discussing this matter.
I have read with some sympathy the feedback given during the consultation and understand the concerns raised by operators about their craft and the costs to their businesses of the safety improvements, but my concerns are to do with the safety of crew and passengers, which must be at the fore of any legislator’s mind. Although older boats have a reasonable safety record, I and—more important—the safety experts at the Maritime and Coastguard Agency and the Port of London authority are of the opinion that this is more by luck than anything else. We cannot leave safety of crew and travellers to luck; it would be remiss of us to do so. Anyone working on or stepping on board a boat must have faith that they will be safe.
I have a couple of questions. When we discussed this matter 18 months ago, questions were raised about potential job losses. Were the unions involved in the consultation at any stage? Is there sufficient capacity in the industry to ensure that all older ships can be made compliant by the end of the two-year lead-in period? I was pleased to note in the explanatory memorandum that there is some leeway for businesses that seek to make the necessary changes to their vessels, provided they are engaging with the process. Who will monitor and define engagement with the process and how much additional time might that buy for businesses?
Almost 15 years ago, just outside the room we are in today, a vessel crashed into Westminster bridge. It had been pushed into the bridge by tides and was damaged, with an 8 foot below-the-waterline gash. The Maritime and Coastguard Agency expressed the opinion that, had the vessel that hit the bridge been an older style ship that was not compliant with the regulations contained within this instrument, it might have sunk, resulting in loss of life. Between 2010 and 2021 there were 511 incidents on the River Thames involving class V passenger boats, and almost 8% of those collisions or contacts involved older vessels in that class. Thankfully, none of the incidents resulted in fatalities, though there were injuries.
The Port of London authority has navigational safety at the heart of everything it does to ensure navigational safety along the tidal Thames—almost 100 miles from Teddington to the North sea. In line with its targets in the marine safety plan, there has been a significant reduction in serious incidents on the Thames, and the measures outlined in this instrument can only improve standards further for all. I look forward to fewer incidents and a reduction in the severity of those that do occur in the future.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
I start by saying that I do not oppose the instrument and will not seek to hold up the Committee. I agree with almost every word the hon. Member for Wythenshawe and Sale East said, though I have to disagree with his reference to Manchester United.
This is an important piece of legislation. Both the Minister and the hon. Gentleman stated that it comes largely, although not entirely, on the back of the Marchioness disaster in 1989—33 years ago—in which 51 people died. The 2001 report has already been referenced, so I will not take more of the Committee’s time by talking further about it. I know it is said we legislate in haste and repent at leisure, but 33 years, by any standards, is ridiculous.
The maritime passenger safety is of course hugely important to Scotland, whether they are travelling on a service for tourism, or a lifeline to the mainland. We have more than 900 islands, of which at the last count just under 100 are permanently inhabited. I very much echo what the hon. Member for Wythenshawe and Sale East said and a lot of the questions that he asked. I have one additional question for the Minister: what consultation was had with the devolved Administrations and with operators in Scotland and elsewhere?
Lucy Frazer
I thank the Opposition speakers for their comments and for indicating that they will not oppose this obviously sensible measure. I will respond to the points that have been made.
The hon. Member for Wythenshawe and Sale East mentioned the question of time for compliance and whether there would be an opportunity for everyone to comply in time. There is a two year phase-in period, which runs from the date that the regulations come into force. That gives operators the chance to implement the changes, which, as has been mentioned, have actually been in the public domain for a long time. These measures are not a surprise to the industry, and representatives of the industry have been involved in their development. A longer phase-in period was considered but was ruled out because it would give competitive advantage to operators who chose to use their vehicles without improvement to the end of that period, and then to scrap them. Operators who sought to comply would be disadvantaged.
The hon. Gentleman also asked about the consultation period more broadly and whether unions had been consulted. The hon. Member for Paisley and Renfrewshire North also asked about the consultation. The level of engagement from the MCA on this matter has been almost unprecedented. The Government developed the regulations in conjunction with industry representative groups. There have been two public consultations, instead of the normal one, and the MCA held five workshops over a period spanning five years, so, yes, unions have been consulted and there has been tremendous engagement with the industry group that represents crew, as well as many owner-operators.
The hon. Member for Paisley and Renfrewshire North also asked why this has taken so long. I assure him that this is not the first step that we have taken in those years. He will know that standards have been improved for different parts of the passenger vessel sector over a long period of time, with particular step changes in 1992 and 2010. We needed to consider a number of issues—hon. Members have mentioned some of them—but now we would like to bring these regulations into force.
Question put and agreed to.
Ministerial Corrections
(2 years, 1 month ago)
Ministerial CorrectionsRead Full debate Read Hansard Text
Cabinet Office
(2 years, 1 month ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Brendan Clarke-Smith
I am more than happy to write to the hon. Lady. My mother is a BSL signer, so once again, this is something I deeply care about. I expect that such work will be implemented as part of the accessibility process.
[Official Report, Fifth Delegated Legislation Committee, 19 October 2022, c. 8.]
Letter of correction from the Parliamentary Secretary, Cabinet Office, the hon. Member for Bassetlaw (Brendan Clarke-Smith):
An error has been identified in my answer to the hon. Member for Nottingham South (Lilian Greenwood).
The correct response should have been:
Brendan Clarke-Smith
I am more than happy to write to the hon. Lady. My mother is a BSL signer, so once again, this is something I deeply care about. The current work includes monitoring of accessibility requirements for deaf people but BSL specifically is not monitored as part of the accessibility process.
Defence
(2 years, 1 month ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Wallace
I would also like to share with the House details of a recent incident that occurred in international airspace over the Black sea. On 29 September, an unarmed RAF RC-135W Rivet Joint, a civilian ISTAR—intelligence, surveillance, target acquisition and reconnaissance—aircraft on routine patrol over the Black sea was interacted with by two Russian armed Su-27 fighter aircraft.
[Official Report, 20 October 2022, Vol. 720, c. 860.]
Letter of correction from the Secretary of State for Defence, the right hon. Member for Wyre and Preston North (Mr Wallace):
An error has been identified in my statement.
The correct response should have been:
Mr Wallace
I would also like to share with the House details of a recent incident that occurred in international airspace over the Black sea. On 29 September, an unarmed RAF RC-135W Rivet Joint, an ISTAR—intelligence, surveillance, target acquisition and reconnaissance—aircraft on routine patrol over the Black sea was interacted with by two Russian armed Su-27 fighter aircraft.
Financial Services and Markets Bill (Third sitting)
Tuesday 25th October 2022
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Financial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 October 2022 - (25 Oct 2022)
The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Chair
I have a few preliminary comments to make. Will Members who speak send their notes by email to Hansard in the usual way—it really helps? Will you ensure that you have turned off all your electronic devices, so that you do not disturb anyone? As ever, tea and coffee are not allowed during sittings—just a reminder. Everyone in Committee is experienced, but there have been a lot of changes over the past couple of years, so I will remind you about proceedings and how we run Bill Committees.
Today, we begin line-by-line consideration of the Bill. The selection and groupings list for the sitting is on the table—it is worth getting a copy—and it shows how the clauses are selected and the amendments grouped together for debate. Amendments grouped together are generally on the same or similar issues. I know you are aware of this, but decisions on amendments do not take place in the order in which they are debated; they are taken in the order in which they appear on the amendment paper. The selection and groupings list shows the order of debates. Decisions on each amendment and on whether each clause should stand part of the Bill are taken when we come to the relevant clause.
The Member who has put their name to the lead amendment in a group is called to speak first—so, I will call Peter first, because his amendment is the first listed today—and other Members are then free to catch my eye in the usual way. I urge you to make that obvious, as sometimes it is a little difficult to tell. A Member may speak more than once in a single debate. At the end of a debate on a group of amendments, I shall call the Member who moved the lead amendment again. Before they sit down, will they please indicate whether they wish to withdraw the amendment or take it to a vote? Will any Member who wishes to press any other amendment in a group to a vote please let me know in advance, because it helps the organisation of our proceedings?
Clause 1
Revocation of retained EU law relating to financial services and markets
Peter Grant (Glenrothes) (SNP)
I beg to move amendment 44, in clause 1, page 1, leave out line 6 and insert—
“(1) The Treasury may, by regulations, revoke the legislation referred to in Schedule 1.
(1A) The Treasury may not make the regulations referred to in subsection (1) if the Chancellor of the Exchequer considers that the revocation of legislation provided for in the regulations would have the effect of prejudicing the interests of consumers, unless alternative and adequate legislative provision has been enacted which mitigates these prejudicial effects.”
This amendment would mean that the Treasury cannot revoke retained EU law relating to financial services if such revocation would be prejudicial to the interests of consumers, unless other provision has been made to mitigate these prejudicial effects.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
That schedule 1 be the First schedule to the Bill.
Peter Grant
It is a pleasure to see you in the Chair this morning, Dame Maria.
As Members know, the SNP group came close to voting against the Bill on Second Reading. In fact, we tabled a reasoned amendment, primarily because of our concern about how the clause intends to take matters forward, but it was not selected by Mr Speaker. A sad fact for many of us is that the United Kingdom is no longer part of the European Union and that, therefore, all European Union legislation needs to be reconsidered. My problem is that it has already been decided in the Bill that, on financial services, all European Union legislation needs to be thrown out.
We hope that someone in the Treasury will at the same time, or very quickly afterwards, replace that legislation with something at least as good, if not better. I mean no disrespect to anyone here, to any Member of Parliament, the Minister or anyone working in the Treasury, however, when I say that I can have no confidence that that process, on that scale and at that speed, will work—we need only look at the number of amendments that the Government have had to table to the Bill because of mistakes in it, as published. In Delegated Legislation Committees on which I have sat, there have been instances where we have had to correct the correction to the correction of an initial piece of secondary legislation arising from Brexit.
It is simply not realistic to believe that all the revocations and repeals proposed under the clause can be replaced with equally good regulation without mistakes being made. When mistakes are made in the regulation of financial services, people get scammed, companies that should survive go under and the United Kingdom’s reputation as a dodgy place to do financial services becomes even worse. For all that I am not a big fan of the United Kingdom, I do not want to see that happen. I am not a big fan of the United Kingdom Parliament either, but I do not want to see its right to scrutinise in detail any suggested changes to legislation undermined, simply because it suits the Government of the day.
While it may be that the right thing to do with all 200-plus pieces of legislation listed in schedule 1 is to revoke and repeal every single word, Parliament should be given a choice, at reasonable speed, to decide whether that is correct. Ideally, at the same time as Parliament is asked to revoke the legislation, we should be given the chance to consider what will be put in its place.
My view on clause 1 altered slightly when we heard from the witnesses last week, especially those from the financial institutions. Some of them said that they genuinely felt that some of the existing EU legislation needs to go or to be changed significantly. I did not hear anybody asking for a wholesale revision of all 200-plus pieces of legislation. The motivation appears to be to take the European Union sticker off the number plate and put a Union Jack on it instead. If that is the only difference that is being made, what the Government suggest here is far too risky and undermines the right of Members of Parliament, including those who are not on the Committee, and their responsibility to scrutinise legislation that is crucial not only to the wellbeing of the economy on a big scale, but to the wellbeing of the economies of hundreds of thousands of our constituents. For many of them, this legislation has come too late, because they have been ruined by financial services scams that could perhaps have been prevented if this legislation had been introduced sooner.
It is my intention to press the amendment to a Division, Madam Deputy Speaker—I mean, Dame Maria. I do not know whether I should apologise for promoting you. Accepting the amendment would not significantly delay any legislative changes that the Government intend to introduce, but it would ensure that they are scrutinised properly to increase the chance that when mistakes are made in the replacement legislation, as they will be, they are picked up and dealt with before it is too late.
Dame Angela Eagle (Wallasey) (Lab)
Good morning, Dame Maria. It is a great honour to be on a Bill that you are chairing—I think it is our first time together in this iteration.
The Opposition do not have a problem with the principle of repealing some of the EU legislation, but I rise to invite the Minister to give us more detail on precisely how he envisages the wide-ranging power in clause 1 will be exercised in practice. I speak as a former member of the European Statutory Instruments Committee, which did a great deal of work in sifting all of the EU legislation to onshore it ahead of Brexit, including all the legislation covered by the Bill. We sat regularly and looked at thousands upon thousands of pieces of EU legislation, which we brought onshore ahead of Brexit. A great deal of work was done to achieve that, but a great many mistakes were made during the process in the drafting, the interpretation and the way in which powers were onshored in areas where we have not legislated directly for 47 years. This is a great accumulation of technical, but also extremely important, legislation that impacts on our constituents’ experience of everyday life as consumers and on how they use financial services and insurance, banking and savings products. If we get it wrong, there can be a great deal of detriment to our constituents.
Will the Minister give the Committee an idea of how the wide-ranging power to amend a large amount of legislation that has been on the statute book for many years will be done in a way that reassures all our constituents that we have the right balance between consumer protection and consumer rights on the one hand and our financial services industry and the way that it operates on the other? How will Parliament get to look at this? It is possible to argue that clause 1 would allow Parliament to be run over roughshod, without providing proper scrutiny, so will the Minister indicate how it will work in practice? How does he propose the powers will be exercised? What can Parliament do if we perceive that an issue that has been overlooked in all the technocracy impacts on our constituents? We need to ensure we have proper accountability.
I would be less worried if, as the hon. Member for Glenrothes said, we are just taking off an EU flag and sticking on a Union Jack, but I assume the Minister is taking these powers because he wants to use them. Will he set out in his comments on clause 1 precisely how he expects that to happen?
Shaun Bailey (West Bromwich West) (Con)
It is a pleasure to see you in the Chair, Dame Maria. We often cross paths in these Committees and it is great to see you once again in the Chair.
I will speak briefly about amendment 44, following the comments of the hon. Members for Wallasey and for Glenrothes. The Government need to be nimble in how they lay regulations, particularly in this transitional period. Clause 1 provides the ability to be agile, particularly as we redevelop our financial services framework following our departure from the European Union. The Government clearly need the ability to do that. We are dealing with a vast array of regulation, primary legislation and laws that will require a significant amount of time to be developed, but at speed. Clause 1 enables the Minister to do that, and I trust my hon. Friend the hon. Member for Arundel and South Downs to develop the legislative framework in the right way.
Peter Grant
If there is such an urgent need for speed, why has it taken so long for the Bill to be brought before the House?
Shaun Bailey
Perhaps I should have finished my comments, which would have led to the point that the hon. Gentleman has made. There is a need for speed and also a need to make things right. I think that is the point that he and the hon. Member for Wallasey were making, particularly as it is so vital that we get it right. I agree with the hon. Lady that there is a place for scrutiny. Drafting errors are a concern, and we have to make sure that as we build the framework, it is done in the right way. I pay tribute to the work that she did on the EU sifting Committee, because it is a thankless task to go through.
Dame Angela Eagle
It was not the most fascinating thing I have ever done in the House, but it was one of those things that one has to do, or the statute book ends up in a right mess.
Shaun Bailey
I thank the hon. Lady again for the work that she has done.
I will round up my comments by saying that I think it is right that in clause 1 the Minister has the ability to do what he needs to do, but I do ask him to consider what Members have said about the safeguards to ensure that there is the right framework, particularly around drafting amendments and suchlike, so that we get this right. The Bill is needed and the Government are absolutely right to do what they are doing. As with any piece of legislation, it is about ensuring that we iron out the creases. I hope the Minister will give us those assurances today.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
It is a pleasure to serve with you in the Chair, Dame Maria, especially after our time together on the Women and Equalities Committee.
The Opposition recognise that enabling the City to the thrive will be fundamental to support the country and to help people through the cost of living crisis. We need a regulatory framework that allows our country to take advantage of opportunities outside the EU, whether by unlocking capital in the insurance sector for investment in green infrastructure or supporting the vibrant UK fintech sector to thrive.
The Minister knows that the Opposition are broadly supportive of the Bill. We welcome clause 1, which will empower the UK to tailor regulation to meet our needs outside the EU, but my questions are similar to those posed by my hon. Friend the Member for Wallasey. What reassurance can the Minister provide that clause 1 will not result in the Government diverging for divergence’s sake and, in the process, unnecessarily revoking rules that might boost the competitiveness of the City or protect consumers from harm? As my hon. Friend said, we want a bit more detail on clause 1.
I also have a few technical questions. Will the Minister confirm whether his Government still plan to revoke all retained EU law by the end of 2023? What assessment has he made of the impact of that date on UK financial services? The date seems a bit arbitrary and we want to know how much thought went into coming up with it. Does the Minister think there is a risk of creating uncertainty and extra costs for the sector by forcing financial services businesses to unnecessarily adapt their business models by the end of next year? A bit of information would help us gain clarity on the clause.
The Financial Secretary to the Treasury (Andrew Griffith)
It is a pleasure to serve under your chairmanship, Dame Maria. The Bill is central to delivering the Government’s vision for the future of the financial services sector. The hon. Member for Hampstead and Kilburn talked about some of the great opportunities that it unlocks. It seizes the opportunities of EU exit, although it is not exclusively about that. It tailors financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and to deliver better outcomes for consumers.
Clause 1 revokes retained EU law on financial services. That clears the way to regulate financial services in a way that works for the UK, building on the model established by the Financial Services and Markets Act 2000. In response to hon. Members who asked how it will operate in practice, the settled position for some time has been that the FSMA model delegates the setting of regulatory standards to operationally independent financial services regulators, within the framework that Parliament sets. That is an internationally respected approach that historically has had support from all sides of the House, and I hope that continues.
As a result of our membership of the EU, the UK has been left with a patchwork—the hon. Member for Wallasey talked about her assessing role as that corpus of law was brought into the UK.
Dame Angela Eagle
I wonder about the sequencing. There is a list in schedule 1 of all the legislation that applies to financial services, lock, stock and barrel. The sifting Committee had oversight of that when we onshored it. Once the schedule is law, it does not all disappear at once, does it? Surely, we keep it there and have a look at things that might cause difficulty and at where we may wish to diverge.
Andrew Griffith
I am coming to the point where I will address the hon. Lady’s comments, but that is the substance of the position. The Bill enables the powers to do that, but we do not seek divergence for divergence’s sake. The whole purpose of the Bill and of giving the Treasury and regulators the necessary powers is to allow a thoughtful process that provides continued certainty to the sector—so no arbitrary retirement—and that allows time for those regulatory rules to be put on the UK rulebook in a way that is appropriate for the UK. That is the substance of what we are trying to do in the clause.
As to the question asked by the hon. Member for Hampstead and Kilburn, there is no arbitrary backstop date. The technical repeal is in the Bill, but the rules will sit on the rulebook, providing valuable certainty and continuity to the sector until such time as the operationally independent regulators decide that it is appropriate to revisit the rules and tailor them to UK circumstances. That is what the clause is intended to do.
Liz Twist (Blaydon) (Lab)
As a member of the European Statutory Instruments Committee, I wonder whether the Minister can offer any assurance that there will be parliamentary scrutiny of the clause in the future. Can he offer any suggestions as to how we might be able to ensure that that takes place?
Andrew Griffith
The hon. Lady is right to talk about the important role of Parliament. We are giving regulators a great deal more power because we are importing a large body of European laws into the UK rulebook, which is one of the reasons why the Government have contemplated the public interest intervention power in the past. The large number of rules—the hon. Member for Wallasey talked about how large that body is, and painted a graphic picture of all that sifting work—does not lend itself to Parliament being the rule setter in each case. Again, that is at odds with the approach to rule setting in the UK historically, but Parliament will continue to have a voice where it feels the need to.
Dame Angela Eagle
I apologise for intervening, but Standing Committee is the time when we can ask detailed questions, so I hope the Minister does not mind my coming back in. [Interruption.] I think there was a Siri outburst there.
Dame Angela Eagle
As a member of the Treasury Committee, I can say that we are trying to get a handle on the scrutiny that will be applied as regulators come to look at these things. One assumes that they will announce that they are reviewing a particular area, and they may come up with some divergences. Regulators have their way of doing things, Government Ministers want particular things, and sometimes Parliament has a different view, particularly if something affects our constituents in unanticipated ways. Given the structure that the Bill sets out, I am trying to get a handle on how Parliament’s view on an issue would be put forward.
Andrew Griffith
I will try one more time, Dame Maria, but I want to emphasise that the approach that the Government envisage being taken is exactly the approach embedded in FSMA 2000. We should not be debating these points ab initio simply by virtue of the work that the Bill does in importing the EU rulebook into UK law. The Treasury Committee, of which the hon. Lady is a member, does valuable oversight work and spends a disproportionate amount of time interviewing the regulators. All the regulatory rules are required by statute to have a period of consultation.
We are straying off the clause, but the role of the Treasury Committee and its Sub-Committee is codified in the Bill to enhance the level of scrutiny. There is a Government proposal—it would be interesting to hear the views of the official Opposition on this—for a public interest intervention power, which would cover precisely the sorts of issues that the hon. Lady’s constituents may be concerned about relating to regulations. I say again that there is no substantive change to the way Parliament scrutinises the independence of financial services regulation, and I hope that is something on which we can all agree on both sides of the House.
In the interest of time, I turn to amendment 44, which would, as the hon. Member for Glenrothes said, mean that retained EU law relating to financial services could not be repealed, other than where it is prejudicial to the interests of consumers, unless replacement legislation is already in place. It is not the Government’s desire to sweep away retained EU law in financial services without ensuring that it is adequately replaced in UK law. I can assure the Committee that there is no arbitrary sunset—
Tulip Siddiq
I watched every minute of the Minister’s appearance before the Treasury Committee. He specifically said that the Government would revoke the retained law by the end of next year, in line with the previous Prime Minister’s policy. Is there now a change in that policy?
Andrew Griffith
That is not the position in the Bill, which does not contain that date. Whether or not the Government’s intention at the time was different, nothing in the Bill says that that will happen. The Government will not diverge for divergence’s sake, because we understand the need for continuity to give financial services companies the confidence that they seek.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
It is good to see you in the Chair, Dame Maria. Does that also apply to financial organisations based in Northern Ireland, Minister?
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
Will the Minister give way?
Andrew Griffith
One more time. I am being generous in giving way because we are at the early stages of the Bill, Chair.
Emma Hardy
The Minister is being generous, but as my hon. Friend the Member for Wallasey pointed out, we use Committee stage to scrutinise, question and ask for lots of detail that we would not ask for on the Floor of the House.
The Library briefing states that there is to be
“a ‘transitional period’ of undefined length…for each provision that is to be revoked.”
How will the decision be made on which provisions are to be revoked and when? What is the justification for revoking some at a different time from others?
Andrew Griffith
The Committee will indulge me if this sounds repetitive, but the thrust of the questions is the same: there is no change in the fundamental approach to UK financial services regulation, which is that the pen is held by the operationally independent regulators—primarily under the scrutiny of the Treasury Committee, to which they regularly give evidence—and they use the established statutory consultation procedure. That is the position, and will be the position going forward.
If the hon. Member for Kingston upon Hull West and Hessle would like to table an amendment that would dispense with operationally independent regulators in the UK, so that Parliament holds the pen on rule making, the Government will consider it. That is not the Government’s view of what should happen, however, and I do not believe that it is the view of the official Opposition. I understand the important role of parliamentary scrutiny, but an embedded feature, and one that I hear hon. Members pushing back on or challenging, is that regulators—in consultation with industry, following the statutory consultation process—are that ones that make the rules.
I will make some progress. To address a point made by a number of hon. Members, the Treasury will, as it does now, work closely with the Financial Conduct Authority and other regulators to ensure that the transition from retained EU law to UK regulations is orderly and meets the need of UK consumers, and that there is no gap in protections or relevant rules. As I have said, that work will be subject to the statutory consultation process in the normal way.
Amendment 44, tabled by the hon. Member for Glenrothes, is about consumer protection. I can assure the Committee that clause 3(2)(f)—we are getting ahead of ourselves—specifically enables the Treasury to modify retained EU law to protect consumers and insurance policyholders. Clause 4 enables the Government to restate retained EU law in domestic legislation for the same purpose. Consumers of financial services are already assured of appropriate protections under the UK framework for financial services regulation. Parliament has given the FCA a consumer protection objective—one of its core objectives—to ensure an appropriate degree of protection for consumers, which the FCA is required to advance when discharging its general functions. As evidence of that, the FCA has, among other things, recently introduced a new consumer duty. I hope that assures the Committee that there are already adequate consumer protections, both in the Bill and in the wider body of regulation. I therefore ask the hon. Member for Glenrothes to withdraw his amendment.
I will now explain the approach that clause 1 and schedule 1 take to repealing retained EU law. Retained EU law is revoked by clause 1. Schedule 1 lists the retained EU law revoked by clause 1. Part 1 of the schedule captures retained direct principal EU legislation, which means EU regulations such as the prospectus regulation. Part 2 captures secondary legislation that was made to implement EU directives or other obligations. That includes statutory instruments made under the European Communities Act 1972, which implemented significant pieces of EU law, such as Solvency II and the markets in financial instruments directive, known as MiFID.
Part 3 captures EU tertiary legislation, including delegated regulations, implementing Acts and EU decisions. Part 4 repeals part of primary legislation that relates to retained EU law, in particular part 9D of FSMA 2000, which relates to rules defined in relation to the EU capital requirements regulation, and chapter 2A of part 9A of FSMA, which governs technical standards. Those parts of FSMA will not be necessary following the repeal of the retained EU law to which they relate. Part 5 acts as a sweeper provision: it revokes all EU derived legislation relating to financial services that is not directly listed in the schedule. That does not capture any domestic primary legislation; it simply captures the kinds of EU law covered by parts 1 to 3 but not specifically listed. I therefore recommend that clause 1 and schedule 1 stand part of the Bill.
Peter Grant
I thank all the hon. Members who contributed to the debate. I notice that the Minister did not explain why amendment 44 is a bad idea. He has not given any reason why it would make things worse. He has argued that it would not make things better, would make them only slightly better or would make them better in a way that is not needed.
I take the Minister’s point that later parts of the Bill give the Treasury the power to act in the interest of consumer protection. I want to go further than allowing the Treasury to protect my constituents; I want Parliament to force the Treasury to protect my constituents. We do that by not allowing the Treasury to revoke consumer protection legislation until we, the House of Commons, are on behalf of our constituents satisfied that there is a suitable replacement for it.
I draw the Committee’s attention to part 5 of schedule 1, on page 96 of the Bill. It essentially states, “We have listed 200 bits of legislation that we are going to revoke. There are probably lots of other ones that we have not found yet, so we are going to put in a catch-all clause, so that they will all be revoked as well.” That does not strike me as a good way for the House of Commons to revoke legislation. The Minister has repeatedly said that the Government do not expect all the legislation to be revoked overnight. In fact, the explanatory notes to the Bill point out that the Government think that changing all that EU law will take several years. What happened to, “We got Brexit done”? We have hardly even started on the financial services part of Brexit.
As I said in my opening remarks, although I was against the suggestion that that law needs to be changed, I accept that the United Kingdom has to start to change parts of EU law. The wholesale nature of the change intended in clause 1 is not necessary and is extremely dangerous to the interests of our constituents. Amendment 44 would not necessarily remove all of that danger, and I am still concerned about what we would be left with. I have nothing but respect for the Minister as an individual, but let us face it: if recent history is anything to go by, he will not be there when decisions on revoking legislation are actually taken. Who knows? Maybe he has his phone on just now, and is waiting for that call.
Let us be honest: over the summer, this has not been a Government who have honoured their promises. They have not honoured the assurances made to their own party members so that one Member could become Prime Minister—the Prime Minister who recently resigned. Promises made at the Dispatch Box have been unmade almost before the Minister making them sat down. This Government have severely damaged the tradition that assurances given by a Minister, either here in Committee or in the Chamber, will always be honoured. That does not happen any more. I am afraid the House is entitled to ask for a bit more than might have been accepted a few years ago, when the traditions of this House were actually respected by each and every member of the Government.
Dame Angela Eagle
Clearly, Pepper v. Hart applies when a reassurance is given by a Minister. That is partly why we ask questions in these proceedings. We wish to have on record reassurances about the meaning of the statute in front of us, how the Government interpret it, and what the Government’s intent was. If there is any subsequent doubt about that, the record can be looked at under the provisions of Pepper v. Hart.
Peter Grant
I am grateful for that intervention. I do not disagree with a word of it. My point is simply that whatever the conventions, traditions and proceedings of this House might tell us, in practice the doctrine of ministerial responsibility does not apply in the way that I just about remember learning about 50 years ago as a schoolchild, in what was then called modern studies. There are numerous examples of Ministers behaving in a way that would require them to go, if they believed in the conventions of the House. I am not suggesting for a second—
The Chair
Order. I remind the hon. Member that we really need to stick to the text of the Bill, rather than giving a lesson on constitutional law. That would be really helpful.
Peter Grant
Thank you, Dame Maria. I hear the Minister’s assurances, but this issue is too important for us to rely on the conventions of the House, which have been broken far too often. The protection of our consumers and the financial services industry is important enough that any changes to regulations that had to be at least initially consented to by this Parliament should be made only with the consent of this Parliament, to which power was supposed to be returned by Brexit.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
Clause 4 stand part.
Government amendment 2.
Clause 5 stand part.
Andrew Griffith
Clauses 3, 4 and 5 create the necessary powers to replace retained EU law, which we have just been talking about, when it is repealed through clause 1. While the Government will act quickly to repeal and reform those areas that offer the greatest potential benefits, some of the retained EU law listed in schedule 1 —this may give comfort to hon. Members—will remain in force for a period following Royal Assent.
Clause 3 creates a power for the Treasury to modify the retained EU law in schedule 1 during the transitional period—that is, the period from the Bill’s receipt of Royal Assent to the point at which the revocation of the instrument is commenced, whenever that is. That allows the Government to make proportionate and targeted—Members might like to note those words—modifications to retained EU law before it is repealed. That ensures that financial services regulation continues to function appropriately for UK markets, and that UK firms are not required to comply with outdated regulations while we put in place the new UK-designed rules.
Clause 4 allows the Treasury to modify and restate the retained EU law listed in schedule 1 of the Bill. The clause gives the Government the necessary tools to move, over time, to a comprehensive FSMA model of regulation. Under that model, the UK’s expert and operationally independent regulators will generally make the detailed rules for firms to follow, within a wider framework set by Parliament and Government. Under the FSMA model, the Treasury sets the regulatory perimeter through secondary legislation by specifying which activities should be regulated. Some elements of retained EU law perform a similar function and should therefore be maintained in domestic legislation. That includes provisions that set the perimeter of financial services regulation in which the regulators will operate, enforcement powers for the regulators, and the ability of the Treasury to make and give effect to equivalence decisions in respect of overseas jurisdictions.
The clause also allows the Treasury to modify the retained EU law that it restates. That is essential for the UK to seize the opportunities of Brexit, tailoring financial services regulation to UK markets to bolster the competitiveness of the UK as a global financial centre and to deliver better outcomes for consumers and businesses. The exercise of that power will almost always be subject to the affirmative procedure. The only exception is where the power is used to make transitional modifications to either EU tertiary legislation or legislation that was originally made under the negative procedure. In this case, it is appropriate to follow previous precedent and apply the same negative procedure.
Clause 5 empowers the Treasury to replace references to EU directives in domestic legislation through a statutory instrument. EU directives are EU legislative acts that do not directly have effect in the UK; however, there are various references to EU directives in domestic legislation, and those should be removed as we move to a comprehensive FSMA model of regulation. That is why the clause gives the Treasury the power to modify UK domestic legislation to replace references to EU directives. Sometimes, however, no replacement will be necessary, and amendment 2 simply clarifies that the power can be used to remove such references without replacement.
The Government will be able to exercise the powers given to them in clauses 3, 4 5 and in amendment 2 only in line with the purposes listed in clause 3(2). Those purposes have been drafted to be similar to the objectives of the FCA, the Prudential Regulation Authority, the financial stability objective of the Bank of England, and the special resolution objectives. That will ensure that, while retained EU law remains in place and constrains the action that regulators can take to further their objectives, the Government can act as appropriate.
I acknowledge that these are relatively broad powers, but they are appropriately constrained by reference to existing objectives, with appropriate parliamentary scrutiny and in relation to retained EU law. It is proportionate to the task ahead of us, which is to seize the opportunity of the EU exit to build a comprehensive model of financial services regulation tailored specifically to UK markets. I commend clauses 3, 4 and 5 to the Committee.
Emma Hardy
If I am correct, there was significant questioning of clause 3 and the powers during transition in the oral evidence sessions, particularly with Martin Taylor, who was the last person to give evidence. As the Minister may recall, he spoke about how this extra power that the Treasury will have could undermine the trust of the markets in the independence of the regulators. I was just looking to see if there was a copy of the Hansard of those oral evidence sessions, but I cannot seem to see one—[Interruption.] I have one now.
Martin Taylor’s significant concerns were, as we have recently, that when the markets believe there is not independence of the regulators, they react accordingly. Has the Minister reflected on that evidence, and what reassurance can he give the markets and others that the Treasury will not exert undue influence over the regulators?
One of the points that stuck in my mind, though I cannot remember who made it, was about the Treasury having the power to intervene when something is in the public interest. One of the witnesses said that that implies that sometimes the regulators will act not in the public interest, given that the Treasury have to intervene in the public interest and exert power and control over them. I wonder if the Minister has reflected further on some of those concerns that were raised during the oral evidence session.
Peter Grant
It is interesting that we have three clauses here, each of which give the Treasury the power to amend legislation in very, very closely defined and restricted ways, and every one of them needs regulations to be approved by Parliament. Most of them require approval by the affirmative procedure. However, two minutes ago we were told we could wipe out 200 different items of legislation in their entirety without Parliament needing to have any oversight of the process. It does seem a strange contradiction.
The way the clauses are worded and the restrictions that are placed on them mean that this is one of the very few occasions where I would be comfortable in allowing regulations to be used to amend primary legislation. However, I have to say that for some of the restrictions, one wonders why they are there. Subsection (6) to clause 3 requires the Treasury to consult the regulator, and subsection (7) basically says, “But the Treasury only needs to consult the regulators if the Treasury thinks it is a good idea”. Why on earth does that need to be put into an Act of Parliament?
If clause 1 had been worded in a similar way to these clauses, there would have been no need for my amendment. There would have been no question at all from my point of view about that clause being accepted. I hope the Minister can explain why it is that these very limited and restricted powers to amend legislation are subject in most cases to the affirmative procedure, whereby Parliament has to approve them, when all the legislation that was put up for repeal and revocation in clause 1 needs no further detailed scrutiny from Parliament.
As far as the concerns raised by the hon. Member for Kingston upon Hull West and Hessle, I think those comments perhaps related to an amendment that the Government have flagged that they intend to introduce that may well give the Government far too much power to direct the supposedly independent regulators. If and when that amendment comes forward, we will certainly have concerns about it. I do not think those comments were related to the clauses in the Bill as it stands. On that basis, I will not oppose the clauses today.
Dame Angela Eagle
I want to register some concern and get the Minister’s reassurances on the record about what are very broad-ranging powers for the Treasury, which are then subject to constraints. Was it necessary to have such broad-ranging powers? It is not a good way of approaching things unless there are no other options. Is the Minister worried that, over time, those constraints might loosen and the broad powers will remain? The dynamic of this kind of structure is what worries me, rather than the balance that he has explained the Government have currently set.
Shaun Bailey
I shall be brief. Broadly speaking, I support the three clauses and particularly clause three on the qualifications it puts on how the Treasury will utilise those powers. I do not know the inner machinations of the Treasury. I know there are people in this room, particularly the hon. Member for Wallasey, who probably know it better than me, but the practical reality needs to be an important part of this as we debate the clauses too.
I hope my hon. Friend the Minister will say to me that the Treasury will not fly solo without consultation with the regulator. Clearly, the Treasury has built a partnership with the regulators, which forms a key part of any sort of work within the scope of these three clauses, particularly amendments of regulation and the qualifications under clause three. I am just keen to stress the point to my hon. Friend that as the Bill progresses and is practically applied, that discourse with regulators is a key part of its implementation.
The hon. Member for Wallasey made a fair point about the loosening of restraints. The assurances we seek from my hon. Friend are just to ensure that the frameworks that in place are robustly monitored and maintained. That will be the key to ensuring that the constraints under which my hon. Friend’s Department is placed as he executes the provisions of these clauses are properly maintained.
Andrew Griffith
I welcome the contributions from the hon. Members for Kingston upon Hull West and Hessle and for Wallasey, and my hon. Friend the Member for West Bromwich West. Both sides of the House are wrestling with exactly the same issue, which is taking what is acknowledged to be an unprecedented corpus of European law, which the Westminster Parliament had no opportunity to have oversight of or change—
Andrew Griffith
I will not give way at the moment. The issue is therefore about docking that corpus into an established framework of operationally independent regulators, with Parliament establishing the perimeter and ultimately having the right degree of scrutiny. That may be through the public interest intervention power that the hon. Member for Kingston upon Hull West and Hessle talked about, but which is not tabled in the Bill at the moment and is subject to continuing debate. That was the main thrust of the witness in the final session of last week’s sitting.
As currently written, clause three does not interfere with regulatory independence. Repealing retained EU law means the regulators will generally, as the default position, take over setting the detailed requirements, replacing the function of the European Commission and the European Parliament. However, that will take time and so we will not repeal those rules immediately. The regulators, under direction and intervention, as currently, from the Treasury Committee, will decide on the areas of most focus.
Emma Hardy
When will the details on those intervention powers be published so we can have a good look at them?
Andrew Griffith
I have previously given the assurance to the Treasury Committee that they will be tabled during the course of the Committee stage of the Bill. That remains the intention.
I have broadly addressed the points. I do not think Hon. Members oppose the Bill’s wording. I understand probing and I welcome the scrutiny of Parliament; we are here to provide precisely that function. However, I hope that I have been able to set out to the Committee’s satisfaction why these powers are necessary, but also the wider context in which they will be operated.
Dame Angela Eagle
I wonder whether the Minister could be a bit more forthcoming about when the amendment will be available, because that will give us a fuller picture of the Government’s decisions on the delicate balance that must be struck. Bearing in mind that the Committee sits for two weeks and at the end of today we will have had 25% of the Public Bill Committee proceedings on this Bill, I hope that the Minister will not publish the amendment at the end of next week.
Andrew Griffith
I am afraid that the hon. Lady will have to accept my previous commitment to the Committee. I also observe that mixed messages have come from the Opposition side of the House, because a lot of the thrust today is that Parliament should have greater ability to scrutinise or to intervene; previously, we have heard the opposite. But I have nothing further to add in terms of the timing.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4 ordered to stand part of the Bill.
Clause 5
Power to replace references to EU directives
Amendment made: 2, in clause 5, page 4, line 37, after “provision” insert “(if any)”.—(Andrew Griffith.)
This amendment clarifies that the power conferred by clause 5(1) to remove references to EU directives can be exercised so as to remove such references without replacement.
Clause 5, as amended, ordered to stand part of the Bill.
Clause 6
Restatement in rules: exemption from consultation requirements etc
Question proposed, That the clause stand part of the Bill.
Andrew Griffith
Clause 6 supports the efficient transfer of financial services regulation from retained EU law to the regulators’ rulebooks. As retained EU law is revoked, the regulators will take on significant new responsibilities for making rules in areas where EU law currently exists, within the framework set by the Treasury and Parliament through FSMA and enhanced by this Bill. Part of that wider framework sets out the processes that the FCA, the PRA, the Bank of England and the Payment Systems Regulator must follow when they make rules. Those processes rightly include requirements to conduct cost-benefit analysis, to carry out a public consultation and, in some cases, to consult other regulators. Such provisions are crucial to the functioning of our regulatory system and ensure that the impact of new rules on individuals and businesses is appropriately assessed and considered.
However, there are likely to be occasions when existing rules under retained EU law do not need to be materially altered and so, when the regulators bring forward new rules, they may remain broadly similar to the retained EU law that they replace. In those cases, the rules would not require any real changes for firms, compared with the existing retained EU law. The clause therefore enables the Treasury to exempt the regulators from cost-benefit analysis and consultation in those circumstances where they make rules that are “materially similar” to those currently in retained EU law. That will ensure proportionality and will therefore enable the regulators to focus their resources on those areas where reform will unlock the benefits that arise from tailoring regulation to UK markets.
I should reassure the Committee that the clause is framed as a power rather than a blanket exemption. Even when a regulator is proposing to make rules that are “materially similar” to existing requirements, a full consultation and a cost-benefit analysis may be appropriate.
Clause 7 is a technical provision that defines several terms used in clauses 1 to 6 and schedule 1. It governs how those other provisions should be interpreted. I will briefly set out the major elements of interpretation. First, the clause defines the word “regulator” as referring to the Prudential Regulation Authority, the Financial Conduct Authority, the Bank of England and the Payment Systems Regulator. Secondly, it excludes regulator rules from the definition of EU-derived legislation, meaning that where regulator rules implemented EU directives, they will not be revoked by the Bill. That is a necessary exclusion because many parts of the regulatory rulebook would otherwise meet the definition of retained EU law, but it would not be appropriate to repeal them as they are for the regulators to determine. The regulators already have the necessary powers to delete or modify them as appropriate. I therefore commend the clauses to the Committee.
Dame Angela Eagle
Could the Minister spend a bit of time explaining what “materially similar” means?
Martin Docherty-Hughes
I asked the Minister earlier about Northern Ireland, and SNP and Labour Members would be interested to hear what he means by “proportionality” when it comes to services, EU-derived legislation and what differences there will be between the UK and Northern Ireland. He never mentions Northern Ireland—he keeps talking about the United Kingdom.
Andrew Griffith
To the question asked by the hon. Lady, my understanding is that the terms will have the common law usage. It would be inappropriate for me to try to insert my own definition.
Question put and agreed to.
Clause 6 accordingly ordered to stand part of the Bill.
Clause 7 ordered to stand part of the Bill.
The Chair
Members will have noted that we now come to clause 2, which the Government requested we debate in this order.
Clause 2
Transitional amendments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 2 be the Second schedule to the Bill.
Andrew Griffith
We have already discussed the provisions the Bill delivers to allow us to replace the entirety of financial services retained EU law with domestic legislation that is in line with the established FSMA model. The Government will use the powers in the Bill and work closely with the regulators to give effect to that. However, it is important that we act now, where we can, to tailor our regulations to seize the benefits of EU exit and support our world-leading financial services sector. Clause 2 and schedule 2 do just that, making two sets of important and immediate transitional amendments to retained EU law. These are technical and important changes, so forgive me for taking some time to set them out.
First, schedule 2 makes a series of priority reforms to the UK’s regulatory regime for wholesale capital markets as identified through the Government’s wholesale markets review. The regime is predominantly set out in EU-derived legislation collectively known as the markets in financial instruments directive—MiFID—framework. The resilience, effectiveness and competitiveness of the UK’s capital markets rest on strong and effective regulation.
However, the MiFID framework was designed for the EU and intended to ensure detailed, harmonised rules across 28 jurisdictions. Many of the rules are therefore not calibrated optimally for the UK and, in a number of areas, have not delivered the intended benefits. This has led, for example, to duplication and excessive administrative burdens for firms or has stifled innovation. Such rules clearly do not work for a global financial centre such as the UK.
Parts 1, 2 and 4 of schedule 2 deliver the most urgent reforms identified through that process. The reforms will result in a simpler and less prescriptive regime that meets the needs of UK markets while still maintaining the highest regulatory standards. Part 1 of schedule 2 removes unnecessary restrictions on firms’ ability to execute transactions, deleting the share trading obligation and double volume cap. The EU argued that these restrictions would increase transparency in share trading, but evidence suggests that they have prevented firms from accessing the most liquid markets and therefore achieving the best price for investors.
Dame Angela Eagle
Obviously, this is an extremely complex area of technical regulation. It requires the regulators, alongside the Basel Committee and the international authorities regulating the flow of this kind of stuff, to operate effectively. If securitisation goes wrong or if markets begin to be opaque, with transparency going down, there can serious consequences for the countries in which such firms are based. That might also engage systemic threats to the banking structures of those countries. We have been through that before, and we know what happened when securitisation went wrong in the global financial crisis and what damage that caused to the global infrastructure.
Clearly, those tasked with ensuring that that does not happen again—those in the Bank of England, the prudential regulators and the FCA who have a handle on this, as well as the international regulators trying to set standards—have to be very aware of how such regulation might change and effect firms in the markets. However, there will always be a push in these markets to move the boundaries towards something less opaque and more profitable for those doing business, hoping that the risks can be left somewhere else. When risks crystallise, however, they are left on the balance sheets of nations that have to cope with cleaning up the mess. So, while I approve of modernising such regimes, little alarm bells go off in my mind when I think about attracting more such business. That kind of business is attractive if it is safe; it is not attractive if it is unsafe.
The Minister ploughed through his speech about all the technicalities of the shift away from EU-regulated systems and about how onshoring back to the UK will be done. Given how large our banking, financial services and insurance sector is, we are clearly at systemic risk if we get this wrong. We have to get the balance right between ensuring that any new regimes are transparent and safe enough to be hosted in our country. The Minister took us through some of the technical changes, but will he reassure us about the transparency and safety issues in the new regime that I have hinted at?
Peter Grant
If the sun moves much further, I will have to sit on the other side of the room to keep it out of my eyes, so my apologies for having to move seat during the debate, Dame Maria.
I thank the Minister for doing what I hoped he would have done in the debate on the revocations in clause 1: outlining in terms understandable to a lay person why some specific items of EU legislation are no longer appropriate for the United Kingdom—in fact, it is questionable whether they are appropriate elsewhere. I would have wanted to see that before the changes proposed in other parts of the Bill. On the basis of the Minister’s comments, and the fact that none of the regulators we heard from raised concerns, I am willing to accept that the changes suggested in the clause and the details in schedule 2 are appropriate.
I want to draw attention to a comment the Minister made earlier and to give him the chance to correct it. He suggested that this is EU legislation that Parliament never had the chance to scrutinise, but that is not the case. I spent several years, as other hon. Members did, on the European Scrutiny Committee. Every single piece of legislation the European Union intended to implement came before that Committee, which had the authority to call in Ministers and to put a stop on them approving things at EU Council meetings if the Committee was unsatisfied as to the impact. The House of Commons—the whole of Parliament—had the right to take action to prevent any of those directives from coming into force. The fact that Parliament seldom did that is a failing of this and previous Parliaments. The fact that Ministers had so much free rein to do what they liked, and could ignore Parliament if they wanted to, is not the fault of the European Union; it is because of the relationship between Parliament and Government. This Parliament is unfit for purpose, and Ministers from other members of the European Union would not have been allowed to agree to those directives without a vote in their respective Parliaments. I hope the Minister will be willing to correct the record. We can agree or disagree about legislation that the European Union put in place, but to suggest that this Parliament was somehow unable to have any impact on that legislation is simply not accurate.
Tulip Siddiq
Has the Minister picked up any feedback from the sector about the Government’s proposed reform to the position limits—a regulation under MiFID II—and the fact that they have not been adequately assessed for commodity market speculation risks? How does he plan to keep that issue under review? If he has heard of concerns, is he planning to address them?
Andrew Griffith
I am happy to stand corrected by the hon. Member for Glenrothes, but I am not happy to relitigate matters that the British people settled, given the chance in a referendum. I hope the hon. Member will reciprocate by looking forwards, not backwards, so that we can go forward with the best financial services regulation for the UK.
The matters raised by the hon. Members for Wallasey and for Hampstead and Kilburn are precisely within the scope of the regulators, and they have been consulted on. The hon. Member for Hampstead and Kilburn raised important points about the commodity market. The regulators are aware of those, and they will remain under constant review. Parliament itself has the ability, as always, to set the perimeter within which the regulators operate. Having addressed those points, I have no further comments.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Schedule 2 agreed to.
Clause 8
Designated activities
Peter Grant
I beg to move amendment 34, in clause 8, page 7, line 4, after “activity” insert—
“(c) the extent to which the activity has the effect of raising finance for any business purpose by means of soliciting financial contributions other than by—
(i) an authorised issue of shares, or
(ii) borrowing from an authorised financial institution.”
This amendment would allow the Treasury to designate and regulate businesses which seek to raise finance by soliciting contributions from the general public other than by an authorised share issue.
First, I welcome the intention behind the clause, because it seeks to close a number of loopholes that have become evident in the way financial regulators are allowed to regulate and in the way that activities come within or fall beyond their scope. Far too often we see dodgy operators deliberately choosing to operate in empty spaces between the remits of different regulators. Too often the regulators seem more concerned about arguing that something is someone else’s responsibility than about taking responsibility themselves.
It is not clear whether the amendment falls within the scope of this Bill or that of the Economic Crime and Corporate Transparency Bill, which is about to start its Committee proceedings, so I am pleased that it has been ruled competent. Essentially, the problem that the amendment is designed to address is what Blackmore Bond and Safe Hands Funeral Plans became. Quite possibly, it was always the intention of the directors that they would move away from being businesses carrying out particular business activities, and towards being businesses of which the main purpose in life was to get the general public to fund those activities. Although Safe Hands was a funeral plan business on the face of it—that was how it was set up—it became a way for the director, who took over a few years before the company collapsed completely, to take money from people who thought their money would be kept safe to pay for their funeral when the time came. The director then used that money to speculate on wildly high-risk and potentially high-profit investments.
Stephen Hammond (Wimbledon) (Con)
I understand exactly what the hon. Gentleman is trying to do with the amendment, and I have a lot of sympathy, but I am not clear about its scope and extent. Is he trying to ensure that the Treasury starts to regulate crowdfunders? That is potentially what the amendment would allow. It is a very widely drawn amendment, and I seek clarification on this point.
Peter Grant
If it became clear to the Treasury or the relevant regulator that crowdfunders were using funds for illicit purposes, rather than for genuinely good causes, I would expect the Treasury and the relevant regulator to step in. My amendment is designed to put primary legislation in place to allow the regulators to step in, and to allow the Treasury to take action, if it becomes clear that there is a problem, regardless of whether that is through crowdfunding or any other method of raising finance. The important part of the amendment is about finances being raised as a way of raising capital. The amendment does not in any way imply that it would cover, for example, crowdfunding for a good cause or to raise funds for someone who has had a serious accident. That would not be covered by the wording of the amendment.
I can understand the concerns, and I am quite happy if someone can come up with better wording—possibly in an amendment to a different piece of legislation—that achieves the aim of the amendment, but I am utterly convinced that there is a serious weakness in our current regulation. As currently worded, neither this Bill nor the Economic Crime and Corporate Transparency Bill will close down that loophole sufficiently.
At Blackmore Bond, the abuse that was taking place was stopped after it was too late. At Safe Hands Funeral Plans, the abuse that was taking place was stopped after it was too late and people had lost their money. The selling of mini-bonds to the general public, which is what Blackmore Bond was up to, is now outlawed, so action has been taken on that specific kind of abuse. Funeral plans are now regulated, so action has been taken on that specific kind of abuse. I do not want the regulator or the Treasury having always to see where the next specific company disguise is going to be, however; I want them to have the power to regulate based on how businesses take money from the general public.
With those comments, I look forward to hearing the Minister’s response. If he is not minded to accept the amendment, I hope that we can get an assurance that the intention behind it will be addressed at a later stage.
Emma Hardy
I have a general question on the clause and the designated activities regime. In the consultation response document produced by the Treasury—“Financial Services Future Regulatory Framework Review: Proposals for Reform. Response to Consultation” to be precise—some consultation respondents were concerned about what activities would physically be regulated, what constraints were to be placed on the powers of the Treasury and what the consequences for failing to comply with the regulator’s rules would be. I have not yet seen their concerns answered by the Minister. Will he address that?
Stephen Hammond
It is a great pleasure to serve under your chairmanship, Dame Maria. Will the Minister clarify quickly proposed new section 71S? The power in subsections (3) to (7) is an exceptional power, rather than a regular power.
Andrew Griffith
The amendment seeks to make it clear that offers of non-equity securities to retail investors—for example, as cited, retail bonds—can be brought into regulation through the designated activities regime. That is the important subject we are talking about. That regime—the DAR—has been designed to allow for the proportionate regulation of activities involving interactions with financial markets in the UK and conducted by many that are not traditional financial services firms. In essence, it is the core scope of regulation. The DAR includes a range of activities, such as an activity connected to the financial markets or exchanges of the UK, or an activity connected to financial instruments, financial products or financial investments issued or sold in the UK. Any of those can be designated under the DAR. Our contention is that it is therefore already sufficiently broad in scope. We will discuss that further when we consider clause stand part later.
Offers of non-equity securities to retail investors as proposed by the amendment would fall within the definition of the DAR should the Government wish to designate that activity in future. Indeed, proposed new schedule 6B of the Financial Services and Markets Act 2000, which is to be inserted by the Bill and which provides illustrative examples of the types of activities that His Majesty’s Treasury may designate, includes
“Offering securities to the public.”
I can therefore give my hon. Friend the Member for Wimbledon the comfort that he seeks, in that the provision does extend to crowdfunding, which was his specific point.
Peter Grant
I am grateful for that assurance, but does the Minister take my point that in the examples of abuses that I mentioned, people did not say that they were offering any kind of securities? They said that they were selling funeral plans. Next time, they will be selling school or university fees plans or Christmas hamper plans; it will not be presented as the selling of equities as he and I would understand it.
Andrew Griffith
We will refer to that in more detail when we return to the DAR this afternoon. The DAR is the important establishment of the perimeter. I hear the hon. Gentleman on how we set the scope and those definitions, but the position of the Government is that the Bill already enables the Government to take action to ensure that offers of retail bonds are appropriately captured by regulation.
In April 2021, the Government consulted on the future regulation of non-transferable debt securities such as mini-bonds. In response to the consultation, the Government decided to bring certain non-transferable securities, including but importantly not limited to mini-bonds, within the scope of the reformed prospectus regime. The Government confirmed that we would bring forward our reforms to the UK prospectus regime using the powers in the Bill to replace retained EU law—following commencement. I am therefore confident that the Bill as drafted can achieve what is needed to regulate such activities. I ask the hon. Gentleman to withdraw his amendment.
Peter Grant
I am still not sure that the Minister gets this. I will not push the amendment to a vote, but I sincerely hope that he will see the need for such a measure in financial services legislation or, more appropriately, in the Economic Crime and Corporate Transparency Bill on its way through the House. If the clause as worded had been in place 20 years ago, Blackmore Bond would still have happened, Safe Hands would still have happened, and my constituents and all others would still have been scammed out of hundreds of millions of pounds.
A couple of years ago, when I spoke about Blackmore Bond, I said that I had a horrible feeling—an almost certain feeling—that it was already happening again somewhere else; six months later, Safe Hands collapsed and tens of thousands of people lost all their funeral plan money. I do not know the nature of the business that is being used as a cover for the latest scam, but deep in my guts I know that it is happening now, and that it will happen again next year and the year after. Nothing in this legislation as framed adequately clamps down on that.
I will not push the amendment to a vote, not because I do not think it is important but because I would rather not put it to a vote to see it voted down, which would be a serious mistake by the Committee. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Economic Crime and Corporate Transparency Bill (First sitting)
Tuesday 25th October 2022
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 View all Economic Crime and Corporate Transparency Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 October 2022 - (25 Oct 2022)
The Chair
Good morning, everyone. We are sitting in public and our proceedings are being broadcast. I have a couple of preliminary announcements. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk and I remind everyone—including myself—to turn mobile phones to silent. Date Time Witness Tuesday 25 October Until no later than 10.10 am UK Finance; British Private Equity & Venture Capital Association Tuesday 25 October Until no later than 10.30 am Lloyds Bank Tuesday 25 October Until no later than 11.05 am The National Police Chiefs Council; Arianna Trozze Tuesday 25 October Until no later than 11.25 am Jonathan Hall KC, Independent Reviewer of Terrorism Legislation Tuesday 25 October Until no later than 2.30 pm Companies House; National Economic Crime Centre (National Crime Agency) Tuesday 25 October Until no later than 3.00 pm City of London Police; Serious Fraud Office; The National Police Chiefs Council Tuesday 25 October Until no later than 3.45 pm Spotlight on Corruption; Global Coalition to Fight Financial Crime; UK Anti-Corruption Coalition Tuesday 25 October Until no later than 4.15 pm Oliver Bullough; Bill Browder Tuesday 25 October Until no later than 4.45 pm Professor John Heathershaw, University of Exeter; Chatham House Thursday 27 October Until no later than 12.00 noon Centre for Financial Crime and Security Studies at RUSI; Transparency International Thursday 27 October Until no later than 12.30 pm OpenCorporates; Elspeth Berry, Nottingham Law School Thursday 27 October Until no later than 1.00 pm Graham Barrow Thursday 27 October Until no later than 2.20 pm Institute of Chartered Accountants in England and Wales Thursday 27 October Until no later than 2.50 pm The Chartered Governance Institute UK & Ireland; City of London Law Society Thursday 27 October Until no later than 3.10 pm Catherine Belton Thursday 27 October Until no later than 3.30 pm Professor Jason Sharman, University of Cambridge
We will first consider the programme motion on the amendment paper, and then a motion to enable the reporting of written evidence for publication and the motion to allow us to deliberate in private—which will take only a minute or so—before the oral evidence session. I hope to take those motions formally.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 25 October) meet—
(a) at 2.00 pm on Tuesday 25 October;
(b) at 11.30 am and 2.00 pm on Thursday 27 October;
(c) at 9.25 am and 2.00 pm on Tuesday 1 November;
(d) at 11.30 am and 2.00 pm on Thursday 3 November;
(e) at 9.25 am and 2.00 pm on Tuesday 8 November;
(f) at 9.25 am and 2.00 pm on Tuesday 15 November;
(g) at 11.30 am and 2.00 pm on Thursday 17 November;
(h) at 9.25 am and 2.00 pm on Tuesday 22 November;
(i) at 11.30 am and 2.00 pm on Thursday 24 November;
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 48; Schedule 1; Clauses 49 and 50; Schedule 2; Clauses 51 to 90; Schedule 3; Clauses 91 to 100; Schedule 4; Clauses 101 to 134; Schedule 5; Clauses 135 to 141; Schedule 6; Clause 142; Schedule 7; Clauses 143 to 153; Schedule 8; Clauses 154 to 162; 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 5.00 pm on Tuesday 29 November.—(Jackie Doyle-Price.)
The Chair
The Committee will proceed to line-by-line consideration of the Bill on Tuesday 1 November at 9.25 am.
Resolved,
That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Jackie Doyle-Price.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room and will be circulated to Members by email.
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.—(Jackie Doyle-Price.)
The Chair
We are now sitting in public. Good morning to our first witnesses. I am going to crack on straightaway, because the timetabling is tight this morning, but you are very welcome. Thank you for coming. I remind everyone we are now being broadcast. Do any Members need to make a declaration of interest? No. Witnesses, will you briefly introduce yourselves, please?
Nick Van Benschoten: My name is Nick Van Benschoten. I work at UK Finance, which is the voice of the UK’s banking and finance industry. I work in our economic crime policy unit.
Gurpreet Manku: I am Gurpreet Manku. I am the BVCA deputy director-general and director of policy. The BVCA is the representative body for private equity and venture capital in the UK. We look after the smallest venture capital firms investing in start-ups all the way through to growth capital and private equity firms offering across the UK and worldwide.
The Chair
Thank you. You are welcome. Given the time constraints, I will ask Members for short, snappy questions, so short, snappy answers will be very much appreciated. I start with the Opposition spokesman.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
First, thank you for giving evidence. Nick, I am conscious of your perspective for the whole of the financial services sector and I want to ask a question specifically about data and information sharing: is enough happening in the Bill to deal with what has been described to me as the chilling factor of sharing information? What might come back in the consequences of promoting sharing?
Ms Manku, you gave evidence in which you described the “unintended consequences” of requiring limited partnerships to have a registered office. I am not sure that we would necessarily agree with that, so I am interested in your argument.
Nick Van Benschoten: We welcome the provisions in the Bill for private sector information sharing. We are very glad to see that they apply across the AML regulated sector—not just banking, but payments, crypto, e-money and so on—which allows us to follow the money and the data as criminals move across sectors to obscure their tracks. That is very welcome.
We also welcome the protection from breach of confidence. That can be in common law and, typically, in terms and conditions. It is important to be able to encourage people to do the right thing without the fear that they might be subject to litigation. However, we note that the Bill falls short in the way in which we can share information with the National Crime Agency, which is a disapplication of all civil litigation. We would like to explore whether we could go further in the Bill, but those provisions are very welcome.
I will not say too much. An expert colleagues from one of our member banks is speaking to you later, but I stress the fact that we want to encourage the use of information sharing as much as possible. It is not just where customers are exited, but where a restriction is placed on them, such as additional monitoring or thresholds—there are a lot of ways in which the banks put each other on notice. We want to encourage that use as much as possible in true cases of economic crime.
Gurpreet Manku: We welcome the provisions in the Bill to ensure that limited partnerships are not abused by criminals—I want to make that clear. On the point about having a registered office, we agree that there needs to be a service address in the UK for the delivery of documents and for the registrar to contact the organisation, but our concern is actually in reference to the legal meaning of “registered office” in the Companies Act 2006 when it comes to standard companies. We know that the term means something else in that context, so it is actually quite a knotty legal point rather than an objection to the principle of having a link to the UK.
It is just about ensuring that any existing arrangements that have been set up for legal and regulatory purposes for international funds structures remain intact. We will need to work through the process of what this means in practice. We were speaking to BEIS officials as soon as yesterday to talk through what it means in practice. This is more of an implementation point, and we have suggested edits that will come through to officials.
Seema Malhotra
Quite a lot of people want to ask questions, so I will make further remarks later.
Dame Margaret Hodge (Barking) (Lab)
Q
“We do not think these proposed changes support the Bill’s central aim of reducing the use of limited partnerships for money-laundering, since criminal users of limited partnerships will simply ignore them.”
That suggests to me that we are not going far enough. We are aiming to catch the people who are guilty of economic crime. Attached to that, somehow I cannot see any investor wanting anything other than to know that they are putting their money into a kosher investment. Even if you are just a pension fund putting your money into a scheme, it does not seem a bad idea to check that the person behind it is legitimate and not a drug or people smuggler.
Gurpreet Manku: Absolutely. We agree with you that it is not in our interests to have our limited partnership fund structure abused by criminals for all those reasons. We believe that the introduction of annual confirmation statements, the requirement to have authorised corporate service providers register limited partnerships and the power for HMRC to obtain accounts will deter criminals and prevent them from using the vehicle—we hope that they have stopped using it now given that these reforms are finally going through Parliament.
On how those points link to the evidence you quoted specifically, which was actually about some niche requirements on passive investors in a limited partner- ship fund, a worry there is that those investors might be deterred from using the UK limited partnership structure because they feel that their liabilities are being increased, that they are being asked to do the job of management and that criminal sanctions are attached to that. That part of our evidence applied not to the Bill as a whole but to those specific areas.
Alison Thewliss (Glasgow Central) (SNP)
Q
Nick Van Benschoten: We think that the Bill’s provisions for Companies House reform definitely point in the right direction. The question for us is, “Are they going far enough and will they be implemented fast enough?” Companies House abuse is, as I am sure you are all aware, a significant problem that we in the regulated sector have been trying to compensate for, but we cannot. We need Companies House to act as a proactive gatekeeper.
On the verification measures, one of the key points is that they fall short of minimum industry standards. Verification of identity is necessary but not sufficient. A key thing we have noted is that the Bill does not provide for order-making powers to allow Companies House to verify the status of directors or beneficial owners, and for that sort of requirement on company information agents and so on. That seems an odd gap. We understand that it may be a matter of phasing or resourcing, which can be dealt with in the implementation, but not if we do not have the order-making powers in the bill.
I have spent 12 years arguing for Companies House reform in my various roles. I do not have another 12 years in me, to be frank. We need to make sure that the Bill gives the powers so that the debate can be had during implementation and, if necessary, a phased or risk-based approach. What I mean is that there is a real risk of nominee directors and abuse thereof. Companies House needs to be able to verify that and therefore bring other things within its realm of power, querying and amending the register.
The how is maybe another question for more detail, but a risk-based, reasonable approach is also minimum industry standards. We have not yet seen it, but I note that the international body FATF—the Financial Action Task Force—agreed last Friday that it was going to consult on best practice guidance on implementing new standards for company registers. These are the same reforms that the Government pushed for as part of their G7 presidency. It has been part of the change: the US is setting up a register; Switzerland is moving. The UK cannot fall behind these new standards, so it is important that the Committee takes cognisance of that.
Trust or company service providers is one of those cases where we know that there is an issue; the banking sector and other industry partners in the joint money laundering intelligence taskforce and another four along with the National Crime Agency did a study of the risks of abuse in the UK trust or company service provider sector. We found shortfalls. There was a remediation exercise agreed. I understand that the remediation exercise is still ongoing. It is one of those sectors where there are concerns. We are doing other work that I am not at liberty to discuss, but it is about that sector.
That means that Companies House needs to be careful and cautious. There need to be strict legal undertakings with proper penalties, not just that they have met the standard of verification but that they have done everything they should be doing as a regulated sector. There needs to be access to the evidence of these checks, and that evidence needs to be something that, on a risk basis if necessary, can be queried—not just the information in the register but the actual checks undergoing. There needs to be the ability for Companies House to take sample checks and do also risk-based reviews. That may be something we can come to later on in terms of the querying power. I am sorry for a long answer, but it is an important point.
Alison Thewliss
Q
Nick Van Benschoten: I do not have a view on that. I know that the Treasury will be consulting on reforming the AML supervisory regime. That is something we have been pushing for for quite a while. I know that Jersey, for example, has a very different model where it has most of the regulator sector under one bailiwick, and that includes company formation. That may be something that the Committee looks at in future, but it is not the UK model at the moment.
Our priority would be, rather than look at the cost-benefit narrative and machinery of government change, the co-ordination point. There need to be powers not just to request information but to get information from other supervisors. There needs to be the ability to pass information around the ecosystem, including the National Crime Agency and regulated sector people sharing intelligence. There are some provisions in the Bill at the moment where we think they could go further on that matter, but the key thing is that Companies House needs to be a data hub. On whether it has the responsibility or others, we have not taken a view on that yet, I am afraid.
Alison Thewliss
Q
Nick Van Benschoten: I do not think they are unprecedentedly low. From a very quick survey, we found that Benin and Turkmenistan also have a low figure. I am not sure that is the company the UK wants to keep. There is a question about international competitiveness. It is important to note that in other EU countries with major financial centres it is in the £50 to £100 range. That does not seem an unreasonable amount for us.
Perhaps more importantly, we think Companies House needs to get resourced properly. You have to will the means, not just the ends. It is very important that Companies House fees are set at a reasonable level that would not deter an entrepreneur but would disrupt some of the bulk abuse we have seen, in which criminals set up hundreds and hundreds of shell companies. That is definitely a typology that we have seen.
Once there is enough money coming through main registration, there is then the question of whether Companies House will be granted any investment money out of the economic crime levy that is coming in next year. It is important that the levy is spent on things that actually improve the system, and that we do not just cross-subsidise, and that some of the opportunities also have a benefit for the economy—maybe for streamlining the onboarding of small companies, or for facilitating other access to regulated services.
Obviously, there is the question of what the Government will spend the levy on. We welcome the money that they have spent so far. There is an interesting proposal—by, I think, one of the Committee members’ all-party parliamentary groups—that the Government should match-fund the economic crime levy. Obviously, we in the regulator sector would love that. It is something for the Government to consider.
