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Oral Answers to Questions
(11 months ago)
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Kevin Foster (Torbay) (Con)
Andrew Jones (Harrogate and Knaresborough) (Con)
The Secretary of State for Foreign, Commonwealth and Development Affairs (James Cleverly)
I regularly engage with our NATO allies. I did so most recently at the NATO Foreign Ministers meeting from 31 May to 1 June in Oslo, where the UK demonstrated our continued solidarity with Ukraine and we discussed preparations for the upcoming Vilnius summit for NATO leaders. We continue to hold NATO as the foundation stone of the Euro-Atlantic defence structure.
Kevin Foster
NATO’s unity is its strength. It brings countries together to deter aggression and defend freedom—things that would be enhanced by welcoming Sweden into the alliance. When does the Foreign Secretary expect a unanimous decision in NATO to do just that?
James Cleverly
The UK has been a strong supporter of both Finland and Sweden’s accession to NATO. I was very pleased that Finland joined us at the most recent Foreign Ministers meeting. The UK will continue to push for both Hungary and Türkiye to ratify the accession of Sweden to NATO.
Andrew Jones
I was very pleased to hear the Prime Minister confirm that Ukraine’s rightful place is within NATO. Will my right hon. Friend outline what steps he has taken to build the path towards its membership?
James Cleverly
The commitment that was made at Bucharest many years ago still stands. In the intervening years, Ukraine has demonstrated through its experience on the battlefield an increased acceptance of NATO’s standards and doctrine, which has been driven by the training that the UK and other NATO allies have provided. Inevitably, that will have shortened the time between now and the point it becomes a full member of NATO. Of course, it is impossible for us to speculate when that will be, but I hope that it will be soon.
Valerie Vaz (Walsall South) (Lab)
Our ambassadors play a skilful role in NATO and I wish to place on the record my thanks to Fleur Thomas in Luxembourg, which hosted the NATO Parliamentary Assembly, for her excellent briefing. What assessment has the Foreign Secretary made of Sweden actually joining NATO, which will strengthen its unity, before the Vilnius summit?
James Cleverly
The UK’s position has been clear on this: Sweden should join soon. Our desire, which is shared by all allies with the exception of a couple, is that Sweden should be a full member by the time of the Vilnius summit. We aspire to have a flag-raising ceremony and for Sweden to play a full part in the discussions at Vilnius. That will continue to be the aim towards which we work.
Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
When did the Foreign Secretary last engage with Hungary and Türkiye on the matter of Swedish accession, and when will he do so again? How easy is it to stress to them the importance of Sweden being in NATO? What is the blockage?
James Cleverly
My last conversation with Türkiye on this was at the NATO Foreign Ministers meeting in Oslo on 1 June. My most recent engagement with Hungary on this was at the OECD meeting in Paris at the tail end of last week.
Mr David Lammy (Tottenham) (Lab)
As the NATO Secretary-General said last month, Ukraine’s “rightful place” is in NATO. Over time, our support will help to make that possible. Does the Foreign Secretary agree that once, with our support, Ukraine has prevailed in its war against Russia’s invasion, there can be no Minsk 3.0, and that Britain should play a leading role in securing Ukraine’s path to join NATO?
James Cleverly
I am very glad that the right hon. Gentleman agrees with the Government’s position on this, which is that Ukraine’s rightful place is within NATO. We have worked towards that aim. Our support—the training, equipment and advice that we have provided—will have helped to speed up the pathway from now to the point when Ukraine becomes a full member of NATO.
Alyn Smith (Stirling) (SNP)
We would all agree that NATO is the cornerstone of defence policy, and, like many other colleagues, we support Sweden’s membership. However, the EU defence capacity is evolving at lightspeed because of events in Ukraine and events within the EU. We are seeing with the peace instrument, the strategic compass and procurement policy, that the UK really does risk being left behind in many of the discussions outwith NATO. Is it not time for a comprehensive security treaty between the UK and the EU to regulate these discussions?
James Cleverly
We enjoy a strong series of bilateral relations with EU member states and a strong relationship with the EU at the corporate level. However, I repeat that NATO is the foundation stone for the Euro-Atlantic defence structure. I have had that conversation with many Foreign Ministers from EU countries, and they agree. That is why we are committed to strengthening NATO and why at the Vilnius summit we aspire to have Sweden as a full member. However, we also need to progress the modernisation process for NATO to ensure that it continues to be fit for the future. That will be our aim. NATO is what keeps us safe in the Euro-Atlantic area.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (David Rutley)
My right hon. Friend the Foreign Secretary visited Brazil in May and I visited in March. We both met Brazilian authorities to discuss the risks faced by environmental activists in Brazil and how the UK can support their protection, including through the UK-Brazil partnership on green and inclusive growth, which was signed in May during the Foreign Secretary’s visit.
Mr Dhesi
Last week marked the one-year anniversary of the brutal murders in Brazil of the environmental activists and journalists Dom Phillips and Bruno Pereira. It is vital that those responsible for their murders are brought to justice, but we in the UK must play our part to protect environmental and indigenous activists from violence. What steps is the Minister taking to protect activists, especially British nationals, who are engaged in environmental activism abroad? On Brazil, what assessment has the UK Government made of President Lula’s attempts to halt deforestation of the Amazon rainforest?
David Rutley
I thank the hon. Member for his question. I offer my sincere condolences and the condolences of all on the Government Front Bench and, I am sure, of the whole House, to the families of Dom Phillips and Bruno Pereira, particularly considering the first anniversary that the hon. Member highlights. I know that the Foreign Secretary had meetings with the police and with Ministers to discuss the case, and I have had similar conversations. We want to make sure that those who committed that heinous crime are called to account and face justice. We continue to have active dialogue with the Brazilian Government to find ways that we can tackle environmental crime and deforestation.
Fabian Hamilton (Leeds North East) (Lab)
As we have heard, it is one year since the tragic murder of Dom Phillips and the Brazilian activist Bruno Pereira, who were murdered because of their environmental activism. I want to broaden the question slightly, because it seems to me that there is a role for those who take that kind of action to try to stop the destruction of the Amazon rainforest in particular. As long as it is peaceful and legal activism, not just in Brazil but across Latin America, what else is the Minister doing to protect British nationals and support human rights defenders across the region?
David Rutley
I recognise the hon. Member’s comments; he has taken a keen interest in the case, along with others on both sides of the House. We are working closely with the Brazilian Government on these matters. We have invested £300 million in the Amazonian biome, a huge amount of which is focused on Brazil. That will provide all kinds of support for indigenous communities and help to tackle environmental crime. We want to work within that framework to help protect environmental activists as well.
Bob Blackman (Harrow East) (Con)
The Secretary of State for Foreign, Commonwealth and Development Affairs (James Cleverly)
The Government regularly assess the impact of the IRGC’s destabilising activities on the UK’s interests and on British nationals. We work closely with our partners to deter those destabilising activities, including on the interdiction of Iranian weapons in the Gulf and of weapons proliferation in Russia. The UK sanctions the IRGC in its entirety.
Bob Blackman
My right hon. Friend will be aware that the regime is boasting that its hypersonic missiles can hit Tel Aviv in 400 seconds, that the joint comprehensive plan of action restrictions end in October and that there are suggestions that British universities have been involved in research that has led to drones that are attacking Ukrainian positions from Russia. Will he therefore commit to ensuring that there is no delisting of any organisations involved in any of those activities, undertake to research the position with UK universities and proscribe the IRGC in its entirety?
James Cleverly
I am aware of the reports about research that my hon. Friend mentions and we are, of course, looking into that. We continue to stand firm on our commitment that Iran cannot become a nuclear weapons state, and we will ensure that, as the sunset clauses in the JCPOA arrive, we take evolved measures to ensure that that is the case. He will know that we keep designations consistently under review.
Andrew Gwynne (Denton and Reddish) (Lab)
The Foreign Secretary knows that there are concerns across the House of Commons about the involvement of Iranian state-based actors here in the United Kingdom and their threats towards Iranian activists here who have fled persecution in their homeland. He knows the strength of feeling about proscription as well. What assessment has the Department made of the rapprochement between Saudi Arabia and the Iranian regime, and has he spoken to anybody in Saudi Arabia about that?
James Cleverly
I have had conversations with both the Saudi ambassador to the Court of St James and the Saudi Foreign Minister on that issue. They are making attempts to permanently bring ceasefires in Yemen to a full peace settlement. If that is the case, we are very happy to support that action. We remain deeply engaged with regard to Iran’s regional behaviour. On the threats to British nationals and people based here in the UK, the Foreign, Commonwealth and Development Office maintains a very close and ongoing working relationship with the Home Office, as the hon. Gentleman would expect, so that we can co-ordinate both our defence and our international actions on that issue.
Kerry McCarthy (Bristol East) (Lab)
The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)
UK policy is not to sponsor or support the issuing of any exploitation licences for deep-sea mining unless and until there is sufficient scientific evidence about the potential impact on deep-sea ecosystems, and strong, enforceable environmental regulations, standards and guidelines have been developed by the International Seabed Authority and are in place. That is both a precautionary and a conditional principle that we are following.
Kerry McCarthy
The Minister has just read out the written answer that was given fairly recently. As I understand it, that actually means that the Government have rejected calls for a precautionary pause, saying that it is better to be involved in negotiating environmental protections. I have to say that it is a brave politician—or perhaps a foolish one—who takes on Sir David Attenborough, who has said that it is
“beyond reason to consider the destruction of deep sea places”
before we understand them properly. Sir David also says that we should listen to scientists. More than 700 scientists from 44 countries have just supported a precautionary pause, so why won’t the Government?
Anne-Marie Trevelyan
The hon. Lady is quite right: David Attenborough’s championing of all things in the natural world gives us as policymakers around the world, and all those in the next generation who are passionate about ensuring that Governments get this right, the enthusiasm and the energy that are required. As I have said, at the moment the policy is not to sponsor or support the issuing of any exploitation licences, precisely because we want to ensure that, using the International Seabed Authority—the organisation that brings all state parties together—we are working together to come up with a policy that will protect and assure the deep seabed.
James Gray (North Wiltshire) (Con)
One of the seas that may become most vulnerable to deep-sea mining is the Arctic ocean, as the ice retreats and it opens up. We are extremely concerned about what the consequences may be for the environment there, and that is why the Government agreed to a moratorium on fishing in the central Arctic ocean. If they can agree to a moratorium on fishing in the central Arctic ocean, why can they not agree to a temporary “no digging” agreement in respect of deep-sea mining?
Anne-Marie Trevelyan
My hon. Friend is, of course, a great champion for and expert on all things to do with the Arctic. If I may, I will ask the Minister, Lord Goldsmith, to get back to my hon. Friend with more detail on that. As I say, the UK continues to take the very firm position that we will engage through the ISA Council to ensure that we get a global position that protects the seabed.
Dr Luke Evans (Bosworth) (Con)
Paul Holmes (Eastleigh) (Con)
Sir James Duddridge (Rochford and Southend East) (Con)
The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)
Artificial intelligence can bring huge economic and social benefits for the UK and our global partners. We are working with key partners to embrace the opportunities of AI, as well as seeking global co-operation on managing the risks. AI will present significant new opportunities to revolutionise how the Foreign, Commonwealth and Development Office operates, and how it delivers impactful diplomatic and development outcomes across the globe.
Dr Evans
Since I delivered my speech written by AI in the House in December, we have moved on to the fourth iteration of ChatGPT, which wrote it. Advancements are happening at such pace that we need to build a regulatory framework to prevent a similar situation to the one that we find ourselves in with the internet: 20 years on, we are trying to police it. What is my right hon. Friend doing to pull the world together around a globally agreed framework on AI?
Anne-Marie Trevelyan
I did not have the pleasure of hearing my hon. Friend’s ChatGPT-written speech, but I shall definitely look it up and see just how good it was. On 7 June, the Prime Minister, who was in the USA with President Biden, announced plans for the UK to launch the first global AI safety summit, so that we can do exactly what my hon. Friend says: try to tackle the challenge of agreeing safety measures, in order to evaluate and monitor the most significant risks from AI. The FCDO will engage with key international partners to deliver the Prime Minister’s ambition for the summit.