The Minister of State, Department for Business, Energy and Industrial Strategy (Jackie Doyle-Price)
Q
Gurpreet Manku: To clarify, I think this is a really important Bill. We have been saying for a very long time that the provisions need to be implemented quickly. The issues that we have raised are really on points of detail. Raising an international private equity or venture capital fund is quite a complex process. We hope that the swift introduction of the provisions will deter criminals from using the vehicles that we are talking about. When the requirement was introduced for Scottish limited partnerships to go on the people with significant control register, it led to a dramatic drop-off in the use of such partnerships for nefarious purposes. We were not aware that English limited partnerships were being used in that way instead, and we were surprised that they were, because English limited partnerships do not have a legal personality, and so cannot hold assets and should not be able to set up a bank account; certainly, they cannot in this country. We were therefore surprised by the scale of abuse there.
The Government are sending a really strong signal by introducing these provisions, particularly the requirement to have an authorised corporate service provider submit documention and the measures around annual confirmation statements. That should deter criminals. Our version of the limited partnership fund structure has been emulated across the world, so there is a lot of competition, in the sense that international fund groups could set up a vehicle in the UK, the EU or the US. Our wish is for them to be here, because that drives other economic activity.
We have a huge domestic venture capital and growth capital funds industry that invests in small businesses around the country. Two thirds of our investment is outside London; 90% of investment goes to small and medium-sized enterprises. Our managers are small firms; they need a domestic vehicle that works and is trusted by international investors, including those from the US who invest heavily in our members. These vehicles are used by private equity and venture capital funds. They are also used by infrastructure, pension schemes and fund-to-fund investors. Notably, they are also used by the British Business Bank through its equity programmes. It is the largest venture capital and growth equity investor in the UK. It has a really important role in catalysing innovation and crowding in additional institutional investors. I am passionate about the need for a robust UK vehicle, and it has been really disappointing to see the abuse first in Scotland and then in England in recent years.
English limited partnerships and Scottish limited partnerships are popular because they are here. The UK law courts attract institutional investors, as does the fact that we have a large professional services community here. Because we have funds here, we also have the administration here, which means that we have good-quality jobs around the country; some of our members have hubs in Belfast and Southampton. I am passionate about ensuring that this vehicle works, and the rules that are being introduced will deter criminals; they will improve the robustness of the vehicle.
Our points are really points of detail, just to ensure that the limited liability status of investors is protected and that we can implement these reforms in a swift and easy manner.
Jackie Doyle-Price
Q
Gurpreet Manku: I think it will make a very good statement, and it will attract international investment. There is a huge level of interest in the UK because we have had some brilliant growth stories in our businesses, particularly in deep tech in life sciences and biotech, especially coming out of the pandemic. There is a lot of interest in investments, and the Bill will send a signal that these investors should be using UK fund vehicles and not those based outside the country.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
Q
Nick Van Benschoten: That is the case, and perhaps more, in a way, than you might expect. We are not saying that Companies House should be regulated for anti-money laundering, but it does not have the provisions to verify the status of directors or beneficial owners. That is the gap to the standards. I should stress that the industry standards allow reasonable measures in how you verify status, because it is a challenge, but those reasonable measures are a matter of how, not whether.
Liam Byrne
Q
The second thing I think you said is that the verification regime proposed in the Bill runs a risk of failing to establish those in actual economic control of a company. Is that true?
Nick Van Benschoten: There is always the risk, yes, but some of the shortfalls in the Bill can be addressed, and we think they should be, so that we can address the issues that you mention. In specific terms, some of the abuses are going to be abuses that the UK has suffered in the past; others will be abuses that we have seen happening overseas. The key thing is that the Government need to take a risk-based approach to measuring those. At the moment, the Bill does not allow Companies House to pick up some of those measures, including if we identify them in the future and want to remedy the regime.
Liam Byrne
Q
Nick Van Benschoten: I think they could be improved, yes.
Stephen Kinnock (Aberavon) (Lab)
Q
Nick Van Benschoten: Are you addressing the question to me?
Stephen Kinnock
To both of you, if you do not mind. It would be good to hear from both of you on both questions.
Nick Van Benschoten: My view is that, in terms of resourcing, there is a lot of new technology. Companies House is quite lucky that it can leapfrog using best practice. We have had a number of meetings with it. I think you may be hearing evidence from Graham Barrow later; we had a roundtable with Graham Barrow, Companies House and some other providers to try to explore this issue. Companies House is quite lucky in that it does not need to be a manual exercise: the goal is to get very much a minority manual review by humans, with the majority being technology and machine learning and so on.
That said, we also did a webinar with a number of data providers, including well-known companies that are looking at the size of the challenge and the opportunities. There is a big difference between quick wins and longer-term investment. Companies House already has a risk engine; it has data analytics already. It is just that its enforcement people, working as hard as they can, have their hands tied behind their back. I think there will be a lot of policy development, and work to implement not just the technology but the way that it interacts with the regime that it wants to set up. It is a challenge, because the short term is a burning platform.
Known patterns of abuse are identified every day. Also, a number of companies may be about to walk off with a lot of stolen public money through bounce back loan scheme fraud, and that is an area where Companies House may or may not have powers. Whatever powers the Bill gives need to be operated at speed. Sorry, that was a roundabout way to get to your question. There are short-term things it can do now, and there is a long-term thing; but it must make sure that it is dealing with the urgent as well as the transformative. We understand that the transformative exercise will take a long time, but there is also need for it to apply more tactical focus around the risks, especially in the short term. What was your second question? Sorry, I forgot it in my enthusiasm.
Stephen Kinnock
On data sharing.
Nick Van Benschoten: Each country has its own threats and problems. Singapore’s COSMIC database addresses particular exposures and problems that it has with trade-based money laundering. The UK is in a different place in that market, but we have our own problems. In terms of data-sharing, one of the key things we would like is for Companies House to enable permissioned access to the regulated sector. We have a lot of problems that are not so much in high-end corporate, but in the retail customer base. We have money mules for fraud, we have a lot of spoof companies enabling purchase and investment scams. Trying to work out where exactly the needle is in the haystack is difficult when we do not all have access to the same data.
Companies House seems to be facing a binary choice: either it is public, or it is only for the public sector. There does not seem to be a middle ground that works on a need-to-know basis, where you have an obligation to apply money laundering checks and to have careful, need-to-know handling procedures and anti-tipping off and so on, and where that information is available for the purposes of safeguarding your customer and maintaining the integrity of the market. From a UK perspective, that is definitely something that we would support. We also think it might allow us to develop something equivalent for our own risks, as the Singaporeans and other countries have done.
Gurpreet Manku: We have focused on the limited partnerships provisions in the Bill, but in principle we would support Companies House being appropriately resourced to implement all these changes effectively. I have no objections to data-sharing with relevant authorities. Our investment community operates across the globe, so we are used to this type of activity in other jurisdictions.
Alison Thewliss
Q
Gurpreet Manku: We have not looked into that. I do know that Ireland has set up a new funds limited partnership, so that could be part of the reason for their growth—but that was very recent, so I do not know why that has happened. Again, it is quite worrying if people are just moving around, exploiting different structures.
Dame Margaret Hodge
Q
The Chair
May I ask for a brief answer?
Gurpreet Manku: We are commenting on different parts of the Bill. On the limited partnerships part, we think that a number of the new provisions being introduced will deal with the issues you have outlined. To reiterate, we are really unhappy and shocked to see the amount of abuse of this fund structure, because it has been in place for decades and is used for legitimate purposes on our side.
When you read the paper cold, you are right—it does look quite negative; we probably should have reinforced our support for the provisions that will work. Sometimes we have a tendency to go into the detail and start thinking about how things will be implemented in practice. We want to ensure that we use the tools and implement the most effective measures in the Bill. If there are other points that, on balance, would not necessarily help with the overall aim of the Bill, perhaps we should look at whether they need to be implemented.
The Chair
Q
Nick Van Benschoten: I would just say that we support the application of the Companies House powers to all the entities registered at Companies House. Companies House needs risk-based querying powers and to be able to follow the data and the money. My earlier comments also apply to the point about limited partnerships and verification by trust company service providers; we need a much more cautious approach to the reliability of that service.
Seema Malhotra
Q
Nick Van Benschoten: From a financial sector point of view, it is important to look at this as an ecosystem; that is definitely how the criminals look at it. They look for weak points. Sometimes the problems are upstream of the financial sector, but it crystallises in our sector because that is when people realise that the money has gone out of their accounts.
We are very supportive of the fraud provisions in the Online Safety Bill—we think they are critical. We also think it critical that everyone be incentivised to play their part. That includes potential issues around the scope of the economic crime levy, which applied only to the AML regulated sector. The Bill levels up powers for the cryptoasset seizures and freezing orders. That is welcome; it simplifies things. We work with crypto sector associations. They are now trying to realise that they are part of a regulated sector, and they want to be part of the gatekeeper community.
On what the Bill does, it is important, as I mentioned, that there be information sharing across sectors. That is key, because then we can see whether we all have a different piece of the puzzle to put together. A systems approach is definitely needed; that is maybe the context for our point that Companies House should really be an enabling hub. That includes giving access to information that may not be on the public register.
Seema Malhotra
Q
Nick Van Benschoten: That is a very good point, yes. There are also the information processing provisions on the identification, prevention and detection of economic crime in the Data Protection and Digital Information Bill, as well as the Online Safety Bill. Obviously, consultation is ongoing about a statutory APP or authorised push payments code. There may also be other vehicles in one of those bits of legislation, or this one, for other measures that we are currently discussing with the Government. I think the Minister made reference to our difficulty with having to process payments within a set period—there is a hard regulatory obligation, even when we have identified economic crime risks. We are still exploring whether that needs guidance or legislation. All these things need to come together if we are to design the right ecosystem. That then raises the question of who is leading the system. We are working on that with the Government.
The Chair
We have less than one minute. Ms Manku, do you want to make a few final comments?
Gurpreet Manku: We are glad that these provisions are being implemented. We have been working on them since 2018, and stand ready to work with officials to ensure that they are implemented effectively to meet the Bill’s overall goals.
The Chair
That was good timing. I thank the witnesses for coming to see us and for their answers.
Examination of Witness
Nigel Kirby gave evidence.
The Chair
Thank you for joining us, Mr Kirby. We have until 10.35 am. Would you briefly introduce yourself, please?
Nigel Kirby: Good morning to the Chair and the Committee. I am currently the head of the group financial intelligence unit at Lloyds Banking Group. Across the industry, I am a representative on UK Finance’s information and intelligence committee and, for full transparency, as part of that I was deputy director of the economic crime command of the National Crime Agency.
Seema Malhotra
Q
Nigel Kirby: Perhaps I can give a couple of the examples that we used when we were speaking with the Home Office for the formation of the Bill. In one case that involved money laundering, Lloyds identified seven customers that were receiving cash payments into their accounts. We linked those seven customers because they used the same fraudulent documentation—a gas bill—to set up their accounts. They had all been linked using fraudulent IDs. They were sending money to one individual in another bank.
At the moment, we act on such cases by meeting our statutory obligations—we exited those customers—but from the criminal’s perspective, the second bank is not aware of the fact that they are receiving those funds, because we do not have the capability to share that information with them. Secondly, it is highly likely that those seven customers moved on to other banks and continued that activity because, again, at the moment we have no capability to share the information about our economic crime concerns in that space.
That is a fairly simple example, but to build on it, the same kinds of techniques were used to launder criminal funds in another case involving three companies that were banking with us. We recognised that they were receiving cash money from the same post office source. They were also receiving money from other companies in banks. That money all got consolidated and was sent out to, if you like, a fifth bank. I do not know what happened to it after that—we cannot see.
Seema Malhotra
Q
Nigel Kirby: It was, at that particular point, a UK domestic bank, yes. We have this sort of complexity of companies that are linked using different identities and are moving money around, layering it in the system, and sending it to other parts of the system. We are currently limited in what we are able to do.
On those three companies that we at Lloyds could see were receiving money from five other banks, at the time we could not inform those banks of our concerns or explore with them whether that money was legitimate—it is not all illegitimate; it could, of course be legitimate funding. Furthermore, when that money was consolidated and sent to another bank, we were unable to inform that bank.
Whatever the predicate crime—there are all sorts of predicate crimes—the layering is not that complex but it uses the banking system, across the banking system, to obfuscate and layer the funds, and then the criminals move on. The big challenge at the moment is that we can report those entities and companies, but they will just go and open up in another high street bank, and when they have exhausted the five major high street banks, they will go to the challenger banks, and when they have exhausted those, they will go to the fintechs. We are not aware of that in the way that other industries such as the motor industry might well be.
Seema Malhotra
Q
Nigel Kirby: To take the first question first—about whether the Bill goes far enough—I commend and compliment the Home Office. It worked with us on the Bill. This piece of legislation was, fortunately, done by the Home Office but using our case examples. The Home Office explored whether the Bill would work with the scenarios we gave them. That helped the information provisions to be pretty much in the right place. There is one key omission from our perspective; I can come back to that, if helpful. There is also one key dependency in another Bill—
Seema Malhotra
Q
Nigel Kirby: The omission was referred to by Nick Van Benschoten: the civil liability protection. In the UK, we have real trust and confidence built up in voluntary information sharing with the National Crime Agency under section 7 of the Crime and Courts Act 2013. That has been the basis of our voluntary sharing, and we have built confidence in it over seven years.
The legislation has two limbs to civil liability protection—I will have to read my notes to make sure I do not make a mistake. The first limb is
“an obligation of confidence owed by the person making the disclosure”—
that limb is also included in this Bill. The second limb that we rely on is
“any other restriction on the disclosure of information (however imposed)”—
that limb is not included in the Bill.
Our position is that the Bill should align with the existing legislation that we are comfortable with. We would have more comfort in sharing and be more incentivised to share if we had the same protections as we have when we share with the National Crime Agency. The further observation is that there is not just one precedent; another piece of legislation, the Criminal Finances Act 2017—under section 11, I think—had sharing provisions with the purpose, in effect, of bringing better disclosures to the NCA. It had exactly the same two civil liability limbs, written in the same way. We believe that the second limb would be hugely helpful in doing things.
You might want to come back, but the other dependency that is key for us is that the Bill is drafted as an interlink with the GDPR, as you well know. That is wise, and one of the protections—that it has that link with the GDPR—but because the Bill has that interlink, the provisions in the GDPR are really important. I am aware that there is a draft Bill that has not yet been laid before Parliament and, again, we—my colleagues in UK Finance—have worked on that Bill. Absolutely key for us in the draft Bill is a legitimate interest for sharing, because that Bill sets out legitimate interests.
At the moment, the GDPR cites only fraud as a legitimate interest, and no other crimes. To be able to make the measure in this Bill work, we need the revised GDPR to have the “prevention, investigation” and “detection” of crime—what the GDPR says at the moment—to be for all crime as a key part, so we can make the interlink. Otherwise, we are restricted only to fraud, but do not include wider economic crime.
Alison Thewliss
Q
Nigel Kirby: Your question is specifically about fraud and what we can do in that space. I suggest that tackling fraud is a shared responsibility. When you look at a typical fraud, you have the payment platform, as you mention; you have a sending bank and a receiving bank, and you have the victim. To tackle it, we need to look at the whole ecosystem, as Nick said, and have an approach that works. I am not convinced that there are things that one can put into the Bill for that—it is the wider point of the whole ecosystem coming together for any fraud strategy moving forward, how we tackle that and how we incentivise the right behaviours for tackling fraud in future.
Alison Thewliss
Q
Nigel Kirby: When looking at enacting new legislation, I would go back to the purpose. Putting my NCA hat on, rather than from a Lloyds perspective, I was involved in two pieces of quite significant legislative change: the introduction of asset forfeiture orders in the Global Finance Act, and the change in the sanctions penalty from two years to seven years. That was done very much on an operational need basis. As an organisation, we were able to put out the operational perspective of the gap—the fact that we could not use certain powers because, in the sanctions case, of the length of the sentence. There was a big gap in the ability to seize assets from a civil regime.
In whatever we look at, it is important that we understand that gap from an operational perspective. It is clear and compelling that by having new legislation, that gap gets filled. The other point is that there is the resource and the ability to use the legislation when it comes forward.
Alison Thewliss
Q
Nigel Kirby: I would leave those to UK Finance; it is not my area of expertise. Our nominated office in Lloyds feeds into UK Finance so we get the whole industry.
Jackie Doyle-Price
Q
Nigel Kirby: I can link this to your question on safeguards. Coming from a law enforcement background, I believe that safeguards for members of the public are really important in this space, and I am used to following those. GDPR does not stop us from doing some things. It provides a set of safeguards for what we do.
When you look at what the Bill does on safeguards—I am trying to answer both questions—it makes it very clear that we share this information when certain conditions apply, such as exit or restriction, or we need the relevant actions, which would be the prevention and detection investigations for economic crime. Those safeguards are built into the Economic Crime and Corporate Transparency Bill.
In GDPR you already have safeguards in place. The first safeguard is: do we have a legitimate interest to share? That is precisely my point, Minister, about our needing to have legitimate interests to share—prevent all crime, not just fraud. Then you have a necessity limb to this. Is what we want to share targeted? Is it proportionate? Is there a less intrusive way? From a law enforcement perspective, we look at whether our actions are proportionate and collateral intrusion. There is a balancing act sitting there as a third limb, on ensuring that the legitimate interest of the public is not unduly overridden. I actually support the fact that there are safeguards in GDPR; I think that is the right thing to have. I support the fact that we need to meet those to be able to share information, but in doing so in that particular space, we need to be able to have sufficient breadth to be able to share across all economic crime and not just fraud.
Jackie Doyle-Price
Q
Nigel Kirby: I think it would be very helpful to have, on the obligations, clear guidance from somewhere like the Information Commissioner’s Office—it has got good guidance, to be fair—as we move through this. Should the Bill be enacted and become legislation, guidance across the industry and from the relevant Government sectors or law enforcement sectors on how we do this and come together in the same way as we came together through the Bill, would be important and give clarity, because, as I am sure you are aware, Minister, there are different interpretations of things, different views and different risk appetites. That is normal in business. The views, legal interpretations and risk appetites will always be different, but where there is guidance to help us through this, with a positive intent from Parliament, that is always really helpful.
Dame Margaret Hodge
Q
I want to take you back—I could not quite hear what you said to Alison—to the SARs regime, if I may. It may not be your area of expertise, but it is a very important instrument for informing the enforcement agencies of where there may be a problem. The system is clearly broken—hundreds of thousands of SARs are landing on the desks of enforcement agencies. And we had the idea that they could be put into categories—risk categorised. I wonder whether you are able to comment on that at all, because if currently there is just a tick box—you send off your SARs and you have done it—too often the banks then carry on doing business with a suspicious person. Is there room in the Bill for doing something more on that regime, to ensure that the enforcement agencies are more effective in rooting out economic crime?
Nigel Kirby: I think the SARs regime and the Proceeds of Crime Act 2002 itself actually need—well, not necessarily to be turned upside down, but to be looked at as a whole. I think an individual focus just on some aspect of SARs probably would not change the system in any particular—
Dame Margaret Hodge
Q
Nigel Kirby: Just to be very clear, I am here from Lloyds Banking Group; I will answer this question from my former role at the NCA—from that perspective. SARs do have huge value in what they do; the idea that they just go to a box and are not used is not entirely correct. One of the things the UK has done with SARs, which is world leading and others are quite jealous of, is that they are accessible to a wide range of investigators. It is not about following each one up. There is a database. A wide range of financial investigators can see them and they are held there for six years, as legislation allows. So there is a huge use there.
Also, Dame Margaret, we need to think about this. There is the SARs regime and there is the SARs reform work that is being led; investment is going to be put forward there. I would suggest that we need to see what differences the SARs reform makes first.
Dame Margaret Hodge
Q
Nigel Kirby: Reflecting back and particularly focusing on this area, as I am sure you do, we need to build and are building on the public-private relationships we have had. One Member mentioned Singapore and Holland, but actually, from the perspective of a private-public partnership, how we operate together and particularly the joint money laundering intelligence taskforce, we are seen as world-leading in that space. There is something there about building on that as we move forward and bringing in other sectors, which I know the NCA does. In this particular space, the enablers, as they are sometimes referred to—the telcos, the ISPs, the social media companies—being brought into that public-private partnership and building on what we have is important.
The Bill brings forward private-private relationships, and I think that is important. Hitherto, the information-sharing provisions have all relied on the NCA gateways. There is a throttle there, in terms of capacity. Widening that out so that private-private can share and be the frontline, in many ways, to help to prevent and detect is an important way forward.
Broadening out, there are a couple of elements in the legislation that we need to look at. For us, one is about friction in the system. We have a very quick payment system in the UK; when you pay, you press the button and off it goes. That is something we have got used to as a public and as a banking industry. It is unhelpful when you are looking to put legitimate targeted friction into a system to temporarily stop what I will call economic crime, because it is not just fraud, although it includes that.
Dame Margaret Hodge
Q
Nigel Kirby: Respectfully, I think that is a different question.
You asked me to put my other hat on, Dame Margaret. Looking at the scale of fraud—you know, you have got it here; you are familiar with it—and the number of victims and the cost to the UK, it is time for the UK and those with the power to do so to either think about fraud as a strategic policing requirement or, going even further, ask whether it is now a national security threat. I do not just mean with that label—that is really important. You can put a label on these things, but if it could be classed as a national security threat and have the available resources brought together from our national agencies and national policing, that might have a greater impact for the public.
Stephen Kinnock
Q
I have two questions. First, I am trying to understand why you have this sense of optimism, because it looks like a pretty dire situation to me. Our enforcement agencies have been starved of the resources and capabilities they need. Secondly, you have had a long career in the NCA and in enforcement; I am sure you are still in touch with some of your former colleagues. If you had to define the resources they need, what extra would they need to be able to turn this situation around? It would be great to hear from you on that.
Nigel Kirby: For clarity, I used “world-leading” specifically in reference to private-public partnerships and what we are doing for voluntary information sharing. Look at the joint money laundering intelligence taskforce and the facts in that space: it has supported 950 investigations that have led directly to 280 arrests, with £86 million secured. There are some hard figures around here that are different. When I was in law enforcement, we had law enforcement from other countries coming to ask how we did it, including Singapore and Holland. I am in the private sector now, and we have private sector colleagues coming to ask us how do we do that part. That is just a part of the ecosystem that is important—
Stephen Kinnock
Point taken.
Nigel Kirby: If I misled you or you took it that way, that was not intended.
On your question about if I were still there, I am sure that Graeme Biggar, the DG of NCA, will have plans for what that could look like. When I was there, we certainly put forward evidence-based propositions such as, “If there were x amount of funding, these are the extra capabilities we could bring and this is the impact we believe it could have.” I am afraid my contacts are not close enough now to know the detail of that.
Stephen Kinnock
Q
Nigel Kirby: I fully agree that we need enforcement to be properly resourced with the right capabilities to be able to deliver what it is asked to do.
Liam Byrne
Q
Nigel Kirby: Well, it does not stop that in the UK because our financial system launderers are in there, but what we can do is to prevent them from continuing to abuse the financial system. Take the example I gave with the five other banks—four were sending money—that were involved with Lloyds. The Bill will allow us to have a conversation with the four banks that were sending money into our companies, and to say “In relation to our responsibility for understanding due diligence, money laundering and so on, can we share information on those four companies so we can better understand those flows from those companies?” That is important, because some of them may have been legitimate and some may have been illegitimate, but that will help us to define the good from the bad in that particular space. It will also act as an alert trigger for those other four banks to have a look if they have not done so already.
An intelligence-led approach would say, “Lloyds has a concern about these four companies” and it could look further into the matter and do an investigation into its own relationship with its customer. The other element on all that money that came through to us—it was in the millions—that went out to a fifth bank, which I will call bank F, is that we could alert that bank about our money laundering concerns, provided we had exited those three companies, which we did. If that bank had not already picked it up with its transaction monitoring, it would have an intelligence-led trigger to be able to do its own investigations, and to stop that and report it to the authorities.
The final and important part of this is the indirect part—we call it the utility. The ability to better share this information for others is important because. If all those companies were exited out of the financial system by the five banks involved, it is highly likely that they would go on and open up accounts with other banks. This Bill gives us the opportunity to be alerted to that and to take the appropriate action and due diligence that we need.
Liam Byrne
Q
Nigel Kirby: It is an important point in terms of focusing on risk. We are having a conversation at the moment in industry with law enforcement and a regulator about how we can define where the high priorities are and how we can focus our resources on them, while meeting regulatory requirements and the law enforcement perspective. It would be helpful—we refer to it as dial up, down down—in terms of resource to be able to move to a space where our voluntary discretionary resource could be targeted in exactly the way you suggest, because there is a lot of voluntary discretionary resource in this space.
Liam Byrne
Q
Nigel Kirby: Not in the sense of prioritising what the highest threats are and where we should be. That is to the best of my knowledge. Just for clarity, I am not familiar with every aspect of the Bill.
Seema Malhotra
Q
Nigel Kirby: I think, with respect, that “automatic strike-off procedures” are your words, not mine. I used the fact of us taking an approach and considering whether to exit—that might be a similar thing—a customer. We take this really seriously. We look to understand whether we have economic crime concerns about those consumers. There is a range of things that we can do in that space. The ultimate one is about exit. We would exit that relationship, which is contractual, so we are able to do that. But there are other things that we do, and one is actually to speak to the customer and understand that transaction. We see some unusual transactions, but we have a conversation.
Seema Malhotra
It is more about Companies House automatic strike-off—but they might be your customers.
The Chair
Order. I am terribly sorry; we do have to leave it there. I must cut it off on the dot. Mr Kirby, thank you very much for joining us.
Examination of Witnesses
Andy Gould and Arianna Trozze gave evidence.
The Chair
We will kick off. You are very welcome, witnesses. Thank you for joining us. Would you be so kind as to briefly introduce yourselves and your positions?
Arianna Trozze: Hello everyone. My name is Arianna Trozze, and I am a PhD researcher at University College London. I look at detecting and prosecuting financial crime involving cryptoassets, and for the past year I have also been advising the Home Office on a part-time basis on technical aspects involving cryptoassets in relation to this Bill.
Andy Gould: Morning. My name is Andrew Gould. I am a detective chief superintendent with the City of London police. My job is to run the cyber-crime programme for the National Police Chiefs’ Council, which is focused on building capacity and capability across policing.
Stephen Kinnock
Q
Andy Gould: Sure. Fraud is not really my area of responsibility—I am focused very much on computer misuse act offending—but yes. I know there has been significant additional resource put into the ROCUs for fraud in the last couple of years. Is there enough capacity to meet the demand? Probably not. What policing probably needs to do is take a slightly different approach. Rather than trying to investigate those volume crime offences, it should focus more on those organised crime groups or individuals that are doing the most harm. That is the kind of pivot that policing is trying to make, in terms of being more proactive. I know Commander Adams is giving evidence this afternoon, and he will be able to tell you more about that.
Stephen Kinnock
Q
Andy Gould: Yes, I do. I think we have got the capability, but what we lack is capacity. The capability we have got today does not necessarily mean we will be able to maintain that capability tomorrow. We have invested, through the national cyber-security strategy and the programme through Government. We have got about an extra £100 million that has been invested over the last four years or so, building capability across policing. Some of that money we have effectively taken into crypto, so that cyber money is being used to cross-subsidise wider policing. We have created what we describe as cryptocurrency tactical advisers across the whole of policing. There are now officers in every force and every regional organised crime unit who are trained and equipped to do that. We have nationally procured the investigative tools to enable them to progress the investigations, and we have a national storage platform to store that once we have seized it.
We are in a position where we have actually seized hundreds of millions of pounds worth of cryptocurrency assets within the last year or so. The challenge we have is that it is getting harder and harder to do. The assets themselves are becoming more diverse and more technically complex, so our officers are in a bit of an arms race trying to keep up.
On the tools that we use, you might have one supplier that is brilliant on Bitcoin but not so good on another asset class, so we need more than one investigative tool to be able to investigate effectively. That is very expensive. One of the providers is currently quoting $60,000 to $80,000 per licence. That is unachievable, or unsustainable, for policing. We need to procure nationally for everybody, so we have an 80% discount on our current investigative tool, taking that approach.
The big worry for me at the moment is not just the technology changes and whether we will be able to maintain that level of resourcing and expand the capacity across policing; we have created a real staff retention problem. Because crypto is an emerging market, some of the best expertise and understanding of crypto in the UK sits within policing. We have been investigating cryptocurrency since 2015 or 2016. One of my sergeants has just been offered 200 grand to go to the private sector. We cannot compete with that. That is probably the biggest risk that we face within this area at the moment.
Stephen Kinnock
Q
Arianna Trozze: I would echo Andy’s point about the difficulty of tracing certain cryptoassets and investigating certain chains and things like that, and how this is evolving rapidly in competition with the existing providers and the blockchain services themselves. It gets more and more difficult to investigate as time goes on. You need more and more capacity building and investigative tools. At the same time, the crypto companies and the blockchain companies are seeking to develop their technologies in ways that will evade that detection, so it is a constant race between the two sides to be able to effectively investigate and prosecute these crimes.
Alison Thewliss
Q
Arianna Trozze: One of the key ways that legislation can future-proof itself in the face of this rapidly developing technology is via the definitions. I think that the definition of cryptoasset in the Economic Crime and Corporate Transparency Bill is sufficient to do that. Probably most importantly, the inclusion of cryptographically secured contractual rights means that the definition will cover smart contracts, which is really the technology that underpins all the major advances in the space of, for example, decentralised finance and non-fungible tokens that have taken place, and that we expect to continue to develop in the coming years. Furthermore, the ability to amend those definitions via secondary legislation is clearly a positive, because in the event that something slips through the cracks and develops in a way that we cannot anticipate, it will make it more efficient to change them.
Alison Thewliss
Q
Arianna Trozze: Because they are very clear that they include cryptoassets, it really makes the rules clear for everyone in the industry. Consumers then know as well what rights they have. My view is that it obviously cannot do everything, but the fact that there are provisions for victim compensation goes a long way to also protecting consumers. Obviously, it does not prevent the crimes from occurring, but it helps them to recover the losses.
Alison Thewliss
Q
Arianna Trozze: I cannot really speak to that. I am very sorry about that.
Andy Gould: I cannot either—sorry. I have not looked at that.
Jackie Doyle-Price
Q
Andy Gould: Probably the most obvious area would be around ransomware, which is if you are an organisation and you get hacked and attacked and then lose access to all your files or systems, and then get a demand from a cyber-criminal saying, “Okay, if you want to get access back, you have to pay”—basically, an extortion demand. That extortion demand will virtually always be in cryptocurrency, because there is a view that that is harder to trace.
Depending on the kind of cryptocurrency, the traceability varies. Effectively, a lot of the technology that sits behind cryptocurrencies is based within what is described as the blockchain. Arianna is much better at explaining this than me, but the blockchain is effectively a public ledger, if we are talking about Bitcoin or something like that. We can see all the transactions. It is like your bank account or NatWest or any other bank doing its transactions in the public space—everybody can look at them. It is effectively decentralised and very public, so there are real benefits in that. The anonymity comes from not knowing who is sending what or who is who, in terms of the bank accounts—the wallet equivalent.
That provides opportunities to follow the money, but, although you might be able to see where the money goes, you will not necessarily know who has sent it or who has received it. There are other investigations you would need to do that. And there are tools—mixing services or exchanges—that will jumble it all up and then send it elsewhere, and you will not be able to see what has come in compared with what is going out. That is why criminals like to use it—because, as they see it, it covers their tracks effectively.
Arianna Trozze: One way to make it a bit clearer is to situate cryptocurrency money laundering in the traditional phases of money laundering. When we talk about money laundering, we tend to talk about three specific phases—placement, layering and integration. In the crypto space, placement may look like someone depositing their Government-issue currency into a cryptocurrency exchange, and exchanging it for cryptoassets, or potentially using what is called a fiat on-ramp to buy cryptoassets using their fiat currency. They may also use something like an over-the-counter broker, which may allow them to buy cryptoassets using cash.
Then, the layering process follows, which is kind of what Andy was talking about, in terms of trying to obfuscate the origin and trail of funds. There are a lot of different tactics that the criminals can use to do that. As Andy mentioned, they may use mixing services, to try to break the chain. They may create thousands of different cryptocurrency wallets and accounts and transfer the funds among them in order to make it more difficult to trace. They may exchange them for various different types of cryptoassets, including privacy coins, which we, again, have a lot of trouble chasing, although there have been advancements in that regard. Finally, they may move to completely different blockchains, using what are called blockchain bridges, and that further makes it more difficult to trace—as Andy mentioned before, different providers have different capabilities and different expertise in terms of which chains they specialise in and which assets they are able to trace. That is something else that they may do to hide that trail of funds.
Finally, we have the integration process, which is criminals using those now-cleaned funds for mainstream economic activity. We know that sometimes they may seek to keep those funds in cryptoassets in an attempt to further their gains, speculatively investing in the market; or they may, again, use one of these exchanges or what is called a fiat off-ramp to transfer their cryptoassets back into pounds or any other currency.
Jackie Doyle-Price
Q
Arianna Trozze: Yes, and as it is such a quickly developing technology, there are constantly new ways coming out for criminals to use the technology for various purposes. Again, it is a rush for law enforcement and investigative companies to try to keep up with this.
Andy Gould: To give you a sense of the scale of the challenge, there are thousands of different forms of cryptoassets or cryptocoins in existence. We have to learn to use all the ones that the criminals are using. We can only do it with the private sector. There is no way we can invest in or have the skills in-house to be able to develop all of those tools for all of those different asset classes, so we work really closely with all the big private sector companies to build that capability. It is why we do big open national procurements—because that is the only way it is affordable.
Liam Byrne
Q
Andy Gould: It is really hard to say, because it is so hard to identify or report at scale. However, I would say yes. If you talked to all of the big cyber-incident companies and the threat intelligence companies about what we are seeing, in terms of reporting, then yes, everybody would say that it is rising. Certainly, the crime survey for England and Wales does.
Liam Byrne
Q
Andy Gould: It is both. There is a real mixture. You can have your sophisticated organised crime groups, with some of those having a bit of a crossover with hostile state actors, which makes that more complex to manage. You therefore have a lot of overseas threat at the higher end, but during the pandemic we also saw a shift of mainstream, traditional—if that is the right way of describing them—UK-based criminals moving into cyber-crime, because a lot of the tools are readily available on the internet and are quite easy to use.
Liam Byrne
Q
Andy Gould: Yes, that is right.
Liam Byrne
Q
Andy Gould: Yes, definitely.
Liam Byrne
Q
Andy Gould: I think that a lot more has been invested. I think—
Liam Byrne
That was not the question. Are we investing enough?
Andy Gould: Well, as a police officer, I will always say that you are never investing enough.
Dame Margaret Hodge
Q
Andy Gould: No, there is definitely an element of truth in that. If you have a public blockchain, you can see where it is moving, and that is very open—Bitcoin is the most obvious open public blockchain and the most popular crypto. However, that does not mean that you necessarily know who it is that starts and finishes. That is the issue, and with a lot of the different criminal services available, it is becoming harder and harder to manage. It is becoming more tricky. So, the answer to your question is probably yes and no.
Dame Margaret Hodge
Q
Andy Gould: The Financial Conduct Authority has taken on regulatory powers in this space. I am not an expert in that area, but that is looking pretty promising. A lot of UK-based entities that were offering those services are no longer able to do so, so there has definitely been a clean-up of the market in that space, which is positive.
The challenge is that international regulation, and a lot of the recent work we have seen in that space, has driven a lot of overseas exchanges and providers, which might have been operating in a bit of a grey space, shall we say, to suddenly look to become more legitimate and comply because they want to come into the mainstream financial system. I would use the analogy that the tide is going out on a lot of the more criminal providers. They are effectively being left as “clearly not engaging, clearly criminal”, and a lot of those that may be operating in the grey space in international jurisdictions are becoming more and more legitimate as they clean up their acts.
Dame Margaret Hodge
Q
Andy Gould: Absolutely, yes.
Seema Malhotra
Q
Andy Gould: The average member of the public using cryptocurrency will probably be using an account through one of the legitimate exchanges. They will go through the whole “know your customer” process that they would go through for a bank. Regulation pretty much covers that; I think we are in a good place with it. It is the criminal exchanges and criminal service providers that regulation would not affect. You would not be able to build an infrastructure that stops them being able to create their own wallets, as you could for those accounts with what are effectively crypto banks.
Arianna Trozze: There has been research that some of the KYC processes, especially in some of the higher-risk exchanges, are quite easy to fool with fake documents and other such things. There are companies serving UK customers that are still not registered with the FCA and do not meet its KYC or AML requirements, despite its best efforts. For example, none of the Bitcoin ATMs operating in the UK is registered with the FCA, even though they are supposed to be, and they tend to have quite lax KYC requirements. They may require you to put in a phone number. Some of them have more requirements, but whether it is a rigorous process remains in question.
Seema Malhotra
Q
Arianna Trozze: In my view, the only thing would be more enforcement efforts against non-compliant companies. I do not know how practical that is, or what kinds of resources there are to address the problem, but to me the only way forward is to make sure that those companies and operators know that it is not acceptable to be working and serving UK customers without a licence.
Seema Malhotra
Q
Andy Gould: I think the FCA has prosecution powers and enforcement and regulatory options, but I could not say what it is doing about that.
Seema Malhotra
Q
Andy Gould: I do not know. They only came in earlier this year, so I would be surprised if the FCA has got to the stage where it is able to exercise them in terms of investigation.
Jane Hunt (Loughborough) (Con)
Q
Andy Gould: Yes, definitely. That is a huge benefit of the Bill; it is one of the provisions that we have been asking for. Imagine a scenario where you execute a search warrant on criminal premises: you go in and you can see stolen property, but at the moment, if they are not there, they are not under arrest and there is no existing investigation. You then have no power to take that crypto under the Proceeds of Crime Act 2002. So yes, that is a big step forward for us.
Stephen Kinnock
Q
Andy Gould: No.
Stephen Kinnock
Q
Arianna Trozze: I need to think for a moment.
Andy Gould: We are generally very happy with the provisions of the Bill. One area that we might want to look at is storage of the assets. Imagine you have £100 million- worth of cryptocurrency. That is really expensive to store, and there is always a security risk around where it is stored. If we were able to turn that into cash straight away at the point we get the restraint from the magistrates court, and that that was a standard power, a lot of that cost and security concern would be taken away. That would be one area where we could improve.
There is an existing power under POCA, where you can go to the Crown court and make that application, but that can be contested by the defendant. There is a cost associated with that. If we had a standard power to do that, I think we would be a bit happier, but we are generally very happy with the provisions in the Bill.
Arianna Trozze: I would echo that I generally think the Bill goes far enough—as far as is technologically possible at this time. I do not think there is anything that I personally would amend at this time.
Stephen Kinnock
Q
Arianna Trozze: I see both sides of that argument. Obviously, if assets are transferred into cash and then the original assets significantly gain value, and if the person with the assets were then found not to be a person of crime, the Government would be on the hook for the change in value of those assets. There are two sides to the argument but, as Andy mentioned, the storage is quite risky and very expensive. I ultimately agree, but I see both sides of the argument.
Alison Thewliss
Q
Andy Gould: It is quite commercially sensitive, but it could be a large sum—we are talking hundreds of thousands of pounds.
The Chair
Okay, we have come to the end of this session. Thank you very much for joining us.
Examination of Witness
Jonathan Hall KC gave evidence.
The Chair
Q
Jonathan Hall: I am the independent reviewer of terrorism legislation. I also have a bit of a background in crypto from my practice as a barrister, which is why I was interested in this whole area. I was asked by the Government to feed into some of the clauses as they went through, and I am here to talk about the crypto aspect.
Seema Malhotra
Q
Jonathan Hall: I do not know about the resources of the NCA, but in terms of whether the powers go far enough, I think there are some areas where they perhaps go too far, or at least where I think, from a fundamental rights and individual rights perspective, some attention may need to be drawn. There is the simple question whether you should be able to seize cryptoassets on the basis of the fact that they might be used by terrorists. Of course you should. Then you have the complicated question of how you bring about a seizure regime where assets are not physical. It is one thing if you seize a jewel or some cash, but it is another thing if you are effectively seizing information. What you have here is a very lengthy set of provisions to allow you to do that.
Generally speaking, I think it works, but there are one or two areas I want to draw to your attention. The first, which I think is acceptable but worth thinking about, is that the power is a power to seize not just cryptoassets but crypto-related items. In practice, you are not seizing a thing; you are seizing a code and that can be written down on a bit of paper or on a computer. What these provisions do, unlike all the other seizure powers that say you can seize the jewel, the cash or the contents of a bank account, is that they allow the police to seize any item, which could be a computer, or a piece of paper. So, it is quite a wide seizure power. I think it is kept effectively within bounds, but it is something that is worth drawing attention to, which is different from other aspects of seizure in this field.
The next point is that you have to be able to convert crypto and there are several reasons for that; one is because the prices may go massively up or down. Individuals whose assets are the subject of seizures may never be prosecuted—and this is a civil remedy—and, in fact, no final application for forfeiture may ever be brought. That is particularly true in the context of terrorism, because often what counter-terrorism police will want to do is disrupt the transfer, but they will not necessarily want to go on and apply to forfeit. The figures from last year show that there is a disparity between the number of accounts that are frozen and the amount of money that is finally the subject of forfeiture.
The Government did listen to my views on this issue. It is important that the Bill has provisions such that both the police can apply to convert the cryptocurrency into, say, pounds sterling, and that it is also open to the individual from whom it is seized, who might say, “Look, I bought this crypto. It’s gone massively up in value. You’re never going to apply to forfeit this. I don’t want to lose out on the rise of value.” There is provision in the Bill for the individual to go to court and say, “I’m a person from whom the crypto has been seized. Please can you convert it?” That will be decided by the court, but it is good that that provision is in the Bill; I think it works.
Is this too boring and long? I mean, there is a third bit, which I think is the most difficult bit. It is the power of a magistrates court to require a UK-connected wallet provider to freeze the cryptoassets and, even more significantly, to require that the UK-connected crypto wallet provider should actually pay the money over to the court. It is slightly in the weeds, but what the Government have done—and I understand it—is to try to be quite novel. They are really trying to push the law here, because they realise that many of crypto wallet providers will not be based in the UK, but this comes with a consequence regarding how the Bill is currently worded. I will just give you the bit that I think may need a bit of attention; it is clause 10Z7B—
Dame Margaret Hodge
Q
Jonathan Hall: Yes, I will. It is clause 10Z7B(7).
The Chair
Q
Jonathan Hall: I am not sure I have got the same document; I have got the Public Bill Committee document for 30 September and it is on page 10.
The Chair
Q
Jonathan Hall: I will just flag it up to you. It defines a UK-connected cryptoasset service provider. It includes a provider
“ which…is acting in the course of business carried on by it in the United Kingdom.”
Well, that is completely fair enough; if they are carrying on business in the United Kingdom, they should be subject to court orders. However, it then has this provision:
“has terms and conditions with the persons to whom it provides services which provide for a legal dispute to be litigated in the courts of a part of the United Kingdom”.
I will just put the flag up and then allow the Committee to move on. That is quite a wide extension of UK jurisdiction over companies that may be based abroad and potentially over victims who may have claims overseas.
Jackie Doyle-Price
Q
Jonathan Hall: Let us imagine that counter-terrorism police have intelligence that there is an Islamic State cell that has been fundraising in Birmingham, and they are going to try to transfer the funds that they have managed to raise to an active cell based in Syria. Their plan is to do that by using Bitcoin. Let us imagine counter-terrorism police had intelligence that that was about to happen. They could raid the premises where the UK-based cell was operating. They could seize a bit of paper on which the crucial key is written down, which would allow the transfer of the funds to take place to Syria. They could then use that key to grab the cryptoassets—let us say it is £1 million-worth of assets that are about to be converted, or have been converted, into cryptocurrency—and transfer the cryptocurrency to a police-controlled wallet or to another provider who they trust.
That money, which would otherwise have gone out to Syria to buy guns and so on, will then be seized by the police. If the police have evidence to do so, they could in six or 12 months’ or up to three years’ time, go to a magistrates court and say, “We can prove that this cryptocurrency was going to be used for the purposes of terrorism” or “It was the resources of a proscribed organisation, Islamic State. Can you now please order that the money be seized and transferred to the Treasury?” Does that help?
Jackie Doyle-Price
Yes, not only is that a brilliant explanation that brings this to life, but it is a great plot for a film.
Jonathan Hall: It is real life. There was a man called Hisham Chaudhary who was convicted last year of doing more or less that.
Jackie Doyle-Price
Q
Jonathan Hall: We can never be confident it is completely future-proof, but it is necessary and definitely a very strong step in the right direction. As I say, I have one reservation about overseas companies where I think it may go a bit too far. It may just be a question of deleting one part of the provision I read out to you. In general, it is a good step.
The Chair
I think the number of the page you are looking for is in the amendment document on page 47 and it is new schedule 1. I think that is what you were referring to, Mr Hall. I am going to move on anyway.
Alison Thewliss
Q
Jonathan Hall: In the counter-terrorism world, there is an open question about quite how much this blockchain technology will be used by terrorists. There is quite a lot of excitement about the possibility of its use, but the jury is slightly out about how much it is, in fact, being used. I cannot speculate why that would be. Counter-terrorism is a well-resourced part of police business, so I would expect that there would be specialists who would be willing to stay because they are quite highly motivated; outside counter-terrorism, I do not know. I was very struck by the point about the £200,000 transfer fee.
Dame Margaret Hodge
Q
Jonathan Hall: Do you mean the Russia-Ukraine aspect?
Dame Margaret Hodge
Ukraine gives one a sort of focus on the worst aspects of dirty money, but are we really being as comprehensive as you were when you did the counter-terrorism stuff there?
Jonathan Hall: The one thing that I think would make all the difference would be to resource Companies House. I follow Graham Barrow on Twitter—I think he is giving evidence—and occasionally I look at the overseas entities register, and, as he has pointed out, there are these anonymous chip shops in Barnsley, which have about 57 British Virgin Islands companies attached to them. It seems that that is the low-hanging fruit: having a well-resourced Companies House that can tackle the entries, verify them and prosecute them.
Dame Margaret Hodge
Q
Jonathan Hall: The funny thing is that there is a principle in law that, if someone is giving advice to someone in order to commit a crime, legal professional privilege does not apply. It is quite hard to find examples of cases in which that doctrine has been applied, so I do not know whether it is about law enforcement having the confidence, when they have a lawyer who is deeply engaged in advising someone to break the law, to say, “We don’t care that you are saying this is privilege because we are going to run the case and say it is for a criminal purpose”. Beyond that, I do not know. I am a lawyer and I completely support maintaining access to justice—of course I do. But you are also completely right that lawyers and trust companies are at the heart of this issue, and I am afraid there are professional enablers.
Stephen Kinnock
Q
Jonathan Hall: I have not got an answer beyond the one I gave before, I am afraid. I am sorry; I have not thought of a positive thing. I would just remove that subsection (b) from the definition of UK-connected cryptoasset service provider.
Stephen Kinnock
Q
Jonathan Hall: It is quite a bit step to convert it to fiat currency, or pounds, because you are then interfering with the bet that person has placed on the value of the currency going up. I do not know what the figure is in terms of storage. I am interested, too, in the question of potential police liability. I am thinking about the Sanctions and Anti-Money Laundering Act 2018. As you know, before the Government brought in the suite of changes that allowed urgent sanctions, they were very careful to narrow down the potential liability that the Government might have in relation to sanctions, if they were challenged. I have not given it attention, but maybe it is worth having a look at whether there are equivalent protections for the police. The seizures can be very high in this field—they can measure many millions—so the potential liability of the police could be quite high. We would not want the police to be too disincentivised by the risk that they would be on the hook for damages, if everything goes wrong.
In terms of the balance, it may be that ultimately one or other party—the person from whom the assets are seized, or the police—is going to suffer some sort of loss. The key thing is to make sure that people have access to the courts. The courts will have to generate their own sort of expertise and case law over when you should convert a currency. I can imagine that someone will come to the magistrates court saying, “My assets have been frozen. Now is the time for converting them from Bitcoin into Ethereum”, and the court says, “What? How do I determine that?” There will need to be a body of expertise. This is a minor point, but it is something that I support: one of the intentions is to allow quite a wide range of law enforcement personnel to be responsible for the court proceedings, precisely so that you can develop a cadre of people who have got that sort of expertise.
Alison Thewliss
Q
Jonathan Hall: I do not want to say. The key thing is that I am not a Scottish lawyer, and I am not going to try and opine on whether there is a legitimate use of them. The key thing is basic enforcement. You made the point that there are zombie companies. Well, someone in Companies House needs to follow these things up. I am sure they will, but the resourcing of Companies House is where I would put my money.
Liam Byrne
Q
Jonathan Hall: It is a serious problem. I would say that the reason we have not faced the wave of mass casualty terrorist attacks in the UK, in contrast to America, is the lack of readily available firearms. That is the key thing. It is why the growth of the extreme right wing and all these ideologies that inspire mass killings, the obsession with Columbine and so on, have not resulted in mass shootings. From a national security perspective, the real concern is the alignment—if it happens—between terrorist organisations and those in organised crime, who do have the capacity to source firearms. That is a really important point.
Economic Crime and Corporate Transparency Bill (Second sitting)
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Our first witnesses, the fifth panel, are Martin Swain from Companies House and Adrian Searle from the National Economic Crime Centre.
The Minister for Security (Tom Tugendhat)
May I just declare an interest, very briefly?
The Chair
Absolutely. We will all listen with bated breath to the Minister’s declaration of interest.
Tom Tugendhat
I simply refer to my wider declaration in the Register of Members’ Financial Interests.
The Chair
Thank you. Mr Swain, would you introduce yourself briefly for the record?
Martin Swain: Good afternoon. I am Martin Swain. I am one of the executive directors of Companies House, with responsibility for—
The Chair
You will have to speak up, because the acoustics in this room are very poor.
Martin Swain: Apologies. At Companies House, I have responsibility for policy, strategy and communications, and legal services.
The Chair
Thank you. Mr Searle?
Adrian Searle: Good afternoon. I am Adrian Searle. I am director of the National Economic Crime Centre. I am here with two hats on: as the director of the NECC, as it is called, and as a director within the National Crime Agency—so I can make comments about both the NECC and the NCA. If it helpful, I can explain a little bit about what the NECC is.
The Chair
No, I do not think so; we do not have time for that. I call Seema Malhotra to ask the first question.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
My second question is to both of you. Do you believe the Bill should go further and reform the strike-off procedure for companies? There is a recognised issue where companies are building up debts, not filing a return and then being struck off as one of the routes through which money laundering may be taking place, with limited room for manoeuvre after that. Would there be any benefits to reforming that process? Is there any consideration, for example, of companies being placed in a compulsory liquidation procedure? I would be interested in your thoughts on that.
Martin Swain: As you say, we have £63 million through the spending review for transformation. We are two thirds of the way through our transformation programme at the moment. It is fair to say that we have been clear with the Department and Treasury that we are taking on significant new functions and responsibilities. Some of that will require more people and people with different skills from those that we have now. Companies House is a register of information, so a lot of our people do processing work. We will need to move those people off that. We will need to employ skills that we do not currently have, so we are actively talking to the Department and the Treasury about our funding model.
To your point on fees, yes, we could increase fees to pay for additional resources. I know there is some challenge around the fee being too low. Again, we have taken provision in the Bill to charge fees for different things that we currently cannot charge fees for. For example, we cannot currently recover costs for investigation and enforcement activity, as it is centrally funded. We are taking powers to do things differently. I do not think I am at a stage to be able to say we have a definitive figure that we have agreed with the Department or Treasury that would give us our funding model for the future.
The Chair
Mr Searle?
Adrian Searle: I think the question that was probably targeted towards me is not about the resources in Companies House, but the second, follow-up question relating to striking companies—
Seema Malhotra
It was about how to tackle economic crime and whether the reform of the strike-off process is important to that.
Adrian Searle: The strike-off process is not something I have a detailed understanding of. I suspect Martin might be better placed to answer that question.
Martin Swain: Again, it is something we are very aware of. Companies take advantage of the strike-off route to discharge themselves of debts and so on, and for other purposes. My sense is probably that the Bill as drafted gives us what we need. It is about how we take forward the policy in that area regarding where companies are moved to strike off. For example, we get lots of representation with regard to lots of companies being registered at one address—a registered office being used and abused. The route for that would be to default them to our address at Companies House, for not having a registered office address that is valid. The next step on that would be strike-off, but clearly if we do that we may be having an adverse impact on the system and giving companies a route to use it for criminal activity or to fold without paying their debts. We are very aware of the issue.
The Minister for Industry (Jackie Doyle-Price)
Q
Adrian Searle: I think we have. There is, as you say, a real challenge to get the balance right between a prosperity and a security agenda. As we know, the Companies House reform elements of the Bill are a long time coming, so there has been lots of analysis and consideration of how you get the balance right. What I know from a law enforcement investigative perspective is that the changes being introduced under the Bill will certainly make the job of law enforcement far more straightforward in terms of our ability to investigate criminals and corrupt elites who are exploiting the complexity of the corporate structures to hide their assets, launder their wealth, and so on. I am confident that it gives Companies House and, by extension, the investigative agencies the powers we need. The indications that I have from exchanges with Martin and others in the industry are that the changes do not go so far that they inhibit transparent business practices in a way that undermines our economy. It feels to me that the balance is right.
Martin Swain: It is a very good point. It is a challenge for us as an organisation, because we have very clear direction from our Ministers that we should not create a burden for business, or make it difficult for companies to incorporate or for people to invest in the UK. The concept of balance is always there for us. We will bring in things such as ID verification, but we need to make that really efficient, and make it easy for people to understand the process, so that we do not create a burden for the vast majority of companies on our register that are legitimate businesses. That is quite a tension sometimes, because there is a significant spotlight on Companies House to become more than the passive register that we are at the moment, and to become—I hear this term—an “active gatekeeper” of the register. There is a potential that we move too far into that territory and make it harder for the vast majority of companies to deal with us.
I mentioned our transformation programme. There are two elements to our transformation. One is the legislative reform and all that is involved with that. The second part is digitising our services. That is what we have been focusing on in the last few years: making our systems really quick and easy to use, and to drive data, rather than receiving information on paper. You cannot work effectively with law enforcement from paper transactions; you have to have data.
Jackie Doyle-Price
Q
Martin Swain: It is a huge culture change for us, not least in becoming more of a proactive agency. I hear it said that Companies House will be key to the economic crime ecosystem; what I say to people is that we will also be part of the business growth ecosystem. It is important that we have that dual role.
Adrian Searle: I think there is real value for businesses in being able to trust the other businesses they are dealing with. There is a strong argument that the transparency agenda supports the business agenda.
Alison Thewliss (Glasgow Central) (SNP)
Q
Martin Swain: At the moment we are in the design phase for verification. I should say first of all that we will not do the ID verification ourselves; we will outsource that.
Alison Thewliss
Q
Martin Swain: At the moment we are looking at two options. We are working closely with Government Digital Service and others on the potential for the Government solution. We have been clear with them about our requirements with them. We are separately looking at market options, whereby we would go to the private sector and outsource via that route, where a number of providers can do identity checks.
Alison Thewliss
Q
Martin Swain: It goes back to some of the things that I said about ease of doing business. There are two key parts of our specification: whether we can make it really efficient, and fast and easy for people to do, and whether it is at an equivalent standard to the industry standard. We are very clear that we are operating along the same lines as others in the system.
Alison Thewliss
Q
Martin Swain: I heard that, and I am surprised that they are saying that. I will have a conversation with them about where that has come from.
Alison Thewliss
Q
Martin Swain: People with significant control will be subject to verification—beneficial owners, but not shareholders who have less than 25%.
Alison Thewliss
Q
Martin Swain: It was a decision by the Department and Ministers, post consultation. They consulted on the whole area of shareholders, and the information that they hold, and verification. The decision was that they would not be subject to verification.
James Daly (Bury North) (Con)
Q
Martin Swain: One of the main measures is ID verification. That is one of the biggest gaps in our register at the moment. We do not verify people who are setting up and running companies. The fact that we will know them and have verified them is key. We are taking considerable powers in the Bill to do things that we cannot do at the moment. We cannot query information that is filed with us. We cannot analyse and proactively share information. At the moment, we are very reactive. I use the word “passive”, and “reactive” is another word that I would use. We react to colleagues such as Adrian coming to us saying that they want information on certain things. In the future, we will be able to do our own intelligence work and will proactively be able to work with law enforcement.
James Daly
Q
Adrian Searle: For sure. It is a really fundamental change. I already have folk from my intelligence and investigative teams in the National Crime Agency working with colleagues in the Companies House teams to help them to set the road map for how they will transform.
Dame Margaret Hodge (Barking) (Lab)
Q
The Chair
We now resume the evidence session. Mr Swain is going to answer the question that was put to him by Dame Margaret Hodge.
Martin Swain: The question was about the balance of burden against tackling economic crime. I think you asked about the need for smarter regulation. I totally agree. Part of the challenge is how we use our powers in future. I would say that the way in which we use our powers will be around the integrity of the register; we will focus our activity on where we can have the most impact to improve the integrity of the register. In doing so, we do not want to create a burden for legitimate businesses.
The benefit of focusing on the integrity of the register is that we create value. As Adrian said, we already contribute a significant amount of money to the UK economy. If we can improve the integrity of the register so that people are making better decisions based on the data, and people are not being defrauded because of the way in which we are improving the integrity of the register, to me that is what smarter registration should be about.
Dame Margaret Hodge
Q
Martin Swain: We will not be replacing the AML supervision, which rests with the AML supervisors. The Bill introduces a number of measures around ACSPs which we currently do not do. For an ACSP to file with us, they will need to register with us.
Dame Margaret Hodge
Q
Martin Swain: With us. This is separate to their AML supervision. In order to file with us, they will need to register. We will verify the identities of the people who run the agency—the agents—and we will require them to confirm who they are supervised for for AML purposes. We will cross-check that with the AML supervisors. There are also some new offences in the Bill, so people will be required to maintain their records of their supervision with us. If they are suspended from their AML supervisor and do not tell us, that will be an offence. They will also have to maintain records of verification, which we will have the power to check. None of that exists at the moment. An agent can file with us without any of those things happening.
Dame Margaret Hodge
Q
Martin Swain: Yes.
Dame Margaret Hodge
But it does nothing.
Martin Swain: I am not going to answer from HMRC’s perspective. If we are talking about smarter regulation, the benefit is that we will have a power and an ability to go back to HMRC and raise flags where we see activity from agents that is not consistent with what we want.
Dame Margaret Hodge
That is very helpful, thank you. I have a quick question for Adrian.
Adrian Searle: Can I come in on that earlier question? The requirement that the company service provider has a UK footprint is a significant shift. Prior to this Bill, overseas-based service providers could provide that third-party service to registered companies. That is a fundamental challenge. When there is a UK footprint, whether it is the supervisory bodies or, potentially, the investigative agencies, we have got a starting point that we can go after, which you cannot do when there is an overseas base.
Dame Margaret Hodge
Q
Adrian, with your wider remit, there has been a huge decrease in the number of cases that have been taken by the SFO and indeed by all the agencies. One reason is the fear of costs landing on those agencies—for example, the NCA—if they lose the case. Can you give us a view? Do you think we should have a cost cap, in the way we have with unexplained wealth orders? Do you think we should have the American system whereby no costs at all are given to the litigant or the person accused of wrongdoing at the end? What is your view of that?
Adrian Searle: We are certainly very keen to continue to look at that. The cost capping in the UWO regime is attractive. I understand that other colleagues and Government, in particular the Ministry of Justice, have had conversations. They are having concerns raised that that undermines the core principle of loser pays. There are different views on this issue.
Dame Margaret Hodge
Q
Adrian Searle: We find cost capping an attractive proposition, but we also understand that it is challenging. In addition, we are speaking to colleagues in the Home Office and the Treasury about the establishment of a regime that will help us to manage the risk associated with potential big financial costs if we were to lose a case. There is a governance system that they are proposing to put in place that will help us to manage those risks. It is still early days, and conversations are ongoing, but at least colleagues in Government recognise the challenge that we face. There is no doubt a chilling effect on the agency from the risk associated with financial costs.
Dame Margaret Hodge
Q
Adrian Searle: I assume that is a reference to the ARIS system—the asset recovery incentivisation scheme. As it currently stands, we get 50%.
Dame Margaret Hodge
Q
Adrian Searle: It is certainly true for the NCA and policing. I would need to check whether that runs across the whole system. I can come back to you on that.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
Q
Martin Swain: Not yet, to my knowledge. We have had the confirmation of part of our £63 million, but we are in conversations with the Department around future budgets.
Liam Byrne
Q
Martin Swain: It would be very difficult for me to describe what a gold standard would be at this point. We have put in a significant proposal to the Department as part of our spending review preparations.
Liam Byrne
Q
Martin Swain: I cannot give you a figure on the budget, but in terms of numbers of people, it was in excess of an extra 100 people.
Liam Byrne
Q
Martin Swain: That was our assessment at the time. It obviously depends how quickly we can digitise services because, as I said earlier in the session, the quicker we can digitise things, the more we can move people off manual processing into other work. I think it also depends on what the final shape of the legislation is when it gets through. We saw that with the Economic Crime (Transparency and Enforcement) Act 2022, where there were things, as the legislation went through, that changed and we had to adapt and do things differently. It would be wrong of me to estimate it at this point, before the legislation has passed.
Liam Byrne
Q
Martin Swain: I would probably say we do not need to. We have this package of reform, and it is fair to say we have worked really closely with the Department and people like the Treasury on what the package of reform needs to look like. We have been heavily involved, and we have been able to influence some of the thinking around what the reform needs to look like. However, I think nobody would disagree with the need to reform Companies House. Certainly, we would not; we welcome these reforms with open arms. As an agency, it is probably fair to say that we are hugely excited by the prospect of being able to do things that we have not been able to do in the past.
Liam Byrne
Q
Martin Swain: I have not said they failed to agree it. We have not got to that point of agreement yet.
Stephen Kinnock (Aberavon) (Lab)
Q
Martin Swain: I do not think we would have the capacity to do ID verification internally, certainly not within the timescale that we are looking at bringing it in. I go back to my point—and I will pick up the point with UK Finance—that we will be operating ID verification to standards that are appropriate across sectors that use ID verification. With any aspect of these reforms, there is potential for gaps in the system. What we are trying to do is design out gaps in the system. However, I think we know from the current companies framework that there are gaps in the system, and even where you plug those gaps, others will appear.
The Chair
Thank you very much indeed to both of you for your evidence. It has been very helpful. We now move on to the next panel.
Examination of Witnesses
Commander Nik Adams, Simon Welch and Michelle Crotty gave evidence.
The Chair
Good afternoon. We now have Commander Nik Adams from the City of London police, Simon Welch representing the National Police Chiefs’ Council, and Michelle Crotty from the Serious Fraud Office. May I ask each of you to introduce yourselves briefly, please?
Commander Adams: Good afternoon. I am Nik Adams, commander in the City of London police and the current lead on economic and cyber-crime.
Simon Welch: Good afternoon. I am Simon Welch, the national co-ordinator for the National Police Chiefs’ Council on the economic crime portfolio.
Michelle Crotty: I am Michelle Crotty, chief capability officer at the Serious Fraud Office.
Stephen Kinnock
Q
Commander Adams: Shall I start, as the City of London senior rep? I have the advantage and the disadvantage of having been in this job only since April, so I can give you a view of where I think things have got to. I obviously was not part of the network when that report was written. I think it reflected an approach to economic crime that has been very much built bottom up historically, which led to the assessment that policing was fairly fragmented, with different levels of investment and different prioritisation across forces.
As long as economic crime and fraud, in particular, are not part of the strategic policing requirement, it is difficult to really get police forces to galvanise that response. We have seen, however, some fantastic work by the Association of Police and Crime Commissioners to get fraud and economic crime into police and crime plans. We have seen through the support that the City of London police has provided, as the co-ordinating force, a great deal of consistency starting to layer on in local forces. In this year alone, we have visited 29 out of all 43 forces to look at their delivery of the economic crime response and of shared good practice across the country. That bottom-up has given us those improved levels of consistency.
Through the spending review and the police uplift programme, we are seeing significant investment at both a regional and a national level to help us to build some of those capabilities. By the end of this year, we will have proactive economic crime teams built around a consistent model in every single regional organised crime unit. With the anticipated investment from the economic crime levy, we will see the growth of regional economic crime teams—proactive financial investigation at a regional level—and, with our support, the continued network of those teams across the country, which will give us a growing and more consistent approach as we go forward.
Stephen Kinnock
Q
Dame Margaret Hodge
I will read out the two figures. The number of crimes under investigation has halved in the past three years, and convictions for fraud offences, according to national crime statistics, have decreased by 67% since 2011. What you are talking about is theoretical; it is not what is happening. At the same time, fraud is going up and up.
Stephen Kinnock
Will you say a word about why that is? The system seems not to be working, so what do we need to do to fix it?
Commander Adams: I will start and then bring in Simon, who is an expert on money laundering. The first thing to say is that fraud is getting increasingly complex. About 70% of all fraud emanates from overseas and, as Adrian touched on, it is very difficult for us to obtain prosecutions and convictions across jurisdictions. That is a real challenge for us, as are the growth in technology, the way in which fraudsters are now exploiting people and the changes in tactics.
Fraudsters are moving away from unauthorised payment fraud, where people’s details are stolen and used fraudulently—banks are now preventing somewhere in the region of 65p in every pound of that type of activity—and we are now seeing much more sophisticated frauds, where people are socially engineered, or manipulated, into physically approving transactions. That of course is much harder for technological solutions to prevent, when the target is a human being.
Of course, all that complexity requires a much more complex and sophisticated policing response. As I described, the growth that is coming down the line—in particular the proactive growth—will not start landing until the end of this year and then, of course, we are several years before we have fully experienced and really competent and effective investigators working on those crimes. All those things will layer on over a period. We anticipate that the technological advances will continue, both in support of us and in challenging us in how we can investigate and progress these crimes. Simon, do you want to comment specifically on money laundering?
Simon Welch: On money laundering, the amount of offences—detected offences—is going down. Criminals are getting a lot more savvy about our tactics and things like that, so we find that they are not having assets in their own names so much—vehicles, houses, things like that—and our opportunities for confiscation are probably going down a bit. However, what you can see from the seizure figures is that the cash value is up, but the volume is down. We are targeting and getting good results from the cases, but it is a smaller number of cases. In reality, POCA is now quite old, and people are used to us going after the money, so they take far more steps to protect that money from us being able to confiscate it.
Jackie Doyle-Price
Q
Michelle Crotty: At the moment, we have those pre-investigation powers for overseas bribery and corruption. They allow us to investigate earlier, in particular to identify banking evidence earlier, and to see whether there is a case to pursue. By extending that to fraud and domestic-based issues, we are enabled to do that in those cases. At the moment, we have to take on a case formally and to commit resource in order to exercise the powers. To some extent, we can negotiate on occasion with companies to get that material, but if we have the power of compulsion, it would make it quicker and easier to get the material and so identify whether there is a case there.
Jackie Doyle-Price
Q
Michelle Crotty: Yes.
Jackie Doyle-Price
And to address some of the questions we heard earlier—if you can act more quickly and establish whether a crime has been committed, that is clearly more efficient.
Michelle Crotty: It is more efficient and means that, if we follow the money and there is a reasonable explanation, we can screen a case out more quickly, rather than committing more resource and taking longer to reach that decision.
Alison Thewliss
Q
“Company formation and related professional services are therefore a key enabler or gatekeeper of”
trade-based money laundering. Is there enough in the Bill to remove that risk?