Paul Holmes
It was good to see the Prime Minister visit Washington last week to continue building our relationship with the United States, so that it is the strongest it can be. Will the Minister outline how we will work with the United States to ensure that the AI summit that was agreed to can be a success under UK leadership?
Anne-Marie Trevelyan
The Prime Minister and President Biden agreed that the UK and US would take a co-ordinated approach to the opportunities and challenges of the emerging tech that we see around us, such as AI. The UK welcomes early support from the US on the global summit on AI safety, which we will lead. We will work very closely with the US, and of course other international partners, to ensure that we deliver an important step forward on this issue.
Sir James Duddridge
AI represents a massive opportunity across a number of sectors, including in the diplomatic sphere, but we must recognise that there are risks. Specifically, what is the Foreign Office doing to counter the potential efforts in this space of Russia and China, which may use artificial intelligence to undermine British interests overseas?
Anne-Marie Trevelyan
Global co-operation will be vital to ensure that AI technologies and the rules governing their use are developed in the right way, and are aligned with our values of openness and freedom. The FCDO is working with departments across the UK’s national security ecosystem, including the National Cyber Security Centre, to ensure that we contribute to and benefit from advances in AI, while making sure that we increase our resilience against, and reduce the risk from, any threats that we face. We hope to have as many leading nations as possible involved in the AI summit.
Peter Grant (Glenrothes) (SNP)
The opportunities of AI are global, but so are the threats. It is obvious that significant co-ordination and co-operation in scientific research will be essential. In that context, could the Minister explain how cutting ourselves off from the world’s biggest scientific research programme helps the United Kingdom?
Anne-Marie Trevelyan
The hon. Gentleman is right: we absolutely all see the huge potential of AI, but we must not be complacent about the risks. That is why the UK, in leading the AI summit and bringing together all parties from around the world, will ensure that we establish world-leading governance and regulation, so that we can take the opportunities while ensuring public safety and trust.
Jim Shannon (Strangford) (DUP)
Never! Humour aside, may I thank the Minister very much for her response? It has been quite positive. Given that artificial intelligence will have a significant impact on international relations, will she provide reassurance that all AI advances must and will be scrutinised to a greater extent, for the safety of the people in the United Kingdom of Great Britain and Northern Ireland?
Anne-Marie Trevelyan
Mr Speaker, I assume that your reference was to the hon. Member’s great intelligence, because that is what artificial intelligence is demonstrating it can be. It is always a joy to support what he says and answer his questions, and he is exactly right: by working through those international relationships, with the UK driving things and holding that really important leadership role, we want to be able to bring countries together through bilateral engagement, using the many multinational fora out there to really ensure that we are tackling and understanding those threats. We need to provide an environment in which, as AI develops, we can maintain oversight while ensuring that we take advantage of opportunities that will bring economic prosperity. I look at the work that we are doing across the world, and I see how it can assist developing countries to safely leapfrog ahead with technologies in so many ways.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
We have all seen how hybrid warfare has been used against this country and our allies in recent years, and of course AI systems could pose new cyber and information threats as well as providing economic and social opportunities. We have already called on the Government to close gaps in the AI White Paper by introducing proper oversight of models such as GPT-4, and I have raised with Ministers the specific issue of whether access is allowed in the FCDO. I was told that access was not permitted on FCDO corporate systems, but that further guidance was being developed. Has that guidance now been issued, and are FCDO staff currently able to access AI systems on personal devices, for example? What safety protocols are in place?
Anne-Marie Trevelyan
If I may, I will write to the hon. Gentleman, because I do not have the latest information on that issue.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
As we have heard, artificial intelligence presents opportunities but also threats, many of which are impossible to quantify at this time. That is as true in AI diplomacy as in anything else, so at the world’s first major AI conference, will the UK Government commit to developing and facilitating AI only with countries that respect human rights and will obey the rules of international law?
Anne-Marie Trevelyan
As we bring the world together at the AI summit in the autumn, we want to have discussions with all our international partners about what the rules of the road need to be. The UK Government are absolutely going to be leading on making sure that the facilitation of AI in every sphere of our lives takes place within a framework that provides safety and gives trust to both our citizens and the rest of the world.
Fleur Anderson (Putney) (Lab)
Dr Philippa Whitford (Central Ayrshire) (SNP)
The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)
On 24 May, the United Kingdom co-hosted an international pledging conference for the horn of Africa that helped mobilise nearly £2 billion to help nearly 32 million people across the region.
Fleur Anderson
The east African wet rains and the pledging conference have both come, but the food crisis is worsening. Just three weeks ago, the Government announced a further cut in aid to the region. Local organisations need more funding than most, so will the Minister set targets to increase funding to local organisations for adapting to climate change in the region and to diversify livelihoods to support vulnerable communities?
Mr Mitchell
The hon. Lady is right about the importance of localism and localisation. I should make it clear to her that Britain’s pledge was £143 million—that will have an enormous effect. She should also bear in mind that we have a degree of flex when it comes to humanitarian budgets, and we have announced for next year that Britain—the British taxpayer—will be spending £1,000 million on humanitarian relief.
Dr Whitford
When the UK co-chaired the UN pledging conference, the Minister described the situation as
“one of the most devastating humanitarian crises in the world”,
yet he has cut funding compared with previous years and pledged less than 20% of the contribution that was given by the UK during the 2017 droughts. With over 70 million people now classed as at threat of starvation, is he not rather ashamed of the UK’s meagre response?
Mr Mitchell
If I may say so, the hon. Lady’s response to what I said is not fully comprehensive. We have allocated something like £400 million to east and central Africa, and although it is true that the bilateral spend is slightly below last year’s level, as I said, we do have some flexibility. It is the starting point for our spending this year, and of course, we will keep all these matters very much in our minds.
Vicky Ford (Chelmsford) (Con)
Climate change and conflict are causing untold misery across the horn of Africa and forcing millions of people to leave their homes. Does my right hon. Friend agree that we should be spending more of our overseas aid on stabilising lives in such places as east Africa and less on expensive asylum hotels here in the UK?
Mr Mitchell
My right hon. Friend is right, and she can rest assured that those points are made in discussions within Government. The point I would make is that as a result, the Treasury agreed to provide an extra £2,500 million of support to compensate for that spending. I think that was the right decision, and I strongly support it.
Maggie Throup (Erewash) (Con)
In February, I visited Kenya with World Vision UK and saw first-hand the impact of climate change on drought and hunger. While the £143 million aid package, which the Minister mentioned and which was announced at the UN pledging conference in May, is welcome, what more can the UK Government do to support this crisis-stricken part of the world at this important time?
Mr Mitchell
My hon. Friend is absolutely right in what she says. That is why we have announced that we intend to publish a White Paper setting a road map towards achieving the sustainable development goals by 2030 and making greater progress on tackling those climate change problems. We hope to engage the interest, involvement and support of colleagues on both sides of the House in that White Paper endeavour.
Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)
More than 29 million people across Ethiopia, Kenya, Somalia and South Sudan are now experiencing catastrophic hunger levels following a fifth failed rainy season in a row. It is also the fourth year in a row that this Government have cut aid to those countries. Oxfam has estimated that one person is likely to die of hunger every 28 seconds between now and July. Can the Minister please explain how he is restoring Britain’s leadership in international development while decimating our support to some of the very poorest people on earth?
Mr Mitchell
First, let me say that British leadership has been exercised at the two big conferences that took place in Saudi Arabia and Qatar. British expertise and technical know-how is ensuring greater resilience and adaptation spend to drive up the ability to survive these crises when they take place next. If I may say so, the hon. Member must not diminish the extraordinary support and leadership that Britain is giving across the horn of Africa. The figures we have announced are preliminary figures, as I have said. We will react to the crisis—that is one of the things we are able to do—and those figures take no account of the tremendous support that British taxpayers are giving through the multilateral system.
Jeff Smith (Manchester, Withington) (Lab)
The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)
The Government recognise the challenging debt situation facing many African countries. The UK is working with international partners to address rising debt vulnerabilities.
Jeff Smith
Every dollar spent by low-income countries on servicing unsustainable debt is a dollar not spent on providing basic services and tackling climate change. I know that the Minister wants to make a difference on this, but the status quo clearly is not working. Given that 90% of developing country debt contracts are governed by English law, why will the Government not agree even to consult on legislative opportunities to compel private creditors to take part in debt restructuring, to make them part of the solution, not the problem?
Mr Mitchell
As the hon. Gentleman knows, we are looking at that specific issue. We think there is a case for majority voting when it comes to debt settlements, and we are exploring all that. He is right to emphasise that 15% of low-income countries are already in distress and 45% are at high risk of entering debt distress. Next week, at the Macron summit in Paris, Britain will be driving forward the climate-resilient debt clauses, which our export credit agency, UK Export Finance, was the first to start to put into grants. That will make an enormous difference, and we are pressing for all creditors to offer such clauses in their loans.
Kate Osborne (Jarrow) (Lab)
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (David Rutley)
We share Colombia’s delight for the rescue of the four children in the Amazon. We commend the efforts of all those who took part in the inspiring search and rescue.
During his visit to Colombia last month, my right hon. Friend the Foreign Secretary met President Petro and Foreign Minister Leyva and discussed our ongoing support for the implementation of the 2016 peace agreement in Colombia. Through our conflict, stability and security fund, which has now committed £80 million since 2015, we will continue to support the implementation of the peace agreement and improved stability and security in Colombia.
Kate Osborne
Colombia’s Attorney General Barbosa was appointed under the previous Government, who oversaw numerous human rights scandals, including the killing of protesters by police. Barbosa is now harming President Petro’s “total peace” policy by blocking the lifting of arrest warrants that would enable some leaders to come to the negotiating table. As UN Security Council penholder for the Colombian peace agreement, what technical and financial assistance can the Government provide to ensure that all of Colombia’s institutions are supporting peace?
David Rutley
As I have said, we are working very closely together at the highest level. The Foreign Secretary has met President Petro and the Foreign Minister to push the cause for peace, and I was fortunate to attend the UN Security Council in January. We want to continue to tackle the challenges in Colombia, working with our Colombian counterparts, and we have put serious investment into that cause to back up our penholder relationship.
Kirsten Oswald (East Renfrewshire) (SNP)
The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)
We remain committed to doing what we can to assist Mr Johal. We have raised concerns about his case with the Government of India on over 100 occasions, including his allegations of torture and his right to a fair trial. The case was raised most recently by Lord Ahmad of Wimbledon, who is the FCDO’s Minister of State for south Asia, with Indian External Affairs Minister Jaishankar on 29 May.
Kirsten Oswald
Last week, Scotland’s First Minister, Humza Yousaf, met Jagtar’s brother Gurpreet and pledged to do everything he can to bring Jaggi home. The First Minister is raising his concerns with the UK and Indian Governments, and the Scottish Government stand ready and eager to work with the FCDO to bring about Jagtar’s safe release. What engagement has the FCDO had with the Scottish Government on this, and will the Minister pledge to work with Scottish Government colleagues to bring Jagtar home to Scotland safely and soon?
Anne-Marie Trevelyan
I thank the hon. Lady for demonstrating the Scottish National party’s support for the work the UK Government continue to do in our discussions with the family and when raising this with the Government of India, and we encourage the SNP to continue to have those conversations with us and to support the work we are doing.
Simon Fell (Barrow and Furness) (Con)
Mr Johal is not the only person detained in India who needs the Government’s attention at the moment. Since 2017, a group of human rights defenders known as the BK 16 have been imprisoned. Their only crime has seemingly been to defend the rights and values of some of the poorest and most marginalised people in the country. Father Stan Swamy, aged 84, died in custody with Parkinson’s only a couple of years ago. May I ask what representations the Foreign Office is making on their behalf?