Simon Welch: It is difficult to say. We have heard about the verification processes going on. With the authorised corporate service providers, if we strengthen all that and make things more difficult, we target harm. At the moment, you can register a company from abroad, and there is little opportunity for us to follow that up, especially in a jurisdiction that it is difficult to get information from. The idea of having ACSPs in this country, where we can see them and start the inquiry from the UK, would be very desirable. I am not sure whether the Bill goes that far; I have not read that bit too much.
The Chair
Sorry, you are going to have to speak up. We all wish to hear the answer.
Simon Welch: Sorry—I appreciate that. Authorised corporate service providers, if they are based in this country so that we have a starting point for our inquiry, would be something that we would welcome. That would make it easier for us to start an inquiry. At the moment, if it is coming from a jurisdiction that is not particularly co-operative with us, it might be difficult for us to get that information, so, clearly, we would want to see that.
Alison Thewliss
Q
Michelle Crotty: No. Anything that will help us to identify suspects is welcome, as my colleague has said.
Alison Thewliss
Q
Simon Welch: If they can still get the companies and they can still make them work, they are going to make them work. It is if we make it prohibitively difficult for them to do that—if we make it difficult for them to create their verifications, because they will have to work harder to get the verification sorted out to make sure they have got the IDs sorted out. We have talked about the fee of £12.50 for registering a company. There are lots of arguments about that—frictionless trade and things like that—but we have the lowest price for registering a company pretty much anywhere in the world.
Alison Thewliss
Yes—by some margin.
Simon Welch: So is there a view for increasing that and using it for Companies House to invest in verification? That is something that could be looked at.
Alison Thewliss
Q
Simon Welch: I do not know. If you were to ask a businessman what they were prepared to start a company for—how many companies they are looking to start? At the end of the day, if you were just building a couple of companies and you knew you were going to get a really good service, you might be quite happy to pay £100 or whatever. I do not know what is a reasonable price.
Commander Adams: One of the challenges for us in our investigations is how desirable shell companies are to criminals who want to create a legacy pattern that an organisation has been running for many more years than it actually has. Of course, if you are then into a large-scale boiler room-type fraud, whether you are paying £12, £100 or £1,000, it is simply a drop in the ocean compared with the amount of money you are going to make at the end of that. Making it harder for people to inappropriately and unlawfully use shell companies in the way they are at the moment is what will help us ultimately.
Alison Thewliss
Q
Commander Adams: If I am right, the Bill allows for retrospective work to take place. However, as you have alluded to, there are simply millions of entities on there. As you heard from colleagues earlier, the resourcing of those retrospective checks, given all the work that has to be done—there are something like 1,500 companies registered every day in the UK; it is phenomenal—is going to be a real challenge. We would want to see resourcing to do those retrospective checks, to remove those companies from the register as quickly as possible.
James Daly
Q
Commander Adams: Again, you heard from colleagues earlier about this. The big thing for us is making sure that checks are undertaken to ensure that individuals who are setting up companies or have a significant stake in them are verified, to give us, as Adrian said, those investigative lines of inquiry into individuals. For us, that is the biggest game changer in what we are currently seeing, but of course it will require the right level of scrutiny and adequate robustness in those checks, and the capacity to do them at speed.
James Daly
Ms Crotty?
Michelle Crotty: The same—anything that allows us to identify the people behind it and then to use that to follow up with lines of inquiry. Capacity is certainly something that we would be concerned about, but the work that the NCA and the NECC are doing with Companies House should help with that, in terms of training Companies House staff.
Simon Welch: It would also be nice to be able to data wash some of the registrations through law enforcement indices before they were actually registered. That is obviously another quantum leap from where we are now. I think we are looking at sharing that data, but that is another thing for Companies House to work out, in liaison probably with the NECC. I think that would be preferable for us. Then we could prevent these companies from opening up in the first place, and stop them being used as vehicles for criminality.
Dame Margaret Hodge
Q
Michelle Crotty: We are very strongly on the record as saying that that is an offence that we would like to see. We have seen good results with it in relation to bribery and corruption since its introduction in 2010. Nine of our 12 deferred prosecution agreements have involved a failure to prevent bribery offence. We think that it not only punishes but helps to reform corporate behaviour. What we have seen with the Bribery Act 2010 is that companies have very much focused on putting adequate procedures in place because that is the defence that it provides them. The prosecution is one part of it, but actually the preventive work in terms of adequate procedures is as important, if not more important.
The other thing that we would say in terms of the impact on business is that for a failure to prevent economic crime offence many of the adequate procedures would already be in place in terms of anti-money laundering and other areas. Clearly that is something that the Committee, and guidance, would need to work through, but the impact on business may not be as heavy as some might fear.
Dame Margaret Hodge
Q
Commander Adams: Yes. Ultimately, as Michelle said, I do not think that the imposition on business would be that significant. There are lots of areas where we see unintended consequences of thresholds upon which, or below which, things are not reported to law enforcement. That sort of legislation would give us the ability to ensure that there are policies and processes in place in institutions to provide the sorts of checks and balances that identify patterns that might fall outside some of the clearly defined breaches of legislation. That, for me, would be the galvanising benefit of that power, in a not dissimilar way to financial institutions reimbursing victims, which helps to galvanise effort and investment into preventing crime, to avoid spending money out the other end. All those sorts of measures are really helpful. Particularly through Adrian’s role as director of the NECC, I think he would say that the things that help to galvanise the partnership and the whole-system response to fraud is where we will ultimately see our biggest successes.
Dame Margaret Hodge
Q
Michelle Crotty: The SFO would like to see those. We understand the concerns that other parts of the system have in terms of how you ringfence a cost regime just for economic crime. In terms of what the SFO can recover in any one year, we can retain £900,000 of legal costs if we win. Clearly, it is the other way if we lose, and there are ongoing discussions with the Treasury. I gave evidence to another Committee last week that, where we do not have a fund available to us for that that sits within our budget, we have to go and negotiate one with the Treasury if we lose. We would certainly welcome some protections, but we understand the challenges around fitting them into the broader scheme.
Seema Malhotra
Q
Simon Welch: Obviously, we are putting more resource into this area. If we are to go after them proactively, we are building up our intelligence around this. Historically, fraud has not been given the same emphasis as other types of criminality, so I think we lack in some areas. If we start to build that up, to get more intelligence that is actionable for us to work on, and to go after some of these people proactively as opposed to reactively, we will be getting ahead of the game, and then we will be able to arrest these people and prevent other people from becoming victims. It is important to invest in this area. It is a difficult time for us, because recruitment and retention of staff are challenging. We are looking to build, and are getting investment streams coming into us. We are looking to develop that all across the piece. We are looking at the intelligence and at the proactive capability and the investigative capability to take this on.
Seema Malhotra
Q
Simon Welch: Resources are a big part of it, but there is experience as well. If we bring in new people, they are unlikely to be the most experienced investigators. Unfortunately, in recent times, we have lost a lot of our middle-ranking, experienced investigators, so we are having to bring people through quite quickly. There is quite a quick turnover now, especially in things like crypto investigations, because those skills are very desirable in the private sector. It is really difficult for us to hang on to those people, so we are going through a bit of a treadmill trying to recruit and hang on to them. Mr Adams is looking at things like structures and strategies within the force to try to hold on to people and to look at different ways of retaining those skills and experience to make us that much better at investigating these things.
Seema Malhotra
Q
Michelle Crotty: It is fail to prevent for us, and it is capacity, capability and retention. As my colleague said, we can train people up with fantastic training, but the real challenge is that they are then very valuable recruits—not just to the private sector, but within the law enforcement community and in how we operate jointly to ensure that we build a pathway for people within law enforcement, as well as out into the private sector.
Commander Adams: The final thing to add to all of that is technology. The licences for the tools that we are able to use at the moment, particularly some of the tools for tracking crypto assets, are expensive. When you start to build up those layers of individual costs that Simon described on the tools and technology, to be really effective we have to bring those together with highly skilled and highly competent individuals. All that is a challenge for us at the moment, in the recruitment environment that we face.
Liam Byrne
Q
Commander Adams: I am not sure that my impression is the thing to take as gospel here. We see from the crime survey, our annual reporting and the growth in trends around victimisation that fraud is growing year on year. We predict that there could be anywhere from 25% to 65% growth in fraud over the next four to five years. If we were to go around the room and ask for a show of hands on who has received a smishing or phishing message, versus those who have been burgled in the past 12 months, I think we would be staggered at the volume.
Liam Byrne
Q
Commander Adams: It is a really complex landscape. We have a great deal of investment from the private sector in some of our specialist capabilities. We need more investment at the frontline of policing in undertaking economic crime investigations at that most basic level. That does not mean more people; it means investment in training to ensure that all frontline officers can deliver that.
Liam Byrne
Q
Simon Welch: As Mr Adams says, we could always do with more people—if you ask, we will always say we want more staff—but the reality is that it is difficult to bring them in at the moment because we are not offering wages that are competitive with some of the other agencies or the private sector. We are struggling to build that up. If we can build that up and maintain some trajectory so we can hang on to some of the staff to get them to an experienced level, we will start to see more impact on performance there, but we need to work on that really hard.
Commander Adams: I touched at the beginning on the investment and the proactivity around both financial investigation and fraud investigation. We have to see some of that investment land, get people into the posts, do the work that City of London police is doing as the national lead force to co-ordinate that activity across the country, and see what effect that has. That will then inform the business case and the arguments that we make for more or different resource in the future.
Liam Byrne
Q
Commander Adams: That might be one for Simon.
Simon Welch: Yes. You can identify a person of significant control, but sometimes it can be difficult if you are looking at the people who ultimately have control of some of those companies, because you have people stood up saying they are that person, but there are people sitting behind that person. It depends how good your intelligence is whether you can work these things out. Very often, if you investigate these people, you will be able to see that they have control of the company. If you do not investigate them, you will not be able to tell. You need to be on them with the right intelligence to work it, and then you might have an opportunity to show that they were running that company.
Liam Byrne
Q
Simon Welch: As an ex-policeman, I will always say yes to that, but obviously there are implications, because you need the resources down there to do it. Obviously, we will always go for the gold standard wherever possible, because if you are doing that, you are stopping people getting in at the first level, but there are obviously implications of the cost of that. But yes, of course we want the highest standards of verification.
Liam Byrne
Q
Michelle Crotty: It is certainly an issue for us. We would be interested in the proposal. If the evidence is overseas, even if the offence is based here, I think we would want to think through the mechanics of the prosecution. There would be some detail to work through, but in principle, I think we would welcome looking at that kind of offence.
The Chair
If there are no more questions, I thank the witnesses for their attendance and their contributions.
Examination of Witnesses
Dr Susan Hawley, John Cusack and Thom Townsend gave evidence.
The Chair
We now have evidence from Dr Susan Hawley from Spotlight on Corruption, John Cusack—via Zoom—from the Global Coalition to Fight Financial Crime, and Thom Townsend, representing the UK Anti-Corruption Coalition. Can I ask Dr Hawley and Thom Townsend to introduce themselves first?
Dr Hawley: Hello. I am Dr Susan Hawley, executive director of Spotlight on Corruption. We are a UK anti-corruption charity that monitors how the UK enforces its anti-corruption laws and keeps its international anti-corruption commitments.
Thom Townsend: Good afternoon, everyone. My name is Thom Townsend. I am the executive director of Open Ownership and the incoming chair of the UK Anti-Corruption Coalition. Open Ownership supports more than 40 Governments around the world to implement exactly these types of reforms.
John Cusack: Hello everyone. My name is John Cusack. I am the chair of the Global Coalition to Fight Financial Crime, which is an NGO. It is a 20-member organisation, both public and private, with large members such as Interpol and Europol, as well as Open Ownership—Thom’s organisation—and RUSI, which you may well know in the UK too.
Seema Malhotra
Q
Secondly, does the Bill provide enough mechanisms to help with transparency around the new responsibilities of Companies House, and should there be reporting—to Parliament, or certainly publicly available—on new powers? What would you want to see in order to have confidence that measures are having impact?
The Chair
Who wants to go first?
Thom Townsend: I think that there are significant areas of improvement for the piece of legislation that we see before us. Primarily, from our perspective, we focus on reform of company registrars around the world, so my focus is very much on how Companies House can better operate. The key area we would identify is around the verification mechanism, as you would expect, and that splits out into two points.
One is around how we verify someone’s identity versus how we identify and verify the statement of control and ownership that they are giving about their involvement with the company. That second part—their status—is not covered here. We are not putting in place mechanisms to understand whether the disclosure of beneficial ownership is accurate, and that is a significant problem. A colleague talked previously about having a gold standard, but we are far off that. We see company registrars in countries around the world taking meaningful steps to attempt to use their data and powers to begin to understand whether those statements are true. That needs to be significantly beefed up in this legislation.
On the second part—the ID of individuals—there are grave misgivings about that being outsourced to the trust or company supervisor profession. There are other ways of identifying people: in an ideal world, Companies House should be doing that. That is a big change for this piece of legislation, but frankly, that is where most of the world is going.
Seema Malhotra
Q
Thom Townsend: It is worth saying that countries that are doing very well on this typically have a national identity card system that is the foundation of their ID process. There are other ways of doing it. I think about Estonia, France, Germany—the list could go on, but it is based around their national ID card system. Clearly, we do not have that. The Government have done significant work on their own identity verification programme, which has had mixed results. We know we can do this. It does not necessarily need to be outsourced to that profession, which of course is supervised, but we collectively have severe misgivings about it.
On the second point around the accountability mechanism, we would like to see a very strong mechanism for Companies House to be coming to Parliament on a regular basis to talk about how this is looking and how it is performing. It is a much broader conversation about the kinds of indicators we would like to see reported on. That is a much longer conversation, but I will pass over to colleagues at this point.
John Cusack: I share Thom’s views, principally, on this. I spent 30 years working in banking as an MLRO—that is the previous history to my current role—and I spent many, many occasions trying to establish beneficial ownership. It is not easy, but it is the key to understanding risk and understanding who owns and controls a bank account, real estate or a company. That is absolutely key. I would like to see an obligation on the companies register that is essentially equivalent to that which a bank has in relation to knowing its customer, to the extent that that is possible. That is where we need to get to. Thom was explaining that some of the better countries are trying to get to that kind of standard.
Secondly, I believe that the registrar of companies needs to have a much stronger obligation than is currently set out in the proposed legislation—it needs, again, to be slightly similar to my old obligations as an MLRO. There needs to be an obligation to operate an AML programme that is worthy of the name, and to have strong and meaningful controls in order to be able to demonstrate that Companies House and the companies register are doing a similar job to what other people do in the private sector.
Dr Hawley: I would like to strongly back that up. It is essential that the “know your customer” rules that the private sector has to use are used by Companies House as well. There is no point having a registry that SMEs cannot rely on because it is not as accurate as it needs to be. That has been a problem now that the big companies simply do not use the corporate register because it is so inaccurate. There is a long way to go on that.
We also have real concerns, as Thom mentioned, about the authorised corporate service provider provision in the Bill. In essence, it relies on another part of the system—the anti-money laundering supervision system—and the danger is that we are just playing whack-a-mole. We are just pushing the problem down the road. We know that HMRC, in its supervision of TCSPs, has had lots of very serious questions about whether it is up to the job, and it just recently revised its average fine level down from £250,000 to £8,000. There are real questions about whether that is a serious deterrent. In its recent report, it found that nearly 50% of its cases that went up to the governance panel had to be returned to the case officer for serious work to be done again. Either the Bill needs to address the AML supervision regime—I can tell you some of our suggestions, because it would not be that difficult to come up with a transition—or there are real questions over whether that clause should be in it at all.
A final point, which was picked up earlier by colleagues from law enforcement, is about how this will be funded. The registry will be meaningful only if there are proper resources. It can be completely cost-neutral to the Treasury. We are heading into a difficult fiscal time, so it needs to be cost-neutral. As the gentleman from the National Police Chiefs’ Council said earlier, we have almost the lowest registry fee. We are the 6th lowest, in company with Rwanda, Timor-Leste, Ukraine and South Africa. Most other countries charge an average of £150 to £300, compared with £12. That could go an enormous way to getting the right IT infrastructure. We know a lot of this will have to be done with technology and AI. Making sure that the fees for Companies House are set at a realistic level to make this properly verified is essential.
Jackie Doyle-Price
Q
Dr Hawley: Absolutely. The key thing is what John alluded to—clause 88. What is the requirement in the Bill for how far the registrar has to go? If it is the minimum amount, the fees will be minimal. If we are going for the gold standard, the fees will need to be higher to reflect the greater verification work.
Thom Townsend: Just a quick thought: what strikes me, reading the Bill, is that it is not quite clear what Government want Companies House to be, when you delve into the detail. Is it around minimising criminal activity, as in the fourth objective? Is it about preventing, which comes up in clause 88? That needs to be resolved to give a very clear idea in primary legislation of what we want Companies House to be. It should be the first line of defence in the UK economy from the perspective of integrity and preventing crime.
Jackie Doyle-Price
Q
Thom Townsend: Absolutely. My point was just that countries that do have been able to go further and faster as a result of having the underlying infrastructure. But no, absolutely, you can do that. We have brought down the cost of identifying people in this country very rapidly, with KYC for new banking, and taking a video of yourself. We have a lot of technology and lots of ways to achieve that end. It does not have to be done through the trust and corporate service provider industry—it simply does not.
Jackie Doyle-Price
That is helpful.
John Cusack: I will just add to Thom’s point about clause 88. The language concerns me greatly. This will be dependent on the registrar’s diligence and, essentially, on the financing that the registrar has in order to carry out their activities. The language—that the
“registrar must carry out such analysis of information within the registrar’s possession as the registrar considers appropriate”—
is extremely timid. If there is no money for it, the registrar will not be doing anything. That is really problematic. We would not apply that in any other circumstance; we would want to set out the obligation—the expectation—and to fund that appropriately, not the other way around.
Alison Thewliss
Q
Dr Hawley: We focused more on what is not in the Bill. I do not know whether John or Thom want to address that.
Thom Townsend: I would hand over to John on this one.
John Cusack: The Bill is positive. It is one of the contributions that will definitely help, and it is trying to fix a long-standing problem. At the end of the day, however, if we want to deal with financial crime, economic crime, we need convictions—investigations, prosecutions and convictions—and asset recoveries. That comes from resourcing the public sector, as well as demanding high expectations from the private sector. I am worried that in the UK the financing of law enforcement, and of the FIU in particular, is insufficient to assure the objectives that we all want, which are to mitigate, manage and reduce harms from economic crime. This is a long-standing weakness in the UK, as it is in many other countries, and that would definitely help, but let us not kid ourselves that it will make a material difference to the economic crime situation in the UK.
Alison Thewliss
Q
John Cusack: Yes, of course. I would support that. However, I would also say, with respect, that the idea is to do prevention with the changes. When we put a lock on the door of an aeroplane, the fact that no one has stormed the cockpit is not how we judge whether a lock on the door is appropriate. We are tightening things up and preventing financial crime, but yes, absolutely, we need to see more enforcement. You would hope that these measures will mean that people will no longer necessarily look to UK companies and Scottish limited partnerships as the vehicle of choice for abuse, and they will look elsewhere.
Alison Thewliss
Q
Thom Townsend: When this legislation passes, there will be a lot of remedial work to sort out what is there—there is no doubt about that. Everything that you have just described is true, and it is probably a lot worse even than we are aware of. As you just mentioned, we are clearly starting from such a low bar that any legislation will have some kind of deterrent effect, but it is important to think not just about ensuring that we hit the gold standard with a piece of primary legislation. It is also the resourcing, but ultimately nothing that we can do will create a 100% perfect system.
Essentially, we are trying to remove as much noise as possible from the system to give law enforcement the best possible chance of focusing its resource where it can make the most difference. It is important not to think about this in zero-sum terms of: is it possible to commit crime or not? It is really just about making an environment where it is somewhat more manageable to detect, and then enforce. As it stands it, is the wild west on that register. If you wanted to do enforcement, we would be here until the end of time.
Alison Thewliss
Q
John Cusack: Not necessarily, because what I am most interested in is getting the Bill out in its current form with a financed and adequate registrar with obligations, and resolving that underlying issue. One of the reasons people use UK companies is not so that they can open UK bank accounts, because then you go through the gamut of UK obligations in the regulating sector, even though that happens occasionally when buying real estate and other things. Actually, people buy and acquire UK companies and Scottish limited partnerships so that they can open accounts abroad, because the UK is seen as a first-class jurisdiction. That means that when they open those accounts abroad, not many questions are asked, or not as many as would be if they were acquiring a Nigerian company, for example, which would ring all sorts of alarm bells. The interesting thing about the companies registry is that the abuse by foreigners does not necessarily translate into a UK economic crime issue per se, even though it is something that we also all want to address.
Dame Margaret Hodge
Q
John Cusack: For my high-risk customers, I always had it at 10% in my financial institutions, and 25% for non-high-risk customers, because I really wanted to ensure that I had almost everybody who could possibly be interested in the company or a relationship. I stuck at 10%, but you can always argue it lower or a bit higher.
Thom Townsend: Yes—whether it should be 5% or not, it needs to be lower. There is an argument to be made between 10% and 5%. My sense is that we have a 25% global standard on this because it is a sort of round number.
Dr Hawley: It is really interesting to look at what Jersey and Guernsey are doing on financial crime. They have a 10% threshold, and they are introducing a lot of other very interesting economic crime measures that go far further than we have in the UK, including a failure to prevent money laundering offence. They also have a measure to forfeit accounts based on a suspicious activity report, so they are really looking at very radical measures in Jersey and Guernsey that will make the UK look quite behind.
Dame Margaret Hodge
Q
Dr Hawley: I would say that that is the easiest. It is a great question and I will jump in, because I have my three. It would be really fantastic if Parliament signalled that its intention is not to pass a Bill that will just stay on paper; it needs to be properly resourced and make a real difference in terms of economic crime. There are three different cost-neutral ways of doing that, some of which you mentioned in earlier discussions. One is cost protection across civil recovery for law enforcement. The US-style system really works. If we want US-style enforcement, we need US-style rules.
Another way is to increase Companies House fees to match the scale of verification that we need. The other way is to invest far more. In the US, 100% of forfeiture goes into a central fund, and local police get up to 80%. We heard earlier that the NCA gets 50%; some police forces only get 18%. We also desperately need to find ways to match the money that law enforcement brings in. Law enforcement brought in £3.9 billion over the last six years. If that had been reinvested in law enforcement, we would have top capability in this country.
There are two other things. I have mentioned AML supervision already. If we could make the Office for Professional Body Anti-Money Laundering Supervision a body that genuinely raises the consistency of supervision across the board while the Treasury works out the bigger picture on supervision, it would make a really big difference. OPBAS could name and shame supervisors who were not performing, and that needs to apply not just to the legal and accounting sectors, but to HMRC and the FCA.
Finally, there is corporate liability reform, which you also referred to earlier. We have been waiting for it. It was in 2015 that there was the first Conservative party manifesto commitment to have a failure to prevent economic crime offence. The Law Commission has now spoken; we have been waiting a long time for it. Ideally, you would have a failure to prevent fraud offence, a failure to prevent false accounting offence and a failure to prevent money laundering offence, but you also need to bring in a change in the identification doctrine for the schedule 8 offences to make this work.
Thom Townsend: Unsurprisingly, verification—the first thing would be to think very hard about whether it is the trusts and service providers sector that we want to do that, to think much more broadly about what other mechanisms are available to us, and to cast the net widely around the world; there is a lot happening.
Secondly, the statements of beneficial ownership and significant control should be verified too. That is a far harder task, because the world has not figured out entirely how to do that. There are some really good examples; places such as Austria are doing good work, but it is largely about using data from across Government to make sure that you can red flag those statements.
Thirdly, we probably also need something in the Bill about having a more permissive data-sharing environment, to make sure that Companies House is getting what it wants. If you look at how the Bill is currently drafted, we have data that is “in the registrar’s possession” or “available to the registrar”. It is very unclear what that means, and it needs to be much broader than that.
A supplementary fourth point is to think long and hard about how we are using an identity, once verified, persistently in a lifelong way. Australia, New Zealand and India issue unique identifiers to directors—and, in Australia’s case, to beneficial owners—for life, which makes the investigation process much more straightforward. There is a lot of good practice out there. We need to look very hard at that and think about how we incorporate it into what the UK is doing.
John Cusack: As far as the Bill goes, I have mentioned one point already, which is the item in relation to beefing up the obligation on the registrar. The second piece is on the information-sharing provision in the Bill—I think it is clause 148. It is a limited information sharing item that essentially requires a SAR to be filed before private information sharing can take place. There is also the exit, pretty much, of the customer, which is potentially problematic. We are going to find that one potential bad actor leaving one bank cannot then open an account somewhere else, but we will also find that innocent people will be involved in that. I would rather have something broader, which allows the detection of unidentified financial crime, whereas, in this particular case, we are going to get identified suspicion being shared, which will potentially lead to some very serious unintended consequences, even though I am very supportive of the provision.
The last thing that I would say outside the Bill is that, ultimately, it is about asset confiscations and asset seizures. The UK is doing okay, but it is not doing anywhere near as well as it should be, and it is certainly underperforming compared with a number of important countries. I will give you one example. Italy not only seizes the amounts that Susan was talking about, but over four or five years it seizes almost £10 billion a year in asset confiscations, because it treats the Italian mafia as a matter of national security and targets its resources accordingly. I would like to see not a change in the law, but the rightsizing of the resources across the piece, whereby they are directed toward the tip of the spear, so that law enforcement FIUs in the UK and asset recovery can be prioritised and targets set, and we get close to the Italians, rather than being where we are today.
Liam Byrne
Q
Dr Hawley: I alluded to one point earlier, which is that if this is not a registry that companies and people can rely on, it will have been a waste of time and money. I alluded earlier to SMEs particularly not having the resources and having to rely on Companies House in a way that large companies would not; they would do their own intelligence. It will be bad for business and the business community, and it will be bad for the UK’s competitiveness. If you look at our competitiveness rating under the World Economic Forum measures, we are pretty good on quite a lot of things—in the top 10 —but for tackling serious and organised crime we are 70 out of 141. That is a competitiveness rating, so it will dent our competitiveness. Actually going for gold standard practice will be good for the economy, and will make us more competitive.
Liam Byrne
Q
Thom Townsend: Objective 4 does really need to say “prevent”. It is an objective related to the registrar’s functioning. The registrar should be responsible for taking really active and clear measures to prevent criminal activity under its bailiwick.
Liam Byrne
Q
Thom Townsend: That seems like a ridiculously low bar.
Liam Byrne
Q
Thom Townsend: Sorry, what do you mean?
Liam Byrne
We have registries of beneficial ownership for assets and property. We have to try to make it possible for law enforcement to connect companies, individuals and assets. Do you think we have the framework for connecting those three dots effectively?
Thom Townsend: As it stands, no. Some form of this legislation will go a lot further. We need to look at how we are uniquely identifying people. In that case, there is an argument for bringing that ID process in-house so you have clarity around it. You can assign that identifier, which then gets used across the panoply of datasets that law enforcement have in their possession to do that interconnectivity. We run the risk a little bit, as the legislation is currently framed, of creating another island that is a bit better connected but probably will not sit at the heart of the process and be that effective first line of defence that the UK economy should have.
Seema Malhotra
Q
Dr Hawley: Ensuring that companies cannot just liquidate has been incredibly important to law enforcement in the past. I am very sorry, but we might have to get back to you on that because I have not looked specifically at that clause.
Seema Malhotra
Q
Thom Townsend: I think there is a balance between speed and effectiveness. Companies House is fantastic at what it does now—it provides a really good service to register a business quickly, and it is really easy to use—but it has never had to do the kinds of things that we are now proposing it does. It will be a long journey to get from where it is today to the sort of high-functioning all-singing, all-dancing machine that we are proposing.
There is a balance between achieving the objectives of the Bill, and the wider goals of dealing with corruption and countering kleptocracy in the UK. We will probably have to look at some sort of transitional arrangement but, ultimately, we should have a much more aspirational and ambitious vision for what we want Companies House to be in five to 10 years’ time, put the resourcing in place, and ensure oversight and accountability to drive that forward and make it happen.
The Chair
Would anybody else like to answer that question? No? In that case, I thank all three members of the panel for their help in giving evidence.
Examination of Witnesses
Oliver Bullough and Bill Browder gave evidence.
The Chair
We come now to the next panel, for which we have until 4.30 pm. This panel comprises two people, both journalists, authors and experts—if I may put it like that—on the Russian Federation. I extend a very warm welcome to Bill Browder, who is in the room, and to Oliver Bullough, who is appearing via Zoom. Bill, would you like to introduce yourself?
Bill Browder: Good afternoon. Just to correct that, I am not a journalist; I am an activist and author. I am the head of the Global Magnitsky Justice Campaign. Basically, my life for the last 13 years has been the result of the murder of my lawyer in Russia, Sergei Magnitsky. My campaign has taken two tracks. One is to get the Magnitsky Act, which imposes asset freezes and visa bans on human rights violators and kleptocrats, passed in different countries, including the UK—35 countries have the Magnitsky Act.
The second part of my activity has been to trace the $230 million that Sergei Magnitsky discovered, exposed and was killed over. We found that that money was going to 24 different countries, and we filed 16 different criminal complaints. From those criminal complaints, I have had the opportunity to see at first hand who does it well and who does it badly, and let me tell you: this country does it badly.
This country has never opened a criminal investigation into the money laundering connected to the murder of Sergei Magnitsky, even though many other countries have done, and have frozen and seized assets. I hope that we will have the opportunity to talk about why that is the case, because I think I can make some proposals for the legislation that might cause this country not to be at the bottom of the league table.
The Chair
We will come to the questions in a minute. Oliver Bullough, would you introduce yourself, please?
Oliver Bullough: It is great to be here. I am sorry that I am not there in person. It is half-term and I have the children in the other room, with instructions to be quiet. It is an honour to appear alongside Bill, who I have known for a long time and whose work I have been following since even before he was an activist outside Russia—when he was still fighting corruption inside Russia.
I am a Russia enthusiast—a Russophile. I worked in Russia as a journalist for a long time. I inevitably came across corruption, because it is difficult to spend any time in Russia without coming across corruption, but the more that I investigated corruption and the more time I spent looking into it, the more I realised that it cannot be understood as simply a Russian phenomenon. The money does not stay in Russia; it moves out of Russia and too often it ends up in the UK, where it buys real estate, football clubs and many other things. I have been spending, I suppose, most of the last decade attempting to map how money moves from kleptocratic countries via tax havens and ends up in cities such as London, in order to work out how corruption really works and cut through some of the simplifications that are often used.
Seema Malhotra
Q
Bill Browder: Thank you. This is the crux of the whole issue. By the way, it was not just Magnitsky money that was not investigated. We have this problem; since Vladimir Putin has come to power, he and 1,000 people around him have stolen $1 trillion from the Russian people. This has been the largest destination of Russian money laundering. In 22 years since he has come to power, not a single money laundering prosecution has come out of Russia—not one—and we are talking about $1 trillion.
What is going on here? What I have learned is that the law enforcement agencies effectively refuse to open criminal cases unless they are 100% sure that they can win without any tough fight on the other side. Why are they so risk averse in opening cases? It comes down to simple risk-reward for them. Their budgets are very thin, as law enforcement does not have a lot of money, and when they go to court here on any type of civil case—it is not true in a murder case, but it is true in a civil case—if they lose at any point, not just at the end of the case, but at any point procedurally during the case, the loser has to pay the winner’s court fees, and there is no budget for that. Therefore, the UK law enforcement agencies will not take that risk.
I have seen it done differently. We presented the United States Department of Justice with the same information. They do not have that problem; they can open a case, conduct an investigation and build their case as they are doing their investigation, and if they lose, nobody loses their job, nobody is bankrupted, and no departments have to go back and beg for more money from the Government. Whatever money they have spent on their lawyers is the money they have spent.
What has to happen here—this is plain as day—is that you have to get rid of this adverse costs issue in a civil case brought by the Government. You could easily write an amendment to the law as it is written, because it is not here right now, to say that if the Crown Prosecution Service brings a money laundering case or an economic crime case, there are no adverse costs. If you make that point, it will change the whole dynamic—the whole risk-reward—for these people.
Dame Margaret Hodge
Q
Bill Browder: The same thing.
Dame Margaret Hodge
Q
Bill Browder: I was not even aware that in a criminal case, a murder case, nobody pays adverse costs. I am not sure if you bring a criminal case in these other—
Dame Margaret Hodge
I think in a murder case they would, actually.
Bill Browder: Would they?
Dame Margaret Hodge
I think so, yes. I am no lawyer—God, I am looking around the table for a lawyer.
The Chair
When I practised as a lawyer, if somebody was acquitted they would be able to ask for their costs to be paid out of what are called central funds, so the taxpayer would be paying for them, not the prosecuting authority.
Bill Browder: However you want to define it, what I would say is I have seen how it works in other countries and they do not have this issue. Therefore, there is no disincentive to bringing a case. It is just remarkable. In every single aspect of the Magnitsky case, we brought it to law enforcement. We brought it to the National Crime Agency; they refused. We brought the company formation agents that were involved in forming the companies during the stuff connected to the Magnitsky case to HMRC. They never shut down a single company formation agency, even though they regulate them.
Nobody brings any cases at all. There are three possible reasons. It could be the reason I have just stated, which is the most charitable one: that there are economic disincentives. I could also say “incompetence”, but I don’t want to say that, or I could say “corruption”, but I am going to stick with the fact that the economic incentives are not there for them. Whatever the reason is, this country should be ashamed of itself. It is an absolute shame, and nothing will change from this law unless there is actual law enforcement. What can we put in place so that the laws are enforced? At least get rid of the economic disincentives.
I will add one more thing, which is that in countries like the United States, if the Department of Justice wins a forfeiture case, they get the money and then they can fund future investigations from that money. When you are talking about a budget of the prosecution service being several billion pounds, you win one big case and you could fund the entire prosecution service.
The Chair
Q
Oliver Bullough: I agree with Bill that the UK has a shameful record when it comes to its failure to investigate and prosecute financial crime. I would add, however, a fourth explanation to Bill’s list of potential reasons why that is not happening. For many years or perhaps many decades, there has been a belief in Britain that making things as simple as possible is good for business—the idea that it is simple and cheap to set up a business and better to have less regulation than more regulation is invariably good for Britain’s business climate.
Alison Thewliss mentioned Scottish limited partnerships earlier. We saw this phenomenon when Scottish limited partnerships were discussed in the House back in 2017 after the exposing of the Moldovan laundromat. There were suggestions by her colleague then—the SNP’s Treasury spokesman, Roger Mullin—about trying to tighten up the rules around SLPs, but they were torpedoed by the Treasury because of concerns that that would lead to investment funds having to spend extra money on meeting regulations.
I believe the estimates for each fund would be between £14,800 and £27,600 per investment fund. That is the cost supposedly to the UK economy. If you compare that to the cost of fraud to the UK economy, which is estimated by the University of Portsmouth at approximately £130 billion, you see how absurd it is to be worried about saving £14,800: we are faced with a problem that is costing us more than £100 billion.
The cost of fraud, which is rampant—40% of known crimes—is a huge tax on businesses and individuals in the UK. It is made possible by the fact that we have been failing for so long to do anything about economic crime. If you look at that quantity of fraud, as estimated by the academics in Portsmouth—there are higher estimates—it is equivalent to about a fifth of the total tax take. It is like adding another VAT to the UK economy, or twice as much again as all taxes levied on corporations. That is the cost of economic crime on the British economy.
There has been a philosophical failure to realise that making things easy is not always good. At some point, you are making things so easy for criminals that you are essentially making things difficult for honest people. In this case, by adding regulation we will be deterring criminals and therefore making things easier for honest people. That is something that, for far too long, people in public life in the UK have failed to realise.
I am here talking only about the effect on the UK. On top of the cost of fraud to the UK, hundreds of billions of pounds are laundered through the City of London every year; that is the National Crime Agency’s estimate. It clearly a guess—a round number—and it could be more; it could be less. That is money being stolen by criminals, drug traffickers and kleptocrats, and laundered through the UK. They are keeping this money. Essentially, it is being taken away from good people and kept by bad people. If we could stop this happening—instead, confiscate the money and keep it for ourselves or return it to the people it is taken from—it would be what is called in rugby a 14-point swing. We would be taking it away from one team and simultaneously giving it to the other one.
I agree that the three suggestions that Bill made for why the UK has been so bad at fighting economic crime are all possibilities, but my favourite fourth one is that we have been simply philosophically failing to understand why economic crime is a problem. This Bill is a real opportunity to do something about that. I was listening to some of the earlier panels; I would like to second what was said by almost everyone, which is that a new law is very good, but a new law is definitely not enough on its own. We need far more resources for Companies House, the National Crime Agency, the Met, the City police, the Serious Fraud Office and all the police agencies to be able to use this Bill.
As I understand it, the funding per officer at the National Crime Agency is estimated at one third of their counterparts at the FBI. Leaving aside the fact that there are far fewer of them, just per officer they are funded at a third of the level of the FBI. If we want them to be able to do the same job that the Bill is talking about, and that American prosecutors and investigators are able to do, we need to fund them adequately. We should at least be funding them as well as their colleagues at the FBI if we want them to be able to do as good a job.
Jackie Doyle-Price
Q
Bill Browder: People are very simple: they operate on the basis of rewards and punishments. There are big rewards for people in the City of London to launder money. Banks make money off transactions and accounts and so on. Company formation agencies make money off selling directors and forming companies. Lawyers make money setting up these structures. There is no consequence if they are involved in in dirty business—none. Nobody faces any consequence.
What we have just seen at Companies House is remarkable: thousands of companies being registered for no commercial purpose other than to launder money. These companies then set up foreign bank accounts. We know who the directors are. Some of the directors are UK citizens. The company formation agencies are UK company formation agencies. We report it to the police, and nothing happens. If nothing is going to happen, then you are not going to change the culture.
America has the Foreign Corrupt Practices Act. Most American corporate executives do not want to be prosecuted and therefore do not make bribes abroad. Austria does not, and so they do. We are in a situation where there is no consequence for doing any of this type of stuff. It does not matter what is written in this law; it does not matter what was written in the previous law. There was a great law passed called the unexplained wealth order. It is a beautiful law, which solved a huge problem, which is not having to get evidence from the bad guys in the kleptocrat countries, and just using the evidence that we have here. We have used it in four or five cases, and most of the cases have actually been on behalf of dictators going after their enemies. We have a total failure of law enforcement. It probably should be studied as a separate issue: why is law enforcement not doing its job? Why is it failing?
You can write as many great laws as you want—there is some good stuff in this law, and good stuff in the previous laws—but if no one is going to enforce it, then you are never going to change the risk-reward and people are going to carry on doing stuff. All this will continue, and I will sit here 10 years from now making the same allegations about how this is a centre of money laundering.
Oliver Bullough: I would like to agree with everything Bill just said. People are more or less rational: they act according to their incentives. We can try and change the culture in the City of London as much as we like but, essentially, if there is no prospect of being arrested, prosecuted and jailed, or at the very least given a large fine, for committing these kinds of crimes, then someone will always be available to commit them because the reward will be sufficiently large and there will be no downside.
I gave a talk to a school a couple of years ago. One of the kids had been sitting silently throughout, and he put his hand up and asked me at the end, “Yeah, Mister, if you know all this about money laundering, why don’t you just go and do it?” I still do not really know the answer to that question, because there is no real reason not to do it. It is a gimme of a crime. You are 99.9% likely to get away with it.
What is particularly frustrating is that when we have prosecuted fraud and put resources into prosecuting fraud, it not only pays for itself, but is a huge profit centre. We saw that from Lord Agnew, who ran a small anti-fraud office from the Cabinet Office during the covid pandemic. He had a small anti-fraud budget that returned tenfold the amount of money that was paid. It is a complete no-brainer to go after this money and these crimes. We would be benefiting the country in every way.
I agree with Bill; it is very frustrating to hear talk about changing culture, when what we really need to do is to change people’s incentives. The way to do that is to enforce the laws that we have.
Tom Tugendhat
Q
We will be listening for further ideas in the future, but do you agree that the Bill at least sets out the first steps to where we really do need to be going to make sure that the crimes begin to be prosecuted? Just to answer your question, Oliver, the reason you do not launder money is that you are and remain a person of integrity; sadly, you are not very rich for it, but there you go. That is the price.
Bill Browder: I have never had any trouble with the laws as they are written here. We probably do not even need this. It is a great law—congratulations; I applaud you on putting it together. It is 252 pages of mind-numbing stuff—
Tom Tugendhat
Of detail, Bill!
Bill Browder: It is great. There is no problem with the actual legislation. This is a rule-of-law country, and the laws have been written, and continue to be written, very well. There is just a huge disconnect between that and the enforcement.
I would add one little detail, if you want to get into the nitty-gritty. We have seen that UK companies are used abroad to set up accounts—this was mentioned by Dr Susan Hawley and perhaps one other—because it looks legit to have a British company with a Cypriot or Latvian bank account. Somehow, when you get a transfer from a British company with a European bank, everything then—that is how these people get away with it.
I would therefore add one small provision to this law, which is easily done. When people are setting up their companies, they should have to disclose, on an annual basis, where they have foreign bank accounts. If you were to do that, then every anti-corruption investigator could go around and start looking at that. I do not think that it is a huge additional disclosure requirement. People have to disclose their income, expenses and so on, so why not disclose where they have bank accounts?
The Chair
Q
Oliver Bullough: I think it was Samuel Johnson who said, about a dog walking on its hind legs, that
“It is not done well; but you are surprised to find it done at all.”
I am happy that the Bill exists; I was happy that there was another one earlier in the year. I would prefer it, however, if Parliament sat back and, instead of passing two fairly minor economic crime Bills in one year, put them together into one with all the other things that desperately need doing, take a long time over it and, when passed, really ensure that the law, as passed, is enforced.
Bill mentioned unexplained wealth orders. Those were a fantastic idea—perhaps hugely overhyped when they were brought in, but a great idea—and a real potential silver bullet for tackling top-end economic crime by both organised criminals and kleptocrats. Sadly, after the failure of the case against the daughter of the former President of Kazakhstan, they have not really been used at all. That is because the National Crime Agency does not have the money it needs to do the job, and that is because politicians have not sufficiently prioritised fighting economic crime. That is where the money comes from.
Yes, by all means, it is good to have another Bill, but I would far prefer to see the existing laws properly enforced by properly-resourced law enforcement agencies with continuous political support than have another Bill. I say that as someone who has been banging on about the problems with Companies House for absolutely ages.
Dame Margaret Hodge
Q
I want to deal with another issue, since you are both Russia experts. There is a mood across the House to tackle the issue of seizing Russian assets as well as freezing them. I know that you have both been working in that space, so could you comment on that? How do you think it could be done, do you think it is a good idea and how much is at stake, to the extent that any of us know the figures?
Bill Browder: Shall I go first, or do you want to, Oliver, since I have been hogging the first response?
Oliver Bullough: No, Bill, you can go ahead.
Bill Browder: We are on our third Prime Minister in seven weeks; there is an economic crisis going on; the purse strings are tight. There will be pressure here not to send as much money to Ukraine because we are worried about our money at home. There is also pressure in the United States. Some 30 Democrats wrote a letter to Biden saying, “Let’s just settle this thing and give the Russians what they want”—or something along those lines—“and not spend this money.” There is also pressure from the Republicans on the other side, saying, “No blank cheque for Ukraine”.
We also cannot let Ukraine go, under any circumstances, because, if we do, Vladimir Putin will be knocking at the door of Estonia or Poland. Therefore, how do we pay for it? Ukraine needs the money and the military equipment. Well, let us let the Russians pay for it. It is a simple thing: the Russians have started this war, created all this conflict, caused all this destruction and killed all these people, and we have $350 billion of their central bank reserves frozen, as a first step.
Why are we not using that money to support the Ukrainians? There are people who say, “That’s never been done before, and therefore we shouldn’t do it.” I would argue that it is pretty straightforward. In Parliaments around the world, what do you do? You make laws. If it has not been done before, make a law so it can be done. It is not a legal issue; it is purely a political issue. Should we dig into our own pockets, or should we let the Russians pay for their own war? We should start by letting the Russians pay for their own war.
I am having the same conversations elsewhere. I was just in Canada, speaking to the Canadian Parliament, last week, and I have been speaking to the US Congress. It is a no-brainer. It is a more complicated issue when you start going to the oligarchs, because you have to prove that somehow they are connected to the Government. But when it comes to the Government themselves, $350 billion is being held right now by the UK, the EU, Canada, the United States, Australia and Japan. That is an easy way to solve this financial problem and help the Ukrainians win this war.
Oliver Bullough: I would like to add to that. One of the reasons why it is complicated to take money away from oligarchs is that, once the money is here, it benefits from the rule of law that we have and so on. It is always harder to take egg out of a cake once it has been baked. It would have been a far better idea not to allow the money to come here in the first place. The lesson I would like to see learned from the current Ukraine crisis is that it is far more cost-effective and efficient not to allow kleptocrats to launder their money through the UK in the first place. If we do not support kleptocratic networks, those networks will not survive. They will not be able to come to such strength and vitality that they threaten their neighbouring countries.
Yes, it is important to confiscate Russian money to return it to Ukraine. Yes, it is important not just to freeze but to seize oligarchic property. But it is also important to put in place the powers, and particularly the law enforcement structures, that we need to prevent more kleptocrats from coming here. Next year, it might not be a threat coming from Russia; it might be a threat coming from China or somewhere else. We would find ourselves in exactly the same situation: trying to work out what to do with money that we had frozen when, if we had not allowed it here in the first place, we would not even have to have this discussion.
Dame Margaret Hodge
Q
Let me put to you another issue. If we strengthened accountability, those working in the Executive agencies might work a little harder at putting into effect the laws that we parliamentarians pass. Bim Afolami has an idea of establishing a Select Committee of the House that would look at the regulators—the enforcement agencies—and could ask for individual cases to be heard by the Committee in private, to see whether there are systemic issues at play, which could lead to public reporting on those issues.
That is one idea. There are others around. Do you think the lack of accountability, particularly for the enforcement agencies, could be a contributing factor to the fact that we just do not do enough—that we do not use our existing structures enough—even without the money and even with the cost issue?
Bill Browder: I think so. This is not the first time I have had this conversation with Members of Parliament. I have been in front of many Committees—the Home Affairs Committee, the Foreign Affairs Committee, this Committee and others—to talk about this lack of enforcement, and I have talked with many Members of Parliament. There is no disagreement with me. Every political party supports the idea of not having London be the money laundering capital of the world. I think everybody agrees. Many good Members of Parliament have put pressure on different Governments, put questions to them and had conversations, and I have seen many Government Ministers agree. Then, all of a sudden, we get to this total disconnect: law enforcement cannot be instructed by Parliament or the Government to open or pursue a criminal case or explain why it has not done so. It is living in its own world.
The only thing the Government can do is replace the people in executive positions in law enforcement; that is the only sanction. There has to be a better way. There are arguments about not wanting to politicise law enforcement and I totally sympathise with those, but at the same time if it is completely failing it needs root-and-branch reform—whether parliamentary oversight, Government oversight or some other mechanism. It is just failing and it has continued to fail in a way that is totally unacceptable. I would hate to be sitting here a decade from now having the same conversation.
Alison Thewliss
Q
Oliver Bullough: It is probably fine. Hopefully, if things are actually enforced and Companies House is given the money it needs to do the job and it is ambitious about that, this may work. Personally, I would like the threshold for a person with significant control to be reduced significantly: perhaps to 10% or 5%. Perhaps there should not be a threshold at all, but if you control you need to declare it.
The Bill is potentially an improvement. I still do not think it is the kind of root-and-branch re-evaluation of Companies House that we need. An amazing variety of corporate structures are available in this country. I do not think anyone has stopped to say, “Do we really need limited liability partnerships and limited partnerships? Why do we have both?” Does anyone stop to think about why they exist at all? Limited partnerships were created as a bit of a strange afterthought back in 1906 anyway. Why do they even exist?
I would like to see discussions like that, personally, but as it stands I think that bit of the Bill is probably okay—certainly if it is enforced properly. If there were an Oliver Bullough-ocracy, there would be all sorts of different changes to how companies could be used. I would not allow people to use foreign companies to own UK property at all; you would have to own it via British companies if you wished to use a company. But that is not going to happen so it is silly to talk about it.
On Margaret Hodge’s point, in the Oliver Bullough-ocracy I would definitely like to have something similar to the Senate’s Permanent Subcommittee on Investigations, with the power to investigate whatever it likes and do really forceful, well resourced investigations into Government agencies or anything at all. That would really help to cut through some of the failures to understand why the failures are happening and to really bring accountability to these bodies, which have been able to hide behind the lack of oversight for a long time.
Alison Thewliss
Q
Oliver Bullough: I heard the Companies House official talking earlier; I did not join at the beginning so I did not catch his name. He was saying that there would be difficulties with resourcing the verification of all that, particularly when it comes to the issue I wrote about recently in my newsletter, about what I call “offshore shell people”—people essentially acting as a kind of shell company. It is noticeable that while the number of offshore companies owning property in the UK has flatlined over the last decade, the number of people with overseas addresses has increased by 250%. Clearly, scams can always be used and things are always coming in. Making sure that Companies House can have the resources to do all that is a tough ask.
This is perhaps stretching way beyond what is in the Bill, but I am not sure that it would not be a good idea to have what the British Virgin Islands has, which is that an ordinary person cannot just file things with Companies House; they have to go via a lawyer or another registered professional. I am not sure that that would not be a bad idea, because then you would not have this issue at all of people being able to log on.
Just to show how absurd it is, I was at a conference the other day and a participant from Canada could not believe me when I said how easy it is to file things at Companies House, so we logged on together and she created a company then and there. She is a tax consultant; there was no “tax consultant” option on the dropdown menu, so she called herself a taxidermist. That is how absurd the system is. There is a lot of scope for improvement before we need to worry about fine-tuning the details.
Alison Thewliss
Q
Bill Browder: One of the things we have seen is that the same individuals—these money launderers—will find a drunk Latvian person, get their passport and then register them in hundreds and hundreds of companies. If those companies get shut down, then they can register them as the directors of other companies; they then become directors of those companies.
Why is it okay to have a person be a director of 400 companies? That does not make any sense to me. Why should there not be some limitation—maybe 10? Ten companies is a lot of companies—but 400 companies, or a thousand companies? That limitation would be an easy thing to put in here, and that would make it harder for the criminals, because there are not that many people who are ready to give up their passports to do money laundering. The number of people who are involved in this is quite small when you actually look at it, because most people do not want their names being used for these terrible schemes.
Alison Thewliss
Q
Bill Browder: In theory, yes. This whole post-box idea just lends itself to anonymity and so on. Why do people not just register their companies at their own home or their own business address if there is a legit company? What is this business with 2,000 companies in one strange industrial park in Glasgow?
Alison Thewliss
Q
Oliver Bullough: I did an investigation a while ago and there was a woman who was a director of four companies, I think, despite the fact that she had been dead for five years. Clearly, someone had been using her signature to sign off on the companies, and that is clearly a misuse of information. Clearly, that is falsifying company information and is already a criminal offence. Despite the fact that I had written about it, nothing was done; no action was taken. As I say, there are a lot of easy wins here before we need to worry about the details.
Alison Thewliss
Q
Bill Browder: Well, Scotland is so dwarfed by London that you do not have to worry about your reputation, because the reputation is so bad here that no one will even be paying attention.
Seema Malhotra
Q
Bill Browder: I have written a whole book about this. The bad guys in Russia are a big part of the problem, but you cannot export this type of corruption and money laundering unless you have somebody doing the importing. And who is involved in the importing? It is the western enablers—the lawyers.
I have had shocking experiences with western law firms that are benefiting from this. If there were some kind of duty whereby they had to actually look into the source of their funding or the legitimacy of the business, I think that would be an extremely powerful thing, if it was actually enforced. There is a whole other long discussion of law that one could have about the role of western enablers, and particularly the lawyers.
The Chair
I am afraid that under the rules that we operate on, I have no discretion to allow this very interesting sitting to continue, so we have to finish. I thank both our witnesses for a really fascinating sitting. Their great insight and knowledge on this subject has been of immense value. Thank you very much indeed.
Dame Margaret Hodge
On a point of order, Sir Christopher. May I ask whether our proceedings are covered by parliamentary privilege?
The Chair
The answer to that is yes, they are, but it should not be abused.
Examination of Witnesses
Professor John Heathershaw and Thomas Mayne gave evidence.
The Chair
We now come to the ninth panel. We have Professor John Heathershaw from the University of Exeter appearing via Zoom and Thomas Mayne from Chatham House. Good afternoon. I am going to ask Professor Heathershaw, first, to introduce himself briefly.
Professor Heathershaw: My name is John Heathershaw. I am professor of international relations at the University of Exeter. I work on aspects of money laundering related to post-Soviet political elites.
Thomas Mayne: I am Thomas Mayne. I am a research fellow at the University of Oxford and a former visiting fellow at Chatham House. I am one of the authors of “The UK’s kleptocracy problem”, a report we released at Chatham House in December.
First, by way of very quick introductory remarks, on the day we launched the report, the then Foreign Secretary, Liz Truss—how time flies—was also speaking. That was a nice coincidence. She was asked about our report and her response was that the UK has the strongest money laundering regulations and laws in the world. As we have heard today, we could debate whether that is true or not; there is some evidence to suggest that it is. However, as we have heard a lot today, without enforcement, laws are useless.
Secondly, I am an expert in kleptocracy and anti-corruption measures. Kleptocracy and money laundering are two slightly different things, and I hope we will get into some of the differences today.
Seema Malhotra
Q
Secondly, would you expect kleptocrats, in the light of this regulation, just to move their assets to unregulated sectors? Are we going to have the protections we would want for Britain, or are we in danger of seeing some of the behaviour simply displaced?
Thomas Mayne: First, on supervision, I do not think there is enough in the Bill. The findings of OPBAS—that the risk-based approach we have put in place really is not working—are quite shocking. What is the solution to that? I know that Dr Hawley was here earlier; Spotlight on Corruption has just released a report on the supervision of the legal sector. There is a debate in that on whether there should just be a single sector supervisor, which is something we should look at.
Generally, I think supervision is lacking and it is very uneven. Across sectors, we are seeing very different layers of enforcement actions. For example, I think the Council for Licensed Conveyancers—obviously, it deals with real estate, which, as we know, poses some of the highest risks for money laundering—produced zero enforcement actions in a three-year period. There are varying levels of not only supervision but enforcement activity. That is definitely something that we should look at that is not really in the Bill. John, do you want to say anything on that question, before we move on to the second one?
Professor Heathershaw: I think the accountability question pertains to parliamentary supervision of those regulatory agencies. As I understand it, there is nothing in the Bill to enhance that. There would be scope for a specific cross-departmental parliamentary Committee in this area, I think. As we know, money laundering crosses different Departments, so greater accountability for poor performance by the supervisors could be tackled through that kind of oversight.
Thomas Mayne: Was the second question whether we are worried about capital flight from the UK?
Seema Malhotra
Q
Thomas Mayne: That is certainly a risk. We are way ahead of the game, in some respects, in terms of which businesses we regulate. I know that there is an ongoing discussion about whether PR agencies should have regulation. I am not an expert on crypto, but I think we should look at bringing it into the existing regime where, if there is a suspicion of money laundering, you have to report it by law.
Professor Heathershaw: To add to that, it is not simply a matter of liquidating assets to move them into other denominations or unregulated sectors. The nature of money laundering is that it is a social and political phenomenon as well. It is about achieving a place to stay where you can protect your assets through the rule of law, and maybe gain some social influence, get your kids into school, and use your residency to garner a wider profile and clean up your reputation. That means that the property and bank accounts are hugely important; they will not just be liquidated overnight.
When we are talking about the kind of money laundering that Tom and I look at by political elites and those from kleptocracies, they are seeking to gain a whole set of goods that you cannot simply get through putting all your assets into crypto, or into a more loosely regulated jurisdiction such as Dubai. There are certain things that the UK, and London in particular, offer that will not simply fall out of the way in a beggar thy neighbour, “Well, we’ll just move ourselves into a sector or jurisdiction that is loosely regulated,” way. I do not think that that should cause us to worry about losing market share, or the problem shifting into another sector, because the problem will always remain in the legal and regulated sectors that are our principal concerns. They will always be there, too.
Thomas Mayne: I have one thing to add on real estate. We now have the registration of overseas entities as part of the previous Act. It will be fascinating to see what happens in January, when the deadline comes in, with the existing properties that we know are owned by oligarchs or kleptocrats, and what kind of information they put on record. It is not a magic bullet. One problem with the ownership of property is that we will not, and should not, have a searchable database where we put in somebody’s name and see whether they own a property in the UK. It does not work like that, so there may be other properties that are perhaps owned by proxies. Those proxies will have their name on record as the so-called beneficial owner, but they will not be discoverable because we do not know about them, and we do not know that proxies are being used. What will be interesting is, as I say, what information will be revealed about the properties that we do know by January.
Jackie Doyle-Price
Q
Thomas Mayne: Transparency is incredibly important. We know that, and we know that what has happened to Companies House in the past 15 years is ludicrous. We have heard examples of that today. We are one of the first countries in the world to have a beneficial ownership register, and I think that the Bill will take us to the next stage in verifying the information that is put on to Companies House, but, as Dr Hawley said earlier, will we still be able to rely on that information? There is also a risk that it just becomes another layer of what we might call zombie transparency. We have all this data, but so what? If it does not lead to enforcement actions or to people who are breaking the rules and submitting false information being penalised—sanctioned, fined, jailed—it will be all for naught. It needs to be accompanied by robust enforcement action. We have heard that from many speakers today.
Jackie Doyle-Price
Q
Thomas Mayne: Absolutely. If we take the PSC register, which has been in for a few years now, we can point to that and say, “This person has to be the controller of that company. Why is this person living in a shed in Siberia when £100 million is going through their company?” Before the PSC register, we could not say that. Now we have verification procedures coming in, we should be able to say that somebody at least—Companies House or whoever—has checked that this person is real and is the person they say they are, in terms of the information submitted to Companies House. We should definitely have this, but it is only the first step.
Professor Heathershaw: To emphasise that point, we know that even where there is transparency—even where we know the money is going—there is an enforcement gap. For example, Tom and I obviously work together, and we have provided your Committee with two of our most recent reports: one on unexplained wealth and one looking comparatively at the Dariga Nazarbayeva and Zamira Hajiyeva cases, in which we demonstrate that the reason why one failed and the other succeeded was simply the incumbency status of the two. The one who remains in power, has a good relationship with the law enforcement authorities back home and has privileged access—one might argue, an unfair advantage there—is able to defend themselves against that measure.
Unfortunately, the UWO reforms that came through earlier this year in the Economic Crime (Transparency and Enforcement) Act 2022 do not fit that part of the problem. It is also part of a bigger problem. When we look at our dataset of £2 billion-worth of properties in the London and the south-east—included at the end of the Chatham House report, the blue one that you should also have—we find that the 73 cases of incumbents, the people who remain in good favour in the kleptocratic states from which they come, get to retain their properties, but 13 out of the 15 cases of exiles, of those who have fallen out of favour, lose their properties. That is not explained by exiles being more corrupt and incumbents less corrupt, so there are problems there around enforcement.
That means, effectively, that however much transparency we have, the measures that are being adopted are not really introducing rule of law at all, because what determines the outcome for people—whether they get to keep their property—depends on whether they are in political favour back in the kleptocratic state. That is a real indictment of the way in which the UK system has hitherto functioned. It shows the limits of what transparency can achieve. As Tom mentioned, with this Bill the UK will be a gold standard of transparency across the world, but it will still lack in terms of accountability and enforcement. That is the real challenge.
Jackie Doyle-Price
Q
Thomas Mayne: Yes.
Professor Heathershaw: Yes, I would agree with that statement entirely.
Alison Thewliss
Q
Thomas Mayne: I think so. Where do you cut it off? It certainly should if there have been large-scale, egregious actions. Oliver mentioned somebody registering companies in the name of a dead person, and I found an example of that in an investigation years ago. People should be penalised for really fraudulent misuse and prevented from registering companies again in the future.
Alison Thewliss
Q
Thomas Mayne: On the point about directors, there certainly should be; it is crazy that you have these people with 1,000 companies. I am not sure on your point about addresses. If you are an investigative journalist or a freelancer and you do not want to register a company with your home address, for example, or if you are the PSC and you have your name on the company, is that enough? Perhaps there needs to be some provision about having an office where you have to physically be and sign your name. I am not sure about the proxy address, but certainly, on your point about proxy directors, limiting the number would be a good idea.
Alison Thewliss
Q
Thomas Mayne: I think so. Obviously it is difficult with PSCs, because I can say I am the PSC of a company and there could be an agreement written in a safe in Liechtenstein somewhere that says it is actually a Kazakh politician or whoever it may be. Certainly, there are probably egregious examples where it is clear that the person is not the PSC. You can do some research on them. There have been some examples today where there is clear evidence that the person is not who they say they are. Yes, there need to be fines, and the fact that there has been only one so far again goes to the point on lack of enforcement over fraudulent information submitted to Companies House.
Alison Thewliss
Q
Thomas Mayne: Possibly; maybe that would overburden it. There are already talks, with the verification coming in, about ramping it up.
Alison Thewliss
Q
Thomas Mayne: It is an option.
Liam Byrne
Q
The Chair
Before you answer that question, is this question directed to that action in relation to measures in the Bill? I hope it is, because otherwise it will not be in scope.
Liam Byrne
Yes, it is a gap in the Bill.
Thomas Mayne: Absolutely, and many thanks for bringing up the case. As you mentioned, none of the authors had any say in the matter and we did not think it was justified, as the evidence we put in the report is entirely accurate. This is a perfect opportunity for some kind of anti-SLAPP legislation to be put in the Bill. Dame Margaret spoke at a recent debate with David Davis; some other examples were given there. If we do not put it into this Bill, will it just be mothballed and we miss our chance? Meanwhile, more journalists are being threatened, and a lot of information is not being put into the public domain because of the threat of a SLAPP. The Bill is related to transparency, as you say, so is there an opportunity to put that sort of measure in the Bill?
Professor Heathershaw: Obviously, I would agree with that. Our report has been subject to these issues. We have also seen many threatening letters over the years. I think it is fair to say that we are some of the leading researchers in the UK on this specific area, at some of the UK’s leading universities. Professionally, it is shocking for me to find that we could be subject to such aggressive letters. The risks were so great, simply because the costs could not be limited.
I think there is a need to introduce a merits test early on to dismiss legislation. I think there is also a need to cap the costs for defendants, because at the moment you have to get very expensive libel insurance to protect yourself, which can be very difficult. Even then, there are huge costs involved.
The question about whether there should be specific legislation from the Ministry of Justice is interesting. At present, that has not been tabled to Parliament and so the opportunity that presents itself—to amend Bills, to provide certain measures, to introduce costs—would definitely be within scope. When you see these cases, many of the people from outside a Government service who have given evidence today—I am sure Oliver Bullough or Bill Browder would speak to this themselves—have been subject to those actions for things they have written that are entirely accurate and in the public interest. In that sense, such a measure is within scope.
It is also within scope because money laundering of this type is always accompanied by reputation laundering, which means seeking to clean the public record of questions about your sources of wealth and misdeeds of the past. It is very much within scope and it would be great for the Bill to consider things like a merits test and a cost cap for defendants in defamation counter-claims.
Dame Margaret Hodge
Q
Thomas Mayne: I mentioned earlier the PR industry. I think there is a debate going on, following the Russian invasion, about whether there should be transparency over who you represent. Should it be put on record and in what sense? There are membership organisations in the PR world, but you do not have to sign up to them, so there is an internal discussion going on about whether that should become mandatory. Do you somehow put PR under the scope of money laundering regulations? Maybe that is going too far, but some kind of oversight and transparency of such PR agencies, who sometimes represent the kleptocrats and use their wealth to threaten journalists, should certainly be considered.
Professor Heathershaw: It is my understanding that there was a consultation on a foreign influence registration scheme under an earlier, different Home Office Bill. That is where you may have something equivalent to what the US has in the Foreign Agents Registration Act. If you are looking specifically at kleptocrats linked to foreign regimes, or who are themselves part of foreign regimes, PR agencies are working on their behalf to clean their reputations, potentially in a wider public realm with public institutions, and, of course, to specifically target Government officials to potentially donate to political parties—a non-British citizen can do that while retaining overseas citizenship.
Those things would be in scope of a foreign influence registration scheme. Again, that crosses over into the territory of the Bill. It has previously been proposed as part of another Bill, but I think it is very much needed for the PR industry.
Dame Margaret Hodge
Q
Thomas Mayne: That is an excellent question; I am not quite sure how to answer it. As researchers—quite akin to journalism—we all play a game of self-censorship in what we say. Even when you have information about donations from people from overseas—kleptocrats or oligarchs—that is certainly in the public interest, there is always a tendency to draw back and not put it in the public domain. If there were some other forum that allowed that information to be put there without the legal threat, that would be fantastic. At the moment, we rely on you as MPs to bring to certain issues up under parliamentary privilege, because the way the libel laws are set up in the UK is stymieing that kind of debate, which needs to be able to continue.
Dame Margaret Hodge
Q
Professor Heathershaw: On the Chatham House paper, two of our authors are Americans, and they have a first amendment right. They think the situation that has arisen with respect to Chatham House is extraordinary and absurd. You could have a first amendment right in some kind of British Bill of Rights, which has been mooted in the past. In terms of academic and journalistic freedom, you could have a specific statement setting out that anything within professional competence that is evidence-based and without malice is counted as free speech.
I think there is obviously a need to revise the Defamation Act 2013 to say that, unless you can determine that a statement has been made with malice, and if it is within professional competence and accurate, it should not even be considered admissible as a potential case of libel or defamation. As researchers, our work goes through ethics committees—
The Chair
Order. I am afraid I have to stop you there. I have no discretion to allow you to continue because under the rules set for the Committee, the sitting has to end now. I thank both our witnesses very much for coming along and helping us with our inquiries.
Ordered,
That further consideration be now adjourned.—(Nigel Huddleston.)
Financial Services and Markets Bill (Fourth sitting)
Tuesday 25th October 2022
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Financial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 25 October 2022 - (25 Oct 2022)
The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 10 - Question accordingly negatived.
The Chair
Before we continue with consideration of the Bill, I have a correction to announce to an earlier Division result. In this morning’s sitting, the Committee divided on amendment 44. The result of the Division was incorrectly announced as two Ayes and 11 Noes. The Noes were, in fact, 10. Apologies for that. Although it does not change the substantive outcome of the Division, I wanted to notify the Committee. The correction will be reflected in the Official Report.
Clause 8
Designated Activities
The Financial Secretary to the Treasury (Andrew Griffith)
I beg to move amendment 22, in clause 8, page 7, line 7, at end insert—
“(7) The financial instruments, financial products and financial investments mentioned in subsection (3)(b) may include cryptoassets.”
This amendment clarifies that cryptoassets may be regulated using the new power in Part 5A of the Financial Services and Markets Act 2000 (designated activities) which is inserted by clause 8 of the Bill. The new provision relies on the definition of cryptoasset inserted by NC14.
The Chair
With this it will be convenient to discuss Government new clause 14—Cryptoassets.
Andrew Griffith
It is a pleasure to serve under your chairmanship, Dame Maria. Cryptoassets and blockchain could have a profound impact across all forms of the financial services sector. We are still on the cusp of this breakthrough technology, and its uses are continuing to evolve. Clauses 21, 22 and schedule 6 will enable the Treasury to establish an effective regulatory regime for digital settlement assets. Those include cryptoassets referred to as stablecoins. The Committee will consider those clauses in a later session.