Anne-Marie Trevelyan
As I say, we engage broadly with India on the whole range of human rights matters both to help build capacity and to share expertise in these areas, and where we have concerns, we always raise them directly with the Government of India. Lord Ahmad last raised these human rights issues with the Indian Minister for External Affairs in New Delhi at the end of May.
Jeremy Corbyn (Islington North) (Ind)
The Secretary of State for Foreign, Commonwealth and Development Affairs (James Cleverly)
The UK and Mauritius have held four rounds of constructive negotiations on the exercise of sovereignty over the British Indian Ocean Territory and the Chagos archipelago. Negotiations are ongoing, so we cannot speculate on the possible outcomes or pre-empt their conclusions.
Jeremy Corbyn
I thank the Foreign Secretary for his answer. I would be grateful if he could assure the House that these negotiations are going on in the spirit of the International Court of Justice advisory opinion and the decision of the UN General Assembly in 2019 on the reunification of the Chagos islands with Mauritius. Can he give us some idea of when he expects these negotiations to come to fruition?
James Cleverly
I am not able to give a date or a projected date of when we will conclude these negotiations. We want to ensure that we conclude them successfully. Our shared objective is to ensure the continued effective operation of the joint UK-US defence facility on Diego Garcia, protecting the vital role it plays in both regional and global security.
Henry Smith (Crawley) (Con)
There is absolutely a moral duty for us to allow resettlement of the Chagos island people on the British Indian Ocean Territory, but in those negotiations what discussions have been had with Mauritius with regard to who will be able to resettle the Chagos archipelago? Will it be only Chagos islanders, Mauritians, or even Chinese?
James Cleverly
While the negotiations are between the UK and Mauritius, we are very conscious of the Chagossian communities and will keep them in the forefront of our minds throughout this negotiating process. Our primary objective is to ensure the continued effective operation of our defence facility on Diego Garcia.
Bill Esterson (Sefton Central) (Lab)
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (David Rutley)
The US and UK Governments do more together than any other two Governments in the world. We have a trading relationship worth £280 billion, and last week the Prime Minister was in Washington when he and President Biden signed the Atlantic declaration, a first-of-its-kind economic partnership.
Bill Esterson
The Inflation Reduction Act is attracting investment from the UK to the US, as industry groups across our economy are saying. Does the Minister agree that the refusal to publish an industrial strategy shows there will be no made in Britain plan in response to President Biden’s made in America agenda while this Conservative Government remain in office?
David Rutley
Well, that is an interesting question, to which I say that we have a very clear economic strategy, and the Atlantic declaration is a very important element in strengthening our partnership with the US. The beginning of the negotiations on critical minerals will make sure UK companies are eligible for tax credits under the US Inflation Reduction Act; this is a hugely important and positive step forward.
Mr David Lammy (Tottenham) (Lab)
Our allies in the United States, the European Union, Australia and Germany have all entered the global race to reach net zero and create the jobs of the future with massive public investment, but the Government’s Secretary of State for Energy Security and Net Zero described the United States Inflation Reduction Act as “dangerous” and the Chancellor described it as “distortive” and “not the British way.” Does the Foreign Secretary agree with his colleagues in Cabinet or our allies in the United States? It will be interesting to see whether the Foreign Secretary answers.
David Rutley
We are working incredibly closely with the United States. They are taking their steps forward; we do not want to get involved with the subsidy race, because the UK had a head start of over a decade on green investment. As the right hon. Gentleman knows, as we have been at similar meetings, we are working incredibly closely with the United States and it is a very strong relationship. In my recent visit to the US we highlighted that there is $1 trillion invested in each of our economies; we are going to move forward from that very strong space.
Stewart Malcolm McDonald (Glasgow South) (SNP)
The Secretary of State for Foreign, Commonwealth and Development Affairs (James Cleverly)
I had the pleasure of meeting the Ukrainian Foreign Minister Dmytro Kuleba in Kyiv last week. I reassured him that the UK support for Ukraine and its territorial integrity is unwavering. The Ukrainian Government and people can count on our continued support both in their work on the battlefield and diplomatically, and, through the Ukraine recovery conference, our support in the rebuilding of their country once this war is over.
Stewart Malcolm McDonald
The Secretary of State will know from his many visits and discussions that Iranian drones continue to terrorise the Ukrainian people, not least in the capital city of Kyiv, so it was worrying last week to learn from the US National Security Council that Iran is helping Russia build a drone facility just outside Moscow that could be operational as early as next year. How is the Secretary of State working here in London but also with partners to suffocate that capability as quickly as possible?
James Cleverly
The hon. Gentleman makes a very important point. When we first received credible reports of Iranian support to Russia in its drone attacks on Ukraine we investigated them and subsequently sanctioned entities and individuals involved in that. We are aware of the report he mentioned, and that will of course form part of our thinking on what other action we should take. It is important to remember that the action we have taken thus far is not the limit of our work, and we will continue to choke off the financial supply both to Russia itself and those seeking to arm it in that brutal war against the Ukrainian people.
Mark Eastwood (Dewsbury) (Con)
The Minister of State, Foreign, Commonwealth and Development Office (Anne-Marie Trevelyan)
Sanctions have isolated Russia and Belarus from western financial markets and services, undermining their long-term growth, starving Russia’s military of key western components and technology and restricting Russia’s ability to fight a modern war. The Government remain committed to increasing pressure on Russia and Belarus and have recently introduced further sanctions targeting Putin and Lukashenko’s regimes.
Mark Eastwood
Dewsbury-based Alunet, a supplier of aluminium doors and windows, is being crippled due to unfair competition and sanction circumvention by its Belarus-based former supplier. To help save a £20 million business in my constituency, may I request that my right hon. Friend urgently looks to impose increased tariffs on aluminium products from both Russia and Belarus?
Anne-Marie Trevelyan
The import of aluminium originating from Belarus and Russia attracts an additional duty already of 35 percentage points, which we brought in last year. The import of iron and steel products and of some articles of aluminium from Russia is prohibited. The import of iron and steel products from Belarus is also prohibited. Of course, we keep our sanctions under review, as the Foreign Secretary has said. Indeed, following feedback from my hon. Friend and others, on 20 April, we expanded the list of products covered by the import prohibitions on Russian iron and steel. I am happy to discuss with my hon. Friend and his business what more we can think about doing, working with our colleagues at the Department for Business and Trade.
Sir Chris Bryant (Rhondda) (Lab)
Last year, the Russian Government introduced a new law that requires all businesses, including foreign businesses that have any footprint in the Russian Federation, to assist in the war in Ukraine. That means that any British businesses that are still doing business in Russia are complicit in the war crimes that Russia is perpetrating against the Ukrainian people. Will the Minister make it absolutely clear that all British businesses should completely and utterly desist from business in Russia immediately?
Anne-Marie Trevelyan
One of the extraordinary things we saw only last year when the war broke out was the positive attitude of British businesses and their willingness to take financial pain immediately. They pulled themselves away, not only where we imposed sanctions and prohibitions but beyond that, from Russian markets and activity. We continue to work with businesses, but I take the hon. Gentleman’s point and we will continue enforcement using the tools that we have. We work closely with our business sector, as does the Department for Business and Trade on trading questions, to ensure that that is understood. However, I have always found British businesses to be incredibly positive in stepping beyond what is asked of them in support of Ukraine.
Mark Eastwood (Dewsbury) (Con)
The Secretary of State for Foreign, Commonwealth and Development Affairs (James Cleverly)
Since the last oral questions, we have concluded our successful evacuation operation in Sudan and of course continued to support Ukraine in its fight for freedom. Ministers from the Department have travelled extensively around the world, including my right hon. Friend the Development Minister, who overnight returned from the G20 in India. I visited Latin America and the Caribbean. I have recently returned from meetings at NATO and visited British servicemen and women stationed in Estonia. I have also recently chaired the Foreign Ministers’ meeting of the OECD—the first time that the UK has done that in decades.
Mark Eastwood
Could my right hon. Friend please provide an update on the current political situation in Pakistan?
James Cleverly
Pakistan remains a close and important partner. We have a strong bilateral relationship. When we see political instability and sporadic escalations of violence, it is concerning. We continue to work both directly at political level and through our high commission in the country to seek to de-escalate the tension to ensure that future elections are not marred by the violence that, unfortunately, we have seen recently.
Catherine West (Hornsey and Wood Green) (Lab)
On several occasions, Labour colleagues and I have raised our concerns about the safety of Hongkongers here in the UK. There is still a significant fear felt by the Hong Kong community and a sense that the Chinese Government can act with relative impunity here in the UK. Will the Foreign Secretary commit to the House today to work with colleagues across Government to look at this urgently, as he promised me last year?
James Cleverly
My right hon. Friend the Minister for Security conducted a review of the so-called Chinese police stations in the UK. My Department has engaged with the Chinese Government to ensure that those so-called police stations no longer operate. We released a statement on that last week. The security and safety of people here in the UK remains a Government top priority. We will continue to ensure freedom of speech across this country and the protection of individuals.
Adam Holloway (Gravesham) (Con)
James Cleverly
We continue to work to prevent Afghanistan becoming a future source of terrorist threats here in the UK. We work with our international partners to limit the flow of illegal drugs and illegal migration. We continue to provide lifesaving humanitarian assistance and to work to ensure that our target—that 50% of the beneficiaries are women and girls—is reached. We are on track to reach that, despite the attempt by the Taliban to prevent women and girls from receiving the international support they deserve.
Ian Paisley (North Antrim) (DUP)
The Parliamentary Under-Secretary of State for Foreign, Commonwealth and Development Affairs (Leo Docherty)
I think this is an issue for the Department for Environment, Food and Rural Affairs, but I will look at the issue and write to the hon. Gentleman.
Sir Conor Burns (Bournemouth West) (Con)
Mr Speaker
Order. I have to say this is topical questions and I have to get everybody else in. It is a very important question and I am sure the Minister has got it.
The Minister of State, Foreign, Commonwealth and Development Office (Mr Andrew Mitchell)
Thank you, Mr Speaker. May I add my congratulations to my right hon. Friend on his honour? The UK is appalled by Uganda’s Anti-Homosexuality Act, in particular the introduction of the death penalty for so-called aggressive homosexuality. We have expressed our strong opposition to the legislation, at all levels, with the Government of Uganda. The criminalisation of LGBT+ persons threatens minority rights, and risks persecution and discrimination of all people across Uganda.
Kerry McCarthy (Bristol East) (Lab)
James Cleverly
I have not had a chance to see the detail of the report the hon. Member refers to. I will ensure that my Department looks at that. Whether it is the Foreign, Commonwealth and Development Office or the Home Office, we will investigate that.
Theo Clarke (Stafford) (Con)
I welcome that the UK has been a long-standing champion of the sustainable development goals, so may I ask my right hon. Friend the Foreign Secretary to commit to publishing another voluntary national review of our progress towards the SDGs, and will he attend the UN high level political forum on SDGs next month?
Mr Mitchell
On my hon. Friend’s last point, I think at least two Ministers will be at that forum to represent our country. She asked about the domestic analysis of the SDGs. There was a voluntary national review in 2019, conducted by our former colleague Rory Stewart. He said that it was a work in progress and we are doing quite well. On the wider SDG point, I hope that the whole House will engage with the White Paper, which can help to inject British leadership to drive it forward.
Neale Hanvey (Kirkcaldy and Cowdenbeath) (Alba)
James Cleverly
As I said in response to a similar question, we work closely with the Home Office. The Security Minister has conducted a review on this issue, and I have made it very clear to the Chinese Government that any such activities are completely unacceptable in the UK. They have committed that they will not continue.
Theresa Villiers (Chipping Barnet) (Con)
In its 2030 road map for Israel-UK bilateral relations, the Government committed to working closely with Israel on the threat from Iran. I urge the Secretary of State to do that. Will that include proscription of the Islamic Revolutionary Guard Corps?