Following engagement with industry, the Government recognise the need to move ahead with regulating a broader set of crypto activities beyond stablecoins; that includes activities relating to the trading and investment of cryptoassets such as Bitcoin and Ethereum. Through the Bill, we want to ensure that HM Treasury has the necessary powers to deliver that. The Government believe that creating an effective comprehensive regulatory framework for cryptoassets has the potential to unlock innovation in the UK’s crypto sector and to boost growth.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
What do the Government mean by “innovation” in a piece of legislation? I wonder why such a term is used, because it is so broad. What does the Minister actually mean?
Andrew Griffith
If the hon. Gentleman will let me continue, I can offer some clarification. It is vital that the Government have the flexibility to develop a world-leading regime for cryptoassets in an agile way. The innovation itself comes from emerging new technologies or new uses for those technologies. The role of the Government and the Treasury in this respect will be to create regulatory frameworks that enable their safe deployment, which I hope all Members of the House agree with. Together, amendment 22 and new clause 14 will ensure that that happens.
Dame Angela Eagle (Wallasey) (Lab)
The Minister is quite right that all Governments have to think about how to deal with the emergence of cryptocurrencies, but using that phrase is a bit like using the phrase “genetically modified”. We would certainly want any coin that the Bank of England decided to back to be treated very differently from Bitcoin. Could the Minister say a bit more about how regulating for a piece of electronic money backed by the Bank of England would be different from regulating in a way that would make Bitcoin seem almost reasonable? We know that it is a gigantic gamble that no one in their right mind would want to invest in.
Andrew Griffith
I am cautious of time; this issue would be apt for a debate in itself rather than being discussed as part of the Bill’s technical clauses. Aspects of Bitcoin are already within the perimeter of the regulatory regime. As I said at the beginning of my remarks, that is an emerging area. The hon. Member for Wallasey is quite right that there are trade-offs, and we want to protect consumers while not shutting the regulatory regime off from an emerging set of technologies.
Andrew Griffith
I give way again, but I do not want to turn this into a debate about the underlying societal challenges of an emerging technology; I want us to confine ourselves as much as possible to the Bill.
Martin Docherty-Hughes
I am grateful to the Minister. I disagree that crypto is emerging; it has been around for quite a long time. In terms of parity of regulation and consumers, there are also the producers. It seems that there would be a halo effect: for example, larger companies would control stablecoin, but small or medium-sized companies that could produce stablecoin might be excluded. Will the Minister assure us of the Government’s intention to create equity in the stablecoin market?
Andrew Griffith
It is certainly not the Government’s intention to create anything other than opportunities for different participants to emerge and bring forward products in the sector. Those could include stablecoins, which are asset-backed cryptoassets. Over time, they could include central bank-issued currencies. The Government have indicated a desire to explore that, but have not yet confirmed that the Bank of England or the Treasury intend to issue.
Of course, we must ensure that products already out there being advertised to our consumers are appropriately regulated within the regulatory perimeter. We are not preferring or advantaging one or other part of that, but without the amendment and new clause we would not be able to bring forward the appropriate regulations, which the regulators will consult on with industry in due course. I hope that clarifies the Government’s thinking. Outwith the Committee, it will be appropriate in due course for the Government to update their set of policy objectives for this space. The subject that we are discussing today is somewhat narrower; it is just the remit of the Bill.
Amendment 22 clarifies that cryptoassets are within scope of the designated activities regime introduced by clause 8. We talked earlier about the designated activities regime—the DAR. By bringing cryptoassets within its perimeter for the first time, some of the societal outcomes and concerns that hon. Members have raised can be addressed. If we do not bring them within the perimeter, those concerns cannot be addressed.
New clause 14 clarifies that cryptoassets could be brought within the scope of the existing provisions of the Financial Services and Markets Act 2000 relating to the regulated activities order. The substance is that cryptoassets will be treated like other forms of financial asset: not preferred, but brought within the scope of regulation for the first time. That is the aim of the new clause. It will ensure that the Treasury is equipped to respond to developments in the crypto sector more quickly and deliver regulation in an agile, risk-based way that is consistent with our approach to the broader financial services sector.
The Treasury will consult on its approach with industry and stakeholders ahead of using the powers, to ensure that the framework reflects the unique features, benefits and risks posed by crypto activities. I think that is the assurance that hon. Members seek: that the Government will consult before seeking to use the powers. Any secondary legislation made to bring new cryptoasset activities into the regulatory perimeter would be subject to the affirmative procedure, so each House will have an opportunity to debate the legislation. That gives Parliament the appropriate oversight.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
We welcome Government amendment 22 and Government new clause 14, which we recognise would extend financial protection to cryptoassets. It is a welcome and important move that will help to prevent high-risk cryptoassets from being falsely advertised to the public.
Does the Minister believe that the definition of cryptoassets is broad enough to capture financial promotions of as yet non-existent cryptoassets? I also wanted to ask him how the broad-ranging definition of “crypto” used in clause 8 takes account of the fact that the Bill only brings stablecoins into payment regulation.
Martin Docherty-Hughes
I draw the Minister and his Department’s attention to the work of Dr Robert Herian, who is one of the primary academics on regulation. I am mindful that he says it is the technology that underpins stablecoin and other related cryptoassets that we seek to regulate through the legislation. I welcome that—it is a step forward—but he has also said that the technology
“may offer an opportunity to recalibrate the powerplay between those who would engage in aggressive tax strategies and planning, and those charged with regulating them”.
Can the Minister advise Members whether he believes that this approach to stablecoin and future innovative technologies, which are already there, will enable a recalibration, so that finance is not utilised in some type of tax dodge? Could he reinforce that point? Every time we hear a discussion about stablecoin and cryptoassets, there is a certain element of finance that I do not think anyone here would really support.
Andrew Griffith
On the question posed by the hon. Member for Hampstead and Kilburn, I do believe that the definition is broad enough. If there are specific concerns or use cases that the hon. Member feels are not encompassed, I am happy to take that back offline or to write to her with advice. The intention is clearly to allow sufficient flexibility to broaden the perimeter.
I am not fully familiar with the works that the hon. Member for West Dunbartonshire talks about, but I am happy to become more familiar with them over time. It is clearly not part of the Government’s intention to legitimise what would not otherwise be legitimate or to create the opportunity for issuers to evade responsibility to society. That is not the Government’s aim and objective.
Amendment 22 agreed to.
Peter Grant (Glenrothes) (SNP)
I beg to move amendment 35, in clause 8, page 9, line 25, at end insert—
“(ba) in cases where the regulations make provision for liability, make provision for nominated representatives of organisations against whom liability has been found to be held personally liable for actions undertaken in relation to carrying out a designated activity,”.
This amendment would allow for nominated representatives to be held personally liable for the carrying out of a designated activity when an organisation has been found liable.
This is another amendment that attempts to improve the protection of consumers, small investors and others who in the past have been far too easy prey for unscrupulous company directors and other people in charge of companies. In a number of the recent financial services scams, we have seen that even once the investigatory regulatory process has been completed, which in itself can take five, even 10 years, any attempt to recover money from where it should be recovered from—the pockets of criminals—is frustrated by the fact that the companies at the centre of the scam have at best no money left in their books. Most of the time, they have been placed into liquidation long ago.
Part of that liquidation process is always moving the money into other companies, very often hidden in offshore anonymous companies owned by the exact same person. Effectively, the person who works the scam takes steps to get their money well out of the reach of the UK regulators and enforcers long before the liability of the company is established. Amendment 35 seeks not to require but to allow the designated activity regulations in specific circumstances to make regulations that say, “There will be occasions when individuals who have carried out the misconduct will be held personally liable to people who have suffered.” That means that those who have been scammed in a way that is not covered by the financial services compensation scheme at least have a chance of getting their money back. Possibly more importantly, the amendment would be a further deterrent to those who would carry out such scams, because it will at least partially close down the option of their hiding their ill-gotten gains in a different company, where they are no longer within reach of the regulator.
I appreciate that anything that starts to blur the distinction between a shareholder, a director and the legal personality that is a limited company should be used with caution. I fully understand why, in UK law, a company is its own person with its own legal identity, but there are times when we cannot allow the director of a company to hide behind that—times when natural justice says that if we know who is responsible for people losing their money, and know that they have buckets full of money sitting in a company somewhere, it is perfectly reasonable to say to them, “We will have that money to compensate the people you scammed.”
The victims of Blackmore Bond will never see their money again. I understand that one of its directors is now bankrupt, but the other definitely is not. Most of the victims of Safe Hands Plans will probably not see their money again. Remember, its director bought the company at a time when he knew that it would have to wind up in a year or two; we have to ask why he was so keen to buy it. He is not a poor person; he is extremely wealthy. He just managed to move his money out of that company and into others.
Clearly, the amendment could not be retrospective, but if it was agreed to, it would mean that if any person tried the same dodge in future, their victims could, in court, try to get their money back from the person who stole from them, rather than from the company, which will often no longer exist.
Dame Angela Eagle
I do not want to row in behind the hon. Member and support absolutely everything that he says on his amendment, but I know what he is trying to do: to put something in statute that would solve the problem of fraud, which is more and more prevalent in our financial system, especially in and around the perimeter that we have been talking about. There can be questions about whether a person is inside or outside the perimeter, or whether a bit of their company is inside and a bit outside. That kind of fraudulent hiding behind being regulated when the things being sold are outwith the perimeter does fool a lot of people, and a lot of money is scammed out of our constituents’ bank accounts in that way. Does the Minister have any observations on how we could—
Dame Angela Eagle
Before we were so rudely interrupted, I was saying that, although I do not support the detail of the amendment, it is a hook on which to hang the sheer frustration that many of our constituents feel about a system in which vast amounts of money are scammed. Some of those who have benefited are in plain sight, often with their ill-gotten gains, while our constituents have had their life savings wiped out. It seems that the law can do nothing to touch these people, and I share our constituents’ frustration.
We will get on to fraud and other issues later in the Bill, but I understand and respect the creativity of the hon. Member for Glenrothes in using the amendment to raise them now. In replying to the debate, will the Minister say how the Government think we could massively improve the attack on fraud in our financial system, because it is increasing rapidly? The risks for those who perpetrate fraud are tiny, but the rewards are huge, and that is surely driving the ongoing attacks on the life savings of many of our constituents. That makes engaging with financial services—buying and selling, and buying products from the system—difficult and potentially dangerous, and it puts many people off trying to make the provision for themselves that we would normally want them to make.
Shaun Bailey (West Bromwich West) (Con)
I, too, support the intentions behind the amendment from the hon. Member for Glenrothes, which were very well articulated by the hon. Member for Wallasey. We often see these people swanning around the place with their ill-gotten gains, while many of our constituents have been on the receiving end of a scam. Even when there has been some form of regulatory investigation, some people do not feel that justice has been done. The amendment tries to make tangible something that may appear quite abstract to our constituents. I support the amendment’s aim but, to follow one of the Committee’s themes, perhaps this is not quite the place for it.
That said, I echo the request for reassurances from the Minister on how we will construct a regulatory regime that makes our constituents feel that there is a degree of responsibility. As Members on both sides of the Committee have said, many of our constituents, particularly those who have been victims of fraud and scams, feel that although the letter of the regulatory system may have been followed, justice has not been done. As we consider the Bill, we need to keep that at the forefront of our mind. I can get on board with the intentions behind amendment 35, but we have to first consider its practical effects. I hope that in his summing up, the Minister will give the Treasury’s thinking on this issue.
Tulip Siddiq
Later, I will come to my amendment on the Bill’s fraud provisions, but I want to express my support for the intentions behind amendment 35. Does the Minister oppose in principle the idea of nominated representatives being held liable for the carrying out of a designated activity when an organisation has been found liable?
Andrew Griffith
I thank my hon. Friend the Member for West Bromwich West for his reasoned response; I make common cause with him. The issue of liability compensation vexes the sector, and a huge number of regulatory interventions and compensation schemes are concerned with that. I say to all hon. Members that the battle against fraud and for recompense goes much wider than the Bill. It includes the Government’s fraud strategy, our endeavours on economic crime and the activities of various regulators, but I associate myself with colleagues’ remarks.
It is said that hard cases make bad law, and regrettably the Government feel that the amendment cannot be supported. We need to be conscious that limited liability is an important principle in UK law. Measures elsewhere in the Bill—we will come to them later in our discussions on clause 8—allow the Treasury to make regulations concerning liability and compensation in relation to designated activities. That goes some way to answering the question raised by the hon. Member for Hampstead and Kilburn. In principle, the Government are absolutely on the side of victims; sometimes it is just a question of bringing forward the appropriate regulations that will not have unintended consequences.
Given the breadth and variety of activities that can fall within the designated activities regime, we need a tailored supervision and enforcement framework for each type of activity, rather than over-generalising. The Treasury can use powers in the DAR to design and create separate supervision and enforcement frameworks.
Proposed new section 71P, which will be inserted into the Financial Services and Markets Act 2000 by clause 8, allows the Treasury to make regulations concerning liability and compensation in relation to designated activities. That means that the Treasury can make provision in secondary legislation for the Financial Conduct Authority to hold liable individuals—this answers the question—working for a company that is carrying out designated activity, where appropriate. We support that in principle, but it is for the FCA to bring forward the regulations for a particular type of activity.
Proposed new section 71Q to FSMA provides that designated activity regulations—
The Chair
Order. The Minister might want to pause his comments on clause 8 and focus for the moment on amendment 35. We will come to clause 8 stand part shortly.
Andrew Griffith
Thank you, Dame Maria. You are right: many of these matters fall within the domain of clause 8, which we shall discuss shortly.
Peter Grant
I thank Members on both sides of the Committee who have supported the intention behind the amendment. As I said in my opening remarks, I accept that it does not sit particularly comfortably in a financial services Bill under the Treasury, because the Treasury is not usually responsible for the general regulation of businesses. Nor does it sit comfortably in the Economic Crime and Corporate Transparency Bill, which I understand is shared between the Department for Business, Energy and Industrial Strategy and the Home Office. BEIS, through Companies House, is not responsible for the regulation of financial services and will not be responsible for the regulation of designated activities. Nobody is entirely responsible, and that is the problem.
To those who say, “Yes, we agree with you, but this is not the time,” I say, “If not us, then who, and if not now, then when?”. Tomorrow, some of our constituents will be scammed, and more will be scammed the next day. Every day that we delay, waiting for the Government to introduce the perfect clause that has no unintended consequences, causes unintended consequences for our constituents. I accept that the amendment might have unintended consequences, but the Government’s inexcusable delay in closing the loopholes once and for all has already led to unintended consequences. I intend to press the amendment to a vote for that reason.
Question put, That the amendment be made.
Peter Grant
I beg to move amendment 36, in clause 8, page 10, leave out lines 22 to 27.
This amendment would remove the Treasury’s proposed power to make regulations which modify legislation of the Welsh Senedd, Scottish Parliament or Northern Ireland Assembly for purposes connected with the regulation of designated activities.
The Chair
With this it will be convenient to discuss amendment 37, in clause 8, page 11, line 38, leave out from the first “Parliament” to the end of line 40.
See the explanatory statement for Amendment 36.
Peter Grant
The amendment can be summed up in four words: “Hands aff oor Parliament”, whether that Parliament is the national Parliament of Scotland, Senedd Cymru or the Northern Ireland Assembly. Those who claim to respect the devolution settlement cannot do so with any credibility if they continue to give power to Ministers of the reserved Parliament to override decisions of the democratically elected national Parliaments of three of the four equal-partner nations in the Union. This is a power grab of the kind we have already seen in other EU withdrawal legislation. Some of those power grabs will now happen, because the House has voted for them, but that does not make them right or any less of an outrage against democracy. Amendment 36 must be agreed to for the Committee to be able to hold its head up in public and say, “We support democracy and we respect the devolution settlement.”
Amendment 37, although not technically a consequential amendment, is as close to one as makes no difference, because the wording that it would delete on page 11 would no longer be relevant if we agreed to amendment 36. It is my intention to press amendment 36 to a vote.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
I hope that when the Minister responds to the debate on the clause, he will cover proposed new section 71R of FSMA 2000 before reaching the point mentioned by the hon. Member for Glenrothes. Subsection (1) of the new section is a Henry VIII power that allows the Treasury to amend legislation, including primary legislation. Will the Minister outline when, why and how the Government intend to use those Henry VIII powers, and what safeguards we have in the Bill against their abuse?
Andrew Griffith
I hope that we can dispense with the amendments quickly. They are meant simply to prevent the Government from making amendments to devolved legislation. The clause deals with matters that are reserved to the UK Government. We consider new section 71R in clause 8 as an essential power that gives the Treasury the ability to ensure that legislation works consistently and effectively when changes are brought about by virtue of the DAR. It also permits the Treasury to amend legislation made by the devolved legislations. The position of the hon. Member for Glenrothes on that is clear, but it is not shared by the Government. Although we do not expect to amend legislation from the devolved Administrations, this is a precautionary power.
Let me reply to the hon. Member for Kingston upon Hull West and Hessle. There is no current legislation that we expect to be amended in such a way, but it is possible that legislation made by the devolved Administrations has some references buried within it to aspects of financial services and markets legislation, which is why the power is needed. There is precedent for that approach. Section 144F of FSMA contains a similar power that can be used for legislation made by the devolved Administrations. I hope that that reassures the hon. Member for Glenrothes—although I fear it does not—and ask him to withdraw his amendment.
Emma Hardy
I fear that the Minister did not fully address my point, which is that the clause contains Henry VIII powers. I do not think he clearly outlined exactly when those powers would be used. He has mentioned that there are similar powers in a different piece of legislation, but has not said specifically when the Government would use these incredibly powerful Henry VIII powers to overrule primary legislation.
Peter Grant
I hope that the record of the sitting will clearly indicate that the Minister was given the chance to reply to the hon. Lady’s question—twice, in fact—but chose not to.
It is a fundamental principle of the devolved settlement that the Conservative party insists that it wants to protect that if a decision is made by a devolved Parliament under its devolved powers, nobody should have the right to overturn or amend that decision other than that Parliament. The Minister has said that he is not aware of any circumstances when he would want to use the power, so why not wait until the circumstance arises? Why not speak to the devolved Parliaments then—or, indeed, why have the Government not spoken to them already—to say that devolved legislation is causing problems, and to ask whether they can agree, cross-party and cross-nation, to change it, rather than pushing aside the devolved nations and the devolution settlement, and imposing rules on our people against the devolution settlement? Let us not forget that 75% of our people voted for the establishment of the Scottish Parliament.
I do not agree with everything Senedd Cymru does. It is not my party that is in government in Wales; it will never be my party that is in government in Northern Ireland. I will not agree with everything they do, but I utterly respect the rights of those Parliaments to legislate in the best interests of their people. If the Minister is saying that he does not think that he will be able to trust the devolved Parliaments to make a sensible decision if and when that becomes necessary, we have a big problem.
Martin Docherty-Hughes
My hon. Friend talks about not trusting the Scottish, Welsh or Northern Ireland Government. Any legislation brought forward in those places receives the attention of senior legal advice, whether that be from the Lord Advocate or from others in the devolved Administrations. The amendment defends the legitimacy and independence of the legal advice given by senior legal officers to devolved Administrations.
Peter Grant
My hon. Friend makes a valid point. It is sometimes forgotten that the devolved Parliaments have a number of checks in place to prevent them from attempting to legislate on things that are clearly beyond their powers, and there is a clear example of that happening at the moment, but there is no statutory or constitutional check on this place’s ability to push aside the devolution settlement to legislate on matters that are clearly devolved. That is simply not acceptable. Remember, we were talking about what the Government still call the most powerful devolved Parliament in the world. How can it be anywhere near being that if the Parliament that devolved powers to it can grab those powers back at the drop of a hat or the stroke of a pen? I will not withdraw the amendment. Every time I see such a power grab in legislation, I will speak against it, stand against it, and vote against it.
Question put, That the amendment be made.
The Chair
Given that amendment 36 has fallen, may I encourage the hon. Member for Glenrothes not to press amendment 37, which is similar?
Peter Grant
It does not make a lot of sense to press amendment 37 now that amendment 36 has gone. In fact, arguably, on its own, amendment 37 would weaken the position of the devolved Governments, so I will not press it.
Question proposed, That the clause, as amended, stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 3 be the Third schedule to the Bill.
Andrew Griffith
Clause 8 inserts a new regulatory regime into FSMA called the designated assets regime. I feel that it is already becoming an old friend; we have referred to it a number of times this sitting. Once retained EU law relating to financial services is revoked, the UK’s regulatory framework must be capable of regulating activities that are currently subject to retained EU law in a proportionate manner suited to UK markets. Under the FSMA model, firms must be authorised in order to conduct regulated activities. The Treasury determines, with Parliament’s consent, which activities are regulated by adding them to the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001, the RAO. The type of activities in the RAO are those carried out by banks, and by insurance and investment firms, such as accepting deposits or offering investment services. Authorised firms are regulated as a whole entity. That means that regulators can make rules relating not only to the regulated activity, but to the wider activities of the firm.
Where retained EU law relates to activities covered by the RAO, the regulators already have sufficient powers under FSMA to replace any rules as appropriate. However, there are activities regulated under provisions in retained EU law that are quite different. For example, in retained EU law, there are rules relating to entering into certain types of derivatives contracts. A car manufacturer may enter into a metals derivative contract to protect itself from price fluctuations in the metal that it requires for manufacturing. It would be hugely disproportionate to regulate the car manufacturer entering into that contract in the same way as a bank that offers current accounts or mortgages to customers. However, there is no mechanism in FSMA for regulating these activities in a proportionate way. That is why the Bill introduces the DAR. Under the DAR, the Treasury can designate these activities and make regulations in relation to them, or prohibit them where appropriate.
The Government expect that activities will be designated for regulation under the DAR through the affirmative procedure in the vast majority of cases. However, there is an exemption where, for reasons of urgency, the Treasury must act quickly. The Government are content that this is the appropriate procedure. It is similar to the procedure for adding activities to the RAO. The FCA is already responsible for ensuring compliance with the rules set out in retained EU law, and the clause will ensure that the FCA can also determine what rules are appropriate in future. As the DAR will be a new part of FSMA, the FCA will be required to exercise its responsibilities under the DAR in line with its statutory objectives, which include the new growth and competitiveness objective. The FCA will need to be able to supervise and enforce designated activity regulations and rules.
Emma Hardy
I refer the Minister back to a point I made about the DAR and the response to the consultation by His Majesty’s Treasury. Some of the respondents asked for clarity on exactly what activities would be regulated by the DAR. Can the Minister provide that in writing during today’s sitting, or bring further details to another sitting?
Andrew Griffith
I will do my very best to respond to that question. It is a point of detail. Today we are putting frameworks in place to try to legislate for as many outcomes as possible. By definition, that means that there is not a definitive list, but I will write to the hon. Lady and share the letter with the Committee.
To that point, given the breadth and variety of activities that may be designated under the DAR, a tailored supervision and enforcement framework will be needed for each one. We all recognise that we might want to regulate insurance in a different way from investment banking.
Proposed new section 71Q of FSMA therefore gives the Treasury the power to confer appropriate powers on the FCA for the purpose of supervising and enforcing regulations and rules relating to designated activities. Some activities that the Treasury may designate already have criminal offences attached to them under FSMA—for example, part 6 of FSMA contains two offences related to the offering of securities. Proposed new section 71Q will allow HM Treasury to maintain an existing criminal offence of offering securities and to modify it, including by adjusting the scope of the offence to reflect the scope of the new designated activity. I imagine from comments made that that would get broad support.
The Government will be able to apply and modify only criminal offences that already exist in FSMA. The provisions will not enable the Treasury to create a wholly new criminal offence relating to this activity. Schedule 3 sets out proposed new schedule 6B to FSMA. The schedule is inserted by clause 8 and lists examples of the types of activity that the Treasury may designate using the power introduced by clause 8. That may be the source of my response to the hon. Member for Kingston upon Hull West and Hessle. At this stage, schedule 3 is indicative only. The Government intend that a number of market activities currently regulated under retained EU law will be designated for inclusion in DAR. It is anticipated that a wider range of activities will be designated in future to ensure that the regime supports an agile and proportionate approach in the UK.
Martin Docherty-Hughes
Will the Minister help with a quick clarification on proposed new section 71Q? It refers to “conferring powers of entry”. Would that be on His Majesty’s Revenue and Customs? It has UK-wide powers of entry. Does that refer solely and wholly to HMRC, or does it refer to others who might require entry under the legislation?
Andrew Griffith
I will write to the hon. Gentleman to confirm that. It is important that our model of financial services regulation be responsive to emerging opportunities and challenges, and that includes those that can be regulated in future but are as yet unknown. Hon. Members can understand the thrust of what we are trying to do through clause 8 and schedule 3.
Tulip Siddiq
Am I right in thinking that new section 71R gives the Treasury powers to introduce criminal sanctions without reference to Parliament? Does the Minister think it is right to side-step Parliament in this way?
Andrew Griffith
That is not the intent of the Bill. Its intent is essentially to future-proof existing criminal law under FSMA, but to modify its scope as new activities fall within the designated regime.
Question put and agreed to.
Clause 8, as amended, accordingly ordered to stand part of the Bill.
Schedule 3 agreed to.
Clause 9
Rules relating to central counterparties and central securities depositories
Question proposed, That the clause stand part of the Bill.
Andrew Griffith
Retained EU law contains frameworks to regulate a number of entities that facilitate the proper functioning of financial markets. These entities are collectively referred to as financial market infrastructure, or FMI.
FMI helps to maintain stability in the financial services sector and performs critical functions that help make markets safer and more efficient. To establish a comprehensive FSMA model, the regulators will need the power, when retained EU law is revoked, to make rules to appropriately supervise and oversee FMI. That is provided for in the clauses that we are considering.
Clause 9 gives the Bank of England, which I will refer to as the Bank, a general rule-making power over central counterparties and central securities depositories, or CCPs and CSDs. CCPs sit between two parties to a trade and ensure that if either firm defaults on its obligations, the CCP can fulfil the firm’s trade. This reduces the possibility of contagion to the wider financial system. CSDs settle securities trades—that is, they complete the trade by transferring ownership of the assets, such as shares or bonds, between two parties.
The clause delegates the setting of regulatory standards to the Bank as the expert, operationally independent regulator. That is in line with the overall approach taken to the financial services regulators in the Bill. With the new rule-making powers provided for in the clause, the Bank will be able to adapt the regulatory regime in an agile and responsive way—for example, to take account of changing market conditions, address emerging risks or facilitate innovation. This will be accompanied by appropriate accountability arrangements that will apply to the Bank when it is exercising these new powers; we will discuss those when we get to new clauses 43 to 45.
The clause also enables the Bank to apply some or all of the domestic rulebook to overseas CCPs that are systemically important to the UK.
Peter Grant
Can the Minister give us an indication of whether there are existing institutions that he believes would be regarded as CCPs that are systemically important to this country? Apart from the obvious factor of the amount of business that a body does with the UK, what other factors will be taken into account when deciding whether to designate an institution in that way?
Andrew Griffith
That is a matter on which we would consult and be advised by the Bank. The Bank is the body with the expertise in this space. It would not be appropriate to try to pre-empt its views. This is an emerging area, and we have to be cognisant of how global clearing houses are developing. The UK hosts a number of the most systemic, but that market share cannot always be assured. This provision allows the regulation to follow the market share, or indeed follow the emergence of new CCPs and new clearing houses. The provision reforms the overseas framework so that the Bank has the power to apply domestic rules to CSDs and non-systemic CCPs as well.
Clause 10 provides the Bank of England with the power to direct individual CCPs and CSDs, requiring them to take action to comply with their obligations or to protect financial stability. Using this power, the Bank may either impose a new requirement or vary or cancel an existing one. The power is equivalent to those that the FCA and the Prudential Regulation Authority have under FSMA in relation to authorised firms, and it contains the same procedural safeguards. That includes, for example, a right of appeal.
Clause 12 ensures that the Bank’s regulation of CCPs and CSDs is undertaken in a way that is consistent with the wider financial services regulatory framework under FSMA. It does this by restricting the general power of direction, which the Treasury currently has over the Bank, to provide that it does not apply to its regulation of CCPs and CSDs. That is in line with the existing exemption that covers the exercise by the Bank of its functions as the prudential regulatory authority, in line with the PRA’s position as an independent regulator.
Turning to clause 11, the FCA is responsible for the supervision of certain other entities that help underpin the proper functioning of markets. Clause 11 gives the FCA general rule-making powers over two types of entity: data reporting service providers and recognised investment exchanges. Recognised investment exchanges are bodies such as the London stock exchange that are recognised by the FCA to facilitate the buying and selling of financial instruments and so help drive investment. Data reporting service providers make trade information public to help market participants make informed investment decisions. They also ensure that the FCA has the information it needs to monitor financial markets and protect against insider dealing and other forms of market abuse.
Despite their importance, both data reporting service providers and recognised investment exchanges currently sit outside the core FSMA regime, as they are largely regulated under retained EU law. To ensure that the FCA has sufficient powers to effectively regulate these entities once retained EU law is repealed, clause 11 brings them into the FSMA framework, in line with the approach taken for CCPs and CSDs in clause 9.
Tulip Siddiq
On clause 9, how does the Minister think third country central counterparties and CSDs will be adequately assessed by the Bank of England for the risks they pose to the UK’s financial stability?
I also have questions on clause 12. I am not sure if the Minister wants to answer those now or to come back to them.
The Chair
I suggest that you make all your comments and then we invite the Minister to respond to all of them at the end.
Tulip Siddiq
We support clause 12, which will empower the Treasury to give directions to the Bank where it considers it necessary in the public interest. Does the Minister not agree that such a mechanism is sufficient to direct the Bank of England when the Treasury believes it needs to do so in the public interest? Does he therefore feel that a so-called intervention power is necessary?
In our evidence sessions, which the Minister and other Members were at, we heard very clearly from the deputy governor of the Bank of England and the former chief executive of Barclays that a future intervention power would endanger financial stability and undermine the independence of the Bank of England. There were stark warnings from our witnesses. Does the Minister agree that it would be reckless to ignore that advice from the experts?
Emma Hardy
I want to add to the points made by my hon. Friend on our concerns around clause 12 and the independence of the Bank of England, given that the Treasury has such significant powers over it. I refer the Minister back to the evidence given by Sheldon Mills from the FCA. He said:
“I have worked in regimes with public interest tests. I ran the mergers division at the Office of Fair Trading and the Competition and Markets Authority, and my learning from that is that, if put in place, such a test should be used exceptionally and with care, and that there should be specificity about the matters of public interest—in this case, financial services—on which it would be used.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]
That is the FCA asking for specificity—it is easy for them to say—on exactly when the power would be used and when it would not be used.
Victoria Saporta from the PRA stated:
“A formulation whereby the Government can force or direct us to make or amend rules that we have already made, and that fall squarely within the statutory objectives that Parliament has given us, may be perceived as undermining operational independence and all the benefits that I talked about earlier.”––[Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 7, Q3.]
Those were really stark warnings from two of our key witnesses from the FCA and PRA, talking about the difficulties they had with this specific clause and how this could be seen as undermining their independence.
Martin Taylor went further in his evidence, when I questioned him on these intervention powers. He said:
“One of the problems that led to the recent turmoil—a very English description of what has just happened—was that the Prime Minister and the former Chancellor chose not to subject the mini-Budget to the scrutiny of the Office for Budget Responsibility.”
He continued:
“However, international investors looking at London will have noted this and it has a bad smell, if I can put it that way.”
Later, he said:
“If you were in Singapore or New York, you might be more tempted to do that than you would have been a month ago. We should not do anything else to make this worse. Everything is being done by the new Chancellor to steady the ship…but moves like this proposed measure just go in entirely the wrong direction as far as I am concerned. I think it is very dangerous.”–– [Official Report, Financial Services and Markets Public Bill Committee, 19 October 2022; c. 76, Q149.]
Every single witness seemed to talk about the concerns they have over the level of intervention the Treasury could have over the Bank of England. I would like to hear reassurances from the Minister that he has been talking to the FCA, the other regulators and the markets about this. What reassurance can he give us that this is not HMT trying to again overrule our independent regulators?
Peter Grant
Again, I fully understand the intention behind these clauses and I am not minded to move against them, but I am a bit concerned by some of the interplay between the clauses. I asked the Minister what factors he thought might be taken into account in determining that a CCP is actually a systemic third country CCP, rather than an unsystemic one.
The Bill, on lines 39 to 42 on page 13, suggests that a systemic third country CCP is
“any third country central counterparty that the Bank has determined is systemically important, or is likely to become systemically important, to the financial stability of the United Kingdom.”
The word “systemically” is doing quite a lot of work in that definition. As far as I know, there is no definition of “systemically” in this Bill, or indeed anywhere else, so I am concerned about whether the wording of the clause is tight enough that everybody, including the Bank of England, knows exactly when it can use these powers and when it cannot.
That is important because of the difference that being designated a systemic third country CCP makes. Under proposed new section 300G to the Financial Services and Markets Act, the Bank of England can exercise most of the powers
“only by the application of corresponding rules”,
according to proposed subsection (1)(a). However, proposed subsection (1)(b) says
“except in the case of systemic third country CCPs…only so far as authorised by regulations made by the Treasury.”
That seems to mean that if the Bank of England forms the view that it is dealing with a systemically important CCP, it is free to act in a way that is not explicitly permitted by Treasury regulations, whereas if the Bank decides that it is not systemically important, the ability to act becomes more restricted.
Dame Angela Eagle
My questions seek some reassurance from the Minister, since I think these clauses are broadly welcome and, indeed, vital in the context of the Bill. One would not want to have this system without giving extra powers to the Bank, the Prudential Regulation Authority and the Treasury.
Problems in some of these markets can erupt suddenly and pose substantial, systemic problems. We saw it happen just a couple of weeks ago in the pensions industry with the sudden increase in gilt prices, which suddenly made a lot of the investment strategies of our defined benefit pension fund managers quite perilous. We can all commend the Bank and the regulatory authorities for taking action to try to stabilise the situation with liquidity in the pension funds. I am sure that all of us want to be content that the structures in place for dealing with these kinds of eruptions will be as implied in these three clauses.
Given the extra powers for the regulatory authorities in the Bill, will the Minister give the Committee some comfort about the extra resources that will be made available to the regulators for their extra oversight? The Bill implies that there is much more work for regulators to do across the piece, and it is very important in the vast majority of cases. I worry that they will not be given enough resource to keep a proper eye on the very fast-moving, complex, interactive system that they will be charged with regulating, keeping an eye on and, if required, intervening in, for reasons of contagion or systemic threats to that very interrelated system. If they do not catch that early enough, we know where it can end. I would appreciate some comfort from the Minister, if he can provide it, on the resourcing implications of the powers. Is he satisfied that the resources are there to do the job adequately and properly?
Andrew Griffith
I will try to respond to all the points in turn. First, in answer to the hon. Member for Kingston upon Hull West and Hessle, clause 12 is not an intervention power. It clarifies that the power to direct is effectively removed in respect of the new regulations around CCPs. In many ways, it will give the Bank of England the independence and autonomy that the witnesses she cited sought, although in a more general context. There is a separate point, which is probably not in order for today, about the intervention power, as and when that is tabled. However, that is not the purpose of clause 12, which is a clarifying point in respect of the Bank of England.
The hon. Member for Wallasey raised the issue of resources. The Bill gives the regulators, including the Bank, powers to fund themselves using a levy. That is a stronger financial position than they are in today. The hon. Member knows that I am relatively new—that could change during the sittings of this Committee—but in all my interactions with the regulators, they have expressed themselves satisfied with the resources available to them, but we must be collectively careful about the burdens that we place on them and ensure that those are appropriate.
On the question of what is systemic and whether it is right to regulate overseas CCPs and CSDs, the thrust of what the Bill tries to achieve, and the broad thrust of the debate, is that those are precisely matters that should be decided by the operationally independent regulators in this domain. Although I and others may have views, it will be for the Bank to use its new powers—as now, and as in other domains that are in scope—in consultation with the Treasury, Parliament and others.
Peter Grant
To clarify, if the Bill is enacted as it stands, does the Bank have the option to create a different regulatory regime for overseas parties than it has for those that are based in the UK, or is the intention that the same set of rules will apply regardless of where the organisation is based?
Andrew Griffith
If an organisation is overseas, the approach will be that the Bank, in using those powers, will defer to the overseas regulator where that is appropriate, as it does now. I would not want us to fetter the Bank. It is for the Bank to lay out how it proposes to use the powers that the Bill enables, so as to be able to make the appropriate regulation that it feels comfortable with. I think we can all agree that this is a prudent enhancement of its powers. It broadens their scope, and allows the Bank to follow the risks to this country in a CCP, wherever those may lead it.
Question put and agreed to.
Clause 9 accordingly ordered to stand part of the Bill.
Clauses 10 to 12 ordered to stand part of the Bill.
The Chair
Before we come to the next group, could I ask the Parliamentary Private Secretary to remove the brown paper bag? It is not appropriate to have our lunch out on the side.
Clause 13
Testing of FMI technologies or practices
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 4 be the Fourth schedule to the Bill.
Amendment 38, in clause 14, page 19, line 35, at end insert—
“(d) the views of the appropriate regulator in response to the consultation mentioned in subsection (5).”
This amendment would ensure that the views of the relevant regulator are included in any Treasury reports on FMI sandbox arrangements.
Clauses 14 to 17 stand part.
Andrew Griffith
Clauses 13 to 17, along with schedule 4, enable the Treasury to set up financial market infrastructure sandboxes. One of the objectives of the Bill is to harness the opportunities of innovative technologies that could disrupt financial services. This is especially important for FMIs, which play an important role in providing the networks and services that underpin financial markets. However, there are currently barriers and ambiguities in legislation that prevent firms from using certain new technologies in FMIs or that prevent the benefit of new technologies from being fully realised.
An FMI sandbox is a safe testing environment that will help address this issue by providing temporary modifications to legislation to participating firms where existing legislation does not accommodate a new technology or practice. Those firms can then test and adopt innovative new FMI propositions while being subject to restrictions on their activities and close oversight from regulators. The provision in these clauses will allow the Treasury to set up FMI sandboxes, and I will now set out what each clause does specifically.
Clause 13 will allow the Treasury to set up an FMI sandbox via a negative statutory instrument that will set out the type of firms that are allowed to participate in a sandbox, the activities they can conduct, the temporary modifications to legislation that will be applied to participants, and the duration of the sandbox. Schedule 4 includes an illustrative list of provisions that could be included in a statutory instrument setting up an FMI sandbox, in order to provide guidance regarding how the powers are intended to be used.
To facilitate parliamentary scrutiny, clause 14 requires the Treasury to prepare and publish a report to be laid before Parliament on the arrangements for each FMI sandbox that is created under clause 13, having consulted the regulators. This will include an assessment of the effectiveness and/or efficiency of the FMI sandbox and how the Treasury intends to make permanent changes to the legislation.
Amendment 38 would explicitly require the Treasury to publish the detailed views given by the FCA and the Bank in response to the consultation. The Treasury is committed to ensuring that the regulator’s views are fully taken into account and represented fairly when any permanent changes are intended to be made to legislation. However, it is essential that during this engagement, regulators are able to express their views candidly, particularly about specific participants, and share commercially or market-sensitive information. It would not be appropriate for that to be published. I therefore hope that the hon. Members for Glenrothes and for West Dunbartonshire will not press their amendment to a vote.
Clause 15 will allow the Treasury to make permanent changes to the relevant legislation based on the outcomes of a sandbox on an ongoing basis. Clause 17 sets out the relevant legislation in more detail. As an FMI sandbox will be designed to test the right regulatory approach to new technologies, clause 15 enables the Treasury to legislate to set different requirements from those within the sandbox. This will ensure that if risks or unintended consequences are identified during the sandbox, these can be appropriately reflected in ongoing legislative changes. Where the Treasury proposes amending primary legislation, the Bill requires that the affirmative procedure is used. Where the legislation being amended is not itself primary, a negative procedure will be used instead. This is to ensure that Parliament gives the greatest scrutiny to the legislative changes that are the most significant—in other words, those that fall within primary legislation.
Clause 16 is intended to enable the Treasury to confer powers on the regulators as part of any statutory instrument setting up a sandbox, so that they are able to operate a sandbox effectively. It also sets out who the Treasury needs to consult before exercising the powers in clauses 13 and 15.
Finally, clause 17 sets out how the various terms and concepts used in the FMI sandbox clauses are to be interpreted. It includes a list of legislation that the Treasury is able to temporarily modify for firms participating in a sandbox, which provides an important constraint on the scope of the Treasury’s powers in relation to the FMI sandbox in the Bill. The Treasury is able to add to the list of legislation via a statutory instrument by using the affirmative procedure to ensure parliamentary scrutiny if the Treasury wishes to bring further legislation into the scope of a sandbox. To summarise, the measure will be a hugely valuable way for financial markets to innovate and enable industry regulators and the Government to learn and change in response to practical experience. For those reasons, I recommend that clauses 13 to 17, and schedule 4, stand part of the Bill.
Tulip Siddiq
We strongly support the clauses. A sandbox for financial markets infrastructure will support innovations in the fintech sector, such as developments in blockchain, which has the potential to boost the transparency and productivity of the UK’s financial services. Could he please explain, however, whether clause 13 gives sufficient flexibility for the sandboxes to be used to support innovation in a wide range of financial technologies? The Bill says that sandboxing testing will occur “for a limited period”. Will the Minister further define that and set out the minimum timescales that he believes are necessary to adequately test a new innovation in financial technology?
On clause 14 and the reports on FMI sandboxes, which criteria will be used in the reporting of sandboxes, so that Parliament can transparently assess their effectiveness in safely supporting innovation? On clause 16, which sets out that prior to conferring such a power, HM Treasury must consult “the appropriate regulators” or such persons that it considers appropriate. Will the Minister please share his understanding of the definition of “consultation”? Which stakeholders would have to be consulted, and what is the estimated timeframe for such a consultation?
Clause 17 provides the Treasury with a power to amend the list of relevant enactments by way of the affirmative statutory instrument procedure. Will the Minister elaborate on how he sees that working in practice? Would every individual amendment to the list of relevant enactments be brought before the House for scrutiny? I presume so, but I want to have that on the record.
Shaun Bailey
The provisions in clauses 13 to 17 are incredibly welcome, because we are dealing with a financial services landscape that is constantly innovating and changing. I should declare that prior to becoming a Member of Parliament, I worked for the legal team at a major big seven bank and saw these developments as part of my role there. The provisions are very important because they will ensure that, as the fintech sector continues to develop and the regulatory framework continues to advance and change, they can do so within the perimeters of the sandbox arrangement introduced by the Government.
I particularly welcome the clause 16 provisions on consulting regulators, and the fact that there is going to be a discourse with them. We cannot cut regulators out of the conversation. The clauses do not seek to do that, but the hon. Member for Hampstead and Kilburn was right to raise queries. We need a bit more clarity on what the consultation will look like. I fully appreciate that it is not always possible to give instant clarity when introducing primary legislation, but it will clearly be incumbent on the Treasury to ensure that, as the process progresses, His Majesty’s Government are as transparent as possible about what the consultation will look like.
We should remind ourselves that the practical application of the clauses will change and develop as the landscape itself develops, because that is the subject matter that we are dealing with. On clause 16, with respect to the development and work with regulators, I urge my hon. Friend the Minister not to forget the important role that lawtech plays in the regulation and monitoring of a lot of the instruments that will be part of the sandbox regime. It is often not talked about, but fintech and lawtech work hand in hand, side by side, particularly in this financial services sector.
I support the clauses; they are the right thing to do. As hon. Members on both sides of the Committee have articulated, they allow not only the financial services sector to innovate and develop, but the regulation to be developed in tandem with them. I would, however, welcome clarity from my hon. Friend the Minister on the what the practical applications will look like, particularly as we build that framework.
Martin Docherty-Hughes
I do not want to be the fly in the ointment, but I would like some assurances from the Minister about the FMI sandboxes. The Clifford Chance briefing notes that
“the FSMA Bill permits HM Treasury to allow broad participation in FMI sandboxes which in practice could include FMI providers, and participants in these systems as well as, conceivably, unregulated service providers such as technology companies and any other person that HM Treasury specifies.”
I am looking for an assurance from the Minister and his civil service team on the notion of unregulated service providers having access to the FMI sandbox. It seems that the EU pilot regime is far more limited in its multilateral trading facilities and securities settlement systems, and that it makes no mention of recognised investment exchanges or any other persons. It is not, therefore, making itself a hostage to fortune with its pilot system. Could the Minister and his team provide reassurance on the broad scope of innovation that they seem to be going for?
Dame Angela Eagle
I find myself rising to try to elaborate on the important points that have been made. I do not think that anyone would argue against the need to think very carefully about how to pilot—or sandbox, to use the jargon—the very rapid development and potential of what is happening. It is also important in the context of financial market infrastructure.
Certain infrastructures in our financial system are really old. One need only consider how long it took to get the bank clearing process vaguely up to date to understand the importance of modernising infrastructures. I do not think that anyone would object to an attempt to come up with a structure that tests activities, which is what these clauses do.
The Minister, however, has not provided any detail on issues such as risk mitigation; whether parallel sandboxes involving similar infrastructures will be developed, almost in competition with each other; whether this will happen in just one area; or how the powers will be used to test whether potential infrastructures might be worth using. Could he add a little more colour to how he sees those things happening? How big will the sandboxes be? How long will they be allowed to continue? The Minister is grinning because this is the kind of detail that an enabling Bill does not contain, but it might be quite important.
Testing regimes in other areas are sometimes very limited. I would be worried if we had an unlimited testing system running for a long period, allowing unregulated organisations in, perhaps running in parallel with each other. If that is what the Minister is suggesting, I would be worried. If he is suggesting something much more minor and limited, to see whether the technology works and whether people can interact with it to redesign the way in which websites work, I would be less worried.
Martin Docherty-Hughes
I am delighted that the hon. Lady has allowed me to intervene. The technology is not new, and that is what concerns me in relation to a lot of the debate on the Bill. There is nothing new under the sun about a lot of the technology, which underpins sandboxes, cryptocurrency and so on, that we are talking about. It just seems that a lot of the terminology takes over the substance of the issue that we are discussing.
Dame Angela Eagle
That is true. Blockchain has certainly been around for quite a while. Its use has implications for transparency and for the levels of employment that there might be in the old, more bureaucratic banks.
What would be the use of artificial intelligence in trying to decide how automated these things could become? Would there be worries about over-automation? How would that be looked at in terms of regulation? How open are we going to be about the way in which AI is applied and how it might evolve in ways that might embed discrimination such that we get a system where certain people may be discriminated against and excluded? There are a range of issues that need to be tested in these kinds of environments. It is hard to do that under a negative resolution procedure. I take the Minister’s point, however, about affirmative resolutions. If one of these things worked during the trial period, was issued and became permanent, it is important, as the Minister has said, that any changes are subject to affirmative regulation.
There are a whole load of black boxes in the Bill that we might need to debate further. Could the Minister give us more colour on whether there will be parallel sandboxes, on transparency on what will be used and how it will be compiled, and on how large the sandboxes will be in terms of money on the exchanges or turnover, or however he wants to put it. Then we could consider whether risk is being mitigated and how we can develop a system using trundling and analogue legislation, if I may put it that way, in an environment where innovation is digital and rapid.
I understand what the Minister is trying to do, but this Parliament must still be aware that we need to be on top of the detail of this Bill, rather than just passing shells of enabling legislation that do not give us enough of a handle on what is intended.
Peter Grant
Thank you, Dame Maria, for clarifying earlier that we are talking about sandboxes, not sandwich boxes. Some Members seem to have been a bit confused about that. I am intrigued by the use of the term “sandbox”. To me, a sandbox can be a road safety feature: it is literally a gravel or sand pit on a bad bend in the road to allow someone who loses control to get off the road safely. Alternatively, a sandbox is something that any cat owner will be familiar with. I am genuinely intrigued as to which of those metaphors somebody thought was appropriate for what we are discussing.
The principle behind these measures is absolutely sound. By this time next year, new practices in financial services will have evolved that none of us can begin to imagine just now. That is how things are moving. I take the point made by my hon. Friend the Member for West Dunbartonshire that the technology itself has not significantly changed—it is certainly not new—but the way in which people will use the technology is. The kinds of products that people will start to devise may well mean that existing regulatory practices need to be changed very quickly. The idea of being allowed to pilot something that is genuinely new in a safe space before letting it loose on the wider world is absolutely correct in my view. However, the devil, of course, is in the detail.
I am a bit concerned that the first in this group of clauses says that the purpose of the sandbox will be to test
“for a limited period, the efficiency or effectiveness of the carrying on of FMI activities”.
It does not say that one of the purposes is to test the effectiveness of any regulation that may go with it, which concerns me. Obviously, if someone knows that the activity they are carrying out in a sandbox will be looked at very carefully, they are going to behave themselves. How can we be sure that as well as being effective, it will work for the purposes of the providers? How do we know that the regulation that goes with it will also be effective? Again, that has to be effective as soon as the thing goes live. We cannot wait and regulate it effectively a few weeks later, because it will be far too late by then.
Emma Hardy
In relation to the sandboxes, and particularly in relation to clause 14, I draw hon. Members’ attention to the written evidence submitted by Spotlight on Corruption—in particular, if anyone wants to read along with me, paragraph 12. The recommendation from Spotlight on Corruption is that the Government should update their regulatory impact assessment
“to ensure that an analysis of the economic crime risks is included as part of the evidence base in each assessment.”
That seems incredibly good and sensible advice. As part of the way someone assesses how effective these sandboxes are, they could look at the potential economic crime risks. Spotlight on Corruption goes on to say that the RIAs should
“include a standalone ‘economic crime risks associated with this intervention’ section based on both quantitative and qualitative indicators. It should also include an assessment of the costs/benefits, and wider impacts as well as establishing how the Treasury intends to monitor and evaluate risks after the regulations come into place.”
If we are going to produce a report on how effective this measure is, one of the key things that I think we can all agree on is the need to look at economic crime. Although I have not tabled an amendment to that effect today, I hope that the Minister will look at the issue seriously and perhaps it is something we can return to on Report.
Andrew Griffith
I thank the hon. Member for Hampstead and Kilburn for her party’s support for these measures, which I hope will be a useful addition to the financial services industry.
I will try to answer some of the questions. By their very nature, there is a discomforting element to trying to create safe spaces for innovation. Let me reassure the Committee that all the existing safeguards, whether they relate to economic crime or to consumer protection duties, relate to any changes that are, as it were, released into the wild after the period of experimentation. There is no attempt to create a back door or any diminution in the high quality of financial regulation throughout.
The overall level of scrutiny for this House was raised by the hon. Member for Wallasey. The statutory instrument would be laid in respect of each potential use of the sandbox. It would not be right for me to fetter whether that will be used in serial or in parallel, so we have to contemplate that there could be multiple sandboxes operating in some really quite separate domains at any one point in time. I do not think that would be a bad thing. In many ways, the test of this legislation’s success is that the sandbox is indeed used, and within that process we should contemplate that many of those pilots should fail, just as many should succeed; that is the nature of risk and innovation.
That statutory instrument would set out what categories are in scope of the sandbox, what sort of securities or products are included within it, traded or settled, the platform involved and what limitations there would be. There was a question about the minimum period of time. That would all be laid out in response to the individual applicant to use the sandbox, so that would be determined, and it would be reviewed by the regulators as part of the process of the Treasury laying the statutory instrument. It could well include any additional regulatory oversight, and the important issue of economic crime and prevention. However, to be clear, that is not the Government’s intention, nor would it be looked on favourably if anyone attempted to use that to create back doors for economic crime. The level of scrutiny of any pilot in a sandbox is generally higher than the level of scrutiny intervention from regulators in general.
Emma Hardy
I do not think that the evidence submitted by Spotlight on Corruption in any way implied that it would be the Government’s intention for these sandboxes to bring about economic crime. However, I think we all accept that economic crime is on the rise. Spotlight on Corruption specifically asks for it to be stipulated that the associated economic crime risks are looked at as part of the report into sandboxes. I would be grateful if the Minister could take that point away to consider further.
Andrew Griffith
I am very happy to take that point away and, if appropriate, I will write to the hon. Lady in response. The construct of regulation in this space is that we have a level of trust in our operationally independent regulators, and prevention of crime and of harm to consumers is at the core of the regulatory structure. She should have some comfort that that issue would not be overlooked.
I will try to give a little bit of colour regarding the intention to use the sandbox. It is the Government’s intention that the sandboxes be used rapidly after Royal Assent; indeed, consultations on the matter have already indicated a strong appetite for things such as the use of distributed ledger technology, both for settlement and for other aspects of the financial regime. Those things would be seen by the Government as an enhancement in many respects—whether dealing with settlement risk, credit risk or the speed of transactions. That is an example of the sort of use case that we would expect to be brought forward.
We talked about the regulatory outcome. The relationship with regulators was one of the first points raised. The Bill contains a provision to ensure that the regulators’ views are taken into account. The regulators will, de facto, have a very strong level of scope. Although we would not want to cut off participants by virtue of not being authorised—that would be to cut ourselves off from a source of potential innovation—it is expected that any participant would have had interaction with the regulators prior to entering a sandbox. As some hon. Members know, the regulators interact intensively with bodies such as the Treasury Committee, which we would expect to have a heightened level of interest in these matters.
Question put and agreed to.
Clause 13 accordingly ordered to stand part of the Bill.
Schedule 4 agreed to.
Clauses 14 to 17 ordered to stand part of the Bill.
Clause 18
Critical third parties: designation and powers
Question proposed, That the clause stand part of the Bill.
Andrew Griffith
Financial services firms increasingly rely on a small number of critical third parties to provide services, such as cloud computing providers. Although outsourcing can have many benefits, the growing dependence of financial services firms on this small pool of critical third parties also carries risks. A failure or disruption at a critical third party could have systemic impacts affecting market confidence and threatening the stability of our financial system. To mitigate that risk, the Bill grants the financial regulators powers to oversee the services that critical third parties supply to the financial sector.
Clause 18 gives the Treasury the power to designate a third party to the finance sector as critical, bringing the services provided by that third party into the regulator’s oversight. Only third parties whose failure could have a systemic impact on the sector can be designated in that way. Designations will be done in consultation with the regulators, taking into account a clear set of criteria. The first is materiality—that is, how important the services are to the delivery of essential services, such as making payments. The second is concentration—the number and type of firms that rely on that provider. The clause provides the FCA, the PRA and the Bank of England with new rule-making powers to ensure the resilience of services provided by critical third parties. The regulators have published a discussion paper setting out how they may use the powers.
Clause 18 also grants the regulators a power of direction and targeted enforcement powers. As an ultimate sanction, the financial regulators may prevent or limit a critical third party from providing services to the financial services sector. Clause 19 then makes the necessary consequential changes to FSMA to ensure that the regime functions properly, in particular in relation to the Bank of England’s ability to make rules. This approach is flexible and proportionate, addressing the systemic risk posed by outsourcing to keep the UK’s financial system safe, while targeting only the services that critical third parties provide to the finance sector. I therefore recommend that clauses 18 and 19 stand part of the Bill.
Tulip Siddiq
On clause 18, could the Minister set out the range of disciplinary powers that the Bank of England, the FCA and the PRA have at their disposal short of preventing a critical third party from providing new or current services to the financial services sectors? I want some reassurance from him that the clause will not produce an all or nothing approach.
Peter Grant
Again, I do not oppose the clauses, but I do have a couple of questions. First, the Minister pointed out that the ultimate sanction that the regulator can take is to prevent somebody from carrying out the actions of a critical third party. However, given that it becomes a critical third party because the system would collapse without it, is that not the nuclear button that can never be used? Simply trying to enforce the protective regulation could cause more damage than allowing the issue to continue. I understand that it is a difficult issue to square, but is there any proposal to, for example, introduce new criminal offences? Rather than being placed in a position where we would have to damage a system in order to protect it, are there proposals at least to give the option of taking criminal action against the individuals concerned?
I understand why the Bill does not go into detail about the kind of directions and requirements that might be appropriate, but will the Minister reassure us that there is no intention to use the powers to restrict the rights of people working for critical third parties to take industrial action, should they consider it to be important? That would take us into a completely different area of legislation, but the Bill does not say that the Government cannot do that. I would appreciate an assurance from the Minister that that will not happen as a result of the Bill.
Finally, proposed new section 312N refers to immunity. Certainly we must ensure that, if an organisation acts in accordance with the requirements of the regulator, they cannot be sued simply for doing what they were required to do. Is there a potential issue that they could be sued by an overseas party in an overseas court? Has the Minister considered how we might prevent that from becoming an issue? Clearly, this Parliament cannot legislate to give anybody immunity from being sued elsewhere, and there are people who will tout around the jurisdictions all over the world to find somewhere they can lodge a legal action. Is the Minister concerned that the inability to give international immunity might mean that some of the provisions become less effective than we might have hoped?
Andrew Griffith
Let me try to answer hon. Members’ questions. Nothing in the clause restricts people’s ability to take industrial action. That is not in scope. The powers are not anticipated as analogous to existing ones elsewhere, and the provision is not intended to be all or nothing. The powers are in essence an extension of scope into this domain and would relate to activities such as reviewing the senior manager regime, the ability to compel the requirement of information and looking at things such as resilience. They are not designed to be binary in that respect.
The hon. Member for Glenrothes made a point about the fact that the functions have been designated as critical, but that does not necessarily mean that they are monopolistic. With respect, while that is an important consideration, which we would expect the Bank, in this case, to take into consideration, it is also perfectly possible that, in the case of cloud providers, for example, a number of providers offer identical services. If one was not able to demonstrate a degree of resilience but another was, it would be possible to direct that one ceases to be used without causing the sort of systemic risk that the Bill seeks to prevent. I will write to the hon. Member in respect of what is a complex question about international immunity in law. I hope that he will respect the fact that I should not answer that on my feet this afternoon.
Question put and agreed to.
Clause 18 accordingly ordered to stand part of the Bill.
Clause 19 ordered to stand part of the Bill.
Clause 20
Financial promotion
Peter Grant
I beg to move amendment 39, in clause 20, page 31, line 37, at end insert—
“(1A) Where the content of a communication for the purposes of section 21 has not in the first instance been approved by an authorised person, approval by another authorised person may only be sought the FCA’s approval for the other authorised person to do so being provided in writing.”.
This amendment would prevent operators from “shopping around” for approval from an authorised person where one authorised person has not given approval, unless the Financial Conduct Authority permits this.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
That schedule 5 be the Fifth schedule to the Bill.
Peter Grant
The amendment is quite simple. I understand the reason behind the concept of the authorised person. The Financial Conduct Authority will never have the resources or capacity to authorise every single financial promotion that somebody wants to publish, so that role needs to be outsourced. My concern is that, in some of the scams that my constituents have fallen victim to, the authorised person has sometimes been a key part of the web of deceit and concealment that has been laid for my constituents and others to fall into. Very often, when it all goes wrong, we find that the authorised person who approved the financial promotion has gone out of business themselves, so there is nobody left to take responsibility.
I am concerned that something that I have seen happen in a small number of cases might become more common. If someone takes a financial promotion that is clearly not compliant with legislation to an authorised person, the authorised person might well say, “No, I am not going to authorise it.” There is nothing to stop the person from then shopping around and finding someone who will agree to approve the promotion on their behalf. Because these promotions are so common, and because there are so many of them being authorised and then issued, it is very difficult for the regulator or anyone else to pick up on the ones that should not have got through. We are relying on the integrity of the authorised person.
The intention behind the amendment is to ensure that, regardless of which authorised person someone goes to, they get a consistent answer—either yes or no. If one authorised person refused to give approval for a promotion, it could then be approved only with the consent of the Financial Conduct Authority. I am not sure that I am minded to press the amendment to a vote, but I hope that the Minister will be sympathetic to the intention behind it. If he feels that the amendment is not necessary, or that its purpose could be achieved by a better route, I would be quite happy to hear his reasons.
Tulip Siddiq
We welcome clause 20, which we recognise would introduce tighter controls on those who approve financial promotions for others, to ensure that consumers are better protected. How does the Minister foresee the clause facilitating improved approver expertise, due diligence and challenges in exercising appropriate regulatory oversight?
Dame Angela Eagle
Obviously this is an extremely important part of the Bill because it creates a regulatory gateway for financial promotions. We know from what the FCA has reported that there is an issue with misleading financial promotions. We all know it from our constituency casework; we know it from some of the scandals that have been carried out successfully.
Part of the trouble is the closeness to the perimeter of regulation. A firm can have part of itself in the perimeter, while other parts are outside the perimeter, but in the promotions, it gives the impression that all the firm is regulated and all of what it is doing is within the perimeter, while advertising in a very misleading way things that are actually unregulated and therefore much riskier. We know that a lot of scams have happened that way. The way in which the FCA tries to deal with this situation is like trying to hold back the tide. The fact that so many of the promotions that it has managed to get a handle on—4,226 of them—have been withdrawn or amended to make them less misleading demonstrates that the FCA is doing its best. However, members of the Committee know that there is a constant battle with scammers, who constantly change how they present information to consumers and potential consumers through an ever-increasing number of gateways, even on things like TikTok. It is difficult for any regulator to get a handle on that, so anything that helps to battle the problem more effectively will be welcomed by all of us.
Will the Minister explain in more detail why he thinks that this is the right way to proceed, and how effective he thinks the powers in clause 20 will be in tackling the problem? We know—I think we will come on to this later in our proceedings—that cracking down on fraud more effectively will also be important. With the financial promotions and unauthorised third parties that deal with granting permissions, we know that the current regime can cause problems. We know that it is failing and that the FCA cannot be expected to do all this work with the resources it has, so will the Minister go into detail about how effective he thinks the measures will be, and say how he will be assessing this approach’s effectiveness? Clearly we want a reduction in the amount of scamming and fraud, and the number of promotions that are misleading or downright lie about the nature of the products they are pushing, so I will be interested to hear how the Minister sees clause 20 as the solution to this difficult problem.
Andrew Griffith
I thank the hon. Member for Glenrothes for raising the issue, which I understand is of concern to Members on both sides of the Committee. I also thank him for indicating that he will not press the amendment to a vote. I think the reason for that is that clause 20 is a genuine enhancement of the regulatory infrastructure. It creates a new, two-tier regulatory structure that speaks directly to the issue of those who have been authorising harmful financial promotions. It does so by introducing a new assessment by the FCA that requires that they be assessed as fit to do so. I will come on to what that could look like in a moment.
We understand what financial promotions are. They are inducements or invitations to engage in investment activity in its broadest form.
Peter Grant
The Minister says that we all understand what financial promotions are, but do we really? Is the existing definition agile enough? One of the dodgy directors I mentioned earlier has now set himself up on TikTok as a lifestyle guru. Everybody knows he is doing this to groom people. He will say to someone, “I’ve got this brilliant investment plan that nobody else knows about. Why don’t you do it?” Does that sort of thing count as a financial promotion or not? Quite clearly it is an inducement and an attempt to get someone to sign up to an investment that may or may not be legitimate.
Andrew Griffith
I am not familiar with the precise incident that the hon. Gentleman talks about. We have to reflect that there will be a continuum from someone being a lifestyle guru to someone promoting a financial product. Our job as legislators is to understand where those cliff edges lie and to bring forward procedures that mean that the scope is laid in the right place, so that cliff edges are legislated for appropriately.
Peter Grant
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 20 ordered to stand part of the Bill.
Schedule 5 agreed to.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Economic Crime and Corporate Transparency Bill (Second sitting)
Tuesday 25th October 2022
(2 years, 1 month ago)
Public Bill CommitteesRead Full debate Economic Crime and Corporate Transparency Act 2023 View all Economic Crime and Corporate Transparency Act 2023 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 25 October 2022 - (25 Oct 2022)
The Chair
Our first witnesses, the fifth panel, are Martin Swain from Companies House and Adrian Searle from the National Economic Crime Centre.
The Minister for Security (Tom Tugendhat)
May I just declare an interest, very briefly?
The Chair
Absolutely. We will all listen with bated breath to the Minister’s declaration of interest.
Tom Tugendhat
I simply refer to my wider declaration in the Register of Members’ Financial Interests.
The Chair
Thank you. Mr Swain, would you introduce yourself briefly for the record?
Martin Swain: Good afternoon. I am Martin Swain. I am one of the executive directors of Companies House, with responsibility for—
The Chair
You will have to speak up, because the acoustics in this room are very poor.
Martin Swain: Apologies. At Companies House, I have responsibility for policy, strategy and communications, and legal services.
The Chair
Thank you. Mr Searle?
Adrian Searle: Good afternoon. I am Adrian Searle. I am director of the National Economic Crime Centre. I am here with two hats on: as the director of the NECC, as it is called, and as a director within the National Crime Agency—so I can make comments about both the NECC and the NCA. If it helpful, I can explain a little bit about what the NECC is.
The Chair
No, I do not think so; we do not have time for that. I call Seema Malhotra to ask the first question.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
My second question is to both of you. Do you believe the Bill should go further and reform the strike-off procedure for companies? There is a recognised issue where companies are building up debts, not filing a return and then being struck off as one of the routes through which money laundering may be taking place, with limited room for manoeuvre after that. Would there be any benefits to reforming that process? Is there any consideration, for example, of companies being placed in a compulsory liquidation procedure? I would be interested in your thoughts on that.
Martin Swain: As you say, we have £63 million through the spending review for transformation. We are two thirds of the way through our transformation programme at the moment. It is fair to say that we have been clear with the Department and Treasury that we are taking on significant new functions and responsibilities. Some of that will require more people and people with different skills from those that we have now. Companies House is a register of information, so a lot of our people do processing work. We will need to move those people off that. We will need to employ skills that we do not currently have, so we are actively talking to the Department and the Treasury about our funding model.
To your point on fees, yes, we could increase fees to pay for additional resources. I know there is some challenge around the fee being too low. Again, we have taken provision in the Bill to charge fees for different things that we currently cannot charge fees for. For example, we cannot currently recover costs for investigation and enforcement activity, as it is centrally funded. We are taking powers to do things differently. I do not think I am at a stage to be able to say we have a definitive figure that we have agreed with the Department or Treasury that would give us our funding model for the future.
The Chair
Mr Searle?
Adrian Searle: I think the question that was probably targeted towards me is not about the resources in Companies House, but the second, follow-up question relating to striking companies—
Seema Malhotra
It was about how to tackle economic crime and whether the reform of the strike-off process is important to that.
Adrian Searle: The strike-off process is not something I have a detailed understanding of. I suspect Martin might be better placed to answer that question.
Martin Swain: Again, it is something we are very aware of. Companies take advantage of the strike-off route to discharge themselves of debts and so on, and for other purposes. My sense is probably that the Bill as drafted gives us what we need. It is about how we take forward the policy in that area regarding where companies are moved to strike off. For example, we get lots of representation with regard to lots of companies being registered at one address—a registered office being used and abused. The route for that would be to default them to our address at Companies House, for not having a registered office address that is valid. The next step on that would be strike-off, but clearly if we do that we may be having an adverse impact on the system and giving companies a route to use it for criminal activity or to fold without paying their debts. We are very aware of the issue.