James Cleverly
I have spoken regularly about the process by which proscriptions are made. We do not routinely speculate on future proscriptions. Our relationship with Israel is key. I met the Israeli Foreign Minister and signed a UK-Israeli bilateral road map on 21 March. We continue to hold their safety and security as a priority in our bilateral relationship.
Mr Speaker
I am disappointed. I am sure that next time, the hon. Member for Kilmarnock and Loudoun (Alan Brown) will put on a tie.
Alan Brown (Kilmarnock and Loudoun) (SNP)
James Cleverly
The UK’s position on settlements is of long standing. We continue to call on the Israeli Government and the Palestinian Authority to work towards a sustainable two-state solution. We will always endeavour to make that a reality. That remains the foundation stone of the UK’s foreign policy in the region.
Tim Loughton (East Worthing and Shoreham) (Con)
It is now six months since the illegal blockade of the Lachin corridor—the vital lifeline between Nagorno-Karabakh and Armenia. Since then, the Azerbaijan President has made increasingly bellicose threats towards Armenian people. Can the Under-Secretary of State, who recently returned from Armenia, update us on what we are doing to bring pressure to end that humanitarian disaster?
Leo Docherty
We support the Euro-Atlantic efforts to bring the two sides together. We have urged our interlocutors in both Armenia and Azerbaijan to get back around the table. I look forward to updating my hon. Friend in person.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
James Cleverly
Our bilateral relationship with Türkiye is important. It is a NATO ally and is heavily involved in the facilitation of the Black sea grain initiative, which is helping to feed starving people around the world. I note the hon. Gentleman’s points about the election, which we will look into, but ultimately it is in our bilateral and indeed regional interests to maintain a strong working relationship with Türkiye, and that will continue to be the case.
Wendy Morton (Aldridge-Brownhills) (Con)
Education can make a real difference to the empowerment of women and girls, and a positive difference to communities—something highlighted in a recent impact report from Five Talents, which focuses on setting up savings groups to help communities. Does my right hon. Friend agree that those types of groups can play a vital role in strengthening the resilience of communities in a sustainable way?
Deidre Brock (Edinburgh North and Leith) (SNP)
Mr Mitchell
The hon. Lady raises an extremely important matter. She may rest assured that the Government are fully engaged, through multilateral channels, in driving that forward.
Greg Smith (Buckingham) (Con)
In early June, the Islamic Revolutionary Guard Corps unveiled Iran’s first hypersonic Mach-15 missile, which was widely celebrated in Tehran. What has my right hon. Friend done to challenge the dangerous and continued militarisation in Iran?
James Cleverly
We continue to work closely with our international colleagues, particularly the members of the E3, the United States of America and our partners in the region, to dissuade Iran from its increasingly militaristic presence. We continue to maintain our policy that it should never be a nuclear-weapons state, and we also keep a close eye on other weapons technology development.
Stephen Farry (North Down) (Alliance)
The Windsor framework is a welcome settlement but may I seek an assurance from the Government that they will work closely with the Northern Ireland business community over the detailed operational guidance, such as with the red and green lanes?
Leo Docherty
I am pleased to report that we have issued guidance. We will continue to work with businesses as the green lane rolls out between September this year and September next.
Jonathan Gullis (Stoke-on-Trent North) (Con)
I am proud to represent many Pakistani-British dual nationals in Stoke-on-Trent North, Kidsgrove and Talke, who are rightly concerned about the human rights violations that are taking place, as well as the threats they fear they will face if they return to see family members in Pakistan. What is the Foreign Office doing to ensure those dual nationals will be protected and prevented from ever being detained?
James Cleverly
As I say, we have a strong bilateral relationship with Pakistan. We have access at the most senior levels within Government, and we make it absolutely clear that those British nationals are always at the forefront of our minds. Their protection and security is always a priority for the UK Government. That is universally the case, but that is also something that we make clear to our Pakistani friends.
Wayne David (Caerphilly) (Lab)
We are all concerned about Russian attempts to destabilise the western Balkans, but does the Secretary of State agree that what is required now is maximum co-ordination and co-operation between ourselves, the United States and the European Union?
Leo Docherty
The hon. Gentleman is absolutely right. We are urging Kosovo and Serbia to de-escalate and return to dialogue, and I am sure the Foreign Secretary will make that point when he sees the Serbian Prime Minister later today.
Vicky Ford (Chelmsford) (Con)
The blowing of the Nova Kakhovka dam is the biggest act of ecocide in generations. For the record, will my right hon. Friend the Foreign Secretary confirm again that the UK will leave no stone unturned in holding the Russian regime to account for the damage that has been caused by their war?
James Cleverly
My right hon. Friend is right about the huge environmental damage that has been caused by the breaking of the dam. Although I am sure Members are already conscious of this, it is worth reminding the House that incidents such as this and the damage to other civilian infrastructure across Ukraine is happening only because of Russia’s war and its illegitimate invasion of Ukraine. The best thing that Russia can do to protect the environment and civilian infrastructure, and to end the loss of life, is to withdraw its troops immediately.
Hilary Benn (Leeds Central) (Lab)
The UN high seas treaty is a landmark for conservation. Will the Foreign Secretary assure the House that the Government will look to adopt and ratify it as quickly as possible?
Mr Mitchell
Unless I am advised otherwise, the answer is an emphatic yes.
Henry Smith (Crawley) (Con)
What assessment and representations have the Government made on the decision by the Arab League to readmit the Assad regime of Syria back into the organisation?
James Cleverly
I had conversations with my interlocutors, the members of the Arab League, prior to that decision. I expressed the UK’s concerns about the speed with which that happened. We continue to liaise closely with them on the issue. The UK’s position on Syria has not changed.
Dame Nia Griffith (Llanelli) (Lab)
Consistency in applying sanctions across Government is crucial to maximise the impact on Russia, and the Secretary of State’s leadership in this respect is vital. Is he aware that the Home Office is considering requisitioning a hotel whose multiple shareholders include those who have invested from an address in Russia? Will he raise this matter with Home Office Ministers, to ensure taxpayers’ money will not be used to pay dividends to Russia?
James Cleverly
That question would probably be aimed more accurately at the Home Office, but I will of course raise it with colleagues across Government.
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
Last week’s revelation from Canada’s national security adviser that the republic of India was among the most active sources of foreign interference in that country—along with China, Russia and Iran—is deeply concerning. Does the Minister know whether the Department has taken soundings from our treaty ally and fellow Five Eyes member regarding India’s activities abroad, particularly its surveillance of not only Sikh activists but Members of this House in relation to the ongoing detention of my constituent Jagtar Singh Johal?
James Cleverly
As the hon. Gentleman knows, I have met his constituent’s family, and we continue to raise this case with the Indian authorities. I regularly meet my Canadian counterpart, who has not raised directly with me the specific concerns raised by the hon. Gentleman.
Mike Amesbury (Weaver Vale) (Lab)
Last year seven-year-old Ibrahim was abducted by his estranged father from a school in my constituency. His mother is naturally distraught. Will the Foreign Secretary, or another Minister, meet me to discuss this matter and help to move things forward? Ibrahim was taken to Saudi Arabia.
James Cleverly
I will ensure that the hon. Gentleman has access to either a Minister or the most appropriate officials in the consular department.
Patrick Grady (Glasgow North) (SNP)
It is nearly seven years since the people of Glasgow North voted by 78% to remain in the European Union. Can the Foreign Secretary give just one example from that whole period of our United Kingdom’s diplomatic or international reputation being enhanced as a result of Brexit?
James Cleverly
I am sure you will tell me off, Mr Speaker, because I have more than one such example and I know that time is short, but I will keep talking until you do tell me off. Our ability to move quickly in respect of vaccines—[Interruption.] SNP Members may not like it, but nevertheless our ability to move quickly at that time meant that we were one of the first countries in the world to come out of lockdown. Our ability—
Ian Paisley
Yes, Mr Speaker. You will know that the issue of the Windsor framework falls within the remit of the Foreign, Commonwealth and Development Office. It is a joke to be told by an FCDO Minister that he will take this matter up with the Department for Environment, Food and Rural Affairs, because DEFRA has no role in negotiating veterinary medicines. How can I obtain an answer to the question that I posed today, Mr Speaker?
James Cleverly
As I think the hon. Gentleman knows, we will inevitably liaise closely with those in DEFRA on the practicalities of this, because they are the experts on the subject matter. However, ownership of the policy does lie with the Foreign, Commonwealth and Development Office. We will continue to negotiate with the European Union on all files where there are still outstanding issues, and I assure the hon. Gentleman that this will be one of the matters I will raise during my imminent conversations with Maroš Šefčovič.
Mortgage Market
(11 months ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
Mr Pat McFadden (Wolverhampton South East) (Lab)
(Urgent Question): To ask the Chancellor of the Exchequer what assessment he has made of developments in the mortgage market in recent days.
The Economic Secretary to the Treasury (Andrew Griffith)
The Government recognise the anxiety that people feel about mortgages, and are using the tools at their disposal to limit the rise in rates. We are not an outlier in this regard: as Opposition Members will know, central banks around the world are raising interest rates to combat high inflation driven by the pandemic and Putin's war.
Given that inflation is the No. 1 enemy, we are focused on delivering the Prime Minister’s pledge to halve it this year. Nevertheless, I know that mortgage rates and the availability of mortgages are a concern right now. Mortgage arrears and repossessions remain below pre-pandemic levels, but if a borrower falls into financial difficulty, guidance from the Financial Conduct Authority requires firms to offer tailored support and to deal with customers fairly. The Government also offer loans to help eligible homeowners to cover the interest on their mortgages through the support for mortgage interest scheme from the Department for Work and Pensions, and make it clear that repossession must be a last resort for lenders through the pre-action protocol.
As long as economic challenges exist, we will continue to stand by families. To date, Government support to help households with rising bills in 2022-23 and 2023-24 totals £94 billion. That is equivalent to an average of £3,300 per household, as well as a record 9.7% increase in the national living wage, which I am sure that the Opposition support. While we are taking action to halve inflation and help families, the Opposition would make it all worse. The Institute for Fiscal Studies has been clear that Labour’s £28 billion a year borrowing plan would risk even higher interest rates and higher inflation, and even the shadow Chancellor has admitted that its position is reckless. This is a Government on the side of the British people and that is why, as we shelter people from rising prices, our task remains getting inflation down and getting the economy growing and debt falling.
Mr McFadden
The UK’s homeowners are under increasing financial stress, with two-year fixed rates at 5.86%—up by over 0.5% in just a month—products being withdrawn, and the Resolution Foundation saying that the average mortgage holder is facing an increase in payments of £2,300 this year. This is not just about homeowners; it is about renters too, because the landlords they rent from are also facing increased borrowing costs and that in turn is forcing up rents.
All this pressure was multiplied by the irresponsible decision of the Conservative Government last year to use the country for a giant economic experiment that put booster rockets under mortgage rates. While they enacted their teenage right-wing pamphlet fantasies, using the country like lab rats, homeowners and renters were left to pay the price. Since then, because inflation in the UK has been higher for longer than in many similar economies, the expectation is that interest rates will be higher for longer too, and that is what is driving up mortgage rates and piling on the pressure.
While the Ministers responsible rack up speaking fees around the world, the British public are still paying the price for the economic irresponsibility and recklessness of the Conservative party. Will the Economic Secretary now apologise for the Conservative mini-Budget last September and the lasting effect it has had on homeowners and renters around the country? Will the Government take responsibility for the decisions that they made and the consequences that followed, or is it, as they always claim, someone else’s fault? Now, instead of trying to help hard-pressed homeowners, the Conservatives are fighting like rats in a sack over an honours list and a disgraced Prime Minister. It is clear that they cannot focus on the problems of the country; the only way to do that is to change the Government and let them fight it out in opposition.
Andrew Griffith
We enjoy, as ever, the hon. Member’s rhetoric, but he did not address what his plan would be. He also did not acknowledge that this has an international factor. Perhaps he or one of his colleagues would like to explain why we have seen similar interest rate increases in the USA, where the 30-year rate—the market is somewhat different there—has increased from 4% at the start of 2022 to more than 6% today.