The Minister for Industry (Jackie Doyle-Price)
Q
Adrian Searle: I think we have. There is, as you say, a real challenge to get the balance right between a prosperity and a security agenda. As we know, the Companies House reform elements of the Bill are a long time coming, so there has been lots of analysis and consideration of how you get the balance right. What I know from a law enforcement investigative perspective is that the changes being introduced under the Bill will certainly make the job of law enforcement far more straightforward in terms of our ability to investigate criminals and corrupt elites who are exploiting the complexity of the corporate structures to hide their assets, launder their wealth, and so on. I am confident that it gives Companies House and, by extension, the investigative agencies the powers we need. The indications that I have from exchanges with Martin and others in the industry are that the changes do not go so far that they inhibit transparent business practices in a way that undermines our economy. It feels to me that the balance is right.
Martin Swain: It is a very good point. It is a challenge for us as an organisation, because we have very clear direction from our Ministers that we should not create a burden for business, or make it difficult for companies to incorporate or for people to invest in the UK. The concept of balance is always there for us. We will bring in things such as ID verification, but we need to make that really efficient, and make it easy for people to understand the process, so that we do not create a burden for the vast majority of companies on our register that are legitimate businesses. That is quite a tension sometimes, because there is a significant spotlight on Companies House to become more than the passive register that we are at the moment, and to become—I hear this term—an “active gatekeeper” of the register. There is a potential that we move too far into that territory and make it harder for the vast majority of companies to deal with us.
I mentioned our transformation programme. There are two elements to our transformation. One is the legislative reform and all that is involved with that. The second part is digitising our services. That is what we have been focusing on in the last few years: making our systems really quick and easy to use, and to drive data, rather than receiving information on paper. You cannot work effectively with law enforcement from paper transactions; you have to have data.
Jackie Doyle-Price
Q
Martin Swain: It is a huge culture change for us, not least in becoming more of a proactive agency. I hear it said that Companies House will be key to the economic crime ecosystem; what I say to people is that we will also be part of the business growth ecosystem. It is important that we have that dual role.
Adrian Searle: I think there is real value for businesses in being able to trust the other businesses they are dealing with. There is a strong argument that the transparency agenda supports the business agenda.
Alison Thewliss (Glasgow Central) (SNP)
Q
Martin Swain: At the moment we are in the design phase for verification. I should say first of all that we will not do the ID verification ourselves; we will outsource that.
Alison Thewliss
Q
Martin Swain: At the moment we are looking at two options. We are working closely with Government Digital Service and others on the potential for the Government solution. We have been clear with them about our requirements with them. We are separately looking at market options, whereby we would go to the private sector and outsource via that route, where a number of providers can do identity checks.
Alison Thewliss
Q
Martin Swain: It goes back to some of the things that I said about ease of doing business. There are two key parts of our specification: whether we can make it really efficient, and fast and easy for people to do, and whether it is at an equivalent standard to the industry standard. We are very clear that we are operating along the same lines as others in the system.
Alison Thewliss
Q
Martin Swain: I heard that, and I am surprised that they are saying that. I will have a conversation with them about where that has come from.
Alison Thewliss
Q
Martin Swain: People with significant control will be subject to verification—beneficial owners, but not shareholders who have less than 25%.
Alison Thewliss
Q
Martin Swain: It was a decision by the Department and Ministers, post consultation. They consulted on the whole area of shareholders, and the information that they hold, and verification. The decision was that they would not be subject to verification.
James Daly (Bury North) (Con)
Q
Martin Swain: One of the main measures is ID verification. That is one of the biggest gaps in our register at the moment. We do not verify people who are setting up and running companies. The fact that we will know them and have verified them is key. We are taking considerable powers in the Bill to do things that we cannot do at the moment. We cannot query information that is filed with us. We cannot analyse and proactively share information. At the moment, we are very reactive. I use the word “passive”, and “reactive” is another word that I would use. We react to colleagues such as Adrian coming to us saying that they want information on certain things. In the future, we will be able to do our own intelligence work and will proactively be able to work with law enforcement.
James Daly
Q
Adrian Searle: For sure. It is a really fundamental change. I already have folk from my intelligence and investigative teams in the National Crime Agency working with colleagues in the Companies House teams to help them to set the road map for how they will transform.
Dame Margaret Hodge (Barking) (Lab)
Q
The Chair
We now resume the evidence session. Mr Swain is going to answer the question that was put to him by Dame Margaret Hodge.
Martin Swain: The question was about the balance of burden against tackling economic crime. I think you asked about the need for smarter regulation. I totally agree. Part of the challenge is how we use our powers in future. I would say that the way in which we use our powers will be around the integrity of the register; we will focus our activity on where we can have the most impact to improve the integrity of the register. In doing so, we do not want to create a burden for legitimate businesses.
The benefit of focusing on the integrity of the register is that we create value. As Adrian said, we already contribute a significant amount of money to the UK economy. If we can improve the integrity of the register so that people are making better decisions based on the data, and people are not being defrauded because of the way in which we are improving the integrity of the register, to me that is what smarter registration should be about.
Dame Margaret Hodge
Q
Martin Swain: We will not be replacing the AML supervision, which rests with the AML supervisors. The Bill introduces a number of measures around ACSPs which we currently do not do. For an ACSP to file with us, they will need to register with us.
Dame Margaret Hodge
Q
Martin Swain: With us. This is separate to their AML supervision. In order to file with us, they will need to register. We will verify the identities of the people who run the agency—the agents—and we will require them to confirm who they are supervised for for AML purposes. We will cross-check that with the AML supervisors. There are also some new offences in the Bill, so people will be required to maintain their records of their supervision with us. If they are suspended from their AML supervisor and do not tell us, that will be an offence. They will also have to maintain records of verification, which we will have the power to check. None of that exists at the moment. An agent can file with us without any of those things happening.
Dame Margaret Hodge
Q
Martin Swain: Yes.
Dame Margaret Hodge
But it does nothing.
Martin Swain: I am not going to answer from HMRC’s perspective. If we are talking about smarter regulation, the benefit is that we will have a power and an ability to go back to HMRC and raise flags where we see activity from agents that is not consistent with what we want.
Dame Margaret Hodge
That is very helpful, thank you. I have a quick question for Adrian.
Adrian Searle: Can I come in on that earlier question? The requirement that the company service provider has a UK footprint is a significant shift. Prior to this Bill, overseas-based service providers could provide that third-party service to registered companies. That is a fundamental challenge. When there is a UK footprint, whether it is the supervisory bodies or, potentially, the investigative agencies, we have got a starting point that we can go after, which you cannot do when there is an overseas base.
Dame Margaret Hodge
Q
Adrian, with your wider remit, there has been a huge decrease in the number of cases that have been taken by the SFO and indeed by all the agencies. One reason is the fear of costs landing on those agencies—for example, the NCA—if they lose the case. Can you give us a view? Do you think we should have a cost cap, in the way we have with unexplained wealth orders? Do you think we should have the American system whereby no costs at all are given to the litigant or the person accused of wrongdoing at the end? What is your view of that?
Adrian Searle: We are certainly very keen to continue to look at that. The cost capping in the UWO regime is attractive. I understand that other colleagues and Government, in particular the Ministry of Justice, have had conversations. They are having concerns raised that that undermines the core principle of loser pays. There are different views on this issue.
Dame Margaret Hodge
Q
Adrian Searle: We find cost capping an attractive proposition, but we also understand that it is challenging. In addition, we are speaking to colleagues in the Home Office and the Treasury about the establishment of a regime that will help us to manage the risk associated with potential big financial costs if we were to lose a case. There is a governance system that they are proposing to put in place that will help us to manage those risks. It is still early days, and conversations are ongoing, but at least colleagues in Government recognise the challenge that we face. There is no doubt a chilling effect on the agency from the risk associated with financial costs.
Dame Margaret Hodge
Q
Adrian Searle: I assume that is a reference to the ARIS system—the asset recovery incentivisation scheme. As it currently stands, we get 50%.
Dame Margaret Hodge
Q
Adrian Searle: It is certainly true for the NCA and policing. I would need to check whether that runs across the whole system. I can come back to you on that.
Liam Byrne (Birmingham, Hodge Hill) (Lab)
Q
Martin Swain: Not yet, to my knowledge. We have had the confirmation of part of our £63 million, but we are in conversations with the Department around future budgets.
Liam Byrne
Q
Martin Swain: It would be very difficult for me to describe what a gold standard would be at this point. We have put in a significant proposal to the Department as part of our spending review preparations.
Liam Byrne
Q
Martin Swain: I cannot give you a figure on the budget, but in terms of numbers of people, it was in excess of an extra 100 people.
Liam Byrne
Q
Martin Swain: That was our assessment at the time. It obviously depends how quickly we can digitise services because, as I said earlier in the session, the quicker we can digitise things, the more we can move people off manual processing into other work. I think it also depends on what the final shape of the legislation is when it gets through. We saw that with the Economic Crime (Transparency and Enforcement) Act 2022, where there were things, as the legislation went through, that changed and we had to adapt and do things differently. It would be wrong of me to estimate it at this point, before the legislation has passed.
Liam Byrne
Q
Martin Swain: I would probably say we do not need to. We have this package of reform, and it is fair to say we have worked really closely with the Department and people like the Treasury on what the package of reform needs to look like. We have been heavily involved, and we have been able to influence some of the thinking around what the reform needs to look like. However, I think nobody would disagree with the need to reform Companies House. Certainly, we would not; we welcome these reforms with open arms. As an agency, it is probably fair to say that we are hugely excited by the prospect of being able to do things that we have not been able to do in the past.
Liam Byrne
Q
Martin Swain: I have not said they failed to agree it. We have not got to that point of agreement yet.
Stephen Kinnock (Aberavon) (Lab)
Q
Martin Swain: I do not think we would have the capacity to do ID verification internally, certainly not within the timescale that we are looking at bringing it in. I go back to my point—and I will pick up the point with UK Finance—that we will be operating ID verification to standards that are appropriate across sectors that use ID verification. With any aspect of these reforms, there is potential for gaps in the system. What we are trying to do is design out gaps in the system. However, I think we know from the current companies framework that there are gaps in the system, and even where you plug those gaps, others will appear.
The Chair
Thank you very much indeed to both of you for your evidence. It has been very helpful. We now move on to the next panel.
Examination of Witnesses
Commander Nik Adams, Simon Welch and Michelle Crotty gave evidence.
The Chair
Good afternoon. We now have Commander Nik Adams from the City of London police, Simon Welch representing the National Police Chiefs’ Council, and Michelle Crotty from the Serious Fraud Office. May I ask each of you to introduce yourselves briefly, please?
Commander Adams: Good afternoon. I am Nik Adams, commander in the City of London police and the current lead on economic and cyber-crime.
Simon Welch: Good afternoon. I am Simon Welch, the national co-ordinator for the National Police Chiefs’ Council on the economic crime portfolio.
Michelle Crotty: I am Michelle Crotty, chief capability officer at the Serious Fraud Office.
Stephen Kinnock
Q
Commander Adams: Shall I start, as the City of London senior rep? I have the advantage and the disadvantage of having been in this job only since April, so I can give you a view of where I think things have got to. I obviously was not part of the network when that report was written. I think it reflected an approach to economic crime that has been very much built bottom up historically, which led to the assessment that policing was fairly fragmented, with different levels of investment and different prioritisation across forces.
As long as economic crime and fraud, in particular, are not part of the strategic policing requirement, it is difficult to really get police forces to galvanise that response. We have seen, however, some fantastic work by the Association of Police and Crime Commissioners to get fraud and economic crime into police and crime plans. We have seen through the support that the City of London police has provided, as the co-ordinating force, a great deal of consistency starting to layer on in local forces. In this year alone, we have visited 29 out of all 43 forces to look at their delivery of the economic crime response and of shared good practice across the country. That bottom-up has given us those improved levels of consistency.
Through the spending review and the police uplift programme, we are seeing significant investment at both a regional and a national level to help us to build some of those capabilities. By the end of this year, we will have proactive economic crime teams built around a consistent model in every single regional organised crime unit. With the anticipated investment from the economic crime levy, we will see the growth of regional economic crime teams—proactive financial investigation at a regional level—and, with our support, the continued network of those teams across the country, which will give us a growing and more consistent approach as we go forward.
Stephen Kinnock
Q
Dame Margaret Hodge
I will read out the two figures. The number of crimes under investigation has halved in the past three years, and convictions for fraud offences, according to national crime statistics, have decreased by 67% since 2011. What you are talking about is theoretical; it is not what is happening. At the same time, fraud is going up and up.
Stephen Kinnock
Will you say a word about why that is? The system seems not to be working, so what do we need to do to fix it?
Commander Adams: I will start and then bring in Simon, who is an expert on money laundering. The first thing to say is that fraud is getting increasingly complex. About 70% of all fraud emanates from overseas and, as Adrian touched on, it is very difficult for us to obtain prosecutions and convictions across jurisdictions. That is a real challenge for us, as are the growth in technology, the way in which fraudsters are now exploiting people and the changes in tactics.
Fraudsters are moving away from unauthorised payment fraud, where people’s details are stolen and used fraudulently—banks are now preventing somewhere in the region of 65p in every pound of that type of activity—and we are now seeing much more sophisticated frauds, where people are socially engineered, or manipulated, into physically approving transactions. That of course is much harder for technological solutions to prevent, when the target is a human being.
Of course, all that complexity requires a much more complex and sophisticated policing response. As I described, the growth that is coming down the line—in particular the proactive growth—will not start landing until the end of this year and then, of course, we are several years before we have fully experienced and really competent and effective investigators working on those crimes. All those things will layer on over a period. We anticipate that the technological advances will continue, both in support of us and in challenging us in how we can investigate and progress these crimes. Simon, do you want to comment specifically on money laundering?
Simon Welch: On money laundering, the amount of offences—detected offences—is going down. Criminals are getting a lot more savvy about our tactics and things like that, so we find that they are not having assets in their own names so much—vehicles, houses, things like that—and our opportunities for confiscation are probably going down a bit. However, what you can see from the seizure figures is that the cash value is up, but the volume is down. We are targeting and getting good results from the cases, but it is a smaller number of cases. In reality, POCA is now quite old, and people are used to us going after the money, so they take far more steps to protect that money from us being able to confiscate it.
Jackie Doyle-Price
Q
Michelle Crotty: At the moment, we have those pre-investigation powers for overseas bribery and corruption. They allow us to investigate earlier, in particular to identify banking evidence earlier, and to see whether there is a case to pursue. By extending that to fraud and domestic-based issues, we are enabled to do that in those cases. At the moment, we have to take on a case formally and to commit resource in order to exercise the powers. To some extent, we can negotiate on occasion with companies to get that material, but if we have the power of compulsion, it would make it quicker and easier to get the material and so identify whether there is a case there.
Jackie Doyle-Price
Q
Michelle Crotty: Yes.
Jackie Doyle-Price
And to address some of the questions we heard earlier—if you can act more quickly and establish whether a crime has been committed, that is clearly more efficient.
Michelle Crotty: It is more efficient and means that, if we follow the money and there is a reasonable explanation, we can screen a case out more quickly, rather than committing more resource and taking longer to reach that decision.
Alison Thewliss
Q
“Company formation and related professional services are therefore a key enabler or gatekeeper of”
trade-based money laundering. Is there enough in the Bill to remove that risk?
Simon Welch: It is difficult to say. We have heard about the verification processes going on. With the authorised corporate service providers, if we strengthen all that and make things more difficult, we target harm. At the moment, you can register a company from abroad, and there is little opportunity for us to follow that up, especially in a jurisdiction that it is difficult to get information from. The idea of having ACSPs in this country, where we can see them and start the inquiry from the UK, would be very desirable. I am not sure whether the Bill goes that far; I have not read that bit too much.
The Chair
Sorry, you are going to have to speak up. We all wish to hear the answer.
Simon Welch: Sorry—I appreciate that. Authorised corporate service providers, if they are based in this country so that we have a starting point for our inquiry, would be something that we would welcome. That would make it easier for us to start an inquiry. At the moment, if it is coming from a jurisdiction that is not particularly co-operative with us, it might be difficult for us to get that information, so, clearly, we would want to see that.
Alison Thewliss
Q
Michelle Crotty: No. Anything that will help us to identify suspects is welcome, as my colleague has said.
Alison Thewliss
Q
Simon Welch: If they can still get the companies and they can still make them work, they are going to make them work. It is if we make it prohibitively difficult for them to do that—if we make it difficult for them to create their verifications, because they will have to work harder to get the verification sorted out to make sure they have got the IDs sorted out. We have talked about the fee of £12.50 for registering a company. There are lots of arguments about that—frictionless trade and things like that—but we have the lowest price for registering a company pretty much anywhere in the world.
Alison Thewliss
Yes—by some margin.
Simon Welch: So is there a view for increasing that and using it for Companies House to invest in verification? That is something that could be looked at.
Alison Thewliss
Q
Simon Welch: I do not know. If you were to ask a businessman what they were prepared to start a company for—how many companies they are looking to start? At the end of the day, if you were just building a couple of companies and you knew you were going to get a really good service, you might be quite happy to pay £100 or whatever. I do not know what is a reasonable price.
Commander Adams: One of the challenges for us in our investigations is how desirable shell companies are to criminals who want to create a legacy pattern that an organisation has been running for many more years than it actually has. Of course, if you are then into a large-scale boiler room-type fraud, whether you are paying £12, £100 or £1,000, it is simply a drop in the ocean compared with the amount of money you are going to make at the end of that. Making it harder for people to inappropriately and unlawfully use shell companies in the way they are at the moment is what will help us ultimately.
Alison Thewliss
Q
Commander Adams: If I am right, the Bill allows for retrospective work to take place. However, as you have alluded to, there are simply millions of entities on there. As you heard from colleagues earlier, the resourcing of those retrospective checks, given all the work that has to be done—there are something like 1,500 companies registered every day in the UK; it is phenomenal—is going to be a real challenge. We would want to see resourcing to do those retrospective checks, to remove those companies from the register as quickly as possible.
James Daly
Q
Commander Adams: Again, you heard from colleagues earlier about this. The big thing for us is making sure that checks are undertaken to ensure that individuals who are setting up companies or have a significant stake in them are verified, to give us, as Adrian said, those investigative lines of inquiry into individuals. For us, that is the biggest game changer in what we are currently seeing, but of course it will require the right level of scrutiny and adequate robustness in those checks, and the capacity to do them at speed.
James Daly
Ms Crotty?
Michelle Crotty: The same—anything that allows us to identify the people behind it and then to use that to follow up with lines of inquiry. Capacity is certainly something that we would be concerned about, but the work that the NCA and the NECC are doing with Companies House should help with that, in terms of training Companies House staff.
Simon Welch: It would also be nice to be able to data wash some of the registrations through law enforcement indices before they were actually registered. That is obviously another quantum leap from where we are now. I think we are looking at sharing that data, but that is another thing for Companies House to work out, in liaison probably with the NECC. I think that would be preferable for us. Then we could prevent these companies from opening up in the first place, and stop them being used as vehicles for criminality.
Dame Margaret Hodge
Q
Michelle Crotty: We are very strongly on the record as saying that that is an offence that we would like to see. We have seen good results with it in relation to bribery and corruption since its introduction in 2010. Nine of our 12 deferred prosecution agreements have involved a failure to prevent bribery offence. We think that it not only punishes but helps to reform corporate behaviour. What we have seen with the Bribery Act 2010 is that companies have very much focused on putting adequate procedures in place because that is the defence that it provides them. The prosecution is one part of it, but actually the preventive work in terms of adequate procedures is as important, if not more important.
The other thing that we would say in terms of the impact on business is that for a failure to prevent economic crime offence many of the adequate procedures would already be in place in terms of anti-money laundering and other areas. Clearly that is something that the Committee, and guidance, would need to work through, but the impact on business may not be as heavy as some might fear.
Dame Margaret Hodge
Q
Commander Adams: Yes. Ultimately, as Michelle said, I do not think that the imposition on business would be that significant. There are lots of areas where we see unintended consequences of thresholds upon which, or below which, things are not reported to law enforcement. That sort of legislation would give us the ability to ensure that there are policies and processes in place in institutions to provide the sorts of checks and balances that identify patterns that might fall outside some of the clearly defined breaches of legislation. That, for me, would be the galvanising benefit of that power, in a not dissimilar way to financial institutions reimbursing victims, which helps to galvanise effort and investment into preventing crime, to avoid spending money out the other end. All those sorts of measures are really helpful. Particularly through Adrian’s role as director of the NECC, I think he would say that the things that help to galvanise the partnership and the whole-system response to fraud is where we will ultimately see our biggest successes.
Dame Margaret Hodge
Q
Michelle Crotty: The SFO would like to see those. We understand the concerns that other parts of the system have in terms of how you ringfence a cost regime just for economic crime. In terms of what the SFO can recover in any one year, we can retain £900,000 of legal costs if we win. Clearly, it is the other way if we lose, and there are ongoing discussions with the Treasury. I gave evidence to another Committee last week that, where we do not have a fund available to us for that that sits within our budget, we have to go and negotiate one with the Treasury if we lose. We would certainly welcome some protections, but we understand the challenges around fitting them into the broader scheme.
Seema Malhotra
Q
Simon Welch: Obviously, we are putting more resource into this area. If we are to go after them proactively, we are building up our intelligence around this. Historically, fraud has not been given the same emphasis as other types of criminality, so I think we lack in some areas. If we start to build that up, to get more intelligence that is actionable for us to work on, and to go after some of these people proactively as opposed to reactively, we will be getting ahead of the game, and then we will be able to arrest these people and prevent other people from becoming victims. It is important to invest in this area. It is a difficult time for us, because recruitment and retention of staff are challenging. We are looking to build, and are getting investment streams coming into us. We are looking to develop that all across the piece. We are looking at the intelligence and at the proactive capability and the investigative capability to take this on.
Seema Malhotra
Q
Simon Welch: Resources are a big part of it, but there is experience as well. If we bring in new people, they are unlikely to be the most experienced investigators. Unfortunately, in recent times, we have lost a lot of our middle-ranking, experienced investigators, so we are having to bring people through quite quickly. There is quite a quick turnover now, especially in things like crypto investigations, because those skills are very desirable in the private sector. It is really difficult for us to hang on to those people, so we are going through a bit of a treadmill trying to recruit and hang on to them. Mr Adams is looking at things like structures and strategies within the force to try to hold on to people and to look at different ways of retaining those skills and experience to make us that much better at investigating these things.
Seema Malhotra
Q
Michelle Crotty: It is fail to prevent for us, and it is capacity, capability and retention. As my colleague said, we can train people up with fantastic training, but the real challenge is that they are then very valuable recruits—not just to the private sector, but within the law enforcement community and in how we operate jointly to ensure that we build a pathway for people within law enforcement, as well as out into the private sector.
Commander Adams: The final thing to add to all of that is technology. The licences for the tools that we are able to use at the moment, particularly some of the tools for tracking crypto assets, are expensive. When you start to build up those layers of individual costs that Simon described on the tools and technology, to be really effective we have to bring those together with highly skilled and highly competent individuals. All that is a challenge for us at the moment, in the recruitment environment that we face.
Liam Byrne
Q
Commander Adams: I am not sure that my impression is the thing to take as gospel here. We see from the crime survey, our annual reporting and the growth in trends around victimisation that fraud is growing year on year. We predict that there could be anywhere from 25% to 65% growth in fraud over the next four to five years. If we were to go around the room and ask for a show of hands on who has received a smishing or phishing message, versus those who have been burgled in the past 12 months, I think we would be staggered at the volume.
Liam Byrne
Q
Commander Adams: It is a really complex landscape. We have a great deal of investment from the private sector in some of our specialist capabilities. We need more investment at the frontline of policing in undertaking economic crime investigations at that most basic level. That does not mean more people; it means investment in training to ensure that all frontline officers can deliver that.
Liam Byrne
Q
Simon Welch: As Mr Adams says, we could always do with more people—if you ask, we will always say we want more staff—but the reality is that it is difficult to bring them in at the moment because we are not offering wages that are competitive with some of the other agencies or the private sector. We are struggling to build that up. If we can build that up and maintain some trajectory so we can hang on to some of the staff to get them to an experienced level, we will start to see more impact on performance there, but we need to work on that really hard.
Commander Adams: I touched at the beginning on the investment and the proactivity around both financial investigation and fraud investigation. We have to see some of that investment land, get people into the posts, do the work that City of London police is doing as the national lead force to co-ordinate that activity across the country, and see what effect that has. That will then inform the business case and the arguments that we make for more or different resource in the future.
Liam Byrne
Q
Commander Adams: That might be one for Simon.
Simon Welch: Yes. You can identify a person of significant control, but sometimes it can be difficult if you are looking at the people who ultimately have control of some of those companies, because you have people stood up saying they are that person, but there are people sitting behind that person. It depends how good your intelligence is whether you can work these things out. Very often, if you investigate these people, you will be able to see that they have control of the company. If you do not investigate them, you will not be able to tell. You need to be on them with the right intelligence to work it, and then you might have an opportunity to show that they were running that company.
Liam Byrne
Q
Simon Welch: As an ex-policeman, I will always say yes to that, but obviously there are implications, because you need the resources down there to do it. Obviously, we will always go for the gold standard wherever possible, because if you are doing that, you are stopping people getting in at the first level, but there are obviously implications of the cost of that. But yes, of course we want the highest standards of verification.
Liam Byrne
Q
Michelle Crotty: It is certainly an issue for us. We would be interested in the proposal. If the evidence is overseas, even if the offence is based here, I think we would want to think through the mechanics of the prosecution. There would be some detail to work through, but in principle, I think we would welcome looking at that kind of offence.
The Chair
If there are no more questions, I thank the witnesses for their attendance and their contributions.
Examination of Witnesses
Dr Susan Hawley, John Cusack and Thom Townsend gave evidence.
The Chair
We now have evidence from Dr Susan Hawley from Spotlight on Corruption, John Cusack—via Zoom—from the Global Coalition to Fight Financial Crime, and Thom Townsend, representing the UK Anti-Corruption Coalition. Can I ask Dr Hawley and Thom Townsend to introduce themselves first?
Dr Hawley: Hello. I am Dr Susan Hawley, executive director of Spotlight on Corruption. We are a UK anti-corruption charity that monitors how the UK enforces its anti-corruption laws and keeps its international anti-corruption commitments.
Thom Townsend: Good afternoon, everyone. My name is Thom Townsend. I am the executive director of Open Ownership and the incoming chair of the UK Anti-Corruption Coalition. Open Ownership supports more than 40 Governments around the world to implement exactly these types of reforms.
John Cusack: Hello everyone. My name is John Cusack. I am the chair of the Global Coalition to Fight Financial Crime, which is an NGO. It is a 20-member organisation, both public and private, with large members such as Interpol and Europol, as well as Open Ownership—Thom’s organisation—and RUSI, which you may well know in the UK too.
Seema Malhotra
Q
Secondly, does the Bill provide enough mechanisms to help with transparency around the new responsibilities of Companies House, and should there be reporting—to Parliament, or certainly publicly available—on new powers? What would you want to see in order to have confidence that measures are having impact?
The Chair
Who wants to go first?
Thom Townsend: I think that there are significant areas of improvement for the piece of legislation that we see before us. Primarily, from our perspective, we focus on reform of company registrars around the world, so my focus is very much on how Companies House can better operate. The key area we would identify is around the verification mechanism, as you would expect, and that splits out into two points.
One is around how we verify someone’s identity versus how we identify and verify the statement of control and ownership that they are giving about their involvement with the company. That second part—their status—is not covered here. We are not putting in place mechanisms to understand whether the disclosure of beneficial ownership is accurate, and that is a significant problem. A colleague talked previously about having a gold standard, but we are far off that. We see company registrars in countries around the world taking meaningful steps to attempt to use their data and powers to begin to understand whether those statements are true. That needs to be significantly beefed up in this legislation.
On the second part—the ID of individuals—there are grave misgivings about that being outsourced to the trust or company supervisor profession. There are other ways of identifying people: in an ideal world, Companies House should be doing that. That is a big change for this piece of legislation, but frankly, that is where most of the world is going.
Seema Malhotra
Q
Thom Townsend: It is worth saying that countries that are doing very well on this typically have a national identity card system that is the foundation of their ID process. There are other ways of doing it. I think about Estonia, France, Germany—the list could go on, but it is based around their national ID card system. Clearly, we do not have that. The Government have done significant work on their own identity verification programme, which has had mixed results. We know we can do this. It does not necessarily need to be outsourced to that profession, which of course is supervised, but we collectively have severe misgivings about it.
On the second point around the accountability mechanism, we would like to see a very strong mechanism for Companies House to be coming to Parliament on a regular basis to talk about how this is looking and how it is performing. It is a much broader conversation about the kinds of indicators we would like to see reported on. That is a much longer conversation, but I will pass over to colleagues at this point.
John Cusack: I share Thom’s views, principally, on this. I spent 30 years working in banking as an MLRO—that is the previous history to my current role—and I spent many, many occasions trying to establish beneficial ownership. It is not easy, but it is the key to understanding risk and understanding who owns and controls a bank account, real estate or a company. That is absolutely key. I would like to see an obligation on the companies register that is essentially equivalent to that which a bank has in relation to knowing its customer, to the extent that that is possible. That is where we need to get to. Thom was explaining that some of the better countries are trying to get to that kind of standard.
Secondly, I believe that the registrar of companies needs to have a much stronger obligation than is currently set out in the proposed legislation—it needs, again, to be slightly similar to my old obligations as an MLRO. There needs to be an obligation to operate an AML programme that is worthy of the name, and to have strong and meaningful controls in order to be able to demonstrate that Companies House and the companies register are doing a similar job to what other people do in the private sector.
Dr Hawley: I would like to strongly back that up. It is essential that the “know your customer” rules that the private sector has to use are used by Companies House as well. There is no point having a registry that SMEs cannot rely on because it is not as accurate as it needs to be. That has been a problem now that the big companies simply do not use the corporate register because it is so inaccurate. There is a long way to go on that.
We also have real concerns, as Thom mentioned, about the authorised corporate service provider provision in the Bill. In essence, it relies on another part of the system—the anti-money laundering supervision system—and the danger is that we are just playing whack-a-mole. We are just pushing the problem down the road. We know that HMRC, in its supervision of TCSPs, has had lots of very serious questions about whether it is up to the job, and it just recently revised its average fine level down from £250,000 to £8,000. There are real questions about whether that is a serious deterrent. In its recent report, it found that nearly 50% of its cases that went up to the governance panel had to be returned to the case officer for serious work to be done again. Either the Bill needs to address the AML supervision regime—I can tell you some of our suggestions, because it would not be that difficult to come up with a transition—or there are real questions over whether that clause should be in it at all.
A final point, which was picked up earlier by colleagues from law enforcement, is about how this will be funded. The registry will be meaningful only if there are proper resources. It can be completely cost-neutral to the Treasury. We are heading into a difficult fiscal time, so it needs to be cost-neutral. As the gentleman from the National Police Chiefs’ Council said earlier, we have almost the lowest registry fee. We are the 6th lowest, in company with Rwanda, Timor-Leste, Ukraine and South Africa. Most other countries charge an average of £150 to £300, compared with £12. That could go an enormous way to getting the right IT infrastructure. We know a lot of this will have to be done with technology and AI. Making sure that the fees for Companies House are set at a realistic level to make this properly verified is essential.
Jackie Doyle-Price
Q
Dr Hawley: Absolutely. The key thing is what John alluded to—clause 88. What is the requirement in the Bill for how far the registrar has to go? If it is the minimum amount, the fees will be minimal. If we are going for the gold standard, the fees will need to be higher to reflect the greater verification work.
Thom Townsend: Just a quick thought: what strikes me, reading the Bill, is that it is not quite clear what Government want Companies House to be, when you delve into the detail. Is it around minimising criminal activity, as in the fourth objective? Is it about preventing, which comes up in clause 88? That needs to be resolved to give a very clear idea in primary legislation of what we want Companies House to be. It should be the first line of defence in the UK economy from the perspective of integrity and preventing crime.
Jackie Doyle-Price
Q
Thom Townsend: Absolutely. My point was just that countries that do have been able to go further and faster as a result of having the underlying infrastructure. But no, absolutely, you can do that. We have brought down the cost of identifying people in this country very rapidly, with KYC for new banking, and taking a video of yourself. We have a lot of technology and lots of ways to achieve that end. It does not have to be done through the trust and corporate service provider industry—it simply does not.
Jackie Doyle-Price
That is helpful.
John Cusack: I will just add to Thom’s point about clause 88. The language concerns me greatly. This will be dependent on the registrar’s diligence and, essentially, on the financing that the registrar has in order to carry out their activities. The language—that the
“registrar must carry out such analysis of information within the registrar’s possession as the registrar considers appropriate”—
is extremely timid. If there is no money for it, the registrar will not be doing anything. That is really problematic. We would not apply that in any other circumstance; we would want to set out the obligation—the expectation—and to fund that appropriately, not the other way around.
Alison Thewliss
Q
Dr Hawley: We focused more on what is not in the Bill. I do not know whether John or Thom want to address that.
Thom Townsend: I would hand over to John on this one.
John Cusack: The Bill is positive. It is one of the contributions that will definitely help, and it is trying to fix a long-standing problem. At the end of the day, however, if we want to deal with financial crime, economic crime, we need convictions—investigations, prosecutions and convictions—and asset recoveries. That comes from resourcing the public sector, as well as demanding high expectations from the private sector. I am worried that in the UK the financing of law enforcement, and of the FIU in particular, is insufficient to assure the objectives that we all want, which are to mitigate, manage and reduce harms from economic crime. This is a long-standing weakness in the UK, as it is in many other countries, and that would definitely help, but let us not kid ourselves that it will make a material difference to the economic crime situation in the UK.
Alison Thewliss
Q
John Cusack: Yes, of course. I would support that. However, I would also say, with respect, that the idea is to do prevention with the changes. When we put a lock on the door of an aeroplane, the fact that no one has stormed the cockpit is not how we judge whether a lock on the door is appropriate. We are tightening things up and preventing financial crime, but yes, absolutely, we need to see more enforcement. You would hope that these measures will mean that people will no longer necessarily look to UK companies and Scottish limited partnerships as the vehicle of choice for abuse, and they will look elsewhere.
Alison Thewliss
Q
Thom Townsend: When this legislation passes, there will be a lot of remedial work to sort out what is there—there is no doubt about that. Everything that you have just described is true, and it is probably a lot worse even than we are aware of. As you just mentioned, we are clearly starting from such a low bar that any legislation will have some kind of deterrent effect, but it is important to think not just about ensuring that we hit the gold standard with a piece of primary legislation. It is also the resourcing, but ultimately nothing that we can do will create a 100% perfect system.
Essentially, we are trying to remove as much noise as possible from the system to give law enforcement the best possible chance of focusing its resource where it can make the most difference. It is important not to think about this in zero-sum terms of: is it possible to commit crime or not? It is really just about making an environment where it is somewhat more manageable to detect, and then enforce. As it stands it, is the wild west on that register. If you wanted to do enforcement, we would be here until the end of time.
Alison Thewliss
Q
John Cusack: Not necessarily, because what I am most interested in is getting the Bill out in its current form with a financed and adequate registrar with obligations, and resolving that underlying issue. One of the reasons people use UK companies is not so that they can open UK bank accounts, because then you go through the gamut of UK obligations in the regulating sector, even though that happens occasionally when buying real estate and other things. Actually, people buy and acquire UK companies and Scottish limited partnerships so that they can open accounts abroad, because the UK is seen as a first-class jurisdiction. That means that when they open those accounts abroad, not many questions are asked, or not as many as would be if they were acquiring a Nigerian company, for example, which would ring all sorts of alarm bells. The interesting thing about the companies registry is that the abuse by foreigners does not necessarily translate into a UK economic crime issue per se, even though it is something that we also all want to address.
Dame Margaret Hodge
Q
John Cusack: For my high-risk customers, I always had it at 10% in my financial institutions, and 25% for non-high-risk customers, because I really wanted to ensure that I had almost everybody who could possibly be interested in the company or a relationship. I stuck at 10%, but you can always argue it lower or a bit higher.
Thom Townsend: Yes—whether it should be 5% or not, it needs to be lower. There is an argument to be made between 10% and 5%. My sense is that we have a 25% global standard on this because it is a sort of round number.
Dr Hawley: It is really interesting to look at what Jersey and Guernsey are doing on financial crime. They have a 10% threshold, and they are introducing a lot of other very interesting economic crime measures that go far further than we have in the UK, including a failure to prevent money laundering offence. They also have a measure to forfeit accounts based on a suspicious activity report, so they are really looking at very radical measures in Jersey and Guernsey that will make the UK look quite behind.
Dame Margaret Hodge
Q
Dr Hawley: I would say that that is the easiest. It is a great question and I will jump in, because I have my three. It would be really fantastic if Parliament signalled that its intention is not to pass a Bill that will just stay on paper; it needs to be properly resourced and make a real difference in terms of economic crime. There are three different cost-neutral ways of doing that, some of which you mentioned in earlier discussions. One is cost protection across civil recovery for law enforcement. The US-style system really works. If we want US-style enforcement, we need US-style rules.
Another way is to increase Companies House fees to match the scale of verification that we need. The other way is to invest far more. In the US, 100% of forfeiture goes into a central fund, and local police get up to 80%. We heard earlier that the NCA gets 50%; some police forces only get 18%. We also desperately need to find ways to match the money that law enforcement brings in. Law enforcement brought in £3.9 billion over the last six years. If that had been reinvested in law enforcement, we would have top capability in this country.
There are two other things. I have mentioned AML supervision already. If we could make the Office for Professional Body Anti-Money Laundering Supervision a body that genuinely raises the consistency of supervision across the board while the Treasury works out the bigger picture on supervision, it would make a really big difference. OPBAS could name and shame supervisors who were not performing, and that needs to apply not just to the legal and accounting sectors, but to HMRC and the FCA.
Finally, there is corporate liability reform, which you also referred to earlier. We have been waiting for it. It was in 2015 that there was the first Conservative party manifesto commitment to have a failure to prevent economic crime offence. The Law Commission has now spoken; we have been waiting a long time for it. Ideally, you would have a failure to prevent fraud offence, a failure to prevent false accounting offence and a failure to prevent money laundering offence, but you also need to bring in a change in the identification doctrine for the schedule 8 offences to make this work.
Thom Townsend: Unsurprisingly, verification—the first thing would be to think very hard about whether it is the trusts and service providers sector that we want to do that, to think much more broadly about what other mechanisms are available to us, and to cast the net widely around the world; there is a lot happening.
Secondly, the statements of beneficial ownership and significant control should be verified too. That is a far harder task, because the world has not figured out entirely how to do that. There are some really good examples; places such as Austria are doing good work, but it is largely about using data from across Government to make sure that you can red flag those statements.
Thirdly, we probably also need something in the Bill about having a more permissive data-sharing environment, to make sure that Companies House is getting what it wants. If you look at how the Bill is currently drafted, we have data that is “in the registrar’s possession” or “available to the registrar”. It is very unclear what that means, and it needs to be much broader than that.
A supplementary fourth point is to think long and hard about how we are using an identity, once verified, persistently in a lifelong way. Australia, New Zealand and India issue unique identifiers to directors—and, in Australia’s case, to beneficial owners—for life, which makes the investigation process much more straightforward. There is a lot of good practice out there. We need to look very hard at that and think about how we incorporate it into what the UK is doing.
John Cusack: As far as the Bill goes, I have mentioned one point already, which is the item in relation to beefing up the obligation on the registrar. The second piece is on the information-sharing provision in the Bill—I think it is clause 148. It is a limited information sharing item that essentially requires a SAR to be filed before private information sharing can take place. There is also the exit, pretty much, of the customer, which is potentially problematic. We are going to find that one potential bad actor leaving one bank cannot then open an account somewhere else, but we will also find that innocent people will be involved in that. I would rather have something broader, which allows the detection of unidentified financial crime, whereas, in this particular case, we are going to get identified suspicion being shared, which will potentially lead to some very serious unintended consequences, even though I am very supportive of the provision.
The last thing that I would say outside the Bill is that, ultimately, it is about asset confiscations and asset seizures. The UK is doing okay, but it is not doing anywhere near as well as it should be, and it is certainly underperforming compared with a number of important countries. I will give you one example. Italy not only seizes the amounts that Susan was talking about, but over four or five years it seizes almost £10 billion a year in asset confiscations, because it treats the Italian mafia as a matter of national security and targets its resources accordingly. I would like to see not a change in the law, but the rightsizing of the resources across the piece, whereby they are directed toward the tip of the spear, so that law enforcement FIUs in the UK and asset recovery can be prioritised and targets set, and we get close to the Italians, rather than being where we are today.
Liam Byrne
Q
Dr Hawley: I alluded to one point earlier, which is that if this is not a registry that companies and people can rely on, it will have been a waste of time and money. I alluded earlier to SMEs particularly not having the resources and having to rely on Companies House in a way that large companies would not; they would do their own intelligence. It will be bad for business and the business community, and it will be bad for the UK’s competitiveness. If you look at our competitiveness rating under the World Economic Forum measures, we are pretty good on quite a lot of things—in the top 10 —but for tackling serious and organised crime we are 70 out of 141. That is a competitiveness rating, so it will dent our competitiveness. Actually going for gold standard practice will be good for the economy, and will make us more competitive.
Liam Byrne
Q
Thom Townsend: Objective 4 does really need to say “prevent”. It is an objective related to the registrar’s functioning. The registrar should be responsible for taking really active and clear measures to prevent criminal activity under its bailiwick.
Liam Byrne
Q
Thom Townsend: That seems like a ridiculously low bar.
Liam Byrne
Q
Thom Townsend: Sorry, what do you mean?
Liam Byrne
We have registries of beneficial ownership for assets and property. We have to try to make it possible for law enforcement to connect companies, individuals and assets. Do you think we have the framework for connecting those three dots effectively?
Thom Townsend: As it stands, no. Some form of this legislation will go a lot further. We need to look at how we are uniquely identifying people. In that case, there is an argument for bringing that ID process in-house so you have clarity around it. You can assign that identifier, which then gets used across the panoply of datasets that law enforcement have in their possession to do that interconnectivity. We run the risk a little bit, as the legislation is currently framed, of creating another island that is a bit better connected but probably will not sit at the heart of the process and be that effective first line of defence that the UK economy should have.
Seema Malhotra
Q
Dr Hawley: Ensuring that companies cannot just liquidate has been incredibly important to law enforcement in the past. I am very sorry, but we might have to get back to you on that because I have not looked specifically at that clause.
Seema Malhotra
Q
Thom Townsend: I think there is a balance between speed and effectiveness. Companies House is fantastic at what it does now—it provides a really good service to register a business quickly, and it is really easy to use—but it has never had to do the kinds of things that we are now proposing it does. It will be a long journey to get from where it is today to the sort of high-functioning all-singing, all-dancing machine that we are proposing.
There is a balance between achieving the objectives of the Bill, and the wider goals of dealing with corruption and countering kleptocracy in the UK. We will probably have to look at some sort of transitional arrangement but, ultimately, we should have a much more aspirational and ambitious vision for what we want Companies House to be in five to 10 years’ time, put the resourcing in place, and ensure oversight and accountability to drive that forward and make it happen.
The Chair
Would anybody else like to answer that question? No? In that case, I thank all three members of the panel for their help in giving evidence.
Examination of Witnesses
Oliver Bullough and Bill Browder gave evidence.
The Chair
We come now to the next panel, for which we have until 4.30 pm. This panel comprises two people, both journalists, authors and experts—if I may put it like that—on the Russian Federation. I extend a very warm welcome to Bill Browder, who is in the room, and to Oliver Bullough, who is appearing via Zoom. Bill, would you like to introduce yourself?
Bill Browder: Good afternoon. Just to correct that, I am not a journalist; I am an activist and author. I am the head of the Global Magnitsky Justice Campaign. Basically, my life for the last 13 years has been the result of the murder of my lawyer in Russia, Sergei Magnitsky. My campaign has taken two tracks. One is to get the Magnitsky Act, which imposes asset freezes and visa bans on human rights violators and kleptocrats, passed in different countries, including the UK—35 countries have the Magnitsky Act.
The second part of my activity has been to trace the $230 million that Sergei Magnitsky discovered, exposed and was killed over. We found that that money was going to 24 different countries, and we filed 16 different criminal complaints. From those criminal complaints, I have had the opportunity to see at first hand who does it well and who does it badly, and let me tell you: this country does it badly.
This country has never opened a criminal investigation into the money laundering connected to the murder of Sergei Magnitsky, even though many other countries have done, and have frozen and seized assets. I hope that we will have the opportunity to talk about why that is the case, because I think I can make some proposals for the legislation that might cause this country not to be at the bottom of the league table.
The Chair
We will come to the questions in a minute. Oliver Bullough, would you introduce yourself, please?
Oliver Bullough: It is great to be here. I am sorry that I am not there in person. It is half-term and I have the children in the other room, with instructions to be quiet. It is an honour to appear alongside Bill, who I have known for a long time and whose work I have been following since even before he was an activist outside Russia—when he was still fighting corruption inside Russia.
I am a Russia enthusiast—a Russophile. I worked in Russia as a journalist for a long time. I inevitably came across corruption, because it is difficult to spend any time in Russia without coming across corruption, but the more that I investigated corruption and the more time I spent looking into it, the more I realised that it cannot be understood as simply a Russian phenomenon. The money does not stay in Russia; it moves out of Russia and too often it ends up in the UK, where it buys real estate, football clubs and many other things. I have been spending, I suppose, most of the last decade attempting to map how money moves from kleptocratic countries via tax havens and ends up in cities such as London, in order to work out how corruption really works and cut through some of the simplifications that are often used.
Seema Malhotra
Q
Bill Browder: Thank you. This is the crux of the whole issue. By the way, it was not just Magnitsky money that was not investigated. We have this problem; since Vladimir Putin has come to power, he and 1,000 people around him have stolen $1 trillion from the Russian people. This has been the largest destination of Russian money laundering. In 22 years since he has come to power, not a single money laundering prosecution has come out of Russia—not one—and we are talking about $1 trillion.
What is going on here? What I have learned is that the law enforcement agencies effectively refuse to open criminal cases unless they are 100% sure that they can win without any tough fight on the other side. Why are they so risk averse in opening cases? It comes down to simple risk-reward for them. Their budgets are very thin, as law enforcement does not have a lot of money, and when they go to court here on any type of civil case—it is not true in a murder case, but it is true in a civil case—if they lose at any point, not just at the end of the case, but at any point procedurally during the case, the loser has to pay the winner’s court fees, and there is no budget for that. Therefore, the UK law enforcement agencies will not take that risk.
I have seen it done differently. We presented the United States Department of Justice with the same information. They do not have that problem; they can open a case, conduct an investigation and build their case as they are doing their investigation, and if they lose, nobody loses their job, nobody is bankrupted, and no departments have to go back and beg for more money from the Government. Whatever money they have spent on their lawyers is the money they have spent.
What has to happen here—this is plain as day—is that you have to get rid of this adverse costs issue in a civil case brought by the Government. You could easily write an amendment to the law as it is written, because it is not here right now, to say that if the Crown Prosecution Service brings a money laundering case or an economic crime case, there are no adverse costs. If you make that point, it will change the whole dynamic—the whole risk-reward—for these people.
Dame Margaret Hodge
Q
Bill Browder: The same thing.
Dame Margaret Hodge
Q
Bill Browder: I was not even aware that in a criminal case, a murder case, nobody pays adverse costs. I am not sure if you bring a criminal case in these other—
Dame Margaret Hodge
I think in a murder case they would, actually.
Bill Browder: Would they?
Dame Margaret Hodge
I think so, yes. I am no lawyer—God, I am looking around the table for a lawyer.
The Chair
When I practised as a lawyer, if somebody was acquitted they would be able to ask for their costs to be paid out of what are called central funds, so the taxpayer would be paying for them, not the prosecuting authority.
Bill Browder: However you want to define it, what I would say is I have seen how it works in other countries and they do not have this issue. Therefore, there is no disincentive to bringing a case. It is just remarkable. In every single aspect of the Magnitsky case, we brought it to law enforcement. We brought it to the National Crime Agency; they refused. We brought the company formation agents that were involved in forming the companies during the stuff connected to the Magnitsky case to HMRC. They never shut down a single company formation agency, even though they regulate them.
Nobody brings any cases at all. There are three possible reasons. It could be the reason I have just stated, which is the most charitable one: that there are economic disincentives. I could also say “incompetence”, but I don’t want to say that, or I could say “corruption”, but I am going to stick with the fact that the economic incentives are not there for them. Whatever the reason is, this country should be ashamed of itself. It is an absolute shame, and nothing will change from this law unless there is actual law enforcement. What can we put in place so that the laws are enforced? At least get rid of the economic disincentives.
I will add one more thing, which is that in countries like the United States, if the Department of Justice wins a forfeiture case, they get the money and then they can fund future investigations from that money. When you are talking about a budget of the prosecution service being several billion pounds, you win one big case and you could fund the entire prosecution service.
The Chair
Q
Oliver Bullough: I agree with Bill that the UK has a shameful record when it comes to its failure to investigate and prosecute financial crime. I would add, however, a fourth explanation to Bill’s list of potential reasons why that is not happening. For many years or perhaps many decades, there has been a belief in Britain that making things as simple as possible is good for business—the idea that it is simple and cheap to set up a business and better to have less regulation than more regulation is invariably good for Britain’s business climate.
Alison Thewliss mentioned Scottish limited partnerships earlier. We saw this phenomenon when Scottish limited partnerships were discussed in the House back in 2017 after the exposing of the Moldovan laundromat. There were suggestions by her colleague then—the SNP’s Treasury spokesman, Roger Mullin—about trying to tighten up the rules around SLPs, but they were torpedoed by the Treasury because of concerns that that would lead to investment funds having to spend extra money on meeting regulations.
I believe the estimates for each fund would be between £14,800 and £27,600 per investment fund. That is the cost supposedly to the UK economy. If you compare that to the cost of fraud to the UK economy, which is estimated by the University of Portsmouth at approximately £130 billion, you see how absurd it is to be worried about saving £14,800: we are faced with a problem that is costing us more than £100 billion.
The cost of fraud, which is rampant—40% of known crimes—is a huge tax on businesses and individuals in the UK. It is made possible by the fact that we have been failing for so long to do anything about economic crime. If you look at that quantity of fraud, as estimated by the academics in Portsmouth—there are higher estimates—it is equivalent to about a fifth of the total tax take. It is like adding another VAT to the UK economy, or twice as much again as all taxes levied on corporations. That is the cost of economic crime on the British economy.
There has been a philosophical failure to realise that making things easy is not always good. At some point, you are making things so easy for criminals that you are essentially making things difficult for honest people. In this case, by adding regulation we will be deterring criminals and therefore making things easier for honest people. That is something that, for far too long, people in public life in the UK have failed to realise.
I am here talking only about the effect on the UK. On top of the cost of fraud to the UK, hundreds of billions of pounds are laundered through the City of London every year; that is the National Crime Agency’s estimate. It clearly a guess—a round number—and it could be more; it could be less. That is money being stolen by criminals, drug traffickers and kleptocrats, and laundered through the UK. They are keeping this money. Essentially, it is being taken away from good people and kept by bad people. If we could stop this happening—instead, confiscate the money and keep it for ourselves or return it to the people it is taken from—it would be what is called in rugby a 14-point swing. We would be taking it away from one team and simultaneously giving it to the other one.
I agree that the three suggestions that Bill made for why the UK has been so bad at fighting economic crime are all possibilities, but my favourite fourth one is that we have been simply philosophically failing to understand why economic crime is a problem. This Bill is a real opportunity to do something about that. I was listening to some of the earlier panels; I would like to second what was said by almost everyone, which is that a new law is very good, but a new law is definitely not enough on its own. We need far more resources for Companies House, the National Crime Agency, the Met, the City police, the Serious Fraud Office and all the police agencies to be able to use this Bill.
As I understand it, the funding per officer at the National Crime Agency is estimated at one third of their counterparts at the FBI. Leaving aside the fact that there are far fewer of them, just per officer they are funded at a third of the level of the FBI. If we want them to be able to do the same job that the Bill is talking about, and that American prosecutors and investigators are able to do, we need to fund them adequately. We should at least be funding them as well as their colleagues at the FBI if we want them to be able to do as good a job.
Jackie Doyle-Price
Q
Bill Browder: People are very simple: they operate on the basis of rewards and punishments. There are big rewards for people in the City of London to launder money. Banks make money off transactions and accounts and so on. Company formation agencies make money off selling directors and forming companies. Lawyers make money setting up these structures. There is no consequence if they are involved in in dirty business—none. Nobody faces any consequence.
What we have just seen at Companies House is remarkable: thousands of companies being registered for no commercial purpose other than to launder money. These companies then set up foreign bank accounts. We know who the directors are. Some of the directors are UK citizens. The company formation agencies are UK company formation agencies. We report it to the police, and nothing happens. If nothing is going to happen, then you are not going to change the culture.
America has the Foreign Corrupt Practices Act. Most American corporate executives do not want to be prosecuted and therefore do not make bribes abroad. Austria does not, and so they do. We are in a situation where there is no consequence for doing any of this type of stuff. It does not matter what is written in this law; it does not matter what was written in the previous law. There was a great law passed called the unexplained wealth order. It is a beautiful law, which solved a huge problem, which is not having to get evidence from the bad guys in the kleptocrat countries, and just using the evidence that we have here. We have used it in four or five cases, and most of the cases have actually been on behalf of dictators going after their enemies. We have a total failure of law enforcement. It probably should be studied as a separate issue: why is law enforcement not doing its job? Why is it failing?
You can write as many great laws as you want—there is some good stuff in this law, and good stuff in the previous laws—but if no one is going to enforce it, then you are never going to change the risk-reward and people are going to carry on doing stuff. All this will continue, and I will sit here 10 years from now making the same allegations about how this is a centre of money laundering.
Oliver Bullough: I would like to agree with everything Bill just said. People are more or less rational: they act according to their incentives. We can try and change the culture in the City of London as much as we like but, essentially, if there is no prospect of being arrested, prosecuted and jailed, or at the very least given a large fine, for committing these kinds of crimes, then someone will always be available to commit them because the reward will be sufficiently large and there will be no downside.
I gave a talk to a school a couple of years ago. One of the kids had been sitting silently throughout, and he put his hand up and asked me at the end, “Yeah, Mister, if you know all this about money laundering, why don’t you just go and do it?” I still do not really know the answer to that question, because there is no real reason not to do it. It is a gimme of a crime. You are 99.9% likely to get away with it.
What is particularly frustrating is that when we have prosecuted fraud and put resources into prosecuting fraud, it not only pays for itself, but is a huge profit centre. We saw that from Lord Agnew, who ran a small anti-fraud office from the Cabinet Office during the covid pandemic. He had a small anti-fraud budget that returned tenfold the amount of money that was paid. It is a complete no-brainer to go after this money and these crimes. We would be benefiting the country in every way.
I agree with Bill; it is very frustrating to hear talk about changing culture, when what we really need to do is to change people’s incentives. The way to do that is to enforce the laws that we have.
Tom Tugendhat
Q
We will be listening for further ideas in the future, but do you agree that the Bill at least sets out the first steps to where we really do need to be going to make sure that the crimes begin to be prosecuted? Just to answer your question, Oliver, the reason you do not launder money is that you are and remain a person of integrity; sadly, you are not very rich for it, but there you go. That is the price.
Bill Browder: I have never had any trouble with the laws as they are written here. We probably do not even need this. It is a great law—congratulations; I applaud you on putting it together. It is 252 pages of mind-numbing stuff—
Tom Tugendhat
Of detail, Bill!
Bill Browder: It is great. There is no problem with the actual legislation. This is a rule-of-law country, and the laws have been written, and continue to be written, very well. There is just a huge disconnect between that and the enforcement.
I would add one little detail, if you want to get into the nitty-gritty. We have seen that UK companies are used abroad to set up accounts—this was mentioned by Dr Susan Hawley and perhaps one other—because it looks legit to have a British company with a Cypriot or Latvian bank account. Somehow, when you get a transfer from a British company with a European bank, everything then—that is how these people get away with it.
I would therefore add one small provision to this law, which is easily done. When people are setting up their companies, they should have to disclose, on an annual basis, where they have foreign bank accounts. If you were to do that, then every anti-corruption investigator could go around and start looking at that. I do not think that it is a huge additional disclosure requirement. People have to disclose their income, expenses and so on, so why not disclose where they have bank accounts?
The Chair
Q
Oliver Bullough: I think it was Samuel Johnson who said, about a dog walking on its hind legs, that
“It is not done well; but you are surprised to find it done at all.”
I am happy that the Bill exists; I was happy that there was another one earlier in the year. I would prefer it, however, if Parliament sat back and, instead of passing two fairly minor economic crime Bills in one year, put them together into one with all the other things that desperately need doing, take a long time over it and, when passed, really ensure that the law, as passed, is enforced.
Bill mentioned unexplained wealth orders. Those were a fantastic idea—perhaps hugely overhyped when they were brought in, but a great idea—and a real potential silver bullet for tackling top-end economic crime by both organised criminals and kleptocrats. Sadly, after the failure of the case against the daughter of the former President of Kazakhstan, they have not really been used at all. That is because the National Crime Agency does not have the money it needs to do the job, and that is because politicians have not sufficiently prioritised fighting economic crime. That is where the money comes from.
Yes, by all means, it is good to have another Bill, but I would far prefer to see the existing laws properly enforced by properly-resourced law enforcement agencies with continuous political support than have another Bill. I say that as someone who has been banging on about the problems with Companies House for absolutely ages.
Dame Margaret Hodge
Q
I want to deal with another issue, since you are both Russia experts. There is a mood across the House to tackle the issue of seizing Russian assets as well as freezing them. I know that you have both been working in that space, so could you comment on that? How do you think it could be done, do you think it is a good idea and how much is at stake, to the extent that any of us know the figures?
Bill Browder: Shall I go first, or do you want to, Oliver, since I have been hogging the first response?
Oliver Bullough: No, Bill, you can go ahead.
Bill Browder: We are on our third Prime Minister in seven weeks; there is an economic crisis going on; the purse strings are tight. There will be pressure here not to send as much money to Ukraine because we are worried about our money at home. There is also pressure in the United States. Some 30 Democrats wrote a letter to Biden saying, “Let’s just settle this thing and give the Russians what they want”—or something along those lines—“and not spend this money.” There is also pressure from the Republicans on the other side, saying, “No blank cheque for Ukraine”.
We also cannot let Ukraine go, under any circumstances, because, if we do, Vladimir Putin will be knocking at the door of Estonia or Poland. Therefore, how do we pay for it? Ukraine needs the money and the military equipment. Well, let us let the Russians pay for it. It is a simple thing: the Russians have started this war, created all this conflict, caused all this destruction and killed all these people, and we have $350 billion of their central bank reserves frozen, as a first step.
Why are we not using that money to support the Ukrainians? There are people who say, “That’s never been done before, and therefore we shouldn’t do it.” I would argue that it is pretty straightforward. In Parliaments around the world, what do you do? You make laws. If it has not been done before, make a law so it can be done. It is not a legal issue; it is purely a political issue. Should we dig into our own pockets, or should we let the Russians pay for their own war? We should start by letting the Russians pay for their own war.
I am having the same conversations elsewhere. I was just in Canada, speaking to the Canadian Parliament, last week, and I have been speaking to the US Congress. It is a no-brainer. It is a more complicated issue when you start going to the oligarchs, because you have to prove that somehow they are connected to the Government. But when it comes to the Government themselves, $350 billion is being held right now by the UK, the EU, Canada, the United States, Australia and Japan. That is an easy way to solve this financial problem and help the Ukrainians win this war.
Oliver Bullough: I would like to add to that. One of the reasons why it is complicated to take money away from oligarchs is that, once the money is here, it benefits from the rule of law that we have and so on. It is always harder to take egg out of a cake once it has been baked. It would have been a far better idea not to allow the money to come here in the first place. The lesson I would like to see learned from the current Ukraine crisis is that it is far more cost-effective and efficient not to allow kleptocrats to launder their money through the UK in the first place. If we do not support kleptocratic networks, those networks will not survive. They will not be able to come to such strength and vitality that they threaten their neighbouring countries.
Yes, it is important to confiscate Russian money to return it to Ukraine. Yes, it is important not just to freeze but to seize oligarchic property. But it is also important to put in place the powers, and particularly the law enforcement structures, that we need to prevent more kleptocrats from coming here. Next year, it might not be a threat coming from Russia; it might be a threat coming from China or somewhere else. We would find ourselves in exactly the same situation: trying to work out what to do with money that we had frozen when, if we had not allowed it here in the first place, we would not even have to have this discussion.
Dame Margaret Hodge
Q
Let me put to you another issue. If we strengthened accountability, those working in the Executive agencies might work a little harder at putting into effect the laws that we parliamentarians pass. Bim Afolami has an idea of establishing a Select Committee of the House that would look at the regulators—the enforcement agencies—and could ask for individual cases to be heard by the Committee in private, to see whether there are systemic issues at play, which could lead to public reporting on those issues.
That is one idea. There are others around. Do you think the lack of accountability, particularly for the enforcement agencies, could be a contributing factor to the fact that we just do not do enough—that we do not use our existing structures enough—even without the money and even with the cost issue?
Bill Browder: I think so. This is not the first time I have had this conversation with Members of Parliament. I have been in front of many Committees—the Home Affairs Committee, the Foreign Affairs Committee, this Committee and others—to talk about this lack of enforcement, and I have talked with many Members of Parliament. There is no disagreement with me. Every political party supports the idea of not having London be the money laundering capital of the world. I think everybody agrees. Many good Members of Parliament have put pressure on different Governments, put questions to them and had conversations, and I have seen many Government Ministers agree. Then, all of a sudden, we get to this total disconnect: law enforcement cannot be instructed by Parliament or the Government to open or pursue a criminal case or explain why it has not done so. It is living in its own world.
The only thing the Government can do is replace the people in executive positions in law enforcement; that is the only sanction. There has to be a better way. There are arguments about not wanting to politicise law enforcement and I totally sympathise with those, but at the same time if it is completely failing it needs root-and-branch reform—whether parliamentary oversight, Government oversight or some other mechanism. It is just failing and it has continued to fail in a way that is totally unacceptable. I would hate to be sitting here a decade from now having the same conversation.
Alison Thewliss
Q
Oliver Bullough: It is probably fine. Hopefully, if things are actually enforced and Companies House is given the money it needs to do the job and it is ambitious about that, this may work. Personally, I would like the threshold for a person with significant control to be reduced significantly: perhaps to 10% or 5%. Perhaps there should not be a threshold at all, but if you control you need to declare it.
The Bill is potentially an improvement. I still do not think it is the kind of root-and-branch re-evaluation of Companies House that we need. An amazing variety of corporate structures are available in this country. I do not think anyone has stopped to say, “Do we really need limited liability partnerships and limited partnerships? Why do we have both?” Does anyone stop to think about why they exist at all? Limited partnerships were created as a bit of a strange afterthought back in 1906 anyway. Why do they even exist?
I would like to see discussions like that, personally, but as it stands I think that bit of the Bill is probably okay—certainly if it is enforced properly. If there were an Oliver Bullough-ocracy, there would be all sorts of different changes to how companies could be used. I would not allow people to use foreign companies to own UK property at all; you would have to own it via British companies if you wished to use a company. But that is not going to happen so it is silly to talk about it.
On Margaret Hodge’s point, in the Oliver Bullough-ocracy I would definitely like to have something similar to the Senate’s Permanent Subcommittee on Investigations, with the power to investigate whatever it likes and do really forceful, well resourced investigations into Government agencies or anything at all. That would really help to cut through some of the failures to understand why the failures are happening and to really bring accountability to these bodies, which have been able to hide behind the lack of oversight for a long time.
Alison Thewliss
Q
Oliver Bullough: I heard the Companies House official talking earlier; I did not join at the beginning so I did not catch his name. He was saying that there would be difficulties with resourcing the verification of all that, particularly when it comes to the issue I wrote about recently in my newsletter, about what I call “offshore shell people”—people essentially acting as a kind of shell company. It is noticeable that while the number of offshore companies owning property in the UK has flatlined over the last decade, the number of people with overseas addresses has increased by 250%. Clearly, scams can always be used and things are always coming in. Making sure that Companies House can have the resources to do all that is a tough ask.
This is perhaps stretching way beyond what is in the Bill, but I am not sure that it would not be a good idea to have what the British Virgin Islands has, which is that an ordinary person cannot just file things with Companies House; they have to go via a lawyer or another registered professional. I am not sure that that would not be a bad idea, because then you would not have this issue at all of people being able to log on.
Just to show how absurd it is, I was at a conference the other day and a participant from Canada could not believe me when I said how easy it is to file things at Companies House, so we logged on together and she created a company then and there. She is a tax consultant; there was no “tax consultant” option on the dropdown menu, so she called herself a taxidermist. That is how absurd the system is. There is a lot of scope for improvement before we need to worry about fine-tuning the details.
Alison Thewliss
Q
Bill Browder: One of the things we have seen is that the same individuals—these money launderers—will find a drunk Latvian person, get their passport and then register them in hundreds and hundreds of companies. If those companies get shut down, then they can register them as the directors of other companies; they then become directors of those companies.
Why is it okay to have a person be a director of 400 companies? That does not make any sense to me. Why should there not be some limitation—maybe 10? Ten companies is a lot of companies—but 400 companies, or a thousand companies? That limitation would be an easy thing to put in here, and that would make it harder for the criminals, because there are not that many people who are ready to give up their passports to do money laundering. The number of people who are involved in this is quite small when you actually look at it, because most people do not want their names being used for these terrible schemes.
Alison Thewliss
Q
Bill Browder: In theory, yes. This whole post-box idea just lends itself to anonymity and so on. Why do people not just register their companies at their own home or their own business address if there is a legit company? What is this business with 2,000 companies in one strange industrial park in Glasgow?
Alison Thewliss
Q
Oliver Bullough: I did an investigation a while ago and there was a woman who was a director of four companies, I think, despite the fact that she had been dead for five years. Clearly, someone had been using her signature to sign off on the companies, and that is clearly a misuse of information. Clearly, that is falsifying company information and is already a criminal offence. Despite the fact that I had written about it, nothing was done; no action was taken. As I say, there are a lot of easy wins here before we need to worry about the details.
Alison Thewliss
Q
Bill Browder: Well, Scotland is so dwarfed by London that you do not have to worry about your reputation, because the reputation is so bad here that no one will even be paying attention.
Seema Malhotra
Q
Bill Browder: I have written a whole book about this. The bad guys in Russia are a big part of the problem, but you cannot export this type of corruption and money laundering unless you have somebody doing the importing. And who is involved in the importing? It is the western enablers—the lawyers.
I have had shocking experiences with western law firms that are benefiting from this. If there were some kind of duty whereby they had to actually look into the source of their funding or the legitimacy of the business, I think that would be an extremely powerful thing, if it was actually enforced. There is a whole other long discussion of law that one could have about the role of western enablers, and particularly the lawyers.
The Chair
I am afraid that under the rules that we operate on, I have no discretion to allow this very interesting sitting to continue, so we have to finish. I thank both our witnesses for a really fascinating sitting. Their great insight and knowledge on this subject has been of immense value. Thank you very much indeed.
Dame Margaret Hodge
On a point of order, Sir Christopher. May I ask whether our proceedings are covered by parliamentary privilege?
The Chair
The answer to that is yes, they are, but it should not be abused.
Examination of Witnesses
Professor John Heathershaw and Thomas Mayne gave evidence.
The Chair
We now come to the ninth panel. We have Professor John Heathershaw from the University of Exeter appearing via Zoom and Thomas Mayne from Chatham House. Good afternoon. I am going to ask Professor Heathershaw, first, to introduce himself briefly.
Professor Heathershaw: My name is John Heathershaw. I am professor of international relations at the University of Exeter. I work on aspects of money laundering related to post-Soviet political elites.