Mr Speaker
In fairness, the right hon. Member for Wolverhampton South East (Mr McFadden) is right honourable. But there we are. I call the Chair of the Select Committee.
Harriett Baldwin (West Worcestershire) (Con)
The Government have given the Bank of England the task of targeting inflation at 2%, and our Committee has regularly held the Bank of England Governor’s feet to the fire over its performance on that inflation target. Mortgage rates have been increasing because inflation has been higher for longer than expected. In fact, the Governor said in his evidence to our Committee last November that from now on, our grumpy constituents who are having to pay higher mortgage rates should complain to him rather than to the Government. Will the Economic Secretary endorse the Treasury Committee’s campaign to ask the banks why, instead of just raising mortgage rates on the day the Bank of England raises rates, they do not also increase the savings rates that are paid to our constituents?
Andrew Griffith
The independent Governor of the Bank of England is, of course, right. Today we have seen strong print on wage growth, in part due to the 9.7% increase in the national living wage, on which I hope Members will join me in congratulating the Government. My hon. Friend is, as ever, right to highlight the impact on savers. It is important to me and to this Government that savers get a fair deal, which is one of the reasons why National Savings and Investments continues to offer savers an attractive range of products in the market.
Stewart Hosie (Dundee East) (SNP)
Millions of households are now struggling as their fixed-rate mortgages end and they are moved to much higher variable rates. We also know that only a third of the households that are expected to move from cheap fixed-rate deals have done so, so there is a great deal of pain to go, with 116,000 households a month coming off fixed-rate deals.
Some in the City are suggesting that what we are seeing is a complete reset of the mortgage market, which would imply that there should be a complete reset of the Government’s approach. Given that changes to mortgage rates are driven by changes to the base rate, and that the base rate is the central bank’s primary tool to meet the 2% inflation target handed to it by the Government, what discussions have the Government had with the Governor of the central bank about the effectiveness, or the appropriateness, of an inflation target being the primary target that the central bank works towards?
Andrew Griffith
At his spring statement, the Chancellor was very clear about the Bank of England’s continued remit, beyond which it remains operationally independent. It has been a long-standing feature of this House that Treasury Ministers do not tell the Bank of England how to run monetary policy. Three of the Prime Minister’s five priorities are getting the economy growing, reducing debt and halving inflation.
Sir Simon Clarke (Middlesbrough South and East Cleveland) (Con)
That is very kind, Mr Speaker.
I pay tribute to the right hon. Member for Dundee East (Stewart Hosie) for the previous question, which was extremely interesting and perceptive. Of course, it should escape nobody’s attention that, today, gilt yields are higher than they were when my right hon. Friend the Member for South West Norfolk (Elizabeth Truss) was forced from office in the autumn. I agree entirely with the Minister that it is important to avoid the inflaming of inflation that the Opposition would do, but does he also agree that ultra-low interest rates cannot be seen as the sole benchmark of economic success and that we ought to aspire to higher trend growth as much as low interest rates?
Andrew Griffith
I add my congratulations to my right hon. Friend, who is right that a stable fiscal environment and the lowest possible interest rates are two ingredients and prerequisites for success, but so, too, is a supply-side economy that works to support growth and having the most competitive fiscal environment, which is one reason why the Chancellor has asked the Chief Secretary to the Treasury to look at public sector productivity, with a view to achieving that.
Dame Angela Eagle (Wallasey) (Lab)
To hear the Minister talk about a stable economic environment after the disaster of the mini-Budget and the catastrophe it caused in the bond markets takes some cheek. I commend his cheek, because it is unbelievably cheeky.
Does the Minister acknowledge that households have shelled out over £1 billion in extra mortgage payments since the Government’s disastrous mini-Budget? Does he also realise it is estimated that, in the next two years, £9 billion will have to be shelled out by those with mortgages because of his party’s economic mismanagement? Is he proud of that record?
Andrew Griffith
It may cause the hon. Lady some distress, but I am enormously proud of the £94 billion the Government have provided to support households in these difficult times. I am proud, too, of the Government’s response to the covid pandemic and to Ukraine—would it ill behove any Opposition seeking office to mention those things a little more when talking about the economy? Above all else, I am enormously proud that when any Conservative Government leave office they do not leave notes behind saying, “Dear Chief Secretary, I am afraid to tell you that there is no money left.”
Sir Desmond Swayne (New Forest West) (Con)
Inevitably, the level of Government borrowing itself is a determinant of interest rates, isn’t it?
Andrew Griffith
My right hon. Friend—I congratulate him as well—is right to say that one factor is the level of Government borrowing. This Government have had to borrow unprecedented amounts due to the covid pandemic and the war in Ukraine, and to provide households with that support of about £3,300 over this year and last. That is one reason why one of our key priorities is to reduce the level of debt.
Rushanara Ali (Bethnal Green and Bow) (Lab)
The Minister likes to point out, as he has done again, that this is about international factors and covid—there are lots of other reasons given. However, the Government fail to mention the mini-Budget fiasco caused by the previous Chancellor and the former Prime Minister, with its direct consequence of mortgage increases, with millions of people suffering. Why does the Economic Secretary not come clean on this, as the former Prime Minister and former Chancellor, who presided over that chaos, have done? It is not time that he stopped whitewashing and faced the reality of what he and his Government are responsible for, which is causing misery to people’s lives?
Andrew Griffith
The hon. Lady needs to look at the facts and the numbers. Despite moving in alignment with other international markets—and interest rates have increased over time—interest rates even today for mortgage holders are lower than those reached in October last year. So we are dealing with a macroeconomic international trend, which we are seeing across all western economies. We are moving in alignment with them, but this Government will always prioritise support for households, which is one reason why we have come forward with such significant economic packages in the past two years.
James Sunderland (Bracknell) (Con)
I would love to be able to pass on some good news to my constituents about their households bills. We are seeing wholesale energy costs fall but they are not being translated to the consumer. So how long after inflation falls will we see interest rates come down?
Andrew Griffith
My hon. Friend is a diligent champion for his constituents in Bracknell and I am sure it will not be too long before he has good news to talk about on prices that consumers face. We have seen the cost of fuel coming down and as we achieve the Prime Minister’s objective of halving inflation this year, so some of the cost of living pressures that his constituents face will abate. In the meantime, he should know that this Government are on the side of households and we have been willing to support them to the tune of about £3,300 every year. I wish his constituents all the best.
Emma Hardy (Kingston upon Hull West and Hessle) (Lab)
Interest rates are up and mortgage deals are being pulled left, right and centre, yet the Minister has had to be dragged here to answer this urgent question. Will the Government please refocus on this mortgage crisis, rather than on the latest round of Conservative infighting, and give the public the reassurance they desperately need?
Andrew Griffith
I can give the hon. Lady the reassurance that the wellbeing of the nation’s mortgage holders, savers, pensioners and investors is the whole of my focus, as it is of all of my colleagues on the Treasury Bench. As Members on both side of the House will know, it is a feature of the UK mortgage market that from time to time mortgage deals are withdrawn from the market and repriced. As of now, there are more than 5,000 mortgage offers from different suppliers, at different tenures, in the market. It remains my focus to ensure that those who seek to buy a first home or to remortgage their home have the most competitive offers available.
Miriam Cates (Penistone and Stocksbridge) (Con)
One of the biggest challenges facing our country is the inability of young people to afford to buy a home because of inflated house prices. Although recent interest rate rises have compounded the problem, is not the real problem that interest rates were far too low for far too long, turning savers away from saving and into property investment instead, and thus pushing up the price of property as an asset? Does my hon. Friend agree that this is not an easy problem to solve, but that one possible answer would be for local authorities to build homes that can be bought at a reduced rate, not by investors, but by local young people?
Andrew Griffith
I thank my hon. Friend who does a wonderful job of advocacy for her constituents, including those who seek to buy their first home. This Government, through a variety of measures to support householders in general, have helped more than 800,000 people, of all types, to purchase a property since 2010. That represents a city of approximately the size of Liverpool, such is the scale of the endeavours. It is of course important that we get the nation building, and part of that is about providing the economic stability whereby people are willing to make investments for the longer term.
Sarah Olney (Richmond Park) (LD)
The Government’s economic mismanagement has caused low growth, soaring food bills and record mortgage costs. Millions of hard-working people are being penalised for getting a foot on the housing ladder, in places such as Mid Bedfordshire, the area with the third highest share of mortgage holders in the country. The Minister mentioned the support from the mortgage interest scheme. [Interruption.] In this time of hard-pressed families, will his Government commit to converting that from a loan to a grant?
Andrew Griffith
I did not hear fully what the Member for Richmond Park aligned with Mid Bedfordshire was saying, but I am sure that residents in Mid Bedfordshire have welcomed the stability that we have brought to the economy and the fact that we have supported householders through the past two difficult years, making tough decisions and supporting households to the tune of about £3,300. They will also have welcomed the fact that we have the sort of responsible stewardship of the economy that means that we are not a Government who have historically left power with unemployment higher than when we arrived, leaving notes saying, “There is no money left.”
Mr Louie French (Old Bexley and Sidcup) (Con)
My hon. Friend is correct to highlight that we are facing international challenges and that monetary policy is the responsibility of the independent Bank of England. However, does he agree that Labour’s £90 billion-worth of unfunded spending commitments would make inflation and the cost of borrowing even worse?
Andrew Griffith
I thank my hon. Friend the Member for wonderful Old Bexley and Sidcup (Mr French) for that. I recall that last October Opposition Members were never shy of citing the Institute for Fiscal Studies, but they do so much less today, because the IFS has said that Labour’s £28 billion borrowing plan would cause both interest rates and inflation to rise. I do not see how that would help the nation’s mortgage holders.
Nick Smith (Blaenau Gwent) (Lab)
The value of mortgage arrears has risen by a troubling 10% in the past quarter, so what is the Minister’s assessment of the likely level of arrears in the next quarter?
Andrew Griffith
I talked about the focus on the level of mortgage arrears, which are at an historic level. My Treasury colleagues and I are tracking them extremely closely. We have talked to all the lenders and the Chancellor has brought them all in to ensure that they have responsible policies in place so that repossessions are a last resort.
Nick Fletcher (Don Valley) (Con)
Does the Minister agree that although the Opposition like to blame the Government for this situation, the real problem lies with covid and the Bank of England? The Bank kept on putting money into the economy when the world had stopped producing everything, which meant that there was more money and fewer goods, and so inflation was obviously going to rise. Does he also agree that even though we are in this situation where the Bank is trying to do what it is doing and the Government are doing everything they can, continually putting up interest rates puts people in a really difficult position? Does he believe that we should see what the interest rate increases have done so far in the economy before the Bank of England keeps putting them up month on month?
Andrew Griffith
My hon. Friend speaks wisely and regularly on behalf of his constituents. I will not follow him quite so far as to comment on what the Bank of England should do next.
Just in response to the previous question, Mr Speaker, the level of arrears in residential mortgages, as reported by the FCA, was 0.8% compared with 3.3% back in 2009.
Ben Lake (Ceredigion) (PC)
The Resolution Foundation has estimated that around 1.6 million households will see their fixed-rate deals come to a conclusion before the first quarter of 2024 and, therefore, will obviously feel the impact of increased rates. What is the Treasury’s assessment of the impact that this hit to households’ disposable incomes will have on the wider economy?
Andrew Griffith
We all want interest rates to fall as rapidly as possible. The Bank of England needs to conduct its monetary policy against the target that the Chancellor has set. The Government need to do everything we can to try to reduce the level of debt by controlling our spending, even when that creates difficult decisions for us to make. We will do that so that the day when interest rates fall comes more quickly. In the meantime, this Government are trying to shield households from the pressures of the cost of living, which is why we have deployed that £94 billion this year and last.