Thomas Mayne: I am Thomas Mayne. I am a research fellow at the University of Oxford and a former visiting fellow at Chatham House. I am one of the authors of “The UK’s kleptocracy problem”, a report we released at Chatham House in December.
First, by way of very quick introductory remarks, on the day we launched the report, the then Foreign Secretary, Liz Truss—how time flies—was also speaking. That was a nice coincidence. She was asked about our report and her response was that the UK has the strongest money laundering regulations and laws in the world. As we have heard today, we could debate whether that is true or not; there is some evidence to suggest that it is. However, as we have heard a lot today, without enforcement, laws are useless.
Secondly, I am an expert in kleptocracy and anti-corruption measures. Kleptocracy and money laundering are two slightly different things, and I hope we will get into some of the differences today.
Seema Malhotra
Q
Secondly, would you expect kleptocrats, in the light of this regulation, just to move their assets to unregulated sectors? Are we going to have the protections we would want for Britain, or are we in danger of seeing some of the behaviour simply displaced?
Thomas Mayne: First, on supervision, I do not think there is enough in the Bill. The findings of OPBAS—that the risk-based approach we have put in place really is not working—are quite shocking. What is the solution to that? I know that Dr Hawley was here earlier; Spotlight on Corruption has just released a report on the supervision of the legal sector. There is a debate in that on whether there should just be a single sector supervisor, which is something we should look at.
Generally, I think supervision is lacking and it is very uneven. Across sectors, we are seeing very different layers of enforcement actions. For example, I think the Council for Licensed Conveyancers—obviously, it deals with real estate, which, as we know, poses some of the highest risks for money laundering—produced zero enforcement actions in a three-year period. There are varying levels of not only supervision but enforcement activity. That is definitely something that we should look at that is not really in the Bill. John, do you want to say anything on that question, before we move on to the second one?
Professor Heathershaw: I think the accountability question pertains to parliamentary supervision of those regulatory agencies. As I understand it, there is nothing in the Bill to enhance that. There would be scope for a specific cross-departmental parliamentary Committee in this area, I think. As we know, money laundering crosses different Departments, so greater accountability for poor performance by the supervisors could be tackled through that kind of oversight.
Thomas Mayne: Was the second question whether we are worried about capital flight from the UK?
Seema Malhotra
Q
Thomas Mayne: That is certainly a risk. We are way ahead of the game, in some respects, in terms of which businesses we regulate. I know that there is an ongoing discussion about whether PR agencies should have regulation. I am not an expert on crypto, but I think we should look at bringing it into the existing regime where, if there is a suspicion of money laundering, you have to report it by law.
Professor Heathershaw: To add to that, it is not simply a matter of liquidating assets to move them into other denominations or unregulated sectors. The nature of money laundering is that it is a social and political phenomenon as well. It is about achieving a place to stay where you can protect your assets through the rule of law, and maybe gain some social influence, get your kids into school, and use your residency to garner a wider profile and clean up your reputation. That means that the property and bank accounts are hugely important; they will not just be liquidated overnight.
When we are talking about the kind of money laundering that Tom and I look at by political elites and those from kleptocracies, they are seeking to gain a whole set of goods that you cannot simply get through putting all your assets into crypto, or into a more loosely regulated jurisdiction such as Dubai. There are certain things that the UK, and London in particular, offer that will not simply fall out of the way in a beggar thy neighbour, “Well, we’ll just move ourselves into a sector or jurisdiction that is loosely regulated,” way. I do not think that that should cause us to worry about losing market share, or the problem shifting into another sector, because the problem will always remain in the legal and regulated sectors that are our principal concerns. They will always be there, too.
Thomas Mayne: I have one thing to add on real estate. We now have the registration of overseas entities as part of the previous Act. It will be fascinating to see what happens in January, when the deadline comes in, with the existing properties that we know are owned by oligarchs or kleptocrats, and what kind of information they put on record. It is not a magic bullet. One problem with the ownership of property is that we will not, and should not, have a searchable database where we put in somebody’s name and see whether they own a property in the UK. It does not work like that, so there may be other properties that are perhaps owned by proxies. Those proxies will have their name on record as the so-called beneficial owner, but they will not be discoverable because we do not know about them, and we do not know that proxies are being used. What will be interesting is, as I say, what information will be revealed about the properties that we do know by January.
Jackie Doyle-Price
Q
Thomas Mayne: Transparency is incredibly important. We know that, and we know that what has happened to Companies House in the past 15 years is ludicrous. We have heard examples of that today. We are one of the first countries in the world to have a beneficial ownership register, and I think that the Bill will take us to the next stage in verifying the information that is put on to Companies House, but, as Dr Hawley said earlier, will we still be able to rely on that information? There is also a risk that it just becomes another layer of what we might call zombie transparency. We have all this data, but so what? If it does not lead to enforcement actions or to people who are breaking the rules and submitting false information being penalised—sanctioned, fined, jailed—it will be all for naught. It needs to be accompanied by robust enforcement action. We have heard that from many speakers today.
Jackie Doyle-Price
Q
Thomas Mayne: Absolutely. If we take the PSC register, which has been in for a few years now, we can point to that and say, “This person has to be the controller of that company. Why is this person living in a shed in Siberia when £100 million is going through their company?” Before the PSC register, we could not say that. Now we have verification procedures coming in, we should be able to say that somebody at least—Companies House or whoever—has checked that this person is real and is the person they say they are, in terms of the information submitted to Companies House. We should definitely have this, but it is only the first step.
Professor Heathershaw: To emphasise that point, we know that even where there is transparency—even where we know the money is going—there is an enforcement gap. For example, Tom and I obviously work together, and we have provided your Committee with two of our most recent reports: one on unexplained wealth and one looking comparatively at the Dariga Nazarbayeva and Zamira Hajiyeva cases, in which we demonstrate that the reason why one failed and the other succeeded was simply the incumbency status of the two. The one who remains in power, has a good relationship with the law enforcement authorities back home and has privileged access—one might argue, an unfair advantage there—is able to defend themselves against that measure.
Unfortunately, the UWO reforms that came through earlier this year in the Economic Crime (Transparency and Enforcement) Act 2022 do not fit that part of the problem. It is also part of a bigger problem. When we look at our dataset of £2 billion-worth of properties in the London and the south-east—included at the end of the Chatham House report, the blue one that you should also have—we find that the 73 cases of incumbents, the people who remain in good favour in the kleptocratic states from which they come, get to retain their properties, but 13 out of the 15 cases of exiles, of those who have fallen out of favour, lose their properties. That is not explained by exiles being more corrupt and incumbents less corrupt, so there are problems there around enforcement.
That means, effectively, that however much transparency we have, the measures that are being adopted are not really introducing rule of law at all, because what determines the outcome for people—whether they get to keep their property—depends on whether they are in political favour back in the kleptocratic state. That is a real indictment of the way in which the UK system has hitherto functioned. It shows the limits of what transparency can achieve. As Tom mentioned, with this Bill the UK will be a gold standard of transparency across the world, but it will still lack in terms of accountability and enforcement. That is the real challenge.
Jackie Doyle-Price
Q
Thomas Mayne: Yes.
Professor Heathershaw: Yes, I would agree with that statement entirely.
Alison Thewliss
Q
Thomas Mayne: I think so. Where do you cut it off? It certainly should if there have been large-scale, egregious actions. Oliver mentioned somebody registering companies in the name of a dead person, and I found an example of that in an investigation years ago. People should be penalised for really fraudulent misuse and prevented from registering companies again in the future.
Alison Thewliss
Q
Thomas Mayne: On the point about directors, there certainly should be; it is crazy that you have these people with 1,000 companies. I am not sure on your point about addresses. If you are an investigative journalist or a freelancer and you do not want to register a company with your home address, for example, or if you are the PSC and you have your name on the company, is that enough? Perhaps there needs to be some provision about having an office where you have to physically be and sign your name. I am not sure about the proxy address, but certainly, on your point about proxy directors, limiting the number would be a good idea.
Alison Thewliss
Q
Thomas Mayne: I think so. Obviously it is difficult with PSCs, because I can say I am the PSC of a company and there could be an agreement written in a safe in Liechtenstein somewhere that says it is actually a Kazakh politician or whoever it may be. Certainly, there are probably egregious examples where it is clear that the person is not the PSC. You can do some research on them. There have been some examples today where there is clear evidence that the person is not who they say they are. Yes, there need to be fines, and the fact that there has been only one so far again goes to the point on lack of enforcement over fraudulent information submitted to Companies House.
Alison Thewliss
Q
Thomas Mayne: Possibly; maybe that would overburden it. There are already talks, with the verification coming in, about ramping it up.
Alison Thewliss
Q
Thomas Mayne: It is an option.
Liam Byrne
Q
The Chair
Before you answer that question, is this question directed to that action in relation to measures in the Bill? I hope it is, because otherwise it will not be in scope.
Liam Byrne
Yes, it is a gap in the Bill.
Thomas Mayne: Absolutely, and many thanks for bringing up the case. As you mentioned, none of the authors had any say in the matter and we did not think it was justified, as the evidence we put in the report is entirely accurate. This is a perfect opportunity for some kind of anti-SLAPP legislation to be put in the Bill. Dame Margaret spoke at a recent debate with David Davis; some other examples were given there. If we do not put it into this Bill, will it just be mothballed and we miss our chance? Meanwhile, more journalists are being threatened, and a lot of information is not being put into the public domain because of the threat of a SLAPP. The Bill is related to transparency, as you say, so is there an opportunity to put that sort of measure in the Bill?
Professor Heathershaw: Obviously, I would agree with that. Our report has been subject to these issues. We have also seen many threatening letters over the years. I think it is fair to say that we are some of the leading researchers in the UK on this specific area, at some of the UK’s leading universities. Professionally, it is shocking for me to find that we could be subject to such aggressive letters. The risks were so great, simply because the costs could not be limited.
I think there is a need to introduce a merits test early on to dismiss litigation. I think there is also a need to cap the costs for defendants, because at the moment you have to get very expensive libel insurance to protect yourself, which can be very difficult. Even then, there are huge costs involved.
The question about whether there should be specific legislation from the Ministry of Justice is interesting. At present, that has not been tabled to Parliament and so the opportunity that presents itself—to amend Bills, to provide certain measures, to introduce costs—would definitely be within scope. When you see these cases, many of the people from outside a Government service who have given evidence today—I am sure Oliver Bullough or Bill Browder would speak to this themselves—have been subject to those actions for things they have written that are entirely accurate and in the public interest. In that sense, such a measure is within scope.
It is also within scope because money laundering of this type is always accompanied by reputation laundering, which means seeking to clean the public record of questions about your sources of wealth and misdeeds of the past. It is very much within scope and it would be great for the Bill to consider things like a merits test and a cost cap for defendants in defamation counter-claims.
Dame Margaret Hodge
Q
Thomas Mayne: I mentioned earlier the PR industry. I think there is a debate going on, following the Russian invasion, about whether there should be transparency over who you represent. Should it be put on record and in what sense? There are membership organisations in the PR world, but you do not have to sign up to them, so there is an internal discussion going on about whether that should become mandatory. Do you somehow put PR under the scope of money laundering regulations? Maybe that is going too far, but some kind of oversight and transparency of such PR agencies, who sometimes represent the kleptocrats and use their wealth to threaten journalists, should certainly be considered.
Professor Heathershaw: It is my understanding that there was a consultation on a foreign influence registration scheme under an earlier, different Home Office Bill. That is where you may have something equivalent to what the US has in the Foreign Agents Registration Act. If you are looking specifically at kleptocrats linked to foreign regimes, or who are themselves part of foreign regimes, PR agencies are working on their behalf to clean their reputations, potentially in a wider public realm with public institutions, and, of course, to specifically target Government officials to potentially donate to political parties—a non-British citizen can do that while retaining overseas citizenship.
Those things would be in scope of a foreign influence registration scheme. Again, that crosses over into the territory of the Bill. It has previously been proposed as part of another Bill, but I think it is very much needed for the PR industry.
Dame Margaret Hodge
Q
Thomas Mayne: That is an excellent question; I am not quite sure how to answer it. As researchers—quite akin to journalism—we all play a game of self-censorship in what we say. Even when you have information about donations from people from overseas—kleptocrats or oligarchs—that is certainly in the public interest, there is always a tendency to draw back and not put it in the public domain. If there were some other forum that allowed that information to be put there without the legal threat, that would be fantastic. At the moment, we rely on you as MPs to bring to certain issues up under parliamentary privilege, because the way the libel laws are set up in the UK is stymieing that kind of debate, which needs to be able to continue.
Dame Margaret Hodge
Q
Professor Heathershaw: On the Chatham House paper, two of our authors are Americans, and they have a first amendment right. They think the situation that has arisen with respect to Chatham House is extraordinary and absurd. You could have a first amendment right in some kind of British Bill of Rights, which has been mooted in the past. In terms of academic and journalistic freedom, you could have a specific statement setting out that anything within professional competence that is evidence-based and without malice is counted as free speech.
I think there is obviously a need to revise the Defamation Act 2013 to say that, unless you can determine that a statement has been made with malice, and if it is within professional competence and accurate, it should not even be considered admissible as a potential case of libel or defamation. As researchers, our work goes through ethics committees—
The Chair
Order. I am afraid I have to stop you there. I have no discretion to allow you to continue because under the rules set for the Committee, the sitting has to end now. I thank both our witnesses very much for coming along and helping us with our inquiries.
Ordered,
That further consideration be now adjourned.—(Nigel Huddleston.)
Westminster Hall
(2 years, 1 month ago)
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Baby Loss and Safe Staffing in Maternity Care
(2 years, 1 month ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
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Jill Mortimer (Hartlepool) (Con)
I beg to move,
That this House has considered baby loss and safe staffing in maternity care.
I am honoured to begin this important Baby Loss Awareness Week debate about safe staffing in maternity care, which is imperative. I speak today as the co-chair of the all-party parliamentary group on maternity, but also as the mother of three children. I also speak today because of my three very different pregnancy and birthing experiences, which for me highlight the impact of different staffing approaches on pregnant women.
I lost my first baby in the very early weeks of pregnancy, and I was told by a very kindly midwife that sometimes you have to lose a baby to ripen the womb. This made me feel dreadful. I fought very hard not to grieve openly for that loss, because I felt guilty that I should not. Forgive me: I am full of cold and dosed up, so I will get very emotional.
My first experience of birth 30 years ago was, as it is for many first-time mothers, a long and painful labour. I was persuaded to have an epidural; I think the words were, “You need Slick; he’s very good. Call for Slick.” When it is your first baby, you do not know how labour should feel. You think, “It’s worse for me than everybody else, because I am in so much pain.” So I took the epidural. I was then left for long periods without being checked. There were not many staff on the labour ward that night, and I was in a room on my own with my husband. I was told that when I got nearer they would remove the epidural, because I would need to push.
Sadly, but thankfully, it was only when, unbeknown to me, my son was crowning and in distress that the midwife happened to look in for a check. I had to have an emergency episiotomy and an emergency forceps delivery, which resulted in me having a really severe post-partum haemorrhage, and I nearly died. I remember looking at my new baby in the arms of his father and thinking, “They’re safe; I can go now,” and then I blacked out.
My second son was an extremely large baby, at almost 11 lb, but this was not picked up and he basically got stuck—
Jill Mortimer
He was a whopper; he still is a whopper. It caused long-term damage to my pelvis but, worse, he has had to battle his entire life with learning difficulties caused by a lack of oxygen at his birth. He was a floppy, quiet baby, and at 18 months he was diagnosed with, among other things, hypertonia. All his development was delayed, and he did not walk or speak until he was nearly two. I worked with him, and I am so proud that he kept battling on learning how to learn. Today, at 27 years old, he is training to be a nurse. [Hon. Members: “Hear, hear!”]
It was only during my third pregnancy that I experienced continuity of care, which was wonderful. The ability to build a relationship with my midwife, who stayed with me throughout my pregnancy, labour and beyond, was invaluable. I did not have to go through my story with new people all the time and had someone I came to know and trust by my side. I was lucky enough to experience that and wish more women had that chance.
Despite the benefits of continuity of care, I look back on the pregnancy and birth of my daughter with mixed emotions, because there should have been two of them. Very early in that pregnancy I again started to bleed. I bled with my first son and ended up spending a week in hospital, with people saying to me, “Don’t worry, it’s very early on; you’ll have another baby.” I lay still for a week, I did not breathe, and I kept him. But this time I started to bleed again, and I miscarried my daughter’s twin. I did not know how to feel or how to grieve, while having to put all my efforts into sustaining my pregnancy, fearful every day that I would lose the baby I still carried. I was lucky that my beautiful daughter was born safe and healthy, but that loss never goes away. With each milestone, I reflect on how they should be celebrating together. There should be two of them.
Guy Opperman (Hexham) (Con)
Grab a breath for a second. First, I congratulate my hon. Friend on bringing forward this vital debate. The House is joined with her in supporting the cause that she is espousing. Does she agree with me—this is something that I certainly have suffered from—that the concept of the take-home child is something we all need to come to terms with? I have had three children, but I have been able to take only one home. For my hon. Friend, it is unquestionably the case that she loves and adores her daughter, but never forgets those who came along with her but did not make it in the end. Is that a fair description of the situation?
Jill Mortimer
You have done. Yes, that loss never goes away. I still feel guilty, because it was so early; I did not go through what people such as my hon. Friend have gone through.
Kim Leadbeater (Batley and Spen) (Lab)
I thank the hon. Lady for sharing her deeply personal and emotional story. I want to place on the record my thanks to Alex Walmsley in my constituency, who recently won a BBC Radio Leeds “Make a Difference” award for founding Sands United West Yorkshire, a football team that provides peer support for men affected by baby loss. We often tend to focus on the women, but it is really important that we talk about the fathers who have suffered that loss as well. Does the hon. Lady agree that keeping open local maternity units, such as the Brontë birth centre in my constituency at Dewsbury and District Hospital, is essential to maintaining safe and quick access to maternity services for our communities?
Jill Mortimer
I agree that local maternity services— I have the Rowan suite in Hartlepool—are invaluable, because the midwives know their community. They know the women—they are often friends with the mother or an aunt—and that gives them the feeling that people are listening all the time. It is also important that we get midwives trained in bereavement care. I wonder how that kind of care and intervention may have impacted my experience and helped me to cope with emotions of guilt and loss while still allowing myself to feel joy for the life that I had brought into the world in my daughter.
Sadly, experiences 25 years on from mine have not got any better. I am proud to be here today to speak on behalf of my hon. Friend the Member for Truro and Falmouth (Cherilyn Mackrory)—my friend and colleague—who, as co-chair of the all-party parliamentary group on baby loss, has told us all of her own recent terrible experience of baby loss. We have just had the publication of the Kent report, which details 200 incidents at hospitals in Margate and Ashford. Baby loss still happens all too often. We simply need more midwives so that they can feel confident that they are providing the very best care they can to all mothers. As noted in the Ockenden report, it is not just about safer staffing levels: it is about quality care. We need more trained bereavement specialist midwives.
Sir Roger Gale (North Thanet) (Con)
I had not intended to intervene, because I have to leave the debate, but my hon. Friend mentioned the Queen Elizabeth The Queen Mother Hospital; as the constituency MP, may I place on the record my concern, and the fact that we are pursuing with vigour—and I mean with vigour—every angle to ensure that what happened there never happens again?
Jill Mortimer
I thank my right hon. Friend for his intervention. I am reassured that everybody involved in that case is working hard to put things right.
I am regularly in contact with the wonderful staff at the Rowan suite in Hartlepool. They, too, advocate for the importance of bereavement care for grieving parents. The reality is that bereavement specialists have on average just two hours of working time to dedicate to each baby death. That is simply not enough. I have heard from bereavement midwives who are left having to choose which parents they go to. There are simply not enough of those midwives to go round. Parents who were so full of hope hours earlier are left alone, suffering the rollercoaster of grief that fills the inevitable void from losing a pregnancy or a baby. Expert, kind and understanding support is vital at that terrible time.
I have also met representatives of Sands, one of the many great charities that work in this important area. They have told me that cases of stillbirth in England and Wales rose in 2021 for the first time in seven years. That reflects the experiences of mothers who contacted Mumsnet to say that during covid most of their maternity appointments were cancelled. Mumsnet contacted me to share those mothers’ stories. One mother said that her previous history and notes were ignored and that a previous condition she had suffered from escalated and caused unnecessary complications. She felt that was due to bad organisation, shortages, funding cuts and bad management during covid, which left the delivery unit at her local hospital dangerously understaffed on the night her daughter was born.
I have three asks of my hon. Friend the Minister. Covid is largely behind us, but maternity staff are still exhausted from that time, and 13 babies are stillborn or die shortly after birth every day. Will the Minister please tell us what steps the Government are taking to ensure the 2025 ambition announced by the Health Secretary in 2017 to halve stillbirth and neonatal death rates?
The joint meetings of the APPGs on maternity and baby loss have listened to evidence and stories from multiple women and agencies, and we have commissioned a report with Sands and the Royal College of Midwives. We want to ask the Minister whether she will commit to increasing investment in maternity services and fulfilling the shortfall of 2,000 midwives and 500 consultant gynaecologists and obstetricians. We need more and, sadly, it is becoming harder to retain staff because they are burnt out from the effects of staffing shortages. It is a vicious cycle.
David Linden (Glasgow East) (SNP)
I pay tribute to the way in which the hon. Lady has opened and framed this debate. I speak as chair of the all-party parliamentary group on premature and sick babies and I absolutely agree with the points she is making. Will she go slightly further and ask the Government to consider amending the shortage occupation list so that we can attract more people to come here and fill those roles? We all know a massive timebomb is coming down the line in terms of the neonatal workforce and those on maternity wards.
Jill Mortimer
I thank the hon. Gentleman for his intervention. Sadly, that is not a matter for me as I am not a Minister; it will be for the Minister to reply to that.
Will the Minister look at training more bereavement midwives? Sands has developed the national bereavement care pathway, which provides the framework and tools to ensure that all health professionals are adequately equipped to provide the standard of bereavement care so sorely needed during the immediate aftermath of pregnancy or baby loss. That would prevent women like me, 30 years on, from hearing those same lines; health professionals would understand that, kind as they are meant, they do not help in the long term.
Alicia Kearns (Rutland and Melton) (Con)
I thank my very good friend for her work on this issue. On the point about discrepancy, in my constituency a baby died—it was negligence—and the mother was sent home with four leaflets and never contacted again by the hospital. By contrast, my very best friend lost her baby at nine months in January—as Members can see, we all grieve when we lose someone that close to us—and she had phenomenal care from Tommy’s. Will my hon. Friend press the Minister to do all she can to ensure that there are national guidelines against which the NHS is held to account, monitored and graded for how it provides bereavement care?
Jill Mortimer
I thank my hon. Friend; she must not apologise because obviously this issue is very close to us all. We feel very deeply for all mothers who lose. That is one thing that I wish to ask the Minister to do: will she ask the Government to mandate the national bereavement care pathway so that it is nationwide? Although 105 trusts are already formally committed to rolling it out, they need the additional funding to fully implement all the standards of the NBCP. It is no good just taking part of it; we need it all in place and all midwives need to have that training. What steps is the Minister taking to ensure that all trusts can implement this vital support service?
Those are the three big asks. I know they are big, that times are not great and that there are not funds, but this is such a vital policy area and so much long-term pain could be caused. I thank Members for their time.
Several hon. Members rose—
Philip Davies (in the Chair)
Order. Given the number of Members who wish to speak, I have to impose an immediate four-minute time limit. We need to get to the Front Benchers no later than 10.30.
Helen Morgan (North Shropshire) (LD)
It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Hartlepool (Jill Mortimer) for securing this important debate and for speaking so movingly about her experience.
I draw Members’ attention to the fact that I am the vice-chair of the APPG on baby loss and a member of the APPG on maternity. I joined those APPGs shortly after my election last December because in Shropshire the issue of avoidable baby loss is extremely raw. Although neither of the Shrewsbury and Telford NHS Trust hospitals are located in my constituency, the vast majority of families in North Shropshire welcome their new arrivals in one of those maternity wards.
I did not have my baby in Shropshire as I lived in Buckinghamshire at the time. When he arrived in 2009 by emergency caesarean, making his feelings about the indignity of the situation known to everyone in the theatre at an enormously high volume, I never once worried that either of us were likely to be unsafe. The idea that things might go tragically wrong did not even cross my mind. Although the birth of my baby did not go to plan, I felt brilliantly cared for at all times. When I moved to Shropshire four years later, I realised that, tragically, that is not always the case. Friends with experiences similar to mine told of near misses, blue babies being resuscitated and long stays in special care baby units. A close friend told me she did not realise until many years later that flashbacks to the trauma of the birth were not normal.
We now know, thanks to the bravery of many families and the detailed review of Donna Ockenden and her team, that there were serious and systemic failings at Shrewsbury and Telford over a long period of time. The tragic stories include those of constituents and personal friends. I know of many other women who did not come forward, either because their baby did not suffer any long-term consequences or they did not want to revisit painful tragedies. It sometimes seems that everyone of my age in Shropshire knows a family who lost a baby.
The causes are multiple and this is not the time to discuss them, but safe staffing was fundamental in that tragedy. In the executive summary to the report, Donna Ockenden states:
“It is absolutely clear that there is an urgent need for a robust and funded maternity-wide workforce plan, starting right now, without delay and continuing over multiple years.”
Margaret Ferrier (Rutherglen and Hamilton West) (Ind)
The APPG’s report on staffing shortages found that hospital staff feel that post-natal care has suffered the most from cuts, with most aftercare being devolved to healthcare workers who do not hold the same level of qualification as a midwife. That will impact on the health of mother and baby—for example, if they do not have access to breastfeeding support because resources are stretched too thin. Does the hon. Member agree that post-natal care needs urgent attention?
Helen Morgan
I agree. Many of us have experience of less than brilliant post-natal care, and the staff shortages are well documented. The Health and Social Care Committee report recommendation that £200 million to £350 million a year is required to be invested immediately in maternity services speaks to that issue. On Wednesday 30 March, the then Health Secretary, the right hon. Member for Bromsgrove (Sajid Javid), confirmed that £222 million had already been committed but was not guaranteed for the future, although he would keep it under review. That was two Health Secretaries ago.
On 1 September, the next Health Secretary argued that, given how stretched the NHS was, services such as maternity might no longer be a priority. I seek reassurance from the Minister that that is not the case. Maternity services have been treated as a Cinderella service for years and we have been left with shocking scandal after shocking scandal, with thousands of families devastated by poor care at a time when they were supposed to be at their happiest. I am at a loss to understand the deprioritising of maternity services—the one service that every one of us will need at least once in our lives.
The workforce gap of 2,000 midwives and 500 new consultants has been referred to, but it is estimated that nearly 700 midwives have left the profession in the past year, and eight out of 10 report that they do not have enough staff on their shift to provide a safe service. Will the Minister commit to increasing funding to meet the £200 million to £350 million-a-year recommendation, for a specified period of time, and to developing a fully costed, multi-year workforce plan?
The safe staffing report produced by the baby loss and maternity APPGs, on which I serve, has already been referred to. I draw particular attention to the need for more bereavement midwives. The pressure and increased likelihood of failure, and the sheer exhaustion that overworked maternity staff feel, must be a cause of some of the other issues we have seen at Shrewsbury and Telford NHS Trust, and at the other trusts that face challenges.
Shropshire is not the only area of the country to have suffered a crisis in its maternity services, with Morecambe Bay, East Kent and Nottingham all facing serious issues. Far too many families have faced tragedy. I ask the Minister to ensure that their experiences are not in vain, and that the Government will act on unsafe staffing.
Guy Opperman (Hexham) (Con)
I thank my hon. Friend the Member for Hartlepool (Jill Mortimer) for bringing forward this debate. This is my first Westminster Hall speech in seven and half years; it is an honour and a privilege to speak on such an important matter.
I have had three children, but was able to take only one home from hospital. Teddy and Rafe came and went in the summer of 2020—briefly—and were loved all too shortly. I welcome the work led by the teams at Oxford and Leicester to ensure that there is clear advice to support health professionals in assessing and documenting signs of life in extremely difficult pre-term births. That is what I want to focus on.
I should put on the record, as I am sure many will, the amazing charities such as Sands and others who work in this sphere and who have helped me get over the trauma, loss and bereavement, as have the Northumbria NHS trust in my constituency and St Thomas’s, where my children were born. I thank my constituent, Sarah Richardson, and all the teams at Hexham Queen’s Hall and Hexham Abbey for their support for baby loss awareness.
Consistency across the NHS is key. People will lose children; that is a fact of life. Pregnancy is, as we all discover, more complicated than we imagined it would be—even in 2022. There is work to be done on the improvement of midwives and maternity staffing levels, but the key for me is a consistent approach across all NHS trusts up and down the country. Why does that matter? Because there should not be a postcode lottery in which a parent in trust A is treated differently from a parent in trust B, and poor souls go on the internet and find out that in trust A they would have been treated in one way, but in trust B in another way.
We all have to accept that mistakes are made and that giving birth is a fragile process, but we should expect the NHS and our Government to promote consistency of approach in dealing with the individual issues that mums and dads have.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
Does the hon. Member agree with me that the principle that he correctly outlines should also apply to the nations of the United Kingdom, and that equality of service should apply right across Great Britain?
Guy Opperman
It is a perfectly fair point that there is a difference of approach in the different countries of the great United Kingdom, and I utterly agree that if someone lives in the United Kingdom, they should have a consistency of approach. There should be a coming together of the various professional boards to drive forward consistent standards. I will give one specific example.
Guy Opperman
My hon. Friend will take my time, but I will give way very briefly.
Alicia Kearns
Before it even gets to treatment, a big problem is the way we assess the safety of a pregnancy, which is the same as it was in the 1960s. It has not changed. There is a new AI programme—the Tommy’s app—that could be rolled out across the entire country to ensure that technology is used to assess the vulnerability of pregnancies. Does my hon. Friend agree that that sort of tool is what we need rolled out to ensure consistency of diagnosis and safety in pregnancy, and not just treatment?
Guy Opperman
I endorse what my hon. Friend says. It helps doctors. Doctors and midwives are not the villains here; they all try very, very hard. It is easy for politicians to say, “This trust is not doing the right thing,” or, “This team is not doing the right thing,” but that is genuinely unfair. We have to shy away from being so critical.
This is about trying to provide the cover and approach so that clinicians are better able to deal with particular scenarios and situations. That is genuinely possible. There is good evidence that, on occasion, parents have been told that their child was stillborn when it should have been determined to be a neonatal death. That has consequences, because, as some will know, coroners can investigate neonatal deaths but not stillbirths. There is some evidence—only some; this is very much anecdotal and I do not want to start hares running—that a trust seeking to improve its figures would say that more births were stillbirths rather than neonatal deaths.
We have to be honest about the process and start from a position of generosity of spirit towards the doctors and clinicians who all try their hardest. If nothing else emerges out of today, driving forward a consistency of standards on how deaths are treated is vital.
I have one final comment. My second child came and went in one very long day at St Thomas’s, over the road from this place. The fact that his was a neonatal death meant that the trust attempted to save his life for a period of time and we were able to spend time with him, which is something that I will always treasure.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
It is a pleasure to serve under your chairmanship, Mr Davies. I recognise that health is devolved to the Scottish Government but, with your permission, I will give a cautionary tale.
Some years ago, we enjoyed a consultant-led maternity service based in Caithness General Hospital in Wick, but NHS Highland decided to downgrade it. The consequence is that pregnant mothers now have to travel 104 miles from Wick to Inverness to give birth to their children, which has caused a huge outcry in my constituency. Thinking about the north of Scotland, Members can imagine what it is like to be in an ambulance or a private car in the winter when the weather changes, which it very often does between Caithness and Sutherland, and people get caught in snowdrifts. Despite repeated demands, the Scottish Government have never conducted a safety audit of the huge change in the service. It is a massive issue in my constituency.
More recently, the NHS decided to similarly downgrade the maternity service based in a town with which the Minister and I are equally familiar—Dr Gray’s Hospital in Elgin. There was a huge outcry about that, and this time the Scottish Government said, “Okay, we’ll review the decision.” My first point is that wherever someone lives in Britain, what is good for the goose is good for the gander.
I will close—I will make it easier for you, Mr Davies, by keeping this a short speech—with two unfortunate tales. In 2019, a mother from Caithness expecting twins was being transported on the long journey to Inverness. As I say, it is 104 miles, as opposed to the distance between Elgin and Inverness, which is 38 miles, and I do not know why they are doing it for Elgin and not for the highlands. In Golspie in Sutherland, she gave birth to her first twin and then had to travel 52 miles to Inverness to give birth to the second twin. Miraculously, both children survived, as did the mother, but if that is not harrowing for an expectant mother, I do not know what is.
In the last few days, we have heard the terrible tale of a couple having to leave from the far north in their own car after the mother’s waters had broken. It was a three-hour journey. Recently, the Public Services Ombudsman ruled that her child suffered brain damage as a result. Can you imagine? Consequently, NHS Highland has been ordered to apologise. In my book, I do not think an apology is good enough. It is a cautionary tale. I recognise that health is devolved, but I feel very strongly that no mother, father, child or unborn baby should suffer increased risk simply because of where they live in our United Kingdom.
Tim Loughton (East Worthing and Shoreham) (Con)
I could not, and I certainly do not, seek to compete with the personal testimonies of my hon. Friends the Members for Hartlepool (Jill Mortimer) and for Hexham (Guy Opperman). As Members know, I have been around for a while in this place. We sit through many harrowing and poignant debates, but none has been more emotional and more emotive than those that we have traditionally had to commemorate Baby Loss Awareness Week, and today is another example of that. I pay particular tribute to my hon. Friend the Member for Hartlepool for securing the debate, and to our colleagues for bravely coming forward with their personal testimonies, which make this problem so real. Understanding it is so important for our constituents.
I was lucky with my three children. I did not have to go through the traumas that we have heard about, but so many people do. Despite all the terrible news that we have heard recently, it is worth noting that maternity services in this country are still safe and that the infant mortality rate has fallen to a historic low. However, we are still 19th out of 28 European countries for mortality rates. The ethnic and regional variations in this country are still a disgrace, and those infant mortality rates do not take account of stillbirths. There are 13 stillbirths a day. No doubt lockdown has made the situation worse.
I want to focus briefly on stillbirth. Stillbirth is 15 times more common than cot death. I concentrate on it, because I have been campaigning on it for many years. My Civil Partnerships, Marriages, Deaths (Registration etc) Act 2019 became law in February 2019. Two of its clauses have taken effect; two have not, and those two are to do with stillbirth. I should not have to discuss this today, because those clauses should have taken effect. My Act gave powers to the Secretary of State for Justice to amend the Coroners and Justice Act 2009 so that coroners had the power to investigate stillbirths. They do not have those powers, because coroners can only investigate the body of a deceased person and a stillbirth is not designated as a deceased person. That is a technical, historical situation.
My hon. Friend the Member for Hexham talked about some infant deaths being described as stillbirths. Given those occurrences, rare though they may be, we have heard stories and The Daily Telegraph ran a campaign recently showing that this issue is still a problem. Given the scandals of East Kent, Shrewsbury and Telford, and Morecambe Bay, we need more than ever the reassurance that the coroner has the ability, if he or she chooses, in a limited number of cases, to investigate whether a stillbirth was a result of mismanagement or incompetence or whatever. Parents need that reassurance, and we could all learn from such cases. This measure must come into force, three and a half years after the legislation that enabled it to do so.
My Act included another clause, which was about recognising stillbirths that take place before 24 weeks but are not designated as ever happening. A panel was set up to look at that back in 2018. I was a member of that panel. It has still not reported; no conclusions have come forward. The Act made it necessary for those conclusions to come forward. Could we at last get on with this important legislation? We all agreed that it was necessary and it was passed unanimously through this Parliament.
Angela Crawley (Lanark and Hamilton East) (SNP)
It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Hartlepool (Jill Mortimer) for bringing this important debate to Westminster Hall and for bravely sharing her experience. I also thank the hon. Member for Hexham (Guy Opperman). Sharing these experiences is what makes this House real to people. I know it is difficult to do so.
Today, I want to concentrate not on healthcare, which is devolved in Scotland, but on the professionals. Through my work in the APPG and on the Miscarriage Leave Bill, many have written to me to express their concerns and fears about returning to work after their own personal experiences of pregnancy loss. A swathe of healthcare professionals working in healthcare settings each and every day experience pregnancy loss themselves, and then return to work quite soon after to help to deliver another couple’s baby. It must truly be one of the most traumatic and devastating experiences to have to return to work after pregnancy loss, for anyone, but it must be especially devastating for these healthcare professionals.
Much of this debate is about safe staffing, and rightly so, because there is no more vulnerable time for any parent than through the pregnancy and at the birth of their own child. It is a time of fear and apprehension; a time when people ultimately place all of their trust and faith in healthcare professionals. I cannot imagine how triggering it must be for those healthcare professionals who have to return to work each and every day, and experience their own trauma time and again while supporting other parents to have their happy ever after. For some, that is not possible, which just reopens the trauma for those healthcare professionals.
The loss of a baby at any stage can be truly devastating for anyone, in any profession. That is why I have pushed repeatedly in the House for a basic minimum of three paid days leave for any individual who experiences pregnancy loss. Many people in this House have bravely shared their experiences. I do not particularly wish to go into each individual experience, but sharing experiences is so important because it reminds people that we are individuals, that we are human, and that we ourselves have an understanding of the pain and grief that come with pregnancy loss.
The Minister will no doubt tell me that there is provision for parents who experience pregnancy loss before 24 weeks in the form of sick leave, unpaid leave and other vehicles, but the fact is that there is no statutory provision. Last week, I met with the Chartered Institute of Personnel and Development, which informed me that, thankfully, there are whole sectors and industries that are introducing pregnancy loss policies. Sadly, however, no healthcare professions were among the list of organisations that are introducing such policies.
It is imperative that, regardless of sector or industry, when someone experiences pregnancy loss—there is no provision in law before 24 weeks—they are at least recognised and supported on their return to the workplace. The sad fact is that, for healthcare professionals, that is not the case. A third of employers say that they do not have a formal policy, and the CIPD notes that most smaller businesses feel that a formal policy is a luxury that they cannot afford. Without statutory provision, and without implementation in the healthcare profession itself, the reality is that day in, day out, more individuals will experience pregnancy loss and will have to return to work without the recognition of that loss. That is simply too much; it is simply a tragedy.
Philip Davies (in the Chair)
Order. I am sorry to cut the hon. Lady off during her speech.
Saqib Bhatti (Meriden) (Con)
It is a pleasure to serve under your chairmanship, Mr Davies. I thank my hon. Friend the Member for Hartlepool (Jill Mortimer) for securing the debate, and for her emotional and eloquent speech. She is an asset to the House. I also pay tribute to my hon. Friend the Member for Hexham (Guy Opperman), who spoke passionately about his story, of which I was aware; whether intentionally or not, he highlighted the need for support also for the fathers who go through baby loss. I thank him for his bravery. It is always humbling and a privilege to follow so many emotional contributions. We remember all the babies who were sadly taken too soon. They will always be loved, and never be forgotten.
Every year, stillbirths, neonatal deaths and miscarriages devastate about 3,500 parents. In the west midlands, where I am based, there are about 5.3 deaths per 1,000 live births. Among people from black, Asian and minority ethnic communities, that figure is 6.4 deaths per every 1,000. The theme of this year’s Baby Loss Awareness Week is stepping stones, which focuses on parents’ difficult journey to recovery. It is important to provide focused support, and the Government have taken some action through the Parental Bereavement (Leave and Pay) Act 2018 and the extra £127 million for the NHS. However, my hon. Friend the Member for Hartlepool made an appropriate call for further support. I am particularly taken by the idea of a national pathway, which would provide consistency and avoid a postcode lottery. That certainly merits further discussion.
I pay tribute to charities such as Sands, the Lullaby Trust, Abbie’s Fund and Tommy’s, which clearly do an immense amount of work. However, I pay specific tribute to the Lily Mae Foundation, which is based in my constituency. Just a week and a half ago, it celebrated its 10-year anniversary. Ryan and Amy Jackson lost Lily Mae on 7 February 2010, but they took that tragedy and loss and turned it into something good for people who go through similar experiences. The charity supports parents. It has distributed over 4,000 memory boxes and organises the Balsall Common fun run. Amy also provides one-to-one support. The charity has already supported over 1,000 parents. It also organises an annual skydive, which I have now committed to doing next year. I have not yet told my Whips, but I assure them that it is very much in my interest that I land safely and avoid a by-election at all costs. Will the Minister join me? I put that request on the record.
I am conscious of time, so I have some simple requests of the Minister. I ask her to recognise the support for charities such as Lily Mae, and the invaluable role they play in supporting parents and alleviating pressures on the national health service. I ask her to consider what further support can be given to those organisations.
I am keen to advocate for support for the roll-out of bereavement suites. Before I came to this place, while I was president of the chamber of commerce, I saw a bereavement suite in Birmingham Children’s Hospital. Magnolia House plays an immense role in providing a safe space for parents to process news or spend time with their children in their final hours. A lot of thought goes into it, from the wallpaper to the cups those parents hold.
Finally, I pay tribute to all the fantastic midwives, obstetricians, gynaecologists and grief counsellors for the immense work they do. They do an amazing job. I simply thank them.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairship today, Mr Davies. I thank the hon. Member for Hartlepool (Jill Mortimer) for securing today’s important debate and speaking with such bravery. I also thank colleagues from the APPG for producing such an illuminating report, which looks beyond the stats and figures, and shines a much-needed light on the impact of staffing shortages in maternity settings.
Earlier this year, I met midwives in my own constituency, and what they had to say was deeply upsetting. They told me that they were in crisis, could not cope with the conditions, and felt burnt out, underpaid, undervalued and ignored. However, at the top of their list of concerns were the repercussions that that environment had on their ability to do their job. They described the constant stress of feeling unable to provide the quality of care they wanted to and that patients deserve, and spoke about the pressure they felt to take on extra shifts, knowing that if they did not, they would be leaving colleagues to suffer or, in the worst cases, patients in crisis.
Margaret Greenwood (Wirral West) (Lab)
My hon. Friend is making an important point, which is reflected in some of the conversations that I have had with people working in maternity services. I am sure she will be aware that we have lost 500 midwives from the NHS in England over the last year. Does she agree that it is important that the Government come forward, as a matter of urgency, with a plan to address this staffing shortage crisis?
Olivia Blake
I completely agree. The picture is the same up and down the country. Last year, the Royal College of Midwives warned of an “exodus”, as more than half of midwives surveyed said they would consider quitting their jobs. The result is that two thirds of midwives are unsatisfied with the quality of care that they are able to deliver. That is a bleak picture.
The solutions are quite simple: a proper workforce plan, pay that midwives can live off, conditions that do not drive them to burn out, and increased training opportunities for both new midwives and nurses wanting to convert to midwifery. Midwives across the country are calling for change, so I look forward to hearing the Minister’s response to the report. For the sake of midwives in my constituency and patients across the country, I hope she will commit to taking on board the recommendations.
Two years ago, during a Westminster Hall debate on baby loss, I was inspired by the brave Members around me to speak publicly for the first time about my own experience of miscarriage. I am glad to see the progress that has been made since then, and I put on record my huge appreciation to the campaigners and individuals who have worked tirelessly to achieve that, from Tommy’s and Sands to the campaigner Myleene Klass, who I have been working with. However, for the one in five women who will experience a miscarriage, not enough has changed. The support they receive is still not consistent nationally. Women must still experience three miscarriages in a row before they can access support and tests to find out what is causing the loss, and national miscarriage figures are still not recorded.
Just last week, I spoke to a constituent who has experienced three miscarriages. The experience has had huge repercussions on her mental health, but she has not been able to access NHS mental health support. Now that she has had three miscarriages, she can finally have the simple tests carried out, but she should not have had to wait.
Last year, the then Minister responsible for women’s health, the right hon. Member for Mid Bedfordshire (Ms Dorries), committed to addressing the issue. During an Adjournment debate on 17 June, she stated that the Department would include two of the three Tommy’s recommendations from The Lancet series, “Miscarriage matters”, in the women’s health strategy: to
“ensure that designated miscarriage services are available 24/7 to all”
and
“take steps to record every miscarriage in England.”
The Minister said that the implementation of the last recommendation—to end the three-miscarriage rule and bring in a graded model of care—was not in the remit of the strategy and would instead be left up to the Royal College of Obstetricians and Gynaecologists. I am pleased that the college has consulted on a graded model and adopted it into its guidance, although leadership is still missing from Government to ensure the resources to properly end the three-miscarriage rule. These are welcome steps, but unfortunately the other two were missing from the women’s health strategy.
I received more promises from the previous Minister, the hon. Member for Lewes (Maria Caulfield), that the recommendations would be included in the upcoming pregnancy review, but that review has not been published for years, as we have heard from other hon. Members. With the new Minister in charge, we are yet to receive any confirmation of when the review will be published and our calls will be met. In the light of that, will the Minister commit to including all three Lancet recommendations in the pregnancy loss review and to meeting with myself and campaigners at the earliest convenience to discuss that review? This cannot be something we speak about once a year and then dump in the “too hard to deal with” pile. These are vital and simple steps that we must take to improve miscarriage care for every woman who has or will experience a miscarriage. We cannot wait any longer; we need a new model of care for miscarriage.
David Rutley (Macclesfield) (Con)
Thank you for the chance to say a few words during this important debate, Mr Davies. There have been hugely moving contributions and testimonies from my hon. Friends the Members for Hartlepool (Jill Mortimer) and for Hexham (Guy Opperman)—he and I have been friends for many years, and we are with him in his loss and with all others experiencing such real sadness. We are fortunate in Macclesfield to have support groups, such as Smile Group, that provide help for people having difficulties during or after pregnancy and, no doubt, we have groups that help people during baby loss as well.
We have heard moving and important contributions about the importance of greater consistency in standards, which I completely support. Maternity services are highly valued in our communities. In Macclesfield, our maternity unit was temporarily closed during the pandemic over two and half years ago. It is one of just a few maternity units that is still temporarily closed, and it is greatly missed by parents, and mums and dads who are expecting babies. I am working closely with the East Cheshire NHS Trust and the Cheshire and Merseyside integrated care board to ensure that the unit reopens in line with Government policy—it is Government policy to reopen temporarily closed units—and with the trust’s ambitions in April next year. The unit is vital, as it provides reassurance to parents and the full range of maternity services, including support for baby loss, locally in our community. I would welcome the Minister’s support for the reopening of this much-loved maternity unit.
In closing, let me say again how grateful I am for these contributions across this Chamber. The debate has helped to highlight a vital issue that we need to talk more about and provide more support for.
Bell Ribeiro-Addy (Streatham) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Hartlepool (Jill Mortimer) on securing this important debate.
The loss of a baby at any stage of pregnancy or after birth can be an incredibly painful experience for any parent. I pay tribute to everyone who has and will share their experience of baby loss in this Chamber. It takes a lot to relive that trauma, but I have heard that it means so much to everyone listening when we speak about such issues in this House. Sadly, when baby loss happens, people are often told, “It is one of those things” or “It just happens”. I remember being told in my grief that I was not the first woman that this happened to and that it was one of those things. It is heartbreaking that women continue to be gaslit in this way when we know that negative pregnancy and birthing experiences can drastically or even fatally change outcomes. We have to accept that it is not always “one of those things” and work to come up with solutions to end it.
I want to touch on two things. The first is a report conducted by Five X More—the black maternal health awareness campaign. It conducted the largest nationwide study of black women’s experiences of maternity services in the UK, and the results make for some shocking reading. The report will be presented to Parliament next Tuesday, and will be followed by a lobbying event by the campaign—where it will reiterate the call on the Government to set a target to address disparities and close the gap in mortality rates—to which all hon. Members have been invited. I put that request to set a target to the Minister again today.
The report encompasses the views of more than 1,300 black and black mixed-heritage women and their maternity experiences, including a number of black women who have experienced baby loss. As some will know, black women are four times more likely to die during pregnancy, labour or post partum; Asian women are twice as likely; and women of mixed heritage three times more likely. Black women are 40% more likely to experience a miscarriage, and black babies have a 50% increased risk of neonatal death and a 121% increased risk of stillbirth.
The Five X More report highlights all the negative interactions that women experience with healthcare professionals: feeling discriminated against in their care; receiving a poor standard of care, putting their safety at risk; and being denied pain relief. After experiencing negative maternity outcomes, 61% of the women surveyed reported that they were not even offered additional support to deal with the outcome of their pregnancy—something that, as we have heard today, is widespread. It is vital that we acknowledge these racial biases when we discuss maternity care.
To make maternity care safe for all patients, it is vital that the level of staffing and the treatment of staff is looked at. For every 30 midwives trained in this country, 29 are lost—what an indictment of the state of maternity services in this country. That is one of the reasons I am proud to support March with Midwives and the awareness it is trying to raise of the dire conditions midwives are facing. Midwives are overstretched, under strain and working in situations they know are unsafe, but pushing ahead anyway at a risk to their physical and mental health. They do not do it for the big bucks, but the least we can do is pay them decently—something that we know we are not doing.
All we ask from the Minister today is to address the pay conditions and shortages that midwives are facing. Everybody in this room owes their life or the life of one of their loved ones to a midwife. They deserve better, as do the women and babies they aim to care for.
Jim Shannon (Strangford) (DUP)
I thank the hon. Member for Hartlepool (Jill Mortimer) for setting the scene so very well and the hon. Member for Hexham (Guy Opperman) his contribution. It is always good to hear about personal experiences in speeches, as it shows us all what some people have gone through. My mother has had four miscarriages, while my sister has had two; Naomi, who works in my office, has had one. Although I cannot say that I have personally experienced miscarriage in a real sense, I understand it through the losses of my mother, my sister and my assistant. It is something that very much touches all our hearts.
My heart aches knowing that one in four pregnancies ends in miscarriage, one in 80 pregnancies is ectopic and 13 babies are stillborn each day. For some, those figures may be just stats, but, in reality, every one is a personal story. We have heard some of those stories today.
I have been contacted by countless organisations and constituents about maternity staffing and training. In 2021, the Government announced an investment of £95 million to increase staffing, while a subsequent £51 million is being made available until 2024. I was shocked, although not really surprised, to be told by the charity Sands that that is still not enough to ensure that services across the UK are safely staffed.
Three weeks ago, I had the opportunity to meet Karen Murray and Jayne Cardwell of the Royal College of Midwives and the South Eastern Health and Social Care Trust. I know that the Minister is not responsible for health in Northern Ireland, but I want to give that perspective to the debate, if I can. Midwives in Northern Ireland are experiencing the very same things as here on the mainland, as hon. Members present have spoken to. Karen Murray and Jayne Cardwell brought to light just how dire the situation is in Northern Ireland. We have witnessed recent reports of scandals in Morecambe Bay, where the deaths of 45 babies could have been prevented if adequate maternity care was provided. I stand here blessed and grateful that we have not experienced something similar in Northern Ireland. The representatives I met said that
“it is by the grace of God”
that we have not experienced similar scandals.
The Royal College of Midwives has issued a blueprint for Northern Ireland that paves the way for sustainable, efficient and safe maternity services for women in Northern Ireland. It is a blueprint that could be carried out across the whole UK. The RCM has made it clear that there must be an allocation of money to maternity services that is ringfenced for the full implementation of safety initiatives. There are serious systematic failings—the RCM’s words—that are putting the safety of mothers and newborns at risk. We need more midwives and more specialist bereavement care, especially having heard the stories from hon. Members today. Those are some of the things we need to look after. We also need better supervised neonatal units and consistent financial commitments from our Governments, both regionally and in Westminster, to deliver this.
Organisations such as Bliss, Sands and the RCM have made many recommendations on how we can improve the situation with our maternity services. First, the maternity strategy is in serious need of updating. We must see more midwives and those qualified in specialist care to ensure that even people in the most intricate circumstances are looked after. The Royal College of Midwives says its staff feel the pain of the people they work with; that came across clearly in the meetings I had with the organisation. All our healthcare professionals need better financial, emotional and mental health support as they recover from the devastating impact of the pandemic.
I urge the Minister to engage with our regional Minister, Robin Swann, to ensure that there is never again a repeat of the recent scandals and reports we have heard across the UK. Everyone involved in the political sphere wants to improve the situation, and we can all unite to ensure that our constituents are protected and safe through their maternity journey. Let today be the start of the journey for better maternity care.
Philip Davies (in the Chair)
Before we get to the Front Benchers, last but by no means least I call Richard Burgon.
Richard Burgon (Leeds East) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies. I congratulate the hon. Member for Hartlepool (Jill Mortimer) on securing the debate, and on the candour and bravery with which she spoke from personal experience. I will use the limited time available to me to share the experience of my constituents, Hayley Storrs and Reece Watson, who wrote to me as follows:
“My name is Hayley Storrs & my partners name is Reece Watson. I’m 33 years old & live in Leeds. I work for NHS England as a Care Manager & my partner as an Electrical Engineer.
In October 2021, after a low risk pregnancy our first baby Ollie James Watson, passed away following a placenta abruption at 40 weeks & 5 days gestation. After suffering a haemorrhage at home, we were kept waiting at Calderdale Hospital in an understaffed Maternity Assessment unit, with bleeding & in active labour for over 1 hour before being seen by a midwife.
My son had already passed away inside my tummy & I wasn’t aware. Following his death & traumatic labour where I suffered a post partum haemorrhage, we received no bereavement support from the trust aside from a postcard on his 1st birthday.
The labour ward was short staffed when Ollie was born & I was left alone on numerous occasions with internal bleeding & no pain relief due to staff shortages. We have since learned that had a simple doppler scan been undertaken at any time during my pregnancy Ollie could have been saved. As a result of our experience, I suffered from PTSD, Birth Trauma, depression & severe anxiety, which still impact my day to day life.
Sands were an incredible support to me during the darkest days of my grief, when I wasn’t sure I would survive without Ollie. They provided information, comfort, support & a listening ear when I needed it the most. I attended a local support group which helped me connect with other women in similar situations to ours & made me feel less alone.
What people fail to understand when someone loses a child, it is that you have lost a lifetime. First days at school, first steps, graduations, what their favourite story would have been, birthdays, Christmases. Instead we walk out of a hospital with empty arms & into a world of grief & loss we are not equipped to navigate. My son deserved better than a memory box of scan photos, he deserved to live.
Please listen to us when we say that enough is enough, ask yourselves the question what will it take for change to happen? How many more babies like ours will die before something is done? How many more bereaved parents will it take to campaign for better, safer maternity care for you to take notice? How many more government enquiries will it take for someone to stand up & say ‘we see you, we hear you & we stand with you’?
In loving memory of Ollie James Watson, and all of the babies who never made it home. You will never be forgotten.”
Those are the words of Hayley Storrs, Ollie’s mum, from the constituency of Leeds East. I share them because to put on record Hayley’s and Rhys’s experience. Although I have not experienced baby loss myself, I think it is important that hon. Members who have personal experience share their experiences, that other Members share our constituents’ experiences, as I have done, and that we all come together on a cross-party basis really to address the issue.
This incredibly important debate has shown what can be done when we come together. I congratulate every Member who has spoken bravely about their personal experience, particularly the hon. Member for Hartlepool, who secured the debate and opened it in such an illuminating, informative and brave way.
Patricia Gibson (North Ayrshire and Arran) (SNP)
I am pleased to participate this year in what has become a tradition of debating baby loss. I thank the hon. Member for Hartlepool (Jill Mortimer) for opening the debate; I participate as someone who suffered a stillbirth at full term and who almost died in the process.
Over the last year or so, I have gone to more funerals than I have in the rest of my 54 years of life so far. When we gather to bury our dead at funerals, we talk about them: we talk about what they were like, their foibles and their character, using anecdotes told with affection and laughter. They are mourned and remembered for the person they were. But with stillbirth, there are no such stories. Over time, you simply learn to live with a loss that changes you forever. At the funeral, all there is is a life unlived. There are no amusing anecdotes, there are no character foibles to remember, and there is no personality yet formed upon which to base memories. There is only the madness of grief for a life whose promise and potential have been unfilled and unrealised—a much longed-for and much wanted child, born fully grown and often otherwise perfectly healthy, dead before it can take its first breath. “Born sleeping” is so apt because such babies look exactly like that—a perfectly fully grown, normal baby, but one who is just so unnaturally quiet, appearing fast asleep, with a room all ready at home, prepared and waiting for their arrival. Your very stake in your future is gone.
I want to talk about pre-eclampsia, because it is the cause of so many stillbirths every year. To make an impact on stillbirths, we really need to learn and understand more about this condition. Its most deadly form is HELLP—haemolysis, elevated liver enzymes and low platelets—syndrome. What is interesting is that pre-eclampsia is associated with very serious long-term health risks for women who develop it during pregnancy. They are at long-term risk of chronic hypertension, ischaemic heart disease, cerebrovascular disease, kidney disease, diabetes mellitus, thromboembolism, hypothyroidism and even impaired memory. Who is monitoring the long-term health of women who have suffered pre-eclampsia? Why are the longer-term risks not specifically monitored? Women in those risk categories are not even told that they face those risks and they are simply unaware of the long-term health challenges they may face once they are discharged from hospital. How can that be right?
People talk, quite rightly, about stillbirths being a product of health inequality, but we also know that too often they happen as a result of systematic errors in care. Sometimes, the most basic red flags are simply overlooked, or at worst, ignored. We only have to see the recent, and frankly horrific, independent reports—the latest of which came out only last week regarding maternity care in East Kent, Nottingham, Shrewsbury, Telford and, to my deep regret, the Greater Glasgow and Clyde health board. In my experience, far from seeking to review procedures and learn lessons, that board simply lawyered up to seek to intimate me—and who knows how many other bereaved parents—into silence. It failed to silence me, but I have absolutely no reason whatever to believe that it has learned anything from the systematic errors that led to the death of an otherwise perfectly healthy, 8 lb 5 oz baby. Staffing was not the issue; it was systematic failures, negligence and incompetence that killed my baby and almost killed me.
In all these cases—some publicised recently—bereaved parents all say they encounter the same thing: cover-ups, ranks closing and few, if any, answers—only the isolation and bewilderment of emptiness. I have no confidence that this situation will change, which is why independent reviews are necessary. Health boards and health trusts seem simply unable or unwilling to admit errors without being forced to do so, and that is unacceptable and inexcusable. Despite the warm words, I have seen no evidence that that situation will change.
The bereavement care pathway, which many have mentioned today, is a very positive thing. If parents are to be listened to, their questions must be answered without fear of serious mistakes being uncovered. If there are serious mistakes to be found, they should be found; all else is cosmetic and, quite frankly, patronisingly pointless.
We have made some progress since the first debate I secured about stillbirth in 2016. There is now much greater willingness to talk about the babies whose lives are snuffed out before they can begin. The more that bereaved parents feel able to talk about stillbirth, the less isolated they will feel, but the isolation is real and debilitating, and its impacts are long lasting.
This year’s Baby Loss Awareness Week theme was stepping stones—depicting the path that people must take after losing a baby and the various stages of that journey. The fact is that, for those of us who have to carry out the grotesquely unnatural act of burying a fully grown baby, the path of grief does not end. Grief stays with you for the rest of your life; you simply somehow find a way to live with it.
It really is time that we stopped hearing about serious failings in maternity care that lead to stillbirths. How many times have we had reports? How many times have we had reviews? How many times have we had investigations? What health trust or health board does not know in this day and age what is required to deliver babies safely and support mums through their pregnancy?
Sadly, we know that the latest failures found in East Kent will not be the last. I honestly despair, and I know that all those who have been through a stillbirth also continue to despair, each time we hear of yet more systematic failures. Of course staffing is an issue, but it is not the whole story. For those babies already gone, it is too late, but Governments across the UK must do more to do better; otherwise, more babies will be born asleep.
Feryal Clark (Enfield North) (Lab)
It is a pleasure to serve under your chairmanship, Mr Davies.
May I start by thanking the hon. Member for Hartlepool (Jill Mortimer) for securing this important debate? I also thank all Members for their deeply emotional, moving and important contributions to the debate, especially those who shared their personal experiences and the experiences of their constituents. By talking about these issues so openly, we work to remove the stigma that sometimes surrounds them. This debate and Baby Loss Awareness Week are vital for voices to be heard, and I praise the work of the over 100 charities that co-ordinate and support Baby Loss Awareness Week every year, particularly Sands.
Across the UK, thousands of parents experience the pain of baby loss every year. As we heard, one in four pregnancies ends in miscarriage, one in eight pregnancies is ectopic and 13 babies are stillborn or die shortly after birth every day. Just last week, we saw the publication of the report into the failings of East Kent maternity services, where up to 45 babies could have survived had they received better care—45 lives that were needlessly cut short and 45 families who were made to suffer the most devastating heartache. I am heartbroken for the families who suffer the loss of a baby. Those who suffer such tragedy must receive the physical and emotional support they need and so deserve. Yet, as we have heard this morning, so often they do not receive it.
My constituent Katie suffered a miscarriage in 2017, when she was 13 weeks pregnant. Immediately after receiving the news, she was told to go to another hospital, and her pregnancy folder was replaced with two sheets of paper entitled, “Your options after miscarriage”. She said that she was not treated with compassion by staff at the next hospital. After her operation, there was no follow-up, no aftercare and no information about what to do next. On returning to work, she discovered that her pay had been cut, as her employer did not class pregnancy loss before 24 weeks as a reason to receive sick pay. Katie was lucky enough to find herself pregnant again, but at every appointment she had to go through the details of her miscarriage time and time again. I worry that the trauma Katie went through is shared by many women across the country.
There is a pattern of avoidable harm in maternity units across our country. There were nearly 2,000 reported cases of avoidable harm at Shrewsbury and Telford Hospital NHS Trust. Half of maternity units in England are failing to meet safety standards. Pregnant women were turned away from maternity wards more than 400 times just last year.
Then there are the inequalities highlighted in the debate. I pay tribute to groups such as Five X More that do so much to highlight those disparities, and I thank my hon. Friend the Member for Streatham (Bell Ribeiro-Addy) for mentioning the important work they do. Stillbirth rates for black babies are twice as high as for white babies, and neonatal death rates are 45% higher. In the UK, black women are four times more likely to die in pregnancy or childbirth. A recent review by the NHS Race and Health Observatory found evidence of women from ethnic minority backgrounds experiencing
“stereotyping, disrespect, discrimination and cultural insensitivity”
when using maternity and neonatal healthcare services. Although I welcome some of the measures the Government have taken to address these problems, it is clear that so much more is still to be done.
As with the Government’s response to the investigation into East Kent maternity services last week, the women’s health strategy that was released about two months ago commits only to considering the recommendations of the pregnancy loss review expected later this year and the Lancet series on miscarriages. Considering further recommendations is not enough to reach the Government’s target of halving childbirth and neonatal deaths by 2025 and to provide the care that women need.
Underpinning all this across the NHS is the question of workforce, as we have heard from almost every Member this morning. More midwives are leaving the profession than are joining it. NHS England estimates that nearly 700 midwives have left in the past year—stressed, burned out and overworked. There is now a shortage of more than 2,000 midwives just in England. In a recent survey by Sands, almost one in 10 NHS trusts in England stated that they had no bereavement specialists in their maternity services—no services for parents who lose a child.
I thank all the members of the all-party parliamentary groups on baby loss and on maternity for the report they did on safe staffing in maternity services. It found that bereaved families are affected by staffing shortages, as stretched staff do not have the time to offer compassionate care, to understand what families’ needs are or to refer families to relevant services. We just do not have the staff to provide the good and safe care needed to prevent the avoidable loss of babies. Eight out of 10 midwives reported that they did not have enough staff on their shift to provide a safe service. Even the Chancellor agrees; last week, as co-chair of the all-party parliamentary group on baby loss, he signed the report, which describes maternity and neonatal services as
“understaffed, overstretched and letting down women, families and maternity staff”.
He went on to call for safe levels of staffing. So, as I asked in the main Chamber last week, will the Minister deliver on the Chancellor’s promise? Women, families and their babies deserve to be given the best standard of care to ensure the best possible outcomes. It is high time that the Government delivered that.
The Parliamentary Under-Secretary of State for Health and Social Care (Dr Caroline Johnson)
First, I thank all the Members who have taken the time to attend the debate and those who have spoken so openly about their own, and their constituents’, experiences and concerns. I particularly thank my hon. Friend the Member for Hartlepool (Jill Mortimer) for securing the debate and enabling us to have this important conversation.
Let me take this opportunity to recognise the work of everyone who has been involved in Baby Loss Awareness Week. It is important that we make it easier to speak about pregnancy loss and enable people to have open conversations about their experiences, which in turn can help those who have experienced the tragic loss of a baby. I also take this opportunity to commend the work of the charities that provide excellent support to families experiencing baby loss, including all the members of the Baby Loss Awareness Alliance and the Lily Mae Foundation, which was mentioned by my hon. Friend the Member for Meriden (Saqib Bhatti).
As we take time to reflect, I want to acknowledge how difficult the loss of a baby is. Everyone’s grief will be different. It is a personal, individual process, which people will try to navigate in many different ways. Although it can be challenging to reflect on such tragic losses, this week provides an opportunity for people to remember, reflect, share and seek support and comfort from other people.
This is the seventh year in a row that a debate has been held to mark Baby Loss Awareness Week. I am honoured to take part as the new Parliamentary Under-Secretary of State at the Department of Health and Social Care and to work with everyone to continue making a difference in an area as vital as maternity and neonatal safety.
The independent review into maternity and neonatal services at East Kent Hospitals University NHS Foundation Trust, as mentioned by my right hon. Friend the Member for North Thanet (Sir Roger Gale), was published last Wednesday. I take this opportunity to extend my condolences to the families who suffered due to the care they received and express my gratitude to the individuals who were instrumental in establishing the review and to the inquiry team for carrying out the review to such a high standard. The Government and I take the findings and recommendations of that report extremely seriously, and I am committed to preventing families from experiencing the same pain in the future.
Our maternity safety ambition, as mentioned by my hon. Friend the Member for Hartlepool, is to achieve half the 2010 rates of stillbirths, neonatal and maternal deaths, and brain injuries in babies occurring soon after birth. Since 2010, the rate of stillbirths has reduced by 19.3%, the rate of neonatal mortality for babies born over 24 weeks gestational age has reduced by 36% and maternal mortality has reduced by 17%. However, it is important to note that there was an increase in the rate of stillbirths between 2020 and 2021. This increase occurred at the same time as the covid pandemic, and detailed work is going on to establish why that was the case. I reassure hon. Members that we remain committed to our maternity safety ambition.
Every woman giving birth has the right to a safe birth, and the Government and NHS England are committed to providing women with personalised and individual maternity care. The role of NHS staff in maternity services is critical to safe care for families, and I recognise all the great, hard work by teams across the country and thank them for it.
Members on both sides of the Chamber have talked about funding and workforce. NHS England has invested £127 million in bolstering the maternity workforce even further and in programmes to strengthen leadership and retention and provide capital for neonatal maternity care. We will keep that funding under review. That investment is on top of the £95 million investment made last year in the establishment of 1,200 more midwifery posts and 100 more consultant obstetrician posts. There are increasing numbers of midwifery and obs and gynae trainees.
I am grateful to the APPGs on maternity and on baby loss for producing their report into the maternity workforce, and I acknowledge the important themes in it. The hon. Member for Enfield North (Feryal Clark) raised the issue of retention. NHS England has established a nursing and midwifery retention programme, supporting organisations to assess themselves against a bundle of interventions aligned to the NHS people promise and it will use the outcomes to develop high-quality local retention improvement plans. In addition, in 2022-23 we made £50,000 available for each maternity unit in England to enhance retention and pastoral support activities.
Dr Johnson
I will not, because I have a lot of questions to get through in a really short time.
Many hon. Members talked about bereavement. In the difficult scenario of baby loss, we understand that bereavement care for women and families is critical. We continue to engage closely with the bereavement sector to assess what is needed to ensure that bereaved families and individuals receive the support that they need. This year we have provided £2.26 million of national funding to support trusts, expand the number of staff trained in bereavement care and directly support trusts to increase the number of days of specialist bereavement provision that families can access.
In the women’s health strategy, which hon. Members mentioned, published earlier this year, we discussed the introduction of pregnancy loss certificates for England. This will allow a non-statutory, voluntary scheme to enable parents who have experienced a pre-24 weeks pregnancy loss to record and receive a certificate to provide recognition of their baby’s potential life. The certificate will not be a legal document, but it will be an important acknowledgement of a life lost, and we hope that it will provide comfort and support by validating a loss.
We understand the impact of pregnancy and childbirth on mental health, especially for those affected by the loss of a baby, and we are committed to expanding and transforming our mental health services so that people can receive the support that they need when they need it.
As part of the NHS long-term plan, we are looking to improve the access to and quality of perinatal mental health care for mothers and their partners. Mental health services around England are being expanded to include new mental health hubs for new, expectant, or bereaved mothers. These will offer physical health checks and psychological therapy in one building.
Guy Opperman
I accept that my hon. Friend has many things to cover today. As a former Minister, may I advise her that she might want to be encouraged to write to everyone with detailed answers from civil servants to the points raised?
Does my hon. Friend agree on one key point—that the collation of data and the consistency of approach must be nationwide? While we have many wonderful trusts, that has to be driven by the NHS, for which she is a Minister.
Dr Johnson
I absolutely agree with my hon. Friend.
Going back to the issue of perinatal mental health, we have previously funded Sands, the stillbirth and neonatal death charity, to work with other baby loss charities and the royal colleges to produce and support the roll-out of a national bereavement care pathway to reduce the variation in the quality of bereavement care provided by the NHS and ensure that, wherever a woman and family are being cared for, they get a high standard of care. The pathway covers a range of circumstances of baby loss, including miscarriage. As of April this year, 78% of trusts in England had committed to adopting the nine national bereavement care pathway standards.
The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about pre-eclampsia. NHS England is establishing maternal medicine clinics. These are specialist networks across the UK, which will manage pre-conception, antenatal, post-natal and medical issues in women, and reduce long-term morbidity, thereby improving outcomes for those women who have co-existing medical conditions.
My hon. Friend the Member for Macclesfield (David Rutley) spoke about the maternity unit in his constituency. I know that he is a doughty campaigner for that unit. I will write to him with further information on progress in that area.
The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) talked about the Scottish health service and how it is performing in relation to maternity care. It is, of course, a devolved issue in Scotland, but I was moved to hear about what is happening in areas of the north of Scotland near Elgin. I would encourage the devolved Scottish Administration to consider carefully what is going on there and to see what they can do to improve care. It seems unacceptable for women to travel 102 miles to give birth.
The NHS in England has a medical education reform programme, co-sponsored by NHS England and Health Education England, to direct investment for specialty training for population needs back towards smaller and rural hospitals. That programme entered its implementation phase in August 2022.
Hon. Friends mentioned The Lancet recommendations. While the pregnancy loss review will be published shortly, I am not in a position today to commit to what it is going to say, but we will consider it carefully.
Feryal Clark
I understand that the Minister is not in a position to comment on that review, but now that she has had the opportunity to review the recommendations from the East Kent investigation by Dr Kirkup, is she in a position to say whether the Government will accept those recommendations, or when the Government will announce whether they are going to accept them? They will have a nationwide impact.
Dr Johnson
I thank the hon. Lady for her question. We were both horrified by the East Kent report, which made for extremely difficult reading. We are carefully considering the review. The hon. Lady will appreciate that we are having a change of Prime Minister today and possibly a change of Minister too, so it is difficult for me to make any commitments at this stage, beyond that the Government will consider the matter carefully and further information will be provided in due course.
Let me conclude by making three broad points. First, we appreciate how difficult and distressing baby loss can be at any point in pregnancy and childbirth. I highlight again the importance of sharing experiences and coping mechanisms that may guide other families through their own bereavement. It is important to continue this conversation past this year’s campaign and, again, I thank my hon. Friends who shared deeply personal experiences.
Secondly, I touched on the important range of targeted programmes we are developing to better support families with their bereavement and ensure all families have access to the care they need and deserve, such as pregnancy loss certificates and the national bereavement care pathway. We understand how difficult baby loss can be, and families deserve compassionate and personalised care from their local health professionals.
Thirdly, we are committed to our maternity safety ambition to halve the 2010 rates of stillbirth, neonatal and maternal death, and brain injuries in babies occurring during or soon after birth. NHS England will consider the actions from both the Ockenden report and the East Kent report and map a coherent delivery plan for maternity that will be delivered through the maternity taskforce programme. We have also established a joint working group led by the Royal College of Midwives and the Royal College of Obstetricians and Gynaecologists to help deliver the plan as effectively as possible. I thank hon. Members for taking time to be here today and I thank everyone who took part in Baby Loss Awareness Week.
Jill Mortimer
I sincerely thank all colleagues who have taken part in the debate, particularly those who have shared their own devastating personal stories. As the hon. Member for Leeds East (Richard Burgon) said, there is clearly cross-party support for addressing this important issue; I do not think anyone in the Chamber wants to quote from any more reports. Will the Minister kindly take what she has heard today to the Prime Minister and ask that it be made a priority?
Question put and agreed to.
Resolved,
That this House has considered baby loss and safe staffing in maternity care.
Rugby League World Cup 2022
(2 years, 1 month ago)
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Judith Cummins (Bradford South) (Lab)
I beg to move,
That this House has considered the contribution of the Rugby League World Cup 2022 to culture and sport in the UK.
It is a pleasure to serve under your chairmanship, Mr Davies—a fellow Bradford MP who recognises the power of rugby league. I am thrilled to be here to debate the rugby league world cup. I have the honour of speaking about the sport, the tournament and the importance of its legacy.
I know many Members share my passion for and belief in rugby league. The power and potential of rugby league is phenomenal, because of what it means to our communities and what it can achieve in those communities. That passion and belief is shared by Members right across the political divide. Rugby league is a unifying force indeed.
The world cup is always a special moment in the sporting calendar, but this year it promises to make a huge impact, setting a new bar for the sport and recognition of all that it offers to the country and on the international stage. The road to this world cup has not been easy. Preparations for the tournament began in November 2015. The lifting of the trophies will mark a seven-year journey that has spanned a global pandemic and multiple crises. That we have got here is a testament to the organisers, whose determination parallels the sport itself. Teams from around the globe have gathered in the birthplace of the sport. For the English heartlands of working-class communities in our northern towns and cities, rugby league has come home.
There is so much to celebrate and marvel at, both on and off the pitch. Since its foundation in 1895, rugby league has always been groundbreaking, and the world cup is no exception. For the first time, the men’s, women’s and wheelchair tournaments will be staged simultaneously. It will be the biggest, best and most inclusive rugby league event in history.
Kim Leadbeater (Batley and Spen) (Lab)
I thank my hon. Friend for securing this important debate. I am very proud of the excellent rugby league clubs in Batley and Spen, including the brilliant Batley Bulldogs, Birkenshaw Blue Dogs and Birstall Victoria, along with Batley Boys and Batley Girls. They provide opportunities for boys and girls, men and women of all ages and from all different backgrounds to play this fantastic sport, and are at the heart of our communities. Does my hon. Friend agree that the world cup—men’s, women’s and wheelchair—is a fantastic springboard to get more people into grassroots rugby league, who will hopefully rise up to be the world cup stars of the future?
Judith Cummins
I thank my hon. Friend for her important intervention and I welcome her statement about the inclusivity of rugby league. The competition does offer a springboard for grassroots rugby league to re-emerge much stronger post pandemic.
Jason McCartney (Colne Valley) (Con)
It is an honour to be here under your chairmanship, Mr Davies. I congratulate the hon. Lady—my hon. Friend, in fact—for her superb chairmanship of the all-party parliamentary rugby league group. She talks about the beginnings of the sport; of course, it began in the George Hotel in Huddersfield. We have a quarter-final game in Huddersfield next Friday, which I will be going to with my dad.
On the essence of inclusivity, does the hon. Lady agree that it is great to see a sport’s top world competition including not just the men’s game, but the women’s game and the wheelchair game at the same time? As the hon. Member for Batley and Spen (Kim Leadbeater) said, rugby league clubs really are community clubs. The Huddersfield Giants Community Trust, for example, runs the National Citizen Service programme through the summer, getting young people out doing activities and going away together as a group. This is about not just what happens during the world cup, but the legacy for the future.
Judith Cummins
I thank my hon. Friend for his intervention. I hope that he and his dad very much enjoy the match at the weekend. I absolutely agree that rugby league is just the best game in the world. Anything that does it good in terms of growth in the community is worth celebrating. I hope he has a great time at the weekend.
Jim Shannon (Strangford) (DUP)
I commend the hon. Lady for securing this debate. Her enthusiasm for the sport is self-evident. Does she agree that the focus on team sports in the media and on TV can be the impetus that young men and women need to join a team that builds character and self-esteem, creates friendships, and brings people out of social isolation to social interaction? The promotion of that can only be a good thing for the mental health of people of all ages who could be involved in the riveting game of rugby. I have to say that I am a rugby union man rather than a rugby league man, but that does not make me less of a supporter.
Judith Cummins
I thank the hon. Member for his intervention. I married a rugby union player, so I am saying nothing. It is a totally inclusive sport. It is great to celebrate sport full stop, but it is especially great to celebrate the rugby league world cup being held here. It is fantastic because it is so inclusive. We also have a very interesting mental health programme, which I will cover later in my speech.
We have 20 nations competing in the tournament, from Australia to Wales, Canada to the Cook Islands, Fiji to France and Scotland to Samoa—and Greece and Jamaica have made their debuts in the tournament. Every second of every minute of every match will be streamed live on the BBC, which has its own unique heritage with rugby league. Most games will be carried on either BBC 1 or BBC 2.
At its heart, rugby league is about people and communities. Week in, week out, local communities come together to support their clubs, their local kids’ teams and young players, giving up their time, money and energy, and sometimes even their blood, sweat and tears. The late Colin Welland said:
“Rugby league provides our cultural adrenalin. It’s a physical manifestation of our rules of life, comradeship, honest endeavour, and a staunch, often ponderous allegiance to fair play”—
very much like this place. Strong and insightful words indeed. The sport of rugby league has that power and potential. The tournaments are competitions at the very pinnacle of the sport, and they are spectacular, but the event is so much more; it is laying the foundations for the future of the sport, and for communities, regeneration and levelling up, through its social impact agenda and its legacy.
As chair of the all-party parliamentary rugby league group, I am incredibly proud that the world cup organisers and the Rugby Football League have placed that legacy at the heart of their plans before and after the event. Their trailblazing social impact programme has generated £26 million of investment in equipment and facilities, volunteering, mental fitness, education, culture, and an international development programme. That investment in facilities has helped transform clubs into hubs for their communities.
Charlotte Nichols (Warrington North) (Lab)
I thank my hon. Friend for securing this important debate. I want to pay tribute to some of the legacy work that she mentioned. I recently went to Woolston Rovers, one of my local rugby league clubs, to see its brand-new, state-of-the-art changing room facilities, which were provided through the legacy fund. That will make such a difference locally, so I thank my hon. Friend for raising that point. Does she agree that that legacy right across our communities is exactly what we should see from such an international event?
Judith Cummins
My hon. Friend makes an important point about investing in the legacy of the game; only by doing that will we see a strong and vibrant future for the game.
As well as widening access, the world cup has enabled more people to connect and take part in physical activity. More than 1,000 volunteers are supporting the staging of the world cup via a drive to make sure that everybody who wants to be involved can be, offering support and encouragement to those with additional needs. Some 83% of the volunteers said the programme had helped them to become more independent.
Figures for men’s suicide remain tragically high, and the sport has had its own tragic instances. The men’s health charity Movember is an official partner of the world cup. Its Ahead of the Game programme, which encourages players to “talk more, play better”, has been rolled out to almost 4,000 players and coaches. Now 92% of players say that they feel more confident in recognising the signs of mental health in themselves and in others, and 96% of coaches say that they feel better able to respond to the mental health challenges of young athletes.
Education is a major part of the programme. Even before the opening match of the tournaments, 36,000 children had benefited through the world cup’s partnership with UNICEF on the Rights Respecting Schools programme, which has seen more than 7,500 pupils educated on the importance of respect as an essential value.
A couple of months ago, MPs and Lords in Parliament welcomed all three world cup trophies into Speaker’s house. Mr Speaker is without doubt the biggest rugby league fan in this place. On the same day, Parliament hosted Julia Lee, Jackie Sheldon and former Lionesses, who brought their fantastic exhibition marking women’s often underplayed contribution to the sport.
Julia was the first fully qualified female rugby league referee, starting when she was just 17—the definition of a trailblazer. Hearing their stories was a timely reminder that sports such as rugby league are built from the ground up, with grit, hard work and determination. It was fantastic to see Julia and Jackie, along with Julie Stott and Sue Taylor, inducted into the rugby league roll of honour last week, in recognition of their huge contributions to the sport.
I welcome the world cup’s international programme, which has helped to double the number of women’s teams supported by the federation. The Lionesses’ victory in the football Euros this summer showed what can happen when athletes are recognised for their exceptional talent and skill. A record-smashing number of tickets has already been sold for an England-based women’s rugby league world cup fixture. I know that the women of rugby league will not rest until they are smashing that ceiling, too.
The world cup has also driven forward on disability and para sport. There has been a huge effort to ensure that physical disability rugby league games play a central role, and figure in the imaginations and ambitions of our young people as they look to the future.
Charlotte Nichols
Does my hon. Friend agree that we should all pay tribute to Adam Hills and the Warrington Wolves for all the work they have done over recent years to boost the profile of physical disability rugby league? Will she join me in welcoming the fact that the physical disability aspect of the rugby league world cup is being hosted in Warrington?
Judith Cummins
I thank my hon. Friend for her intervention. Of course, I recognise that Adam Hills has made a significant contribution to rugby league, not only in this country but abroad. He has done a sterling job for everybody.
From keeping ticket prices accessible, taking part in the match days and increasing access to sport and participation, we have seen a huge uptake of interest in rugby league, in all three competitions. The disability rugby league investment alone generates a significant social return. Every pound invested by players and their families generates a social return of almost £10. General investment more than triples its social returns. It is economically transformative and can fundamentally reform the way people think about disability.
Hold that social value in mind, because I want to turn to where it all started—the working-class communities of our northern towns and cities. A recent study identified the fact that investment in sport and physical activity generates a return of four times in social value, and the sector as a whole delivers £72 billion annually. Imagine what that energy and social value, linked to the right investment, could achieve. The transformational power of sport can be used to promote learning and attract employers and investment into places with huge untapped potential that are crying out for levelling up.
It would be remiss of me if I did not make a small mention of the Bradford Bulls in a speech about rugby league. The return of the Bulls to their home at Odsal stadium in my constituency of Bradford South was a tremendous boost to the city, and huge credit should be given to all those involved, because I know it took a tremendous leap of faith and a belief in the future of rugby league in Bradford.
Building on the dividend of the rugby league world cup, and Bradford city of culture 2025, a compelling levelling-up bid has been submitted to Government for a world-class stadium and training complex for elite sports, and a rugby league skills training and education centre, to serve the people of Yorkshire and the north. That would provide more than £1 billion of socioeconomic benefits for Bradford and create many hundreds of jobs. I know that the Minister is already coming to Odsal to see our plans and that you, Mr Davies, would be more than welcome. I cannot wait to host the next world cup in a decade’s time and to be standing in our very own Odsal stadium in Bradford, cheering England on.
Sport is so much more than competition. Regardless of the delight and disappointment experienced by players and supporters alike, sport brings people together. It is a rich cultural asset and a force for good in our society that can help transform fortunes and unlock the potential of our towns and cities, and the rugby league world cup is an incredible opportunity for our northern communities. A record-breaking 61 games in the world cup will be taking place across the north-east, the north-west, the midlands and, of course, God’s own county of Yorkshire. To share the joy, London has the odd game as well. Some of the venues will be household names; others will be new to many spectators and TV audiences alike. All, however, will be proud to play host to world-class players competing in world-class games, which presents the opportunity to promote and share their communities and culture.
Levels of investment and opportunities have not always matched the pride that we feel in our towns and cities, but moments such as the world cup give communities the opportunity to stand tall in the places they call home as they showcase them to the world. That is a testament to the unifying international potential of a sport as fantastic as rugby league, and it is essential that we build on the momentum generated by the world cup tournament. All MPs can get themselves to a game, and I encourage everyone present to go and see a match if they have not done so already, because rugby league is the best game in the world. It gives so much more back than it takes, unites communities and promotes values that make us proud, and we should be proud of the success of the rugby league world cup hosted here in England.
The Parliamentary Under-Secretary of State for Digital, Culture, Media and Sport (Stuart Andrew)
It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for Bradford South (Judith Cummins) for securing this important debate. In these challenging times, it is nice to be able to debate a good subject that is not too challenging.
I know that there is wide support for the tournament and that the sport of rugby league has lots of support from Members, including through the active work that the hon. Lady does with the all-party parliamentary group. She mentioned that she is the chair of the APPG and Mr Speaker is its president, and his upcoming term as president of the RFL shows the strength of his support for the sport. I hope the tournament shows that the Government are fully committed to building and maintaining our world-leading status for hosting major and mega sporting events in this country. The rugby league world cup is a perfect symbol of that commitment and of why it is so important to this nation.
Despite the postponement of the event and all the challenges that that presented, it is good that the tournament started with great success, with over 43,000 fans watching the opening match at St James’s Park. As we have already seen over the course of 2022 with both the women’s UEFA European championships and the Birmingham Commonwealth games, major sporting events have the power to unite the whole nation, instil pride in our communities and give us all something to feel good about. The rugby league world cup is doing just that right now and putting the culture and values of rugby league at the heart of the tournament.
As hon. Members will know, the world cup kicked off on 15 October in spectacular style in Newcastle, with a match that saw England men take on the Samoan men—a match that I was lucky enough to attend. I also attended the men’s launch in Manchester and had the honour of meeting many of the nations’ captains. The matches have continued right across the north of England, with games held in Wigan, Leigh, Warrington and, of course, Leeds. It is incredible that towns and cities where rugby league is the lifeblood of their communities have been able to, and will continue to, host matches that represent the pinnacle of the international game.
Charlotte Nichols
Does the Minister agree that we are able to share not only the culture of the sport but the culture of the nations that we are hosting in our communities? In Warrington, we are proud to be hosting the Papua New Guinea team, the mighty Kumuls. It has been great to see them out in local schools and in the community, sharing their culture with people right across Warrington. Does the Minister agree that those opportunities, which the rugby league world cup has given us, are great for promoting cultural understanding and multiculturalism in Britain?
Stuart Andrew
The hon. Lady is absolutely right to mention that, and I will comment further on the cultural impact of the tournament. She is right: it is great to see so many teams going into the communities where they are staying. They are trying to build support for the tournament itself, but we are also able to share our great heritages and learn from each other.
It is important that, for the first time ever, all matches of the rugby league world cup, including women’s and wheelchair, are being broadcast on the BBC. The opening match, between England and Samoa, hit a peak audience of 1.8 million, which is fantastic. As we saw with the women’s Euros over the summer, visibility is key to bringing a new audience into a sport and giving the sport a platform. The opportunity of the BBC broadcasting the tournament live should not be underestimated. Over the coming weeks, it will be brilliant to see not just the men battle it out on the world stage but, as hon. Members have said, both the women and the wheelchair teams battling it out. Seeing the incredible fitness of those wheelchair teams—and the terrible brutality of what the matches look like—is awe inspiring.
When major sporting events come to the UK, we regularly talk about legacy: what the event leaves behind once the spectators leave the stadiums and the participants leave the field. As the hon. Member for Strangford (Jim Shannon) said, that also highlights the importance of team sports to the rest of the nation. The rugby league world cup organisers prefer to call it the social impact of the tournament—not just what is left behind but what can be done right now. The tournament’s social impact programme is the first of its kind. It focuses on four areas: facility investments, to enable clubs to create welcoming and inclusive environments; a mental fitness programme; an inclusive volunteering programme; and an international development programme, which has developed new relations between emerging rugby league nations and supported development programmes in international communities.
Before a whistle was even blown, the CreatedBy facility investment programme saw investment in 38 club houses, 22 changing rooms, 18 pitches, and 102 kit and equipment packs. Over 50% of the CreatedBy programme went into areas of socioeconomic deprivation, and 90% helped to grow women and girls’ participation, which is an important aspect of the wider work in the Department. Nearly a quarter went to support and grow disability rugby league.
I saw the very real impact of the programme when I went to visit Leigh Miners Rangers rugby league club and saw the new 3G pitch, which the programme funded. That will enable the club to train at the ground all year round, which will save them from hiring additional facilities and enable the teams to have more training sessions. That is important for the grassroots element, which we have discussed. Our thanks should always go to all the amazing volunteers who ensure that such work continues.
As we have heard, the rugby league world cup has also partnered with Movember, and Rugby League Cares delivered its mental fitness programme, which aims to improve the mental fitness, literacy and resilience of young athletes, coaches and parents. Nearly 300 mental fitness sessions have been delivered to rugby league clubs, schools and online, reaching over 4,000 players and 400 coaches. A strong social impact and legacy programme helps to ensure that major sporting events continue to bring benefits to the whole country, and the rugby league world cup is a brilliant example of that.
As the hon. Member for Warrington North (Charlotte Nichols) mentioned, as well as being an incredible sporting spectacle, the world cup offers a great deal of culture to this country. A number of fan zones will be set up near the venues in city centres, and fans from competing nations will be able to mingle and learn from each other’s heritage. The games themselves also offer brilliant opportunities to witness other nations’ cultures. At the opening match, which I attended, I saw the spectacular Siva Tau, which is performed by the Samoan team. If I were facing that, I would have felt really intimidated. Of course, the New Zealand rugby league team kicked off its match against Lebanon with the Haka. In addition, the tournament’s cultural festival programme includes a major new outdoor performance, an epic touring public art and poetry commission and a programme of engagement projects rolled out across 40 library services across the whole of the north of England. It is important that major sporting events enable a broad reach across society and a strong cultural programme helps to do just that.
The benefits that the rugby league world cup has brought to its host town and cities and across the country are clear. The United Kingdom has a fantastic track record of hosting events such as this one and has seen a bumper year of incredible sporting events, such as the Commonwealth games, the women’s Euros and now the rugby league world cup. The Government are committed to continuing to build on our track record and bring more events like the world cup to the United Kingdom. England was recently announced as the host for the rugby union women’s world cup in 2025 and we will continue to build a strong programme of events to ensure that communities right across the UK get to experience the benefits and atmosphere of major sporting events like the rugby league world cup.
I thank hon. Members for their contribution and the hon. Member for Bradford South for introducing this timely debate. I note the point she makes about Bradford. If I am still in post by the end of the week, I will come. Otherwise, I will leave a note on my desk to my successor to say that their first trip needs to be to Bradford.
Charlotte Nichols
I thank the Minister for giving way. I hope he remains in post. However, if he does leave that message, will he also make a note to invite the Minister to the physical disability rugby league world cup, which is being hosted at Victoria Park in Warrington? We would be delighted to host him or, indeed, another Minister during the course of the tournament.
Stuart Andrew
I will graciously accept the invitation, on behalf of myself or whoever follows, because that would be an important and great visit.
Finally, I repeat the points made by the hon. Member for Bradford South: I hope that right hon. and hon. Members will take time out to go and watch one of the matches. They are great to see. I know that we will want to send all our home nations the very best. This is where I get myself into trouble as I have a Scottish father, an English mother and I was born in Wales. Trying to decide which team to support is often a challenge, but I wish them all the very best. Let us hope we go from strength to strength with this amazing tournament.
Question put and agreed to.
Section 21 Evictions
(2 years, 1 month ago)
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Dan Carden (Liverpool, Walton) (Lab)
I beg to move,
That this House has considered the potential merits of ending section 21 evictions.
I am grateful to have secured time for a debate on this matter, which continues to affect all our constituents. I start by paying tribute to my constituents in Liverpool, Walton, who are the innocent victims of the country’s current broken housing system.
“Everyone renting in the private sector has the right to feel secure in their home, settled in their community and able to plan for the future with confidence. But millions of responsible tenants could still be uprooted by their landlord with little notice, and often little justification. This is wrong”—
those are not my words but the words of the right hon. Member for Maidenhead (Mrs May), who was the Prime Minister in 2019, when the Government first committed to scrapping no-fault evictions. In the three years since, more than 200,000 renters have been evicted—that is the equivalent of an eviction every seven minutes, and that is despite an eviction ban that was in place for 14 months during the pandemic.
Section 21 evictions allow for landlords in the private rented sector to evict tenants from their properties without having to establish any fault on the part of the tenant. When a notice is served, it gives tenants just two months to leave their homes. Even the threat of eviction has detrimental effects on tenants. Section 21 notices mean that tenants are unlikely to exercise other rights, such as the very limited right to challenge rent increases, for fear of retaliatory eviction.
Research by Shelter shows that nearly one in five renters have decided not to complain about poor conditions in their homes for fear of being evicted. I witness that frequently in my constituency. A constituent who visited my office had complained to her landlord about the lack of essential repairs to the front and back doors. The landlord refused to carry them out. After she complained again, she received a section 21 notice in the post, telling her to leave the property. That shows the clear imbalance in power when tenants are held hostage to a bad landlord in an inadequate property.
It is easy to underestimate the dislocating and exhausting experience of someone being evicted from the place they call home: living in limbo; never certain of when their time may be up; having to pack up belongings, leave support networks and potentially change employment —all at immense personal, mental and financial cost. Children being unmoored and having to move schools or leave friends and family behind can have a lifelong impact on learning and development.
My constituency office recently spoke to a constituent who contacted us after being served a section 21 eviction notice. She has been living in her property for 13 years with her two children, aged 12 and two. She suffers from anxiety, and after being told she must leave the property her anxiety has “gone through the roof”. She has never had panic attacks as bad as they are now. She said it is
“exhausting to look after kids at the same time as worrying about where we will end up.”
She told us that being served with the eviction notice was “cruel”, and that
“you should not be able to drop a note through someone’s door telling them to pick their lives up and move on.”
If constituents are removed from properties, they are often placed on long property waiting lists, compounding the sense of uncertainty and insecurity that they experience. I want to take this opportunity to commend local organisations such as Vauxhall and Merseyside law centres, ACORN and my local Liverpool Shelter branch, which carry out fantastic work in almost impossible circumstances to support my constituents in the face of minimal Government support. All MPs here will have similar stories from their own constituents, and may be planning to share their contributions today. Indeed, it was those stories, and the tireless work of the renters’ unions and housing campaigners, that pushed the then Prime Minister, the right hon. Member for Maidenhead, to promise a new deal for renters in 2019.
It will come as little consolation that the Labour party announced in December 2017 that any future manifesto would contain a commitment to remove no-fault evictions. The 2019 Conservative manifesto echoed that commitment, promising the abolition of no-fault evictions so that tenants were
“protected from revenge evictions and rogue landlords”.
Again, those are the Conservatives’ words, not mine. Of course, like many Tory promises, that was not worth the paper it was written on. The two and a half years of the premiership of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) passed without any Bill being published.
We have had a consultation, which the Government responded to by again vowing to abolish section 21, but now we find it kicked into the legislative long grass. It was not a priority for the previous Administration and no one knows what the new Government are minded to do—I hope the Minister can shed some light on that today. This is all despite the huge public support for the reform of private renting: some 79% of the public, 80% of Conservative voters and 86% of voters over the age of 65 back greater protections for private renters, according to Generation Rent data.
The private rented sector is dominated and characterised by insecure tenure, increasingly unaffordable rents, poor housing quality and the ever-present risk of eviction. Data from Crisis showed that in the last financial year nearly 20,000 households faced homelessness after receiving a no-fault eviction notice. Losing a private tenancy is the second biggest cause of homelessness in England. If the Government are serious about ending homelessness, what are their reasons for delay? No one should be going homeless.
When we know that private sector tenants have to move more often than people in any other tenure, and then face average moving costs of well over £1,500, we should be doing all we can to ensure that constituents are not pushed into destitution following receipt of a section 21 notice. That is more important than ever in the midst of the current Tory-engineered economic chaos that is causing absolute misery to many people throughout the country.
We are all aware of the huge challenges that our constituents face: the skyrocketing cost of living, food prices at a 40-year high, record energy costs and skyscraping inflation. All those conditions make the need for a safe and secure home more important than ever before. Add to that the dwindling supplies of affordable housing, and more than three decades of deregulation, and it is easy to realise how we have created the toxic conditions that we now find ourselves in.
Where is the Government’s plan to deal with this? It may prove to be too late for many people throughout the country. To use just one example, statistics from the Ministry of Justice show that the situation is not getting better for renters but much, much worse: there was a 52% increase in the number of no-fault evictions between April and June 2022.
Conditions for private renters are continuing to deteriorate, and the Government’s neglect is the cause. That increase in forced evictions took place against the background of 11% inflation, and rent increases of 11.8% outside of London, according to Rightmove. Those rent increases are widespread—data from Shelter shows that 1 million private renters were hit with a rent increase in August 2022 alone—and have a clear knock-on effect: eviction claims for rent arrears are at their highest level since records began.
No one from the Conservative party seems to recognise that rent increases also cause inflation. They are frequently eager to call for pay restraint, or for benefits to be held down, but never for landlords to heed the same advice. The Government continue to consult on a rent cap in the social housing sector. Why is it that private sector tenants are always forgotten about? Announcing the consultation, the Department for Levelling Up, Housing and Communities said:
“Putting a cap on rent increases for social tenants offers security and stability to families across England.”
Highlighting the potential increases of 11% next year for social tenants, the press release stated that this move would
“prevent rents…from rising significantly.”
When we know that price rises will be the same or potentially higher in the private rented sector, why will the Government not provide the same protection to private renters?
In Scotland, emergency legislation has been announced to freeze rents and establish a six-month moratorium on evictions, for both the private rented and social sectors. That demonstrates that, where the political will exists, action can be taken quickly and decisively to provide relief for tenants. What analysis of that legislation have the UK Government carried out? Would the Government be minded to announce a similar pause on evictions?
A dramatic increase in the availability of buy-to-let mortgages, little growth and access to the social rented sector, and now skyrocketing interest rates caused by a mix of backwards ideology and financial illiteracy, have led to a growth in the number of households renting privately. The lack of housing affordability and tenant security in the private rented sector go hand in hand. The cost of frequent, unwanted moves makes people worse off, and money spent on rent is money that is not spent on putting down a deposit or saving for a mortgage.
Kevin Hollinrake (Thirsk and Malton) (Con)
The hon. Member cites the experience in Scotland, where they have had to introduce rent controls on the back of abolishing section 21; is he advocating that we should adopt rent controls for the private rented sector?
Dan Carden
Yes, I am. I thought I had laid out that argument quite clearly. We have a system in which housing benefit subsidises landlords who own property. A much wiser use of that money would be to use it to build new council housing. That saves money in the long run, and allows those living in the properties to have the sense of belonging and security that is vital to wellbeing.
Frankly, successive Governments have not taken this problem seriously enough. The Government must recognise the damaging consequences of this delay and announce what is vital legislation as soon as possible. The promise to abolish no-fault evictions was included in the Conservative manifesto of 2019. The renters reform Bill was included in the Queen’s Speech of December 2019. Three and half years, three Prime Ministers and four Secretaries of State later, that legislation has still not been put before the House.
It is no surprise that many organisations simply do not trust the Conservative party to deliver on these much-needed reforms. Just a few weeks ago, in one of her many U-turns, the right hon. Member for South West Norfolk (Elizabeth Truss) had to reassure the House that it was her policy to press ahead with banning no-fault evictions, after reports had suggested the opposite. Anyone seeking another example of the Government’s half-hearted approach in this area need look no further. Even today, we see another change in Administration. Who knows whether that manifesto commitment will be kept or tossed aside?
We need to see action, not more delay. That is the very least that private renters deserve. We need to keep tenants in their homes. Will the Government investigate incentives to sell with tenants in situ? What will they do to work more closely with councils to help them to create and buy more social housing? Will they look at unfreezing housing benefit, which is currently lagging way behind rents? Will the Minister explain why social tenants may receive a rent cap, following a consultation, but there have been no similar moves in the private rented sector?
I invite the Minister to meet me and organisations such as the Renters’ Reform Coalition to discuss these matters further. Will he give a clear date for the introduction of legislation? To give security and certainty to tenants, it must be in this parliamentary Session.
Before I finish, I pay tribute again to the fantastic organisations that work in this area, particularly all members of the Renters’ Reform Coalition. To use a term that the Government and their allies hold very dear, the renters reform Bill is oven-ready, so set a date and publish it.
Kevin Hollinrake (Thirsk and Malton) (Con)
It is a pleasure, Ms Nokes, to speak with you in the Chair. I realise that when you are in a minority of one, although you are not necessarily wrong, it probably increases the chances of your being wrong, so I will probably swim against the tide of some of the speeches in this debate.
Before I go any further, I should say that there is no doubt that there is a problem in the private rented sector. Everybody would like to see a solution so that people who want to live in accommodation for the longer term are able to. However, let me take Members back to 1985, if I can. I was a relatively young estate agent in York. If someone wanted to rent a property back then, they had a very limited choice—it was probably between three or four quite dark and shabby two-bedroom terraced houses off Bishopthorpe Road in York. There was so little choice back then because we did not have section 21, so if someone invested in the private rented sector and rented a property out—if they were a landlord—and somebody occupied their property, in effect they did so permanently, if they wanted. Members might think that is a really good idea and the solution to our problems; I fear it would lead to many unintended consequences, as it did back then.
Back then we had rent controls. The hon. Member for Liverpool, Walton (Dan Carden) may say that having rent controls is a really good thing, but it would end up putting layer upon layer of legislation on top of what the Government are currently thinking of doing in terms of the abolition of section 21. That will lead to more and more regulation, which will lead to less and less supply. Ultimately, that is very counter—[Interruption.] The hon. Gentleman shakes his head, but that was the reality of the mid-1980s.
Andy Slaughter (Hammersmith) (Lab)
I know we are not here to talk primarily about rent controls, but they go back to at least 1915. On section 21, the hon. Gentleman may be flogging a dead horse. I do not know whether he has seen the briefing from the National Residential Landlords Association, but it says that 70% of landlords could envisage operating without section 21 and another 8% say that it had never been important to them in the first place. The hon. Gentleman may be defending the landlords’ cause, but they may have accommodated the Government’s position and our position already.
Kevin Hollinrake
Like the hon. Gentleman, I have seen that briefing. That means that in effect somewhere between 20% and 30% of supply might go overnight, or go very quickly, and we have seen that in Scotland—[Interruption.] The hon. Gentleman can shake his head, but it is a reality. We have seen in Scotland a reduction in supply on the back of the abolition of section 21, followed by rent controls.
Back in York in the mid-1980s, what the Government are saying will happen is—
Rachael Maskell (York Central) (Lab/Co-op)
On a point of order, Ms Nokes. I do not mean this with any malice, but I think that the hon. Gentleman should refer to his entry in the Register of Members’ Financial Interests.
Kevin Hollinrake
I appreciate that. The hon. Lady could have made an intervention and I would have responded, but she is absolutely right, and I draw Members’ attention to my entry in the Register of Members’ Financial Interests. For many years, I owned an estate agency lettings business, which I do not own any more. I have, I think, four private rented properties in the private rented sector, but I absolutely do not speak on my own behalf; if anything, I speak on behalf of tenants, because I think that the measures being advocated would lead to a reduction in supply, which would ultimately be massively counterproductive for tenants. That is the conversation we should be having: one about whether or not this idea is good for tenants.
If the hon. Member for Liverpool, Walton will just indulge me for a second in terms of responding to his points—he is shaking his head, but if he just listened to my points, it might be useful. Rent controls applied back then. It was not as if rent controls were set according to market value, because there is no market value at that point. As soon as we introduce rent controls, we effectively get rid of market values. That is what happens. Back then the rent offices would compare a property only with other properties that had been rented out, none of which were accessible by the open market. Rent controls take us away from a free market completely.
The Government are also saying that if a landlord needs to reoccupy a property or wants to sell it, they will allow them to do that and ask the tenant to leave on that basis, but that loophole was closed then and it will be closed again. Back then, if someone wanted to ask a tenant to leave, they had to find another house for them. They had to be provided with another house, because the Government did not want that to be used as a back door to getting that tenant out.
Dan Carden
To bring the debate back to the merits of ending section 21 evictions, does the hon. Member think that his Government should deliver on their promises, or should they backtrack on them?
Kevin Hollinrake
My speech is very much in the context of section 21, in that the end of section 21 will not be the end of such measures. I do not think we should abolish section 21, certainly not without more measures relating to how we deal with section 8, which is the other mechanism for getting to grips with difficult tenants—difficult not just for the landlord, but for communities. Some 50% of section 21 notices are used to get people who are guilty of criminal or antisocial behaviour out. Let us not forget the impact of what the hon. Gentleman proposes on local communities.
Kevin Hollinrake
I have spoken to every single Government Minister about my opposition to their plans. Section 8 uses a court-based process. It takes around eight months to get somebody out of a property using section 8. If a person is guilty of antisocial behaviour or is well behind on the rent—measures cannot be taken until somebody is about two months behind—it will take months. It is not that much of a problem for Legal and General, Grainger, Fizzy Living or whatever. They have thousands of properties. If they have a few dodgy tenants, they can blend that problem across their whole estate, so everybody pays for the tenants who make trouble, do not pay their rent or behave in an antisocial manner. What about the small landlord?
I like it when the Opposition talk about business. They always talk about small and medium-sized businesses, as do I. They say that we should abolish section 21, but if someone with one or two properties has a tenant who does not pay their rent for eight months, for whatever reason, that can be devastating to their investment, so lots of SMEs will exit the marketplace, particularly if we abolish section 21 without first reforming court- based process.
When the section 21 measures were introduced in the Housing Act 1988, we saw a massive increase in supply, which has been very good for tenants. The reality is that in most parts of the country, most yields on properties—the return on capital investment—are pretty low. We are looking at a rental yield of 2% to 4%. Interest rates will be 5%, 6% or higher, so if landlords borrow money to buy a property, most will not get an annual return. Most landlords are not profiteering from the private rented sector—far from it.
Margaret Greenwood (Wirral West) (Lab)
Is the hon. Gentleman suggesting that it is appropriate for people who live in rented accommodation to be subject to the vagaries of the market? We are talking about people who live their lives in these homes. What exactly does he envisage they will do in this scenario?
Kevin Hollinrake
That is an interesting point. The vast majority of people in the private rented sector are happy with the shorter-term nature of rented accommodation. I wish the hon. Member for Liverpool, Walton, would not shake his head and would listen to what I say. There is a cohort of people who want to live in rented accommodation permanently. They want it as their family home. I absolutely agree that the Government should provide accommodation for those people. The Government should invest in this much more, and provide long-term, affordable rented accommodation and social rented accommodation. That is definitely the Government’s job where there is market failure.
I concede that there are market failures for people who want to live in permanent rented accommodation. I am not against the Government stepping in and ensuring that can happen. However, if they step in, tell the private rented sector to ensure that, and set out the rules that apply to someone who wants to make an investment in the sector, the reality is that we will get a reduction in investment in the private rented sector, which will mean a reduction in supply, which will make it more difficult for the tenants on whose behalf Members are speaking. That is the reality of the situation. So, yes: we should make greater public investment in long-term rental accommodation to deal with this issue. However, we should not tell landlords, who invest their private money in the private rented sector, that they have to let their property for life, which is what the hon. Member for Liverpool, Walton is considering.
If the hon. Gentleman wants the private rented sector to do that, a way of dealing with the issue would be to offer incentives for that. We could look at capital gains tax, for example; perhaps people who are willing to rent their property for a much longer period—for five or 10 years, or maybe even for life—could get beneficial capital gains tax treatment. Alternatively, we could reverse some of the changes we made in the Finance (No. 2) Act 2015, in which we restricted mortgage interest in the private rented sector; that was pretty damaging for lots of landlords in the sector. We could say to landlords, “We are no longer limiting the way you can deduct interest against your annual rental income, as long as you’re willing to rent your property out for longer, or for life, to give security of tenure to those kinds of tenants.”
I will conclude very shortly, Ms Nokes. The other unintended consequence of what the hon. Gentleman proposes is that private rented sector landlords will prioritise the best tenants. They will not take a risk because of concerns about non-payment of rent. You are going to disadvantage the people you seek to protect through the measures that the Government are planning and that the Opposition—
Kevin Hollinrake
I am ever so sorry. That is the first time I have done that in seven years in this place. What is being proposed will disadvantage the people the hon. Member for Liverpool, Walton, seeks to protect.
I am fully convinced the Government will push ahead with the proposals, and that the Opposition will double down on this if they ever get into Government. I am just saying that they should be careful what they wish for, because this would be very damaging for the people they seek to protect.
Ms Lyn Brown (West Ham) (Lab)
It is a pleasure to serve under your chairship, Ms Nokes. I draw attention to my entry in the Register of Members’ Financial Interests. I have a quarter share in a private rental somewhere in the country—it was an accidental rental. I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden), for bringing this issue to the House and giving us the opportunity to talk about it today. His speech was absolutely excellent. I am grateful for the chance to add my two penn’orth.
As we should all know by now, the economic crisis is putting families at financial risk. Spiking mortgage rates are not just affecting homeowners, but causing massive worries to renters, so it was appalling to see reports that the Government were going to drop rental reform. The Conservative party has promised these reforms over and again without, it appears, ever starting to act on its promise. I can only hope that the incoming Prime Minister will see how the issues of economic stability, renters’ rights and homelessness are linked, but I am not holding my breath. To help families in this country, mortgage rate projections need to come down, inflation needs to be controlled and the economic damage done by this Conservative Government over years needs to be repaired. We can surely all see that. To prevent homelessness from rising even further, the Government need to repair their policy on renters’ rights as well, which means honouring the promise in the Conservative manifesto and finally ending section 21.
Let me tell the Minister a little bit about Newham, just in case he has not come across it during his tenure. We have the highest homelessness rate and the second highest child poverty rate in the country. At the last count, before the cost of living crisis hit, one in 22 people in Newham was homeless. That mostly means that families are stuck in poor-quality temporary accommodation month after month, year after year. That can be a hotel with no facilities for cooking or for washing clothes, and there is a huge cost to the council and a massive cost to those who wait. Imagine having children but no cooking facilities at all. Imagine how expensive and unhealthy that is. In those circumstances, it is massively difficult for people to live a normal life and to give their children the opportunities that all our children deserve. How much worse will that get now, with rents, bills and mortgages all rocketing? We have seen estimates that private rents in London have increased by as much as 16% over the past year. Whose wages are going up by that much?
Let me talk about Syeda, who has been on the waiting list for social housing in Newham for 15 years. She lives with her husband and three children in a basement flat. She and all her children, who are between the ages of five and 18, sleep in one room. Her children are afraid to sleep alone because of the recurring rat infestation, and they have to do their homework on the floor. Understandably, they are falling behind at school. Syeda’s children have increasing breathing difficulties and frequent illnesses because of the severe damp and mould. Syeda has a disability, which makes getting up and down the stairs to the flat very difficult. Unsurprisingly, her mental health is damaged by the family’s awful living situation.
Syeda’s landlord has served them with a section 21 notice, and her family are on the verge of homelessness. The landlord says they want to make comprehensive repairs—from hearing the description, that is absolutely necessary—but instead of recognising the duty that they owe their existing tenants, they are ending the contract. They will no doubt seek a massively higher rent from new tenants once—or if, frankly—any repairs have been effected. Section 21 gives exploitative landlords a free hand to abuse families such as Syeda’s. It makes it much easier for rents to be ramped up far beyond what local people can afford and, frankly, what the property is worth.
Morgan is a single mum of four who already works almost full time. One of her children has a disability. Morgan is on the local housing register and has been waiting for a social home for 18 years. That would be shocking if it was not normal. Until she found her flat, Morgan was in temporary accommodation. She and her children were moved five times from place to place, and had to deal with rats, mould and the additional cost that moving entailed. Her current home ain’t great. It is in bad disrepair, with mould, leaks and broken lights. The flat costs Morgan £1,800 a calendar month—barely affordable even before prices started to increase so much. Having the flat avoids the need for constant moving and the consequent costs, and it is close to Morgan’s work and her children’s schools, but the landlord wants to increase her rent for that poorly maintained flat to £2,500 per month—an almost 50% increase. It beggars belief.
What can Morgan do when the law is on the landlord’s side? What will the Government do to help Morgan and the hundreds of thousands of Morgans and Syedas? I want to hear a really clear reassurance from the Minister that this Government will bring forward a Bill to abolish section 21, and will implement the comprehensive protections for renters that are urgently and desperately needed. If rapid progress is not made, there is surely only one conclusion that we can draw: that this Government and their previous incarnations in the past 12 years have not given a stuff for the plight of renters in Newham, London and across this country. What we need, not just for renters but for the entire fabric of our society, is a general election, and a Labour Government, now.
Wera Hobhouse (Bath) (LD)
It is a pleasure to serve under your chairship, Ms Nokes. I refer the House to my entry in the Register of Members’ Financial Interests. I, too, think that we need reform for renters. I disagree with the hon. Member for Thirsk and Malton (Kevin Hollinrake) that all landlords think that that would be detrimental to them. There has to be a partnership between landlords and renters, and in most cases that goes very well, but we need to protect renters more. That is my firm conviction as a landlord and as a Liberal Democrat Member of Parliament.
As the cost of living rises, people in my constituency facing a choice between paying unsustainable rent or becoming homeless. People have been put in a desperate situation, one that is shameful for the fifth richest country in the world. Severe shortages of social housing mean that more people depend on the private rental market, which can be expensive and insecure.
Section 21 evictions make these issues worse. They tie renters into insecure situations and leave landlords with total control. Earlier this year, Shelter found that since the Government’s original commitment to the ban, more than 200,000 private renters were served with a section 21 eviction notice. That gives private renters just two months to find another home, uprooting their entire life, as we have heard. Section 21 evictions create a culture of fear among private renters. They give landlords the leverage to exert undue power. Private renters may complain to their landlord about problems that the landlord should fix, including damp and mould, but in the case of rogue landlords, that sometimes makes it even more likely that they will face eviction. Indeed, private renters who complain about such issues are almost twice as likely to be evicted within six months than those who say nothing. We are creating an atmosphere of fear: people do not say to their landlord directly what needs sorting out, although they are living in unsuitable accommodation. As a landlord, I do not want that. I want people to have good housing, and I do not want other private landlords to get away with providing unsuitable accommodation. People should never be forced to live in poor conditions because they are frightened of an unreasonable landlord.
Shorthold tenancies leave renters at risk of significant rent increases and unfair no-fault evictions. The English housing survey found that a quarter of private renting households in England were finding it difficult to pay rent. The south-west is particularly struggling. Rent prices are soaring in my constituency of Bath. I see constituent after constituent who is at the end of what they can do; they are in a desperate situation.
Renters are already experiencing excruciating pressure. The support has not kept up with the real cost of living and the real cost of renting. That leaves people with a choice of either paying rent or buying food. Numerous organisations have warned that the current crisis will increase homelessness. Section 21, which is already a leading cause of homelessness, will make that even worse. Nearly 20,000 households in England faced homelessness last year as a result of section 21. The number is set to rise in the cost of living crisis.
Our renting laws provide little security. They make it very difficult to plan for eviction. Renters have been living with huge uncertainty during the recent economic shocks. Research by Shelter found that last year nearly 40% of private renters felt anxious and experienced increased mental health issues because of housing problems. People are being placed under horrific stress by rising bills and prices. We must do all we can to ensure that tenants have a safe place to live. Ending section 21 evictions should be just the start. We must promote longer tenancies to give renters more security. We must unfreeze the local housing allowance to ensure that benefits are closely aligned with rent rates, and we need to introduce mandatory licensing to stop rogue landlords once and for all.
The Liberal Democrats would introduce a new regulator for all private renters and require all private landlords with more than 25 homes to register with it. I personally would go further; everybody should register, so that we can make sure that we have only good rented accommodation for renters in this country, who will increase in number. More and more people live in rented homes. People are worrying about whether they will have a roof over their head. We have a new Government; where is the promised reform? I call on the new Prime Minister to end section 21 evictions. Today would be a good day, or maybe tomorrow or next week. Please ban section 21 evictions now, Prime Minister.
Margaret Greenwood (Wirral West) (Lab)
It is a pleasure to serve under your chairmanship this afternoon, Ms Nokes. I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing this debate and on his excellent opening speech; he is a powerful advocate for his constituents.
All private renters deserve a safe and secure home. According to the charity Crisis, 4.4 million households live in the private rented sector, including 1.3 million families with children and 382,000 households over the age of 65. Government statistics show that nearly 20,000 households in England faced homelessness in the last financial year, after having received a section 21, or no-fault, eviction notice. It shows that evictions more than doubled in the last year and are a leading cause of homelessness in England. Although there are landlords who use section 21 properly—for a host of reasons, including to combat things such as antisocial behaviour—Shelter has highlighted that there is a significant proportion of rogue landlords, who use section 21 as an excuse to shirk their responsibilities, preventing tenants from accessing safe, decent and secure homes.
In its 2019 manifesto, the Conservative party pledged a “better deal for renters”, including abolishing no-fault evictions. This year’s Queen’s Speech included a rental reform Bill, one of the main elements of which was to abolish no-fault evictions by removing section 21 of the Housing Act 1988. According to the Government, doing so would provide security for tenants in the private rented sector, and empower them to challenge poor practice and unfair rent increases without fear of retaliatory eviction. That Bill was meant to be introduced during this parliamentary Session, but just a few weeks ago it was reported that the then Secretary of State for Levelling Up, Housing and Communities, the right hon. Member for Middlesbrough South and East Cleveland (Mr Clarke), was reviewing the policy, and that banning no-fault evictions could be delayed or even scrapped altogether. Two weeks ago, the then Prime Minister was forced to confirm that the ban would go ahead as planned. It is interesting to note that the then Secretary of State said last week that the Government would
“introduce the rental reform Bill in the course of this Parliament.”—[Official Report, 17 October 2022; Vol. 720, c. 355.]
That was echoed by the Under-Secretary of State for Levelling Up, Housing and Communities, the right hon. Member for Pendle (Andrew Stephenson), who said in response to a written question just yesterday:
“Ensuring a fair deal for renters remains a priority for the Government. We intend to legislate in this parliament.”
I hope that the Minister can give us a guarantee today, given that we have another new Prime Minister—our third in a matter of months—that the commitment to banning no-fault evictions will remain the Government’s policy. I hope he can show that the matter needs dealing with as a matter of urgency and commit to bringing forward a ban as soon as possible, because private renters really cannot wait.
Crisis is clear that banning no-fault evictions will help to reduce the number of people pushed into homelessness. However, a ban could risk an increase in evictions through unaffordable rent rises. The Government need to ensure that there are effective protections against that. Rents are increasing sharply across the country. According to the property website Rightmove, in July this year the average advertised rent outside London was 11.8% higher than the year before; in London, it was up by 15.8%. In August, Shelter reported that more than 3,400 households in the private rented sector were evicted by bailiffs between April and June this year—up 39% on the previous quarter.
Research by Shelter found that 64% of private renters said the current economic climate meant that, if they were evicted, they would struggle to afford the cost of moving. This could put more people at risk of becoming homeless. It could also risk private renters being pushed into illegal renting arrangements to make their rent more affordable because they feel they have no other choice, creating situations whereby renters are not named on tenancy contracts and are therefore powerless to get in touch with landlords over mould, damp and other maintenance issues.
Eviction causes misery, bringing uncertainty, upheaval and financial anxiety. The Government must take action and reaffirm their commitment to ending section 21 no-fault evictions as a matter of urgency. I hope the Minister will be able to give us some solid news this afternoon and a date by which that is going to happen.
Rachael Maskell (York Central) (Lab/Co-op)
It is a pleasure to see you in the Chair this afternoon, Ms Nokes. I congratulate my hon. Friend the Member for Liverpool, Walton (Dan Carden) on his excellent introduction to the debate.
For far too long, housing has been an investment as opposed to a human right. That is why it is so important that we start turning the equation around and ensuring that everybody has access to housing. The reality is that few people want to live in the private rented sector. They aspire to have a home that they can call their own, but as rents increase, they are unable to save up to live the dream. It is important that we build the housing stock required to meet need now and in the future.
Dan Carden
There has been discussion about who exactly is in the private rented sector. People may not wish to live long term in the private rented sector, but too many of our constituents are trapped there. The travesty of this Government is that their economic chaos has probably led hundreds of thousands of people in areas such as mine, who would have wanted to get on the housing ladder in the next couple of months and years, to rethink their plans and stay put.
Rachael Maskell
My hon. Friend is absolutely right. Many people saved up for that much-wanted mortgage, and events in recent days have meant their sales disappearing before their very eyes. Demand for property is outstripping supply, which means that the availability of property is such that hope is fading fast for so many people.
This issue is about power and control—about who has wealth and who has none in our country. More and more is being extracted from people who are desperate just to have a level playing field. That is why this debate is so important. If a Government have given their word to the electorate, they should keep it—not least when we are dealing with a significant housing crisis. York so exemplifies a place where there is housing chaos and challenge that I would invite the Minister—if he remains in his place this afternoon—to visit us and see what is really happening.
Rachael Maskell
I will continue my speech for the moment, if I may. My hon. Friend the Member for Liverpool, Walton highlighted the sudden 52% increase in the number of evictions this year. There is a reason for that, and the hon. Member for Thirsk and Malton (Kevin Hollinrake) referred to it: section 24 of the Finance (No. 2) Act 2015.
We have to look at cause and effect in relation to evictions. In came legislation to curb the advantages of the buy-to-let market, meaning that landlords did not get the tax advantages they had previously had. As a result, they are in negative equity, and are therefore looking at how they can derive a profit. I see that happening in two ways in my constituency: first, landlords putting up rents significantly so that they can break even on their investment; and, secondly, landlords evicting tenants, either to put up rents—that is rare—or to flip the house over to become an Airbnb.
In my constituency, we have seen a sharp increase in the short-term holiday let market. The statistics for whole properties show that back in January 2018 there were 973. Now there are 2,118. That decreases the supply of available housing even more, so if more demand is placed on the market, up go the rents again. People in York are pulling their children out of school, giving notice on their jobs and moving out of the area. That has skewed the local economy. We cannot recruit to our public services, and we are in rapid decline, because those 2,000 homes were built to be residential. With a council that is not building, the market is rapidly becoming overheated; it is broken. When someone can make £700 over a weekend on a property—a party house, as we see in the Airbnb market in York—or £945 on rent every month, why would they hang around and not flip their property? That is how the section 21 notices are being used in the residential areas of York. It is breaking communities and harming the market. It also shows how broken the whole market is.
On top of that, the local housing allowance does not meet the levels required, for people who would much prefer to be in social housing. We have to look at the broad rental market area, which is far too large. When there is a heated-up housing market, people who cannot get into social housing also cannot get into private housing, and they have nowhere to go.
Kevin Hollinrake
The hon. Lady is making a good point about holiday homes. Does she concede that section 24, which limits mortgage interest for people who provide homes to the private rented sector but does not apply to holiday homes, is one incentive to make a property a holiday home? If section 21 were abolished, there would be at least two reasons to provide a holiday home, rather than a property to the private rented sector.
Rachael Maskell
The hon. Member makes a point, but it is not an either/or scenario. I appreciate that it is a mess, but the Government have to mop up that mess, as it is of their own making. The fact we have seen landlords rapidly flip their properties demonstrates the urgency of addressing the issue.
I hope hon. Members will support my private Member’s Bill—the Short-term and Holiday-let Accommodation (Licensing) Bill—which is due to have its Second Reading on 9 December. I am looking to license the short-term holiday let market to provide security and allow local authorities the control to prevent some of that flipping. We have to get to the source of the problems. I trust the Minister will address that today.
Jim Shannon (Strangford) (DUP)
It is a pleasure to serve under your chairmanship, Ms Nokes. I thank and commend the hon. Member for Liverpool, Walton (Dan Carden) for setting the scene. In Northern Ireland, we do not have section 21 evictions. We have a different system. However, I want to add my support to what the hon. Gentleman and other Members have said.
In the 2019 Queen’s Speech, the Government led by the right hon. Member for Maidenhead (Mrs May) stated that abolishing section 21 evictions was one of the main housing priorities. Sadly, today’s debate shows that that was not the case. This issue is so important. Although we do not have section 21 notices in Northern Ireland, housing uncertainty is an issue across the whole UK, so it is great to be here to discuss what we can do to ensure stable housing for our constituents. There are colleagues here who have constituents who are clearly under pressure.
Since the Queen’s Speech in 2019, it has been reported that over 25,000 evictions have been handed out. That is 25,000 families plunged into complete disarray, with their security and shelter taken away. While I understand that there are circumstances where landlords may have to ask their tenants to leave the property, it is completely unjustified to give them no reason and no time to get an alternative property organised. The number of claims under section 21 legislation has fallen since 2019, purely down to the eviction ban over lockdown. Now we are back to some sense of normality, there is no doubt this fear for private renters is back on the rise. As life returns to normal, evictions are back on the agenda.
Back home in Northern Ireland, the rental sector falls under the Department for Communities, as opposed to the Department for Levelling Up, Housing and Communities here on the mainland. Under Housing Rights guidelines, there are a set of rules that landlords must follow. If they are not abided by, the council has a right to consider prosecution. Notice is one of the key features of the process, and it depends on how long the tenant has been renting from the landlord. There are 8,406 private rental transactions in Northern Ireland—a 1.3% increase since 2018.
The three council areas that fall into my constituency area are Ards and North Down, Lisburn and Castlereagh, and Newry, Mourne and Down. The highest number of private rentals is in Ards and North Down, where my constituency office lies, with 988 people renting privately. In addition, Ards and North Down has one of the highest average rental prices at £627 per month. I know that does not sound a lot when I hear the hon. Member for West Ham (Ms Brown) refer to £1,800, but for those back home on a reduced wage it is difficult to match that every month.
We must take action to ensure that our constituents have security of tenure, especially in the coming months, when the rising of living and the cold winter pose further risks for those in fear of being evicted from their properties. Homelessness is a massive issue across the United Kingdom of Great Britain and Northern Ireland. Statutory homelessness figures for England revealed a 105% surge in families facing eviction, which is again very worrying.
In addition, there are already 20,000 people declared homeless in Northern Ireland. I have no doubt that a percentage of those figures are down to unjust evictions through section 21 notices. The Big Issue and Shelter have been instrumental in rental reform and challenging the Government on delays in introducing legislation this parliamentary term to tackle unjust evictions. There is no doubt there is a clear divide in opinion on the issue. However, with the current rise in the cost of living crisis, our constituents need our assurance that we are here to support them and act for them.
I call on the Minister and the new Prime Minister, where the responsibility now lies, to ensure that the legislation is fixed to protect our constituents from homelessness this winter and beyond. I also call on the Department for Levelling Up, Housing and Communities to listen to the concerns of tenants and landlords who have the interest of tenant safety and housing stability at the centre and close to their hearts.
It is a pleasure to see the Minister in his place. He answered me very well in a debate last Thursday, and we were all encouraged by that. No pressure, Minister, but we are looking for the same level of response today. There is a Government commitment and I want to see that on paper, in action and legislated for. I also want to ensure that discussions are initiated with relevant Ministers of the devolved Administrations to ensure that Northern Ireland and Scotland, which have different legislation, are not left behind.
Andy Slaughter (Hammersmith) (Lab)
It is a pleasure to serve under your chairpersonship, Ms Nokes, and to take part in a debate instigated by my hon. Friend the Member for Liverpool, Walton (Dan Carden).
I will start by trying to agree with the hon. Member for Thirsk and Malton (Kevin Hollinrake) on this point at least: it is a complex matter to get rid of section 21. Just doing so is not going to be an answer to all our problems in the private rented sector or the housing market as a whole. He took us back to 1985—somewhere I am always happier, politics apart. The housing market was very different in those days. We had just had the Housing Act 1985, which introduced secure tenancy for local authority tenants. A few years later, the Housing Act 1988 introduced assured tenancies, which are still the default tenancy, and are the main—should be the exclusive—tenancy for other social landlords, such as housing associations. We also had protected and controlled tenancies. Other Members with constituencies such as mine, with large private rented sectors, will still come across some protected tenancies, which predate that Act. Generally speaking, those tenants have had, by definition, decades-long good relationships with landlords, fuelled by the fact that they not only have security but a degree of rent control—a fair rent, though not entirely.
Kevin Hollinrake
That is an interesting point, but the hon. Gentleman will concede that when trying to sell a property with a protected tenancy, the value is usually about 30% below market value. If he is suggesting that that would be the effect of abolishing section 21, that would have a very detrimental effect on property values throughout the country.
Andy Slaughter
I will develop my argument and hope to take in that point.
I was giving the background to saying that the one thing that dramatically changed—one of the most fundamental changes in housing law, in the Housing Act 1988—was the ability to opt out of an assured tenancy and create an assured shorthold tenancy. Some social landlords do that; I deprecate it, but they do. Certainly, most private landlords would do that. That was a real change: introducing the free market, changing the relationship between landlord and tenant, and treating people’s homes as commodities for the first time. It is not that most landlords are not well intentioned or do not look after their tenants or, indeed, that they are not entitled to make a return on their investments, but I fundamentally believe there is a slightly different relationship because we are dealing with someone’s home.
The dramatic effect of that is disguised by the fact that—even in 1989, after council house sales had been going for most of a decade but had not really taken off—we still had a thriving social housing market in the 1980s. It was the first port of call for people who wanted a secure home in the rented sector. That disguised the full effect of assured shorthold tenancy and section 21. The briefing we have from Crisis for this debate tells us that 1.3 million families with children now live in the private rented sector of nearly 4.5 million households. I am sure that most of them would prefer the security and affordability of living in the social housing sector, but that is simply not open to them.
The dramatic decline in social housing really began with austerity in 2010, with the almost complete eradication of the social housing grant, after which more and more pressures and misery were piled on social landlords. Post Grenfell, we now have essential work on fire safety, but it is costing individual landlords tens of millions of pounds and they are getting very little of that back from the building safety fund. There is also retrofitting to comply with environmental standards. There are all those issues, along with the lack of resources among housing associations.
I have a major housing association in my constituency that has no build programme until at least 2030. It is selling off hundreds of its properties as they become void, just to make ends meet. The social housing that was the first port of call for people who wanted secure, affordable rented accommodation is no longer there for many people. As for the other source, which was through planning gain, I am afraid we are still—despite the best efforts of the Mayor of London and others, along with individual councils—subject to viability assessments. Therefore, we are not in any way delivering the degree of social housing that we need to.
Such is the context in which we see the private rented sector. It will take time and a Labour Government, I am afraid, to turn that round. I wish the last Labour Government had done more on building social housing and possibly on reforming the private rented sector. Yet as I say, the problems were not as apparent then; they are now. It will take years to build the properties we need. To make the substantive changes in the law, we probably need another major piece of housing legislation. In the time it takes to turn that round, the private rented sector has to be reformed; that is a quicker option. That includes getting rid of no-fault evictions to give people that basic security, but that will not be sufficient in itself. It has to be done in the round.
We have to look at rent levels; if landlords can put rents up as high as they want to, that will just be another way of evicting people without due cause. We have to look at disrepair, which is worse than I have seen it for 20 or 30 years. We have to look at what the exemptions and exceptions are that would allow a landlord to evict. Clearly, there have to be some, but if there are too many and they are too vague, we will simply be replacing one type of no-fault eviction with another.
I do not say all that to get the Government to say, “We will take this away and bring it back in a couple of years’ time.” We would like the Minister to keep the promise that has been made. I know it was a couple of Prime Ministers ago—I think it was last week—but I think we heard from the right hon. Member for South West Norfolk (Elizabeth Truss) that this was still part of the legislative agenda. I hope it still is and I hope they get on with it and do it. What they must not do is think that that is the end of the matter. We will have to wait for a Labour Government to have wholesale housing reform, but if the Minister is going to surprise me on that, I will be very grateful.
This is my last point. I mentioned earlier that the National Residential Landlords Association had given a very thoughtful briefing for this debate. As a body, it is helpful in engaging with people, including with tenants’ organisations and trying to represent decent landlords in that way—all their members probably are decent landlords, because indecent landlords would probably not be members of the NRLA. It specifically mentioned improving tenants’ access to legal support. That is absolutely vital, whereas other things that the Government are doing are not.
If tenants want to challenge matters—even section 21 notices can be challenged if they have not been properly served or executed, or if there are other matters, or if there has been harassment—legal advice is very important. Next April, the Government will impose fixed recoverable costs, which means that not-for-profit organisations such as law centres and those few solicitors who still operate under legal aid will not be able to subsidise their housing work by recovering costs inter partes in that way. I have nothing against fixed recoverable costs in principle, but in practice they will mean a further collapse in the housing legal sector, which in turn will mean that it will be increasingly difficult for people to challenge matters.
The other issues that the NRLA raised are local housing allowance and universal credit, including the delay in paying universal credit, and the gap between what housing allowance gives and the actual cost of properties. Those are all legitimate points. If the Government think they will get a big tick from the private rented sector—any part of it—simply by dealing with the section 21 issue, I need to disabuse the Minister of that notion. Nevertheless, we would like to hear a little more confirmation about what the Government are going to do to about the situation—most of these people, whether they would prefer to be in social housing or to be owner-occupiers, increasingly do not want to be in the private rented sector.
If we had a decent and thriving private rented sector, then some people would make it their first choice, but many people are in the sector because they have no other option. They have run out of options in terms of their living conditions, their overcrowding, their security and the amount of rent they have to pay. The sector needs a proper look. Since the Housing Act 1988, we have declined into a society in which people’s right to a decent home—that is a human right, although if we are going to have another change of Lord Chancellor, perhaps it will not remain one for very long—has declined. The Government need to look at this sector in the round. They cannot just say, “We will do one or two piecemeal things”. They cannot tinker with the housing market; it needs full, wholesale reform.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It is a pleasure, Ms Nokes, to serve with you in the Chair.
This has been an important and timely debate because, as we have heard in the many excellent contributions this afternoon, the problems inherent in a sector that for far too many renters has always been characterised by insecurity, high rents and poor conditions, have become far more acute over recent months, as those renting privately struggle to cope with the impact of high inflation and rising prices.
I start by congratulating my hon. Friend the Member for Liverpool, Walton (Dan Carden) on securing the debate and on the characteristically powerful way in which he opened it. He always speaks with strength and clarity on behalf of his constituents and he did so again today, making a powerful case that overhauling the private rented sector in Liverpool and across the country is a matter of the utmost urgency.
I also thank my hon. Friends the Members for West Ham (Ms Brown), for Wirral West (Margaret Greenwood), for York Central (Rachael Maskell) and for Hammersmith (Andy Slaughter), as well as the hon. Members for Strangford (Jim Shannon) and for Bath (Wera Hobhouse), for their excellent contributions. Although there are common problems and solutions, I am always mindful of the fact that there are different “geographies” of renting and challenges that are specific to certain parts of the country. The debate usefully highlighted that point.