Andrew Jones (Harrogate and Knaresborough) (Con)
Does my hon. Friend see any consistency in the Opposition’s analysis that suggests that the primary cause for interest rate rises is unfunded borrowing, while making significant unfunded borrowing pledges themselves? Will he continue his focus on fiscal discipline and ensure that Government support is targeted at those who need it most in this period of astonishing international instability?
Andrew Griffith
My hon. Friend is absolutely right: the last thing that the economy needs at the moment is any party coming forward with more unfunded spending cuts. It is why the Institute for Fiscal Studies has raised concerns about an increase in interest rates and inflation if Labour were to come to power and spend an additional £28 billion, which I believe even the shadow Chancellor herself has confessed would be reckless.
Janet Daby (Lewisham East) (Lab)
When would the Minister say the Tory party gave up being the party of home ownership? Was it when it crashed the economy last autumn, or was it when it scrapped house building targets?
Andrew Griffith
The hon. Lady is, I am afraid, completely incorrect. The Conservative party is absolutely on the side of home ownership. It is why we have always supported the right to buy, in the face of opposition not just from the Labour party but from Labour-controlled local councils. It is also why we continue to have a wide range of schemes in the market to help first-time buyers.
Liz Kendall (Leicester West) (Lab)
Santander is the latest major bank to temporarily pull its mortgage deals for new borrowers, just days after HSBC did the same. The Minister shrugs his shoulders as if to say that there is nothing to see here, but is it not the truth that this degree of turbulence is not normal, that inflation is significantly worse here than in Europe and the United States, and that ordinary people across the country will look at his denials today and wonder what planet he is living on?
Andrew Griffith
I honestly think that contribution from the hon. Member is unworthy. I would not go so far as to ask her to withdraw it, but if she looks at my comments she will see that I absolutely understand the anxiety that people have about their mortgages. It is a very significant part of people’s household finances. That is why we are using all the tools at our disposal: both providing public spending to protect and shield households at this difficult time, and making the tough decisions to get the economy growing again and to keep debt under control, which is the action that will result in interest rates falling sooner.
Rachel Hopkins (Luton South) (Lab)
People from Luton have moved into Mid Bedfordshire to get on to the housing ladder or to raise their families. [Interruption.] It is true. Due to this Conservative Government’s economic failure, they are now facing soaring mortgage repayments, and we are even seeing banks withdrawing mortgage deals for new borrowers. How can voters trust the Government and the Conservatives to address the mortgage crisis when they are the ones who caused it?
Andrew Griffith
I am deeply intrigued by the concept that the hon. Lady’s constituents have hitherto been moving to the neighbouring Conservative-held seat of Mid Bedfordshire. Perhaps they recognise the better economic potential—the better opportunity to bring down rates as a result of our making the tough choices. Perhaps they welcome the sheer amount of support that we have provided for homebuyers. I wish her constituents well and hope that those who have moved to Mid Bedfordshire enjoy their next Conservative Member of Parliament.
Clive Efford (Eltham) (Lab)
The Minister claims that the current economic climate is down to the world economic situation, but in the next breath he claims that if, at some unspecified date in the future, things get better, that would be down to the Government. Over the recent period, mortgage borrowers have contributed an extra £1 billion in interest rates. Over the next couple of years, they are predicted to contribute £9 billion. The previous Prime Minister has apologised for her contribution to that, so why will he not do the same?
Andrew Griffith
In fairness, it is absolutely the case that these are largely international factors. The job of the Government is to control the variables within their control. The primary thing that they can do is not to come forward with greater unfunded spending promises as that would put more pressure on the public purse and would lead to interest rates and inflation being higher for longer. That is what is within our controllable domain and that is what we are focused on. I am not worried about where the credit accrues or otherwise; what I am worried about is trying to reduce interest rates for ordinary people at the earliest opportunity.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
The Minister talks about Government support and bandies about some big numbers, but does he understand that the effect of that for people is like taking a watering can to the economic bin fire that his Government set alight? Does the Minister have the humility to apologise right now to my constituents who are struggling? The mortgage rate rises might be the straw that breaks their backs—some are already broken—following as they do on the Government’s endeavours in terms of the mini-Budget and Brexit, which have fuelled this economic crisis.
Andrew Griffith
I thank the hon. Member for his question. It must have been quite hard to get through all those points without once mentioning the fact that this has an international dimension. There is a war on European soil in Ukraine, and we have just come through an unprecedented global pandemic. He simply tries to reduce this to whatever is his party’s particular topic of the day. That is not worthy of him when we are trying to have a proper economic debate.
Tonia Antoniazzi (Gower) (Lab)
The Minister claims to be shielding families. He evidently is not going to say sorry. When everybody in this House is supporting their constituents, we need to know what assessment the Department has made of the number of people actually affected by recent increases in mortgage rates.
Andrew Griffith
I thank the hon. Lady for her question. Like others, the FCA has talked about the number of people in any one year whose mortgages are repriced. We do not know what the price of those will be. It seems that around 1 million to 1.5 million people are affected, so a significant number, as my hon. Friend the Member for Bracknell (James Sunderland) mentioned. There are also many savers in society. Rather than looking at what is happening, what we are doing to help is making those difficult decisions. We are not unleashing unfunded, uncosted spending plans on the public purse and we are trying to get through this to help people get to a world where inflation is falling, the cost of living pressures on them are reducing and we can get the economy growing again, which will provide good employment opportunities for her constituents.
Claire Hanna (Belfast South) (SDLP)
I wrote to the Minister earlier this week about the continuing problem of mortgage prisoners, following a comment from the Treasury that it is open to proportionate solutions for those frozen in that position after their mortgage lenders were sold from 2008. Recent reports state that the Government made a profit of £2.4 billion from selling on those mortgages. Will the Minister work with me, and with advocates for the tens of thousands of people trapped in those precarious financial circumstances, to find those proportionate solutions?
Andrew Griffith
The hon. Lady raises the plight of those who have been unable to access even the mortgages at elevated levels that we have been talking about here. I understand the problem; it is something I have given significant time to with my officials and I have read the recent work conducted by the London School of Economics. I hope that, in that spirit, she will also recognise that it is a complex issue and that within that overall collective there are many different individual fact patterns. While I am open to finding solutions, I hope she will recognise that it is not easy and there is no one-size-fits-all answer.
Catherine West (Hornsey and Wood Green) (Lab)
The Minister says there are 1,100,000 people affected by the mortgage market chaos inspired by the Truss-Kwarteng abracadabra magic last autumn. How many renters are affected? There is a renting crisis in my constituency and people simply cannot afford an overnight 20% increase in their rent.
Andrew Griffith
I do not have any figures for rental, but the rental market is something we look at closely and we will keep an eye on what happens to those buy-to-let renters. My right hon. Friend the Secretary of State for Levelling Up, Housing and Communities has brought a significant set of reforms before this House to help renters. I come back to the point that, however popular or unpopular it may be with the Opposition, the best way to manage this situation is to be prudent with the nation’s finances, to get the debt burden falling and to give the markets confidence so that interest rates fall as quickly as possible. I ask all colleagues to work with us on that. The last thing we should be doing is putting out the Opposition’s £28 billion a year of unfunded promises, which will spook the markets and lead to the sorts of rates that none of us wishes to see.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
Shockingly, new data this morning reveals that the value of mortgage arrears has risen by 10% on the quarter—the highest and fastest increase in more than a decade. Many of my constituents are struggling to pay their mortgages. Unfortunately, they are paying the price for the Conservative Government’s economic failures, because a typical household’s mortgage payments are now three times greater than they were just two years ago. What conversations and what meetings have the Minister and the Chancellor had with lenders, and what action will they take to provide forbearance for my constituents?
Andrew Griffith
I should be grateful if the hon. Gentleman would write to me with those statistics. The statistics I quoted earlier are that the level of mortgage arrears reported by the Financial Conduct Authority for the period up to the end of 2022 was 0.81%. That is a record low in recent memory, significantly lower than before the pandemic and much lower than it was in 2009. I am very happy to engage with him about the level of mortgage arrears. I engage with mortgage lenders all the time, as does the Chancellor, and we want them to have the right degree of forbearance for families who are struggling.
Marsha De Cordova (Battersea) (Lab)
This Tory mortgage crisis is affecting my constituents. In London, mortgage costs are set to increase by more than £1.8 billion, people face the financial strain of high interest rates and incomes are not keeping up with those costs. When will the Minister finally get real, understand the impact of the crisis that his Government created and apologise to our constituents? What reassurances can he give to my constituents who will be facing remortgage costs?
Andrew Griffith
I can give a number of assurances to the hon. Lady’s constituents. I imagine that Battersea is a very cosmopolitan place, so as people travel around the world they will understand that western economies across the world are facing exactly the same impact on the cost of living and on interest rates. She talked about £1.8 billion as a very large number; indeed it is, and we share the concern of those with mortgages. However, I put it to her that £94 billion is also a very big number, and that is the amount of household support that we are providing during this cost of living crisis.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
Earlier this year we saw the collapse of Silicon Valley Bank and Credit Suisse. What assessment has the Treasury undertaken of the general resilience of UK financial institutions, especially in a context where rising mortgage costs might lead to a rapid increase in household repossessions?
Andrew Griffith
My Treasury colleagues and I liaise closely with the Bank of England and the Prudential Regulation Authority, whose job it is to assure us of the soundness and resilience of banks. The Governor has talked about how the UK financial system is safe, secure and soundly capitalised, and that remains my belief.
Rachael Maskell (York Central) (Lab/Co-op)
York is a low-wage economy, yet we have extortionate house prices. Last year, housing costs went up by 23.1% in York—the highest rise in the country. My constituents are already mortgaged to the hilt and cannot afford more. What protections will the Minister put in place if mortgage rates rise further, as they are predicted to do? My constituents simply cannot afford their mortgages and they cannot afford this Government.
Andrew Griffith
If York is a low-wage economy, the hon. Lady’s constituents will be benefiting enormously from the unprecedented 9.7% increase in the national living wage. The measures we are putting—[Interruption.] Perhaps she does not like the 9.7% increase in the national living wage that this Government came forward with. We are putting measures in place with lenders, including forbearance, and working with the Department for Work and Pensions on mortgage interest support and to ensure that families have access to the support they need.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
The typical household’s mortgage payments have risen threefold in the last two years, yet in the north-east the typical wage packet is lower than when the Conservatives came to power 13 years ago. The Minister refuses to take any responsibility for the economic misery his Government are inflicting, despite having flagrantly and blatantly crashed the economy less than a year ago. Will he tell my constituents why they should carry on paying the price of Conservatism?
Andrew Griffith
Once again, we have a contribution from the hon. Lady that completely ignores the fact of the global pandemic, the £400 billion of support we have provided and, although I believe she is highly literate in these matters, the fact that interest rates are rising across the western world.
Patricia Gibson (North Ayrshire and Arran) (SNP)
In the first three months of this year, repossessions increased by 27% on the same period last year, and the latest estimates show that 2.5 million customers will need to renegotiate their mortgages over the next two years, with their payments increasing by £9 billion. Is the Minister really telling us that he is satisfied and that he has no reservations about the way that his Government have mismanaged the economy, with the consequent economic turbulence and soaring interest rates that are literally pricing people out of their homes?
Andrew Griffith
This Government are focused—and this is what our constituents want to hear—on halving inflation, growing the economy and reducing the debt burden. From today forwards, that is the action we can take that will see interest rates falling sooner, reduce inflation and get us back to a position of economic growth. I am sure the hon. Lady wants that for her constituents as much as I do.
Mr Toby Perkins (Chesterfield) (Lab)
The Conservative party once prided itself on being the party of homeowners. The fact that we long ago ran out of Conservatives asking questions makes it clear that Tory MPs realise they have nothing to say to those people. Does the Minister realise that my constituents who are desperately worried about the cost of their mortgages will not have heard a single word from him to suggest that things are going to get better as a result of this Government’s actions?
Andrew Griffith
I can absolutely reassure the hon. Gentleman that the Government are focused on his constituents, even if his colleagues find it useful to ask the same question again and again. We are focused on not making the sort of unfunded spending commitments—such as the £28 billion that the right hon. Member for Leeds West (Rachel Reeves) herself described as “reckless”—that would really cause difficulties for mortgage holders in Chesterfield and across the United Kingdom.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Given the jump in mortgage arrears, and to help everyone who is struggling to pay the Tory surcharge on their mortgages since the disastrous mini-Budget, is the Minister considering increasing access to mortgage interest relief?
Andrew Griffith
There are no plans to change that. Those are matters for fiscal events and for the Chancellor.
Fleur Anderson (Putney) (Lab)
The Tory mortgage crisis is affecting my constituents in Putney, including a group of young sharers I met this week whose landlord has had his mortgage increased and has passed the costs down to them. They have to leave their home and the area because they can no longer afford to live in south-west London. The Minister has blamed global factors again and again, but the cost of borrowing is higher here in the UK than in other developed economies. Does he agree that this is a Tory mortgage penalty—a Truss tax—and that the Government are to blame for the 13 disastrous years of housing policy that have brought us here?
Andrew Griffith
I do not agree with the hon. Lady, however fine her rhetoric may be. The reality is that, if we want the nation’s householders to pay less for their mortgages, we need responsible Conservative management of the economy. When it comes to her Putney constituency, the best thing that she can do, if she is on the side of those who wish to own their own home, is urge the Labour Mayor to build more homes.
Madam Deputy Speaker (Dame Eleanor Laing)
Order. [Interruption.] No; do not argue with me.
Madam Deputy Speaker
No, you are not. That question is finished. There is a danger that the House might not be able to hear the question from the hon. Member for Strangford (Jim Shannon).
Jim Shannon (Strangford) (DUP)
There is no danger of that when you are in the Chair, Madam Deputy Speaker.
I thank the Minister for his answers to some very difficult questions. It has been said that 1.5 million households, including some of my Strangford constituents, are set to come off fixed mortgage deals this year and face a sharp rise in their monthly repayments—up to 1.56 percentage points from Tuesday. Has the Minister made an assessment of the impact on those who are considering buying their first house in the next year or so, and will he assure the House that discussions are taking place with local banks on what we can do to support people through the process of buying their first homes amid shocking price increases?
Andrew Griffith
Let me be clear: the Government understand—I understand—the anxiety of those who have a mortgage, those who have invested in their home and those who wish to do so. That is why we will do everything we can—be it providing financial support to the tune of £94 billion, or making good decisions about our stewardship of the economy and not coming up with unfunded spending commitments—to ensure that we get back, as quickly as possible, to a world of falling interest rates and falling inflation, and support those who wish to buy a home above their head.
Spiking
Tuesday 13th June 2023
(11 months ago)
Commons ChamberRead Full debate Spiking Bill 2022-23 View all Spiking Bill 2022-23 Debates Read Hansard Text Watch Debate
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
Richard Graham (Gloucester) (Con)
I beg to move,
That leave be given to bring in a Bill to make provision about the law in relation to administering or attempting to administer drugs, alcohol or any other substance to a person without their consent, whether or not with the intent to cause harm; and for connected purposes.
The clue to the purpose of the ten-minute rule motion is the word “spiking”, which is known and understood by everyone in this Chamber and the vast majority of people in our country. Spiking has been debated before in this House, most recently on 11 January in a Westminster Hall debate in my name. Many Members here today spoke in that debate. Spiking was also the subject of a Home Affairs Committee report published in April 2022.
Almost 5,000 cases of spiking have been reported to police forces across the country. The fact that the police are not obliged formally to collate data on spiking suggests that this is the visible tip of a largely hidden iceberg. That is why spiking was the subject of my earlier ten-minute rule Bill 18 months ago, why the Select Committee focused on the issue, and why it welcomed Ministers at that time looking closely at creating a separate offence of spiking. The Select Committee recommended—rightly, in my view—the creation of a specific offence that would improve reporting of spiking and the gathering of more information about it.
We all recognise that the current legislation on spiking centres on the Offences against the Person Act 1861 and the Sexual Offences Act 2003. One covers the use of noxious substances, the other sexual gratification. However, both Acts are silent on the word “spiking”, which does not exist formally. Indeed, search engines describe it as an informal term meaning to
“add alcohol or a drug to contaminate (drink or food) surreptitiously”.
That is part of it, but it is not all of it.
Some lawyers may argue that existing law covers all aspects of what we term “spiking”—including even spiking by injection, spiking for fun, and spiking without chemical addition—and that we do not need a new informal term in law, a definition of it, or any bringing together of existing laws in modern language and in one place to inform the nightlife sector, the public, colleges and universities, the police and the public at large. I regret to say that the implied message from the Home Office is, “It is all fine as it is.” Yet it is not fine, which is why I am here, like Oliver Twist, seeking more—or rather, seeking action, which is what colleagues from all parties want to see.
When the police do not have to collect the data but have still recorded 5,000 reported cases; when police and crime commissioners want, and the Select Committee recommends, a definition of and a crime described as “spiking”; and when Government Ministers and MPs themselves have been victims of spiking, I believe that it is time for the Government to react and act.
Let me repeat what colleagues have said on previous occasions. One said:
“I know from my inbox that people of all ages and areas will be very pleased that this is being highlighted as it’s awful, can be embarrassing and is often very grim”.
Another wrote that
“speaking to police they find that most cases are young women with an unexpected response to drinks…I really worry about the fear that our young live under, and wonder whether this is another type of control of women.”
The Chair of the Home Affairs Committee, the right hon. Member for Kingston upon Hull North (Dame Diana Johnson), highlighted the problem when she said:
“There is not a specific criminal offence. If a drink is spiked or if an injection takes place, it is rolled into a different criminal offence.”
Those things have all helped to build my understanding of this nightmare experience, which was first drawn to my attention by the experience of my constituent, Maisy Farmer. It is no longer possible for an MP to claim credibly that reports of spiking are unproven. However, it is true that it is not easy for a victim to prove spiking by having a hospital examination of her—or sometimes his—body prioritised to identify the drug, or to provide the identity of a spiker from a crowded nightclub.
That raises two key questions: how should the law change, and what would a change of law achieve? No MP has the responses of Government Departments in advance, so whether it is best to amend existing law or to create a new, defined crime of spiking that covers all contexts is surely for the Government—the Home Office and Ministry of Justice together—to decide.
As to what such a change might achieve, there is a clear opportunity to send a simple message in the language of our times to all those who might think spiking is clever or funny about the criminality of spiking, or attempting to spike, those going out to public or private places.
It is surely a legitimate aim of legislation to consolidate and clarify, using modern language; to nudge behaviour; and to oblige the police to do more than Operation Lester—a temporary project—and to record what is happening accurately over time. Legislation would allow us all in this place to focus on making our constituents’ lives, and nights out, safer, and give our businesses full support in driving down spiking crimes.
The overriding reason for pursuing doggedly the issue of spiking is that we have not done enough and should do more. As the former safeguarding Minister, my hon. Friend the Member for Redditch (Rachel Maclean), said in January:
“We need a holistic response to this crime...We need…legislative change…making sure that police forces can gather data and mount prosecutions using forensic capabilities”—[Official Report, 11 January 2023; Vol. 725, c. 270WH.]
She and many colleagues highlighted, as does the National Police Chiefs’ Council, the lack of a clear criminal offence of spiking.
If the Home Office and Ministry of Justice need further encouragement, I urge them to consider the matter as a violence against woman and girls issue, as it so often is. Policing lead Maggie Blyth said: “If you are spiked, you must come forward. If you have taken illegal drugs, still come forward and report it.” That would be much easier if spiking were a crime. So many of my colleagues and constituents, as well as university groups, student unions, and Dawn Dines of Stamp Out Spiking, have made those points time and again. As the Security Minister said in the previous debate,
“no one wants a gap in the law. No one wants to see crimes going unpunished and no one wants to see victims unable to achieve the level of protection that is absolutely essential.”—[Official Report, 11 January 2023; Vol. 725, c. 282WH.]
That is true and fine, but we need to act, for the thousands of people who have been spiked and those who might still be. The House is here to reflect the concerns of our constituents. We should recognise that spiking exists and should be defined. The law should make all the criminal aspects of spiking clear, in one place. It is quite simply time to stop spiking now.
Question put and agreed to.
Ordered,
That Richard Graham, Vicky Ford, Sally-Ann Hart, Caroline Nokes, Dame Diana Johnson, Valerie Vaz, Joanna Cherry, Wendy Chamberlain, Jim Shannon and David Mundell present the Bill.
Richard Graham accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 24 November, and to be printed (Bill 323).
Procurement Bill [Lords]
Tuesday 13th June 2023
(11 months ago)
Commons ChamberRead Full debate Procurement Act 2023 View all Procurement Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 13 June 2023 - large print - (13 Jun 2023)
16:47 - The House divided: - Ayes: 231 / Noes: 282 - Question accordingly negatived.
17:02 - The House divided: - Ayes: 230 / Noes: 280 - Question accordingly negatived.
17:14 - The House divided: - Ayes: 225 / Noes: 288 - Question accordingly negatived.
17:25 - The House divided: - Ayes: 229 / Noes: 280 - Question accordingly negatived.
The Parliamentary Secretary, Cabinet Office (Alex Burghart)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker (Dame Eleanor Laing)
With this it will be convenient to discuss the following:
New clause 1—Removal from the procurement supply chain of physical surveillance equipment produced by companies subject to the National Intelligence Law of the People’s Republic of China—
“(1) Within six months of the passage of this Act, the Secretary of State must publish a timeline for the removal from the Government’s procurement supply chain of physical surveillance equipment produced by companies subject to the National Intelligence Law of the People’s Republic of China.
(2) The Secretary of State must lay the timeline before Parliament.”
New clause 9—Application of this Act to procurement by NHS England—
“(1) Omit sections 79 and 80 of the Health and Care Act 2022.
(2) For the avoidance of doubt, the provisions of this Act apply to procurement by NHS England.”
This new clause includes the NHS under this Act and procurement by NHS England under the Health and Care Act 2022.
New clause 10—Tax transparency—
“(1) This section applies to any covered procurement for a public contract with an estimated value of £5 million or over.
(2) When assessing tenders under section 19 or awarding a contract under section 41 or 43, a contracting authority must require the submission of a tax report where a supplier is a multi-national supplier.
(3) Where a multi-national supplier fails to submit a tax report, a contracting authority must exclude the supplier from participating in, or progressing as part of, the competitive tendering procedure.
(4) Subject to subsection (5), a contracting authority that enters into a contract with a multi-national supplier must publish a copy of the tax report—
(a) if the contract is a light touch contract, before the end of the period of 120 days beginning with the day on which the contract is entered into;
(b) otherwise, before the end of the period of 30 days beginning with the day on which the contract is entered into.
(5) Where a copy of a contract is by virtue of regulations under section 95 published under section 53(3) on a specified online system, the tax report relating to that contract must be published on the same specified online system—
(a) if the contract is a light touch contract, before the end of the period of 120 days beginning with the day on which the contract is entered into;
(b) otherwise, before the end of the period of 30 days beginning with the day on which the contract is entered into.
(6) A ‘multi-national supplier’ is a supplier with two or more enterprises that are resident for tax purposes in two or more different jurisdictions.
(7) A ‘tax report’ means a report setting out—
(a) the income booked in the UK,
(b) the profit before tax attributable to the UK,
(c) the corporate income tax paid on a cash basis in the UK,
(d) the corporate income tax accrued on profit/loss attributable to the UK, and
(e) any other information specified in regulations under section 95
for the multinational supplier.
(8) A Minister of the Crown may by regulations amend this section for the purpose of changing the financial threshold.”
This new clause would require large multinational corporations bidding for a public contract to provide information about their Income booked in the UK, their profit before tax attributable to the UK, their corporate income tax paid on a cash basis in the UK and their corporate income tax accrued on profit/loss attributable to the UK, and that information to be published.