Doubtless it was not the choice of my hon. Friend the Member for Liverpool, Walton, but when I read the title of this debate late last week it struck me as somewhat odd, given its implicit suggestion that the merits of ending section 21 evictions are still essentially being contested. While there are, of course, those who remain resolutely opposed to reform of any kind, the reality is that there is now a broad political consensus on the need to ban these so-called no-fault evictions. It is obvious why such a consensus exists. As things stand, and as we have heard again today, landlords can evict tenants, after giving as little as two months’ notice, at any point after their fixed-term tenancy has come to an end. They do not have to give a reason for doing so, or even have one.
As a result, large numbers of private renters live day to day in the knowledge that they could be uprooted with little notice and minimal justification, if any. With the threat of summary evictions hanging over them, a significant proportion of those people concentrated at the lower end of the private rental market, who have little or no purchasing power, have to put up with appalling conditions for fear that a complaint will lead to an instant retaliatory eviction. Far too many tenants are evicted each year using a section 21 notice, which is why it is a leading cause of homelessness in England. Abolishing section 21 no-fault evictions is therefore long overdue and will give private renters much-needed security in their homes.
The available evidence also suggests that scrapping section 21 is likely to provide private renters with greater certainty and control over their lives without any corresponding detrimental consequences—unintended or otherwise—or disruption. I draw the attention of the hon. Member for Thirsk and Malton (Kevin Hollinrake) to research carried out by Shelter into the impact of the effective abolition of no-fault evictions in Scotland, following the introduction of new private residential tenancy agreements there in 2017. It found that the measure had no discernible impact on either the size or functioning of the private rented sector there, or on increased levels of homelessness.
Kevin Hollinrake
I add my thanks to the hon. Member for Liverpool, Walton (Dan Carden) for bringing forward the debate. He raised some good points at the start of his speech, which we should consider.
The hon. Member for Greenwich and Woolwich (Matthew Pennycook) might be interested to know that, in the past year, UK rents have risen fastest in Scotland. If he was including me among the people who do not want any reform, then he should not: I absolutely do want to see reform. I would like to see property rental standards that landlords must adhere to, and reforms of the section 21 process, but just not the abolition we are talking about today.
Matthew Pennycook
I deliberately did not assign to the hon. Gentleman a blanket position of “no reform”, but I think that, on this point, he is fundamentally wrong. We need reform, on section 21 and more widely; I will come on to that point.
That research for Shelter is telling because the predictions made by landlord groups in Scotland prior to the introduction of PRT agreements, including that they would kill the sector entirely, have ultimately not come to pass. We should have that at the forefront of our minds when vested interests in the English sector warn of the dire consequences of renters reform.
We in the Opposition still appreciate that good landlords may still harbour concerns about how reform will impact them. We recognise that when section 21 evictions are finally abolished, landlords will need recourse to robust and effective grounds for possession in circumstances where there are good reasons for taking a property back—for example, anti-social or criminal behaviour. We also share the sector’s concern about how ongoing delays in court proceedings could impact on a landlord’s ability to make use of such grounds. However, it is a welcome sign that most landlords and landlord associations now appreciate that greater security and better rights and conditions for tenants are the future of the lettings sector.
When it comes to reforming the private rented sector, scrapping section 21 evictions is obviously not the end of the matter. Among a wide range of necessary measures, we need action on standards to address the shameful fact that one in five private rented homes does not meet the decent homes standard, and one in 10 has a category 1 hazard posing a risk of serious harm. We need changes to landlord-to-tenant notice periods and a national register of landlords. We must make it illegal for landlords and agents to refuse to let to renters claiming benefits, and we need effective measures to address unreasonable within-tenancy rises.
Those go alongside other reforms that are desperately needed. As my hon. Friend the Member for York Central will know, we have argued for many months in the Levelling-up and Regeneration Bill Committee that the Government must act with far more urgency on the growing short-term and holiday lets sector. That is why Labour has made clear that, in Government, we will introduce a new renters’ charter, a new statutory decent homes standard, and take action on short-term and holiday lets.
Thankfully, there is significant consensus across the Chamber on the need to reform the sector more fundamentally, and a number of the measures that I have just outlined were in the White Paper published by the Government earlier this year. The problem is that, as things stand, not only do we not have any firm parliamentary timeline for a renters reform Bill, but, given the disarray within Government, we do not even have the certainty that one will ultimately come forward in this Parliament or, if it eventually does, that it will contain all the proposals set out in the White Paper. As such, I would like to use the opportunity presented by this debate to ask the Minister two simple questions to which private renters following our proceedings will expect answers.
First—as many hon. Members have asked today, and as I have asked many times without receiving a satisfactory answer—when do the Government plan to finally introduce a renters reform Bill? It was in the Conservative party manifesto, so presumably the Government intend to have it secure Royal Assent before the end of this Parliament. However, the Minister must appreciate that private renters facing a difficult winter cannot wait until 2024 for the Government to act. If they introduced emergency legislation, we would support it, but private renters deserve at least some assurance today that the Government will make that a priority.
Secondly, can the Minister confirm that if and when it is finally published, the promised renters reform Bill will contain all 12 of the proposed reforms set out in the White Paper? The last piece of legislation that fundamentally altered the relationship between landlord and tenant in England was the Housing Act 1988, but, as my hon. Friend the Member for Hammersmith rightly made clear in incredible detail, the private rented sector has changed beyond recognition in the more than three decades since that legislation was put on the statute book. It is simply no longer possible to regard its role as primarily a residual tenure for those temporarily unable to access owner occupation or social housing.
Some 11 million people now rent from a private landlord. As well as the young and mobile, the sector now houses many older people and families with young children, for whom greater security and certainty is essential to a flourishing life. At the end of the day, that is what we need to be thinking about here—not the price of housing or the commodification elements involved in the sector. To ensure that private renters get a fair deal, we in this place need to transform how the private rented sector is regulated and level the playing field between landlords and tenants.
As hon. members have said, it is now well over three years since the Conservative Administration of the right hon. Member for Maidenhead (Mrs May) promised to abolish section 21 no-fault evictions. In that time, over 45,000 households have been threatened with homelessness as a result of section 21 evictions, and the figures released so far this year suggest that possession claims resulting from them are increasing markedly as the cost of living crisis intensifies. It is high time that the Government stopped talking a good game about renters reform and got on with legislating for it, and the Minister needs to make it clear this afternoon that they will do so.
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Andrew Stephenson)
It is always a pleasure to see you in the Chair, Ms Nokes. I thank all hon. Members present for their considered contributions to the debate. It was valuable to hear real-life examples from different Members’ constituencies. To those who have invited me to visit, such as the hon. Member for York Central (Rachael Maskell), I say that I will be delighted to do so if I remain in post.
I thank the hon. Member for Liverpool, Walton (Dan Carden) for securing this important debate on the merits of ending section 21 evictions. He made a number of pertinent points regarding issues in the private rented sector. Those issues are faced in all our constituencies, including my own constituency of Pendle, and the Government are committed to tackling them.
As Members will know, the private rented sector is the second largest tenure in England. More than 11 million people call the private rented sector home, and it represents around 19% of households in England. Many of those households—1.3 million of them—are families with children. It is right that they and all tenants feel that their rented house is a home and that they can take jobs and start schooling, confident in the knowledge that they have long-term security. Right now, families across the country are worried about having to uproot their lives at short notice, and millions of tenants have less security than those who own their own homes or are in social housing. That does not need to be the case and should not be.
Everyone deserves a secure and safe home, and the Government are committed to ensuring a fair deal for renters. To do that, we will introduce a renters reform Bill in this Parliament to protect tenants, support responsible landlords and improve standards across the private rented sector. The reforms will be the largest changes to private renting for a generation, so we know how important it is to get them right. We are grateful to those across the sector who have worked closely with the Government on developing the reforms, and we will continue to listen to their concerns, just as I will ensure that the concerns set out by hon. Members are reflected in our responses.
Hon. Members are right to mention the insecurity caused by section 21 no-fault evictions. It is not right that a landlord can ask a tenant to leave without giving a reason, and with as little as two months’ notice. The Government are clear that they want to support the majority of landlords, who act responsibly, but it is not right for tenants to live in fear that their lives may be uprooted at the whim of a minority of rogue landlords. Too many tenants do not complain about dangerous conditions, criminal behaviour or unjustified rent increases, fearing they will be subject to revenge evictions if they do.
As we have set out in our manifesto, which has been mentioned by several Members, and confirmed in the House, the Government are committed to abolishing section 21 of the Housing Act 1988 and giving millions of private renters a secure home.
At the same time, we will simplify complex tenancy structures and move all tenants who currently have an assured tenancy or assured shorthold tenancy on to a single system of periodic tenancies, which will allow either party to end the tenancy when they need to. This will enable tenants to leave poor-quality properties without remaining liable for the rent or to move more easily when their circumstances change, such as when they take up a new job opportunity. Landlords will always have to provide a specific reason for ending a tenancy, which will provide greater security for tenants while retaining the important flexibility that private rented accommodation offers. This will enable tenants to put down roots and plan for the future.
Dan Carden
The Minister is clearly aware of the very difficult circumstances that face so many of our constituents. I said in my contribution that 200,000 people have been evicted because the Government have not acted since they promised to act. If the new Prime Minister leaves the Minister present in his job, will he give us a sense of urgency that the Government are going to act?
Andrew Stephenson
We are in strong agreement that we need to act. It has not been mentioned too many times today—[Interruption.] Well, the hon. Gentleman will remember that the December 2019 manifesto was soon followed by a global pandemic, when the Government took swift and decisive action to protect tenants across the country, so we have taken action. However, we were unfortunately unable to pursue other legislative priorities included in the manifesto with as much speed and vigour as we wanted. We are making significant progress, though. As the hon. Gentleman will know, the White Paper was published in June and some of the consultations that came under it closed only earlier this month.
Matthew Pennycook
Just to clarify—I think it might be helpful. I think the Minister said it is the Government’s intention to introduce a renters reform Bill in this Parliament. Will he give us a firm commitment today that the Government intend to make the necessary parliamentary time available to get that Bill on to the statute book by the time this Parliament ends?
Andrew Stephenson
I thank the shadow Minister for that remark. It is very much the priority of the Government to introduce the Bill and provide parliamentary time for it to proceed. Obviously, the Government’s policies can change, but, in today’s speech, the new Prime Minister underlined his commitment and the new Government’s commitment to the Conservative party’s 2019 manifesto, which included commitments in this area. I am sure that, whether it is myself or another Minister in post, this will remain a priority for the Government and we will want to bring forward the legislation in good time so that it can go through all the stages before the next general election.
We know that landlords need certainty, too. If a tenant needs to leave a tenancy, we will increase the amount of notice they must give. This will ensure that landlords recoup the costs of finding a new tenant and avoid lengthy void periods. The new system will be simpler for tenants and landlords to understand, enabling them to exercise their rights and fulfil their obligations. We are striking the right balance between improving security for tenants and ensuring that landlords continue to feel confident to invest in the market.
Good landlords play a vital role in providing homes for millions of people across the country, and we want to reassure them that the new system will continue to be a stable market for landlords to invest and remain in. No one will win if our reforms do not support landlords as well as tenants.
It is only right that landlords should be able to get their properties back when their circumstances change or tenants break the rules. We will reform the grounds of possession so that they are comprehensive, fair and efficient. We will streamline the possession process, removing unnecessary restrictions on landlords seeking to recover their properties, introduce a new ground for landlords wishing to sell their property and allow landlords and their close family members to move into a rental property. This, alongside the existing grounds for moving in, will give landlords confidence that they can get their property back if their circumstances change.
The vast majority of tenants abide by the rules, but landlords have told us how difficult it is to act when they are unfortunate enough to have an antisocial tenant. Antisocial behaviour causes misery to a tenant’s neighbours and the wider community. Where a tenant’s behaviour cannot be addressed in the property, we will support landlords to end the tenancy. In cases of criminal or serious antisocial behaviour, we will reduce the notice period, with landlords being able to make a claim to the courts immediately. We will explore prioritising those cases in court so that communities do not have to suffer for longer than necessary. We are working across Government to develop guidance for landlords on identifying and addressing antisocial behaviour, and we welcome further input from hon. Members on what we can do to further support landlords with antisocial tenants. Alongside that, we will continue to listen to landlords who provide much-needed accommodation for the thousands of students across the UK every year, to ensure that the sector continues to work for those in higher education.
Hon. Members here will agree that going to court should be the last resort when all other avenues have been exhausted, but sometimes it is unavoidable. Court proceedings can be costly and time-consuming for landlords, which is why we are working with the Ministry of Justice and His Majesty’s Courts and Tribunals Service to streamline the process and ensure that the most serious cases are prioritised. Alongside that, we are reviewing the bailiff process. It is currently the biggest source of frustration and delays for landlords, and we want to make sure that it is as efficient as possible.
Removing section 21 will help millions of tenants, but we understand that many are facing real pressures with the cost of living now. That is why the Government have provided over £37 billion-worth of cost of living support this year to those who need it most. We have also announced unprecedented support to protect households and businesses from the high cost of energy. The energy price guarantee and the energy bill relief scheme are supporting millions of businesses with rising energy costs. That is in addition to the £400 discount already announced through the energy bill support scheme. We have boosted investment in the local housing allowance by nearly £1 billion since 2020, and we are maintaining housing allowance rates at that increased level this year. Those most at risk of homelessness are able to access discretionary housing payments, alongside £316 million-worth of financial support through the homelessness prevention grant.
Finally, several hon. Members have raised the issue of the poor quality of some private rented homes. Most landlords and agents treat their tenants fairly and provide good-quality, safe homes. However, that is not always the case. Too many of the 4.4 million households that rent privately still live in poor conditions, paying a large proportion of their income to do so. Poor-quality housing undermines renters’ health and wellbeing, and we are determined to act. More than one in 10 privately rented homes have serious health and safety hazards that we need to address, as mentioned by the shadow Minister. We have strengthened local authorities’ enforcement powers by introducing financial penalties of up to £30,000, extending rent repayment orders and introducing banning orders for the most serious and prolific offenders, but we intend to go much further.
I hope that all Members here recognise that the Government are committed to reforming the private rented sector in a fair and balanced way, abolishing no-fault section 21 evictions and providing more clarity for landlords when seeking repossession. We are committed to giving tenants more security, meaning that they can stay in their communities and put down roots. In that spirit, I thank the hon. Member for Liverpool, Walton for his thoughtful speech, and hon. Members across the Chamber for their contributions. Delivering a fair deal for renters through these reforms remains a priority for this Government, and I look forward to working with hon. Members to deliver on that agenda.
Dan Carden
It has been a pleasure to serve under your chairmanship, Ms Nokes. I thank all the Members who have contributed. There has been widespread agreement and support for these changes. I will finish on this point alone: our constituents are facing a terrible winter, with economic pressures from all sides. I encourage the Minister to start the process of acting on these commitments. The Government could act now to cap rents and stop evictions, as our constituents face a torrid winter.
Question put and agreed to.
Resolved,
That this House has considered the potential merits of ending section 21 evictions.
Super Health Hub in Plymouth City Centre
(2 years, 1 month ago)
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Caroline Nokes (in the Chair)
I will call Luke Pollard to move the motion and then call the Minister to respond. There will not be an opportunity for the Member in charge to wind up; that is the convention for 30-minute debates.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
I beg to move,
That this House has considered Government support for a potential super health hub in Plymouth city centre.
It is good to see you in the Chair today, Ms Nokes. Plymouth’s NHS is in crisis. Our brilliant NHS and social care staff are working their socks off. The health crisis is not their fault. Things in Plymouth are getting worse, with severe ambulance waiting times, a critical shortage of hospital beds at Derriford Hospital, a social care system in crisis, a shortage of GPs and gaps across our NHS that we simply cannot fill, and we have dentistry waiting lists that last for years. I am here today to deliver a very simple cross-party appeal from Plymouth for the funding we need to build a super health hub, or Cavell centre, in Plymouth city centre.
I know the Minister is familiar with what a super health hub is, but the genesis of the project is important to understand as it shows Plymouth’s health services and our political parties all working together to deliver something truly transformational for our city. The super health hub project is one that I have been associated with for many years. In October 2018, I proposed that Plymouth should build on the success of the network of health hubs across the city with a super health hub in the city centre, repurposing one part of our city centre and bringing health to the high street. That was in response to GP practices, including the one that I was registered at, handing back their contracts and closing.
The proposal was swiftly adopted and advanced by Plymouth City Council and then ultimately rolled into the nationwide Cavell centre programme. Both Conservative and Labour-run councils in Plymouth recognised the importance of the scheme, which enjoys considerable and locked-in cross-party support. The project goes by many names—the super health hub, the West End health hub, the Cavell centre. They are all different names for the same pioneering development.
The Minister will know that the Cavell centre’s programme, developed by the NHS, has six sites under consideration nationwide, of which Plymouth is by far the furthest advanced. Although it was not funded in the comprehensive spending review, the Plymouth Cavell centre project advanced thanks to financial reassurances from the NHS about using capital underspends elsewhere in the national budget. I am sorry to report that the promised funding is no longer available and the project is now at risk. The Minister confirmed to me about the funding last week. So my job today is simple: to ask the Minister to restore or find from elsewhere the £41 million NHS funding that we need for Plymouth to build the super health hub.
Plymouth’s primary care crisis is acute. In 2019, the BBC’s “Panorama” programme showed the severe problems that staff face at the North Road West medical centre: GP vacancies unable to be filled, severe illness and far too few staff. The practice was due to move into the new super health hub—the West End health hub—into modern facilities, and that is now at risk.
Hiring a GP in Plymouth is almost impossible, especially for the practices in the most deprived areas. We are moving at pace to move to paramedic and senior nurse-led practices, because there are simply no doctors available to provide the healthcare that they might provide elsewhere. As a city, we are innovative and creative because we have to be. One third of Plymouth’s population is currently covered by GP practices with emergency standing contracts, but as more GP surgeries close in our communities and practices hand back their contracts, we need an alternative long-term and large-scale intervention. That is what the super health hub, the Cavell centre project, delivers in buckets.
The new super health hub would provide a number of considerable health benefits. At least three GP surgeries in substandard accommodation, currently with large lists of patients—North Road West medical centre, Adelaide surgery and Armada surgery—would relocate to larger premises where they could see more patients. There would be space for 24/7 out-of-hours GP surgeries and pharmacy and X-ray facilities, enabling earlier diagnosis and better management of conditions, such as weight management, smoking cessation, district and practice nursing facilities, physiotherapy and occupational therapy space, mental health services, drug and alcohol treatment, and nutrition. Importantly, alongside that would be advice and information services, debt assistance and housing support, and access to training and employment, volunteer support, social care and prevention services, all under one roof with a single entrance. People would not have to travel miles and miles and fork out for buses or taxis to see someone who can help. In short, the super health hub in Plymouth is about giving people better chances to live longer, healthier and happier.
The benefit that the super health hub would bring to the area cannot be underestimated. The super health hub is to be built on Colin Campbell Court car park, in Stonehouse. Stonehouse is a community with extreme levels of poverty and deprivation. It is an area full of life and full of good people, but the economic and social picture is challenging and the cost of living crisis is making it worse. Stonehouse is in the bottom 0.2% of communities for super output in the entire country, and in the bottom 1% for nearly every other major economic indicator.
Life expectancy in that community is a full 7.5 years lower than the national average; health outcomes are poorer; cardiovascular and heart disease are found in younger people than elsewhere. A third of our private rented homes are classed as non-decent in that community, school grades are a third lower than the city average, and crime is a considerable scourge. Health problems are exacerbated by poverty. This community is responsible for approximately 20% of Derriford Hospital’s emergency admissions. I say this not to talk Stonehouse down but to make the case that this is a community worthy of investment, priority and attention.
The Cavell centre’s focus on early prevention and good healthcare is key not only to dealing with the health inequalities that we have face as a city but to cutting the ambulance queues at Derriford hospital. At this very moment, nearly 20 ambulances are queuing outside our hospital. Derriford has the fourth worst record in the country for ambulance queues. The pressure on our emergency department is critical. Staff there do an extraordinary job, but we need to find ways of reducing the number of people going to the hospital—not just building better facilities at the hospital but reducing the flow.
As more surgeries and dentists close in our community, the case for a super health hub—a centrally located facility—is more profound and powerful than ever. Bringing health to the high street really helps: it repurposes the city centre with the creation of a new health village, with the super health hub at its heart. Plymouth city centre is a very large, post-war city centre serving a population that has found new ways to shop, so we need to repurpose many of the empty buildings. The Colin Campbell Court part of town is an area that could do with a bit more love. It would not only regenerate a part of our city centre but would create more local jobs and, importantly, healthcare accessible to local people. Every bus in Plymouth goes to the city centre—it is not just about supporting people in Stonehouse; it would support people right across our city to access first-class healthcare services.
We have had some mixed messaging from the NHS about this project. It is well regarded and supported. One part of the national health service believes that the £41 million of capital funding would be available for the project. However, it now seems apparent that the intention to make that funding available is no longer present. I thank the Minister for investigating the funding options and speaking to me and my neighbour, the hon. Member for South West Devon (Sir Gary Streeter), so frequently. This issue matters right across Plymouth. A predecessor of the Minister, the right hon. Member for Charnwood (Edward Argar), has also been very helpful. I encourage the Minister to continue being helpful as we look at the options to ensure that we can build a super health hub in Plymouth.
There is considerable support for this project from our local NHS infrastructure, the NHS system and the city as a whole: from the primary care sector to the acute hospital at Derriford; Livewell, our health social enterprise; NHS England; the University of Plymouth; Nudge Community Builders; our local councillors of every party; and our integrated care commission. The project is well supported. But the Minister knows that the capital funding does not exist in the Devon healthcare system to deliver the project without Government support. Without the spending commitment being honoured, the plans for the super health hub in Plymouth will not be able to proceed. The intention was that spades would be in the ground in the new year, once demolition of the site was complete. At this very moment in Plymouth, JCBs are knocking down buildings surrounding the Colin Campbell Court car park in preparation for construction to begin in the early new year.
The business case for the super health hub has been praised locally and regionally, and is supported nationally, but it cannot proceed unless the funding can be allocated within an NHS budget. Because the hub does not neatly fit into an NHS line item, there was always going to be a challenge of sweeping up underspent capital funding from other projects, but being able to do so was the route whereby we could construct this project, as a trail- blazer for the country.
I would like to propose the three ways to proceed that could rescue this project. First, I ask the Minister to look again at the capital underspends across the NHS to see whether a combined effort with our local NHS groups’ funding could deliver this project as a national pilot for a Cavell centre roll-out in every town and city in the country. I would like a research and evaluation project to be attached to this project, so that when it is rolled out the expected massive benefits can be calculated, valued and understood.
Secondly, the Minister knows that so many of the so-called new hospitals are exceeding the spending envelope that has been allocated for them, so that without huge extra sums being allocated to many of the 40 new hospitals, they simply will not be able to proceed. Extra funding is very unlikely given the state of the national finances, but there is a way through. Will the Minister consider whether as part of the Government’s new hospitals programme, funding could be allocated to the Cavell centre programme, delivering a new fleet of pocket hospitals or health hubs before the next general election? It would use only a fraction of the allocated capital budget for the so-called new hospitals.
Work at Derriford’s new emergency department extension starts in the new year. That is because as a city we were further ahead in wanting to invest in our NHS facilities, before the Cavell centre and new hospital programmes were even invented. I encourage the Government to not punish us for being innovative early. I do not mean to do the Government’s PR for them, but I suggest that the super health hub could be the Tesco Express of new hospitals, with everything people need on a regular basis, while still allowing for a big shop at a larger store on an irregular basis. There would be GPs, nurses, physios, diagnostics, X-rays and prevention services on the high street, with the emergency cases, complex treatment and scans at larger hospitals, thus taking pressure off the acute hospitals and ensuring that healthcare is more accessible.
The super health hub is precisely what Dr Claire Fuller’s stocktake of primary care recommends in many ways. The Minister will know that report’s vision for integrating primary care and improving access, with more personalised care available locally to the individuals. The integrated offer is powerful. More importantly, it is more cost-effective than the distributed model we have today, which is failing. It also gives patients more of what they want—more same-day services, less travelling and greater continuity of care—not to mention the expected boost for recruitment and retention of GPs and medical staff in more integrated and better facilities.
The Cavell centre in Plymouth would deliver these objectives, the Government’s own objectives and so much more. That is why I am here to ask for a rethink on the funding—not just to help Plymouth, but to provide a national pilot that the Government could champion nationwide. The building’s design is already set, and it is common across all six Cavell centres across the country. Why not replicate that model elsewhere as well? These pocket hospitals could revolutionise primary and social care.
To raise an issue that is closer to home, we need to be bolder about reimagining our high streets. I have heard the Minister in a previous role talk about the need to put health on the high street and have more innovative city centre and high street models. That is precisely what the Cavell centre model could deliver. I would like to see the Cavell centre in Plymouth be part of a new Plymouth health village, attaching to Plymouth not just a super health hub, but a dental development centre and community diagnostics hubs. It would be a new destination for healthcare. That would not just be for Plymouth; it would be a model for elsewhere. Importantly, that would take pressure off Derriford Hospital, allowing it to breathe and ensuring a better flow through the hospital, which is what we need. While the super health hub project is on pause until we find the funding, can the Minister give reassurances that the other ambitions for the health village—the dental development centre and the community diagnostics hub—will not be sidelined as part of that integrated plan?
If the Minister is looking for shovel-ready projects that demonstrate the Government’s commitment to addressing ambulance times, backlogs, care, doctors and dentistry, this project would be an excellent way of delivering it and, importantly, delivering it quickly. The Minister needs to know that, although I am making the case for this project as a Labour MP, it enjoys cross-party support. Richard Bingley, the Conservative leader of Plymouth City Council, said:
“The Super Health Hub will critically reduce demand on Derriford Hospital and is a key development in addressing some of the vast health inequalities in the area.”
Labour’s Councillor Mary Aspinall said:
“I am absolutely shocked that the rug is being pulled from under this huge investment in our city which would provide about 3,000 appointments a day and employ 250 staff and we will fight for it tooth and nail. People in Plymouth do not deserve to be treated this way.”
I thank all the NHS staff who have been working so hard on the project, not just in Plymouth but in the regional NHS and the national Cavell centre programme. I know the work that they are doing. I will be grateful if the Minister looks again at where £41 million could be found to support our work. For many people, today is the day they learned that that £41 million has been lost. Work was expected to start in just a few weeks’ time, and the news will be a gut punch for many of our GP services, which were hoping to move out of dilapidated premises and into the super health hub. It will be a real dent to our confidence. We know that the problems in primary care will worsen over the winter, and for many people, this was our hope that better days would be ahead.
Such is the strength of feeling that I alone cannot hope to do justice to the case for the super health hub. Will the Minister therefore commit to visit Plymouth and hold a cross-party multi-stakeholder roundtable, so he can hear about the real benefits that the hub would bring to our community? It would be not only a nation-leading project for Plymouth but a trailblazer for healthcare in the rest of Britain.
The Minister of State, Department of Health and Social Care (Robert Jenrick)
I congratulate the hon. Member for Plymouth, Sutton and Devonport (Luke Pollard) on securing the debate, and also make honourable mention of his constituency neighbour, my hon. Friend the Member for South West Devon (Sir Gary Streeter). The hon. Gentleman raised this matter with me within, I think, hours of my appointment as a Minister, and he raised it assiduously with my predecessors, so I know that it is something about which he is extremely passionate. He has made a very persuasive case for the new centre this afternoon. I join him in thanking NHS doctors, nurses and other staff in Plymouth. I appreciate the strain that services are under at the moment and are likely to be under this winter as we continue to move out of the long shadow cast by the pandemic. I thank them for their service to the NHS.
I will first set out the current situation regarding NHS capital funding and the new arrangements for allocating that funding, as that is critical to understanding the prospects of the health hub project, the merits of which have been laid out very persuasively this afternoon. The Government are backing the NHS with a significant capital settlement, which is welcome and will be a step change for the quality and efficiency of care up and down the country. The NHS has a significant budget, but has been marked in recent years—indeed, decades—by under-investment in its capital and estate. Subject to the state of the public finances, we need to correct that as a country. The capital settlement includes over £4 billion a year for each of the next three years, and a total of £12 billion in capital for systems to invest in the estate. Those are part of our changes to health and social care capital funding arrangements.
We are greatly increasing the role of local health system planners in determining local health infrastructure in collaboration with NHS England. In line with nationally published guidance, integrated care boards can decide how the NHS operationally capitalises the spending for their own area. Although we have a range of nationally funded projects, to which the hon. Gentleman alluded, they are already quite well defined. For example, we have committed an initial £3.7 billion over four years to make progress on delivering 48 hospitals by 2030, and 70 upgrades to hospitals, worth £1.7 billion. I want to highlight the fact that much of this investment is benefiting Devon. Over the last few years, there has been £15 million for estate improvements and A&E upgrades at hospitals in the Plymouth NHS trust, and £17 million in hospital upgrades funding awarded to the integrated care board; that includes £9.3 million for imaging facilities at Derriford Hospital and Barnstaple.
Turning to the specific project, I am pleased that the system continues to develop plans so that we can consider a pilot. Plymouth has been able to progress through the business case process more quickly than expected. That is a testament to the hard work of local partners and the strong stakeholder relationship management by the council. The hon. Gentleman paid tribute to the role of the council, and I echo his remarks.
The health centre is designed to address the needs of the local population by providing exactly the kind of one-stop-shop facility the hon. Gentleman described, incorporating GPs, community and mental health services, dentistry, out-patients, diagnostics and pharmacy, as well as space for several community and voluntary groups. That will help to tackle the root causes of poor health and poor wellbeing in the area, which contains some of the most deprived communities in the country.
As I said, we have changed our capital funding mechanisms and introduced integrated care boards to ensure that local investment decisions are guided by local priorities. To that end, it is the local integrated care board that is empowered to invest in the Plymouth health centre if it deems it to be a priority. I understand that Devon integrated care board has been allocated £250 million over the next three years. For the scheme to progress, the NHS Devon integrated care board would need to prioritise its construction via this operational capital budget or other locally sourced funding solutions. I appreciate that this is not the answer that the hon. Gentleman was seeking, but as things stand, there is no additional national funding to deploy for projects like this. The new hospital programme, which he alluded to, is already allocated. Indeed, as he acknowledged, it is possible that that cost of the programme will be greater than the existing budget, so a great deal of work will be required in the years ahead to deliver those hospitals alone, without adding further projects to the programme.
However, given that the hon. Gentleman has brought this debate to the Floor of the House and I have been unable to give him quite the answer that he wishes, I would be more than happy to visit Plymouth and to broker a meeting between his local ICB chair, the stakeholders, such as the council, that have been involved in the project and have advocated it so strongly, and NHS England, to see whether there is anything innovative or creative that we might be able to do to try to move this forwards. I can see the arguments for it are very strong, and it must be frustrating to the hon. Gentleman and to the local stakeholders that its further progress seems to be in doubt.
I am all in favour of the idea of a health village and community diagnostic centres. That is something that we are taking forward on a national scale and so what the hon. Gentleman is trying to achieve here is entirely in line with national policy objectives. If I can, I will revert to him as soon as possible after this debate and arrange that visit and, perhaps more importantly, arrange that meeting in which we can explore why NHS England ultimately was not able to provide the funding that he hoped for. As I understand it, it was never approved funding, but there had been a discussion with NHS England as to whether it might be available. But it never ultimately committed to do that. Perhaps we can explore whether there are any other potential routes, so that we do not close the door on what seems to me to be an extremely valuable project.
I thank the hon. Member for Plymouth, Sutton and Devonport—I thank my hon. Friend the Member for South West Devon as well—for the extremely constructive manner in which he has handled this debate and our previous conversations. I hope that I will be able to take this forward and move it to a successful conclusion.
Question put and agreed to.
Agriculture in Sussex
(2 years, 1 month ago)
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Caroline Ansell (Eastbourne) (Con)
I beg to move,
That this House has considered agriculture in Sussex.
It is a pleasure to serve under your chairmanship, Ms Nokes. We are all clearly proud of Sussex, even if it represents only 2% of England’s farmed area. There is ambition and potential, and there are very many good people working in the sector whose cause we champion today.
The farmed area of Sussex makes up 550,000 acres, 59% of the total Sussex area. Tenants make up 48% of all farmed land in Sussex—that will be a key factor later in the debate. Forty-five per cent of farmed land in East Sussex is used for livestock grazing, 36% for arable use, and only 2% for horticulture, though that is still highly significant for food production. West Sussex uses a higher proportion of land—45%—for cereal and general cropping, with 32% used for grazing and dairy.
Overall, Sussex has a mixed farming picture, using different soil types and land structures. Unlike other English counties, it still has a healthy mix of livestock production, arable and dairy. For the majority of our farms, the average farm size in Sussex is under 100 hectares. A disproportionate number of county farmers therefore rely on local supply chains in order to market product.
My bijou constituency of Eastbourne, sitting in Sussex, may not be best known for its farming. People tend to think of the pier and the beauty of the seafront. Ours is a very Victorian seaside tourist town, which is most important to our economy. As important in Eastbourne are the fisheries, at the eastern end of the constituency, and our highly valued under-10 metre boats. To the west is farmland, which is by nature downland, because as well as being a popular tourist destination Eastbourne is hallmarked as the eastern gateway to the South Downs national park.
Although farming is significant in Eastbourne, food consumption is equally important to all who live there. According to figures, this year alone it is estimated that those in Eastbourne will consume a record 12 million eggs, 11 million litres of milk and 600 tonnes of beef. My point is that everyone in Eastbourne is concerned about food production and security, local provenance and quality. We are all very much in it together.
This debate was inspired by a meeting I had with my local farming community. The Minister will be pleased to know that there was much agreement about the principles of policy on public good. There was also recognition that our greatest asset is in our soils. There are shared aims on nature reset and recovery, the protection and preservation of our beautiful environment, and the need to produce as much homegrown food as possible. Those concerns are very much shared.
Today I will share the concerns expressed at that meeting, because in another guise they provide opportunities to reach greater potential in our area. The agenda centred on food security, the environmental land management scheme, trade, labour and local infrastructure. It was not a short meeting.
On ELMS, one or two of the points made by my local farmers rested on the timeliness of the schemes. They wanted to know when more clarity, guidance and information would be made available, and, notably, when the standards would be published. Unless and until they are published, farmers up and down the length and breadth of the UK will not be in a position to apply to those schemes. That concern is underpinned by the fact that the basic payment scheme is now fading away, so the need to pivot to the new schemes is becoming more important. Any kind of uncertainty about the shape of the schemes will cause consternation, so I look forward to hearing what the Minister might be able to share. From a local perspective, my understanding is that take-up has not really taken off, so I am keen to understand the issues and barriers that sit behind that, not least the elements of the scheme that might preclude farmers in my constituency, and Sussex more generally, who have SHINE—Selected Heritage Inventory for Natural England—features on their land, for which our area is very well known.
The National Farmers Union estimates that 50% of the farmland in my constituency is tenanted rather than owned, which is far higher than in other parts of the country. Therein lies a particular need for clarity on the future of agricultural policy, because tenant farmers’ access to support is perhaps less clear than that for land- owners. Of course, uncertainty is a catalyst for short-term rent agreements, which are an unlikely vehicle to return a productive agricultural system or the environmental benefit that we are looking for.
I am keen to understand more about the outworkings of the Rock review, which was carried out by the independent tenancy working group and looked at accessibility within ELMS. It made more than 70 recommendations, including on the landlord-tenant relationship and on changes to legislation and tax arrangements. The review essentially says that the schemes must be accessible and relevant to tenants and landlords alike, and that many of our counties’ farm estates are key entry points for the next generation of farmers. Of course, we want to make sure that tenants and landlords are making significant investments by upgrading and improving their holdings in terms of both infrastructure and natural capital.
Another feature of my constituency, and more widely in Sussex, harks back to the SHINE features. Our current reading is that they may well be precluded from some of the schemes. The South Downs are rich in archaeological features that were created during several millennia of human occupation. I will not cover the history and pre-history, but farming in Eastbourne apparently dates back to 4000 BC. There is a definite heritage, and there are also 28 scheduled monuments and a whole plethora of burial mounds and ancient farm systems.
Tim Loughton (East Worthing and Shoreham) (Con)
As a long-standing member of the Sussex Archaeological Society who has dug on farmsteads on Beachy Head in my hon. Friend’s constituency, I can tell her that it is likely that farming went on before 4000 BC in and around Eastbourne.
Caroline Ansell
I thank my hon. Friend and near neighbour for his intervention and correction. I delight in knowing that farming has been taking place in the area for more than 4,000 years. All this must surely point towards a good future, as agriculture is so well established there.
We understand that the new sustainable farming incentive scheme provides few avenues to enter if SHINE features exist on the land. Our farmers in Eastbourne and East Sussex in general would be unable to access payments from the new scheme, and that is despite the reduction in the basic payment scheme, which would put them at a disadvantage compared with other farmers.
Another critical point raised at the meeting was the sector’s vulnerability due to the vulnerability of local abattoirs. I know that the Minister has taken a very keen interest in this issue and that he is a strong supporter. The numbers continue to decline, which is definitely of concern in Sussex in general, including East Sussex, where there are only two left. The lack of local slaughter facilities can prevent farmers from adding value by selling directly to the consumer or through other small-scale marketing initiatives, such as farm shops or boxed-meat businesses, which are all important for resilience. There are also the matters of bureaucracy and competition. The industry states that without changes to regulations, nearly 60% of small abattoir businesses are expected to close in the next two to five years. I understand that, for my farmers, that could be terminal. The question of abattoirs is incredibly important.
Am I right in saying—I hope to stand corrected, again—that the funding commitment made by Ministers in the House of Lords was limited to producer-owned abattoirs? If so, that would prevent the majority of small abattoirs from accessing ancillary funding. According to industry, many of those establishments operate a model whereby the producer sends livestock for private kill, with return of the product to the producer. Can we explore how funding could be extended to non-producer-owned small abattoirs?
There are many wider reasons for wanting to keep the abattoir sector resilient, including animal welfare. Despite strong legislation and a very high-performing Sussex rural crime team, which was the subject of particular thanks at my meeting with local farmers, the NFU estimates that the cost of rural crime in Sussex last year was £1.13 million. It has gone down significantly since the excellent work of our Sussex police and crime commissioner Katy Bourne, who established the 21-strong Sussex rural crime team, which I understand is the largest in the south-east. The team has made a substantial and sustained difference. However, the incidents continue, not least in a post-pandemic world where more of the community have learned to enjoy the open space. Yet the legislative language, which says that dogs must be kept under close control rather than on a lead, means that the incidents—which are bloody and have in some cases proven fatal—have continued. Is there a need for stronger messaging on responsible dog ownership? Is there a need for tighter language?
In 2021, NFU Mutual surveyed 1,200 British dog owners and found that three quarters of them let their dogs roam free in the countryside—up from 64% in a similar survey the previous year. Just under half admitted that their dogs did not always come back when called. On livestock worrying, SheepWatch UK estimates that 15,000 sheep are killed by dogs each year. Furthermore, the cost of dog attacks on farm animals across the UK rose to more than £1.5 million in 2021. Those are figures and that is money, but it is far more impactful, beyond the financial; it is distressing for the farmers to see their livestock worried in that way.
In summary, Sussex farmers deliver environmental benefits and significantly contribute to national and local food production. In common with others, they face global challenges stemming from the Ukraine conflict, policy development and an ELM scheme that is still rather embryonic. That is compounded by the fragility caused by diminishing abattoirs and markets.
How can we find the pragmatic solutions to ensure that Sussex farmers can continue for, at the very least, another 4,000 years? What assessment has the Minister made of the ability of farmers managing permanent pasture, and with SHINE features, to access SFI payments? What further steps is the Department taking to address the decline of small abattoirs in Sussex? What assessment has the Department made of the payment rates under SFI, in the light of inflation?
I know that the Government have done significant work in this area. Ambition is high, but the challenges are equally so. My farmers are keen to work with Government policy and to deliver on those shared ambitions. I look forward to hearing what the Minister has to say, so that I might take that back home to them.
Maria Caulfield (Lewes) (Con)
It is a pleasure to serve under your chairmanship, Ms Nokes. I thank my neighbour, my hon. Friend the Member for Eastbourne (Caroline Ansell), for securing this debate. As luck would have it, on Friday morning I and some of my farmers met the NFU over bacon sandwiches and tea, and we discussed many of the issues that she has raised.
I want to raise four key areas with the Minister. The first is the cost of food production. As a farmer, he will know only too well the particular cost of fertilisers. The Agriculture and Horticulture Development Board estimates that there has been a 152% increase in the cost of fertiliser since May 2021, and farmers are struggling to afford it. That has a knock-on effect on the cost of the food that they produce, the costs in our supermarkets, and the overall cost of inflation, which is affecting each and every one of us.
If farmers can afford fertiliser, the struggle to get it seems even greater. We produce only 40% of our own fertiliser, and one of the two plants that we had has closed, again, due to running costs and the cost of energy. There is real concern because some countries that were exporting to us have capped exports in order to bring costs down in their own country and because of the global availability. Access to fertiliser is therefore a huge problem.
I know that the Government have brought in the BPS payments in several chunks to improve cash flow and that they have reduced restrictions around the use of manure. That has helped, but it only scratches the surface of the problem.
Farmers have two key asks. The first is to grow our domestic supply of fertiliser. What discussions have there been with Ministers in other Departments on supporting the fertiliser sector and increasing production so that we are more self-sufficient as a country? The second ask is about the storage of slurry. It is difficult and expensive for farmers, and some of the regulations on slurry covers mean that it is also impractical. They are keen to be able to store it, but improvements to the rules and regulations, and support to increase storage, would help them greatly.
The second key area is ELMS. I echo what my hon. Friend the Member for Eastbourne has said. An NFU survey found that 84% of farmers are keen to take part in ELMS, but only two parts of the scheme are open. The NFU also mentioned access to SFI, which is difficult. Of course, we want to protect and promote the environment, but we must increase food production and be as self-sufficient as possible in this country. The two do not need to be mutually exclusive. Farmers are very keen to get involved, but there are no timelines and no details. As the Minister knows, they need certainty before investing in equipment and staff. They need the forward-thinking plans one or two years in advance, and time is running out.
The third area that was raised with me was labour. I met dairy farmers, poultry farmers and arable farmers who all said the same thing: they need an all-year-round supply of staff, not just seasonal workers. Their two key asks are to expand the temporary worker visa to two years and to look at whether agricultural workers could be on the shortage occupations list. What discussions have there been with the Home Office on that? Particularly in the south-east, where the cost of living is high, it is difficult for farmers to find workers to do quite low-paid but difficult jobs.
My fourth and final ask is around avian flu, which is a huge problem for us in Sussex. It is starting to emerge—thanks to West Sussex—and it might affect my East Sussex poultry farmers fairly soon. The sheer scale is something that has never been seen before by poultry farmers in this country—they are used to seasonal avian flu. They are locking up their free-range chickens and using the measures that are in place, but inspectors are overworked. The compensation scheme is based on the number of birds a farmer has left when the inspector comes to call. The inspectors used to be able to visit 48 hours or 72 hours after a call, but they are now turning up two or three weeks later, when all the birds are dead. We are not talking about a few dozen birds, but hundreds of thousands, and farmers are going out of business.
The clean-up scheme is costing in the millions—not the hundreds of thousands. With all that is going on in the world, avian flu does not seem to be high on the agenda, but it is wiping out the egg industry in my patch. My poultry farmers who are left could sell their eggs hundreds of times over because there is such a shortage, but if their birds get infected, those farmers will be wiped out, and there is no coming back because of the cost. Can we therefore look at the compensation scheme or at least at supporting the assessors so that they can get out to farmers as quickly as possible? Can we support farmers across their whole flock, rather than looking at the number of birds that are still alive by the time the assessor sees them? Can I also ask about a vaccine roll-out? I am not an expert, but apparently there is a vaccine available. Farmers are keen to get involved, even if there are pilot studies to be done, because they are so worried about avian flu hitting their farms.
I have outlined my four key areas. I look forward to hearing from the Minister how we can support our farmers, who do an amazing job. Now that we have seen what has happened to Ukraine, which was the breadbasket of Europe, we can appreciate more than ever the hard work of our farmers, who get up early and work into the night. They are dependent on the weather for their living and put in all the hours. If they get a bad season, it hits them really badly. I just want to place on record my thanks to them, and I hope we can support them in all that they do.
Tim Loughton (East Worthing and Shoreham) (Con)
It is a pleasure to serve under your chairmanship, Ms Nokes. I had not intended to speak this afternoon, but I have been tempted by my colleagues in East Sussex—my hon. Friends the Members for Eastbourne (Caroline Ansell) and for Lewes (Maria Caulfield)—to be a voice for West Sussex and to defend us against charges of spreading avian flu, which my hon. Friend the Member for Eastbourne seems to be accusing us of. I do not know whether I need to declare an interest as the current president of the West Grinstead & District Ploughing and Agricultural Society, but I do so with great pleasure.
I am delighted that my hon. Friend the Member for Eastbourne, in whose constituency I was a couple of days ago—I have spent many happy years there, having been born in Eastbourne—has brought about this debate on Sussex agriculture. Those of us who have had the privilege of being born and brought up and having lived most of our lives in Sussex know that the artificial division into East and West Sussex as a result of the local government reorganisation was a most ghastly occurrence, and Sussex wunt be druv, so Sussex is Sussex.
I endorse all the comments that my hon. Friends the Members for Eastbourne and for Lewes made. Sussex is an interesting county in terms of agriculture. It is a hugely rural county, whereas my constituency is largely coastal and urban, although 52% of the Adur council area, which forms most of my constituency, is in the South Downs national park, which places far more restrictions on the council’s powers when it comes to planning and the availability of land for building more houses.
I often speak to the farmers in my constituency who are within the South Downs national park, and I also spoke at a dinner of the ploughing society recently, and the big issue at the moment is food security—indeed, it is absolutely paramount. Furthermore, if Ukraine has taught us anything, it is the importance of energy security and the pitfalls of becoming too reliant on imports of energy from one or two countries. Energy security is absolutely vital, and our farmers want to play their part in restoring and building our energy security.
Our farmers have greater powers and flexibility to tackle those issues now that they are no longer part of the common agricultural policy, which gave rather artificial subsidies based on what Brussels decided it was best to grow around Europe, rather than on what our farmers knew how to grow locally and what was most sympathetic to our agricultural scene and our local environments. I look forward to seeing different colours making up Sussex fields in years to come, as we grow those things that benefit us most and provide the most effective and most needed foods for local people, and help to build our food security, because we still import far too much food—well over a third.
In Sussex, we have very hilly areas because of the South Downs, which are not suitable for arable farming but which are suitable for a lot of rough grazing. Hence, South Downs sheep and many other breeds of sheep adorn the South Downs, as well as many varieties of cattle. Let us remember that pasture, and active pasture, is one of the best ways of locking in carbon. Those whose protests see them waste milk by pouring it over supermarket floors or who glue themselves to whatever it is they have glued themselves to this week should remember that farmers are probably the most important component in achieving net zero and contributing to environmental stewardship. They are the stewards of the environment. If they undermine and destroy it, they undermine their own livelihoods and their ability to produce food, which is what they are in farming for and have been for many generations. I therefore pay tribute to our farmers, and we should have no truck with people who want to thrust their own lifestyle choices on the rest of us, as if they have a God-given right to dictate what is best for the environment, our health and our welfare.
Many farmers are now moving to shallow plough methods or indeed to no-plough methods, and it will not be long before arable agriculture takes place through minimal ploughing or no ploughing at all, meaning that more carbon will remain locked into the land.
Caroline Ansell
I completely agree with my hon. Friend about how important pasture-land is. The Eastbourne constituency is set to lose one of the last pockets of green space between Eastbourne and Willingdon, which is currently pasture-land for sheep grazing for one of our farms, exactly as my hon. Friend described. However, if all things remain equal, it will become a new housing estate, to the tune of several hundred homes. Does he agree that we should look to afford greater protection to such land, for all the reasons he has just cited?
Tim Loughton
I completely agree. The point is that we must get the balance right. Our part of the country is the most densely populated outside London, and we need more homes. We also need more space for businesses, and particularly higher-skilled businesses, to grow. However, we absolutely need as much land as possible for high-quality agriculture and food and drink production. I am certainly in favour of some land being used for solar farms and other environmentally friendly energy production, but not high-quality agricultural land. So we have to get the balance right in terms of what is best in which parts of our rural landscape, because each element will suffer if we do not.
My hon. Friend the Member for Lewes made a good point about farmers’ costs. I think the cost of fertiliser has gone up from something like £250 a tonne to £900 a tonne at its peak. Fertiliser is energy-intensive and comes from Russia and other such countries. In that respect, I hope the Minister is aware of the Sussex Kelp Restoration Project—indeed, his Department has given a grant to the pilots ongoing in Sussex bay. The project is one of the most exciting and environmentally friendly going on at the moment. We are assessing whether the decision by the Department for Environment, Food and Rural Affairs—for which I am glad we lobbied—to ban near-shore trawling in Sussex bay will enable us to restore the kelp beds so that seaweed can once again become a thing of Sussex beaches. Back in the 1980s and 1990s, around the time I became the MP for Worthing, you could often smell Worthing before you could see it. On hot days in high summer, seaweed would be washed up on the shore where it would rot. In the old days, local farmers would bring their tractors on to the beach and gather up the seaweed to use as a natural fertiliser. However, when industrially produced fertilisers became much more economical, that fell by the wayside. Then, the seaweed disappeared, because of the aggressive activities of trawlers—some of which came from Newhaven, in the constituency of my hon. Friend the Member for Lewes, although it is a long-running saga between Newhaven and Shoreham as to which harbour is responsible—and a whole host of other reasons.
We now have the prospect of regrowing that seaweed in a planned agricultural, farmed way. Seaweed absorbs six times as much carbon as trees and provides marine habitats, with breeding and feeding environments. It is exceedingly efficient at absorbing energy and therefore cuts down on the need for sea defences, so the Environment Agency is a big fan of this plan. Seaweed also provides cattle feed and fertiliser and is a superfood for humans as well. It ticks a whole lot of boxes. If we can make it work in Sussex bay, the prospect of it catching on along other parts of the United Kingdom coastline—we have 12,000 miles or so—is considerable. It would help with fertiliser, our carbon commitments and assorted other things. That form of agriculture could turn out to be a major benefit on so many fronts, and I very much hope the Minister will give his support to the project as the results from the pilots come in over the next few years.
Agriculture is about so much more than just arable land and livestock. In West Sussex, we have the best vineyards in the country—of course, there are a few in East Sussex as well—which produce the finest sparkling wine in the world. Sussex Sparkling is, of course, a trademark, pioneered by Mark Driver at Rathfinny vineyard in the constituency of my hon. Friend the Member for Lewes, where I grew up and spent many happy years in ancient times. It is a fast-growing and successful industry that is taking on the world with the quality of its produce.
Agriculture is also bringing tourism into Sussex. Just as people might go to Bordeaux or the south of France and tour the vineyards, they can now come to Sussex and tour various vineyards in East and West Sussex. People can go to farms, farm shops, galleries, seaside resorts—to Eastbourne pier and Worthing pier—and to decent restaurants serving local produce, such as scallops from Shoreham, which is the United Kingdom’s main centre for landing scallops. Agriculture is going to be a serious element in attracting domestic tourism—people spending time at home—and foreign visitors coming to our shores.
As noted by my hon. Friend the Member for Eastbourne, although her chronology was a little out, agricultural land houses agricultural and heritage assets as well. Our farmers are important custodians of scheduled monuments and many other important historical sites. In my constituency, we have Cissbury Ring, one of our largest iron age hill forts, which was the scene of Neolithic flint mines, a mint in medieval times and so on. We must remunerate and recognise farmers for the important duties they have as stewards of the land—not just for environmental and agricultural production reasons, but for the preservation, conservation and promotion of our heritage.
I am pleased by the pioneering work of the Sussex police commissioner and the local police force in looking after our agricultural areas. Their job is not just to look after some of the heritage sites, but to clamp down on the dog attacks we have seen. Sussex fares particularly badly in that respect, and we need to do more to clamp down on irresponsible dog owners. Farmers also have to deal with the big menace of fly-tipping, which costs them many thousands of pounds, with the hare coursing that goes on and with unlawful Traveller encampments. All of that tends to hit farms and agricultural land disproportionately. Having 21 officers across the whole of Sussex to police the crime that happens in our rural areas is not nearly enough.
I emphasise how important agriculture is. It is not just about farmyards producing wheat, some nice chickens, eggs and everything that goes with that. The knock-on effects—on the local economy, small businesses and the workforce—are considerable. The labour shortage is causing serious problems, and I would certainly reinforce to the Minister the point about having greater flexibility about agricultural worker permits.
Let us celebrate our farmers. Let us celebrate our agriculture. Let us celebrate the food security that our local farmers bring us. But, above all, let us celebrate the world-beating, outstanding food and drink—particularly the sparkling wine—that we produce in Sussex. It can take on the rest of the world with confidence and beat it. Long may it be encouraged to do so.
Daniel Zeichner (Cambridge) (Lab)
It is a pleasure to serve with you in the Chair, Ms Nokes. I congratulate the hon. Member for Eastbourne (Caroline Ansell) on securing the debate and on her excellent introduction to the beautiful part of the world that she represents. She made a series of important points, many of which I would like to associate myself with—particularly those on local abattoirs, rural crime and ELMS, which I will come back to in a minute.
I also welcome many of the comments made by the hon. Member for Lewes (Maria Caulfield)—particularly those around fertiliser, which we have raised on many occasions; labour issues, which are worthy of further discussion; and avian flu, which is very serious. Indeed, I would really encourage the Minister to make a statement about it to the House, because we would welcome the opportunity to have that discussion. Avian flu is really hitting people hard, and it is important that it is discussed in this place so that people realise that we understand the pressures they are under. I also welcome the comments made by the hon. Member for East Worthing and Shoreham (Tim Loughton) about seaweed, which presents huge opportunities and potential.
Despite all that, my opening point relates to the pressure that food producers in Sussex and elsewhere are under because of the cost of fuel and other inputs, as well as labour supply issues. The pig and poultry sectors are under huge pressure, and we have heard comments about bird flu and about the contraction in the pig sector in general, which we have heard about in previous discussions.
The Government have control over some of those issues, but some less so. It is slightly difficult to talk about the Government today—I have some sympathy for the Minister this afternoon—because we are not quite sure which bit of the Conservative party is now in government. Will we see the rather settled approach that we have lived with since 2019 or the growth, growth, growth mantra of the never-mind-the-environment bunch, who have been in place for the last couple of months? Perhaps the Minister could respond to that—perhaps an answer will work its way through as the afternoon progresses—because I am sure that the farmers and residents of Sussex and beyond are keen to find out.
One thing we do know, and over which the Government do have direct control, is that environmental land management schemes—the long-term system of agricultural support to which reference has been made—are being phased out. Across England as a whole, we estimate that at least £1 billion has been taken out of the rural economy so far. What is less clear is how much has gone back. Will the Minister tell us how many applications for the sustainable farming incentive have been received so far for England, and for Sussex in particular? The big promise during the passage of the Agriculture Act 2020 was that, as area payments were withdrawn, they would be replaced by environmental payments for public goods. I warned at the time that that could be a sleight of hand because promising that the budget would be maintained through the Parliament gave good political cover, but there was never any real guarantee that money lost by farmers in Sussex would actually come back to environmental schemes in Sussex. Will the Minister tell us how that is going and whether there has been any assessment of the knock-on effect on the rural economy in Sussex? Lower farm incomes mean less money spent locally on farm machinery and other agricultural services. Do the Government have any mechanism for assessing the impact?
On the withdrawal of basic payments in Sussex, there was a further scheme under the 2020 Act to encourage farmers to leave the sector. That was ostensibly to make way for new entrants, but although the retirement scheme has been implemented, we see no sign of a scheme to replace those who have left. Just last week, in response to my written parliamentary question, the Minister admitted that there had been only just over 2,000 applicants for the schemes nationally. Will he tell us how many applications have been received in Sussex and how many new entrants he expects to replace those who have left? Why are the numbers so low? When might we expect the details of any such scheme to encourage new entrants?
I have two final observations, and they reflect the point made by the hon. Member for Eastbourne in her speech. A few weeks ago, Baroness Rock published her recommendations on agricultural tenancies. As was explained, patterns of landholding are complicated—in Sussex and elsewhere—and the landlord-tenant relationship is complicated. When can we expect a Government response to those recommendations, and which of the 70 will be implemented? Will the Minister at least give us a steer? Without clarity from the Government, I fear we will have further drift, which helps no one.
In conclusion, for Labour, agriculture in Sussex has an important future. Food security matters to us, which is why we argued throughout the passage of the 2020 Act that food production is central to our mission as we seek to buy, make and sell more in Britain, and to use public procurement to source more food locally. We believe that can be done at the same time as ensuring food production is much more environmentally friendly. We think that goes with the grain of where most farmers want to be, and public policies should be there to help them to make investments for the future. That is good for the whole rural economy across England, and good for Sussex. However, it will happen only with consistent leadership from the Government. I trust the Minister will be able to answer my questions, as we all seek clarity on the Government’s position.
The Minister of State, Department for Environment, Food and Rural Affairs (Mark Spencer)
It is a pleasure to serve under your chairship, Ms Nokes. I pay tribute to my hon. Friend the Member for Eastbourne (Caroline Ansell) for calling this debate.
Before I continue, let me refer to some of the comments made by the shadow Minister, the hon. Member for Cambridge (Daniel Zeichner). Today is an unusual day. My right hon. Friend the Member for North East Hampshire (Mr Jayawardena) has left his position as Secretary of State, so I think I am currently stood here as the most senior Minister in the Department. I may seize this moment and take the power. I am sure there will be more clarity on some of the shadow Minister’s questions as the reshuffle continues.
My hon. Friend the Member for Eastbourne started by giving us a tour of Sussex and talking about how much food Eastbourne consumes. That is an important place to start, because food producers should be thinking about consumers. It is an interesting twist on the whole thing, because consumers are interested in not only how much their food costs but how it is produced and whether that is environmentally friendly, as well as its impact on the environment and the landscape that they see. The view of the beautiful, rolling hills in Sussex, which she and other colleagues described, is there because of the food producers in Sussex who have created that landscape over the 4,000 years for which it has been farmed. It is important for us to remember that when we bring forward new schemes to help food producers and farmers. We should think about the impact that will have on the environment.
My hon. Friend went on to talk about food security. Never in my farming or political lifetime has food security been as important or as high on the political agenda as it is today. That is a huge opportunity for the industry, the sector and the Department to shape and influence the direction of travel. There are lots of opportunities; she referred to the ELM scheme, which is going to be a flagship moment for the Department once we have finished its short review. I hesitate slightly because a new Secretary of State will come in, but I expect that any new Secretary of State or Minister in the Department will have a close eye on the fact that we need to improve our food security. We need to grow the amount of food that we produce in the UK. However, that is not a barrier to improving our biodiversity and environmental benefits; we can do both at the same time. For decades, UK agriculture has demonstrated that it can improve efficiency and increase productivity while protecting the environment, but we need to do better.
We need to do more on biodiversity and on improving our environmental output, but of course that works only if farmers engage in the schemes and get involved. The previous iteration was quite a complicated system—there was a bit of bureaucracy in there. The shadow Minister referred to the number of people who were applying for those schemes, which is not as many as we would like. If we are to have the environmental benefit and biodiversity output, we must engage with all the food producers, ensure that they want to get involved in the schemes, make the schemes simple to apply for and make the first rung on the ladder easy to access. Once the new schemes are released, farmers will have an easy opportunity to get involved and to benefit the landscape as we want them to.
Abattoirs have featured a lot in the debate, and they are a passion of mine. Nottinghamshire, which is my home county, does not now have an abattoir within the county boundary. That is a huge disadvantage to livestock producers in Nottinghamshire. We need to do better than that, but—it is quite a big “but”—we have engaged a lot with the Food Standards Agency to ensure that we get the balance right. If we loosen regulation and make it easier for abattoirs to operate, I emphasise that we must not do so at the price of the credibility of the food sector and meat industry.
The meat industry works only because of consumers’ high level of confidence that the system will ensure that the food they consume is safe. There have been a number of occasions through history when that confidence has been rocked, such as when horse meat entered the food chain, or bovine spongiform encephalopathy, which happened early in my agricultural life. Confidence was rocked and that had huge implications. We must ensure that our system maintains the safety of our food and gives credibility to the meat industry.
Maria Caulfield
On abattoirs, some of my local farmers would like to export their beef, but if they were to export to places such as Singapore, the abattoirs need to meet certain specifications. That takes a lot of investment. Are there are any schemes to help exports of British beef and to enable abattoirs that want to take on that extra specification to do so?
Mark Spencer
Certainly. As we expand trade deals and co-operate with people around the world, that will be an important factor. To turn the point around, if we are consuming those products only in the United Kingdom, there may be some tweaks that we can look at that could help smaller abattoirs that produce only for the United Kingdom, so that they may have fewer of the checks and barriers that are necessary for exports. However, I emphasise that that is only what I would like to achieve, and we must reflect on whether it is achievable. We are engaging with the Food Standards Agency regularly to look at what we can achieve together.
My hon. Friend the Member for Eastbourne talked about rural crime, which is very important. I join her in paying tribute to the Sussex police and crime commissioner, who has done great work. She referred to dog attacks, which are particularly traumatic for livestock farmers. Attacks can often lead to abortions or worse at a later date. They can be very traumatic not just for the livestock but for the farmers who find the animals after an attack. Farmers are very attached to their animals.
My hon. Friend started by talking about fertilisers—another topic that is close to my heart. We find ourselves in a very challenging position. CF Fertilisers, which currently has the only production facility in the north-east, has limited the amount of fertiliser that it is producing. It has changed to buying in ammonia to produce ammonium nitrate, rather than producing the ammonia on site. That has had a knock-on effect on the amount of available carbon dioxide, which is a very important product for the food sector. The company actually owns another factory in the north-west near the Wirral, and we have been engaging with Ministers from the Department for Business, Energy and Industrial Strategy to try to work together to encourage CF to work with other partners who may want to take that factory on. That is a work in progress. My hon. Friend can rest assured that the Department takes the issue seriously and we will try to assist if we can.
We then got on to avian flu, which is a very important topic, as highlighted by the shadow Minister. We have seen hundreds of thousands of birds—not only in the agricultural sector but wild birds—lose their life to avian flu. There is a tragedy taking place in our countryside as we stand here today. It is something the Department takes very seriously. My hon. Friend the Member for Lewes (Maria Caulfield) made reference to the ministry vets, who are working day and night to try to assist farmers and get insight.
I cannot emphasise enough how important biosecurity is. It is not just about washing boots and hands before entering one of the units; it is about thinking about where the bedding is stored, because introducing bedding into the facilities is often how the flu comes in. Vermin control is very important to stop rodents making holes in sheds that can allow small birds that may be affected into the units.
My hon. Friend the Member for Lewes asked about vaccination. It is possible that vaccination has a role to play, certainly in the laying or turkey sector. In the chicken-meat system, the turnaround of the birds is very rapid, so vaccinating all those birds is often financially not rewarding. Certainly, that is something the Department is looking at and working with the NFU and other sector stakeholders on.
My hon. Friend the Member for East Worthing and Shoreham (Tim Loughton) mentioned food security, which is an important topic. He spoke of the no-plough, minimum-tillage and no-tillage systems, which are very important. The opportunity for agritech and new technologies and systems of working is going to be fundamental if we are to increase the amount of food we produce at the same time as improving our environmental credentials and biodiversity.
I am quite excited by the opportunities that agritech will bring, whether it is robots, computers, new systems of working or a twist on some of the practices of the last 4,000 years. There is often nothing new in agriculture. We can learn a lot from the way our ancestors farmed without artificial fertilisers. My hon. Friend the Member for East Worthing and Shoreham made reference to the seaweed on the beaches of Sussex, which is also something the Department is looking at closely. In fact, one of my senior civil servants in the Department has just received a Nuffield scholarship to go and look at the benefits of seaweed. I am sure that in getting him into Hansard I have ensured he will buy the cakes for the Department very soon.
We finally got to vineyards, which I thought would be the main topic of the debate because Sussex is enormously proud of its vineyards. I think there are 145 vineyards in Sussex. My hon. Friend the Member for East Worthing and Shoreham made reference to the finest wines in the world, which some colleagues may have taken as being flippant, but it is actually factually correct. We should put on the record that the wines of Sussex have won competitions worldwide. I pay enormous tribute to the producers who have succeeded in that way.
Plumpton College is doing a lot of work to educate the next generation of wine producers and vineyard managers. That offers a huge opportunity for people to diversify into different sectors within the industry.
Tim Loughton
The Minister is absolutely right that they are world-beating wines, particularly the sparkling wines. He has just mentioned Plumpton College, which is an excellent agricultural college. I know it well and live close to it. Agricultural colleges have not come up so far in the debate, and they are really important. Plumpton is leading the way with its viticulture department. Most people connected with English vineyards will have had some connection with Plumpton now.
Agricultural colleges are often overlooked and neglected by our education Departments. It would be helpful if DEFRA would work more closely with the Department for Education to see how we can promote agricultural colleges and a career in agriculture as a really worthwhile career. That career will be higher skilled because of agritech and everything that has already been mentioned.
Mark Spencer
That is an absolutely pertinent intervention. Yesterday, I was at the launch of a new system from TIAH—the Institute for Agriculture and Horticulture—which links up all the education systems to make sure we have a continuous education process all the way through agriculture, so that young people can build a career in the industry. Education is always the answer to everything. We referred to the agritech sector; if ever there were a moment in history when we needed the brightest and most aspirational people to come into agriculture and food production, now is that moment. They need to see that career path and we need to make sure it is easy to get on and engage with.
We have had a fascinating and interesting debate. I can tell the pride this afternoon among colleagues from Sussex. They should be enormously proud of the achievements of their farmers. There are huge challenges facing them, but the Government will be there to assist them on the journey to make sure they continue to keep the people of not only Eastbourne but the whole United Kingdom fed. We will improve our biosecurity to make sure avian flu is limited. We will also improve our environmental output and make sure we improve the amount of wildlife we see in Sussex, as well as producing large amounts of food to keep us all well fed.
Caroline Ansell
I thank the Minister for his remarks. As an educator, I concur with him that education is all things. There is a real role for colleges such as Plumpton in our area to really underpin and pump-prime this sector. That applies to every part of the sector, too.
I wonder whether there is also something to be considered around our holiday activity food programmes and how we might open up a farm experience to children. Last summer, they hit the water; it would be great for them to understand rather more about food and its provenance. West Rise Community Infant School in Eastbourne has its own farm shop. The children keep their own animals and understand the process all the way through. That can only be a good and important thing. I should also mention my one vineyard—one—in Eastbourne: Compton Combe is great in ambition but stands alone. I can see it from my mum’s house. It is small in scale but big in ambition.
We have heard today about the high value in which we hold our farmers, not least for all that we need them to take forward by way of safeguarding and protecting our natural environment, which is our No. 1 asset. I look forward to taking up some of the other points raised in the debate, particularly in respect of those SHINE features, in conversations to come, for which I hope to find the Minister still in his place—or perhaps higher.
Question put and agreed to.
Resolved,
That this House has considered agriculture in Sussex.