New clause 11—Public interest—
“(1) Where a contracting authority is considering outsourcing public services that are at the time of consideration delivered in-house or where contracts are due for renewal, the contracting authority must demonstrate that they have considered whether outsourcing or re-contracting provides greater public value than direct service provision.
(2) As part of the duty in subsection (1), the contracting authority should demonstrate that it has assessed the potential benefits and impact of outsourcing the service in question against a public sector comparator with assessments being based on criteria to be set by the Secretary of State, including taking a five year consideration of—
(a) service quality and accessibility;
(b) value for money of the expenditure;
(c) implications for other public services and public sector budgets;
(d) resilience of the service being provided;
(e) implications for the local economy and availability of good work in relevant sub-national labour markets;
(f) implications for public accountability and transparency;
(g) effect on employment conditions, terms and standards within the provision of the service to be outsourced and when outsourced;
(h) implications for public sector contributions to climate change and environmental targets;
(i) implications for the equalities policies of the contracting authority and compliance with the public sector equality duty.
(3) The contracting authority and the supplier of the outsourced service must monitor the performance of any contracted service against the public interest test and the stated objectives set by the contracting authority pre-procurement to demonstrate that outsourcing the service in question has not resulted in a negative impact on any of the matters mentioned in subsection (2)(a) to (i).
(4) The Secretary of State must from time to time set budget thresholds for when a public interest test would be required.”
The new clause would create a process to ensure that contracting authorities safeguard the public interest when considering whether or not to outsource or recontract services.
New clause 12—Protection of subcontractors’ payments under construction contracts—
“(1) A project bank account must be established for the purpose of subsections (2) to (4) in accordance with the following requirements—
(a) the account must be set up by the contracting authority and the contractor under a construction contract as joint account-holders;
(b) the monies in the account are held in trust by the contracting authority and contractor as joint trustees;
(c) the contracting authority must deposit in the account all sums becoming due to the beneficiaries and any disputed sums must remain in the account until the dispute is resolved and any retention monies remain in the account until they are released to the beneficiaries;
(d) due payments from the account must be made to all beneficiaries simultaneously; and
(e) the beneficiaries include—
(i) the contractor;
(ii) all subcontractors where the value of each subcontract is at least 1% of the value (excluding VAT) of the construction contract entered into between the contracting authority and the contractor; and
(iii) any other subcontractor which has specifically requested that its payments be discharged through the account.
(2) Subsections (3) and (4) have application to construction contracts having a value in excess of £2 million (excluding VAT).
(3) Not later than 30 days after entering into a construction contract a contracting authority must ensure that a project bank account is in place.
(4) In the event that a contracting authority fails to comply with this subsection the construction contract ceases to be valid and may not be enforced by either party.
(5) The Secretary of State must provide statutory guidance on the operation of project bank accounts to ensure that such operation is standardised amongst all contracting authorities.
(6) Subsections (7) to (10) apply where retention monies are not protected within a project bank account.
(7) The contracting authority must establish a retention deposit account with a bank or building society which fulfils the requirements of subsection (1)(a) and (b).
(8) On each occasion that retention monies are withheld the contracting authority must lodge them within the retention deposit account and maintain a record of the names of each subcontractor having contributed to the withheld monies and the amount of the monies contributed by each.
(9) Subject to subsection (10), not later than 30 days after the date of handover of each subcontracted works at least 50% of the withheld retention monies must be released, and not later than the date which is 12 months from the date of handover of each subcontracted works the balance of the retention monies must be released.
(10) A contracting authority has a right of recourse to subcontractors’ retention monies but such right is limited to any subcontractor which is in default of its subcontract in having delivered works which are defective and in breach of the subcontract.
(11) Paragraphs (9) and (10) also apply where retention monies are protected in a project bank account.
(12) Non-compliance with subsections (6) to (11) renders any entitlement to withhold retention monies in a construction contract or subcontracts of no effect.
(13) Subsections (6) to (12) do not affect the right of any subcontractor to pursue recovery of any outstanding or wrongfully withheld retention monies against its other contracting party.
(14) The Secretary of State must provide statutory guidance on the operation of retention deposit accounts to ensure such operation is standardized amongst all contracting authorities.
(15) Any dispute under this section is referrable to adjudication in accordance with section 108 of the Housing Grants, Construction and Regeneration Act 1996.
(16) The Secretary of State must carry out a review of the operation of this section within 5 years of it coming into force.
(17) In this section—
“bank” has the meaning given to it in section 2 of the Banking Act 2009;
“building society” has the meaning given to it in section 119 of the Building Societies Act 1986;
“contractor” is the party engaged under a construction contract with a contracting authority;
“construction contract” has the meaning given to it in section 104, Housing Grants, Construction and Regeneration Act 1996;
“handover of each subcontracted works” signifies the date when the works as defined in each subcontract are substantially complete;
“project bank account” is an account set up with a bank or building society which has the requirements listed in subsection (2);
“retention monies” mean a proportion of monies withheld from payments which would otherwise be due under a construction contract, subcontract or any ancillary contract the effect of which is to provide security for the current or future performance by the party carrying out the works;
“subcontract” and “subcontractor” includes sub-subcontracts and sub-subcontractors.”
This new clause ring-fences monies due to subcontractors in construction supply chains through mandating use of project bank accounts and ensuring retention monies are safeguarded in a separate and independent account.
New clause 13—Dependence on high-risk states—
“(1) The Secretary of State must within six months publish a plan to reduce the dependence of public bodies upon goods and services which originate in whole or in part in a country considered by the United Kingdom as a high risk sourcing country.
(2) For the purposes of this section, a country is considered a high risk sourcing country by the United Kingdom if it is defined as either a systemic competitor or a threat in the latest Integrated Review of Security, Defence, Development and Foreign Policy.”
New clause 14—Procurement and human rights—
“(1) A contracting authority may apply a policy under which it does not contract for the supply of goods, services or works from a foreign country or territory based on the conduct of that foreign country or territory relating to human rights, provided that—
(a) the contracting authority has a Statement of Policy Relating to Human Rights, and
(b) that statement of policy is applied consistently and not specifically to any one foreign country or territory.
(2) Within six months of the passage of this Act, the Secretary of State must publish, and lay before Parliament, guidance on the form, content and application of Statements of Policy Relating to Human Rights for the purposes of subsection (1).
(3) Contracting authorities must have regard to the guidance published under subsection (2) when applying a policy in accordance with subsection (1).”
This new clause would enable public authorities to choose not to buy goods or services from countries based on their human rights record. They would not be able to single out individual nations to apply such a policy to, but would have to apply it consistently, and in accordance with guidance published by the Secretary of State.
New clause 16—Eradicating slavery and human trafficking in supply chains—
“(1) The Secretary of State must by regulations make such provision as the Secretary of State thinks appropriate with a view to eradicating the use in covered procurement of goods or services that are tainted by slavery and human trafficking.
(2) The regulations may, in particular, include—
(a) provision as to circumstances in which a supplier is excluded from consideration for the award of a contract;
(b) provision as to steps that must be taken by contracting authorities for assessing and addressing the risk of slavery and human trafficking taking place in relation to people involved in procurement supply chains;
(c) provision as to matters for which provision must be made in contracts for goods or services entered into by contracting authorities, including mandating or enabling the use of forensic supply chain tracing.
(3) In this section— “forensic supply chain tracing” is the process of using forensic techniques to track the movement of goods and services through a supply chain; “slavery and human trafficking” has the meaning given by section 54(12) of the Modern Slavery Act 2015; “tainted”: goods or services are “tainted” by slavery and human trafficking if slavery and human trafficking takes place in relation to anyone involved in the supply chain for providing those goods or services.”
New clause 17—Food procurement—
“(1) A public contract which includes the supply of food must include provisions ensuring that the supply of food under that contract—
(a) is aligned with the Eatwell Guide, and
(b) includes options suitable for a plant-based diet.
(2) The ‘Eatwell Guide’ is the policy tool used to define government recommendations on eating healthily and achieving a balanced diet published by Public Health England on 17 March 2016, as updated from time to time.”
This new clause would require public contracts for the supply of food to be aligned with current nutritional guidelines and to include plant-based options.
Amendment 14, in clause 2, page 2, line 15, after “funds,” insert “including the NHS,”.
This amendment includes the NHS in the definition of a public authority for the purposes of this Act.
Government amendments 19 and 20.
Amendment 60, in clause 13, page 10, line 11, at end insert—
“(3A) When the Minister lays the statement before Parliament, the Minister must also lay before Parliament a report which sets out—
(a) the Secretary of State’s assessment of the impact of the statement on meeting environmental and climate targets,
(b) the steps the Secretary of State has taken or intends to take in relation to procurement to support the meeting of those targets.”
This amendment would require the Secretary of State to explain in a report laid before Parliament the Government’s assessment of the impact of the national procurement policy statement on meeting environmental and climate targets and to set out any intended steps in relation to the meeting of those targets.
Amendment 4, in clause 19, page 13, line 31, at end insert—
“(aa) must disregard any tender from a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors;”
This amendment, together with Amendments 5 to 8, is designed to ensure that no public contract can be let unless the supplier guarantees the payment of the Real Living Wage to all those involved in the delivery of the contract.
Amendment 5, in clause 41, page 28, line 26, at end insert—
“(3A) A contracting authority may not award a contract under this section to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”
See explanatory statement to Amendment 4.
Amendment 1, in clause 42, page 29, line 14, at end insert—
“(3A) Provision under subsection (1) must not confer any preferential treatment on suppliers connected to or recommended by members of the House of Commons or members of the House of Lords.”
This amendment is intended to prevent the future use of “VIP lanes” for public contracts.
Government amendments 21 to 23.
Amendment 6, in clause 43, page 30, line 3, at end insert—
“(5A) A contracting authority may not award a contract under subsection (1) to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”
See explanatory statement to Amendment 4.
Amendment 2, in clause 44, page 30, line 16, at end insert—
“(4) Any Minister of the Crown, Member of Parliament, Member of the House of Lords or senior civil servant involved in recommending a supplier for a contract under section 41 or 43 must make a public declaration to the Cabinet Office of any private financial interest in that supplier within 10 working days.”
This amendment would implement a recommendation by the National Audit Office that any contracts awarded under emergency provisions or direct awards should include transparency declarations.
Amendment 7, in clause 45, page 31, line 6, at end insert—
“(aa) permit the award of a public contract to a supplier that does not guarantee the payment of at least the Real Living Wage to all its own employees and contracted staff and those of any sub-contractors.”
See explanatory statement to Amendment 4.
Government amendments 24 to 30.
Amendment 61, in clause 58, page 40, line 38, leave out paragraph (c).
This amendment would remove provision allowing a contracting authority to have regard to commitments to prevent circumstances giving rise to the application of an exclusion ground from occurring again when considering whether a supplier should be excluded.
Amendment 62, page 40, line 41, leave out paragraph (e).
This amendment would remove provision allowing a contracting authority to have regard to evidence, explanations or factors not specified elsewhere in the clause when considering whether a supplier should be excluded.
Amendment 63, page 41, line 8, leave out subsection (3).
This amendment removes clause 58 (3), which limits the ability of a contracting authority to require whatever evidence is necessary to make their assessment about whether a supplier is reliable.
Government amendments 31 to 50.
Amendment 17, in clause 68, page 49, line 15, at end insert—
“(10A) Within a year of the passage of this Act, the Secretary of State must prepare, publish and lay before Parliament a report on the effectiveness of this section in ensuring prompt payment of small and medium-sized enterprises.
(10B) Not later than 6 months after the report has been laid before Parliament, a Minister of the Crown must make a motion in the House of Commons in relation to the report.”
This amendment would require the Government to report to Parliament on the effectiveness of this section in ensuring prompt payment of SMEs.
Amendment 68, in clause 71, page 51, line 11, at end insert—
“(6A) When a planned procurement notice is published under section 15 or a tender notice is published under section 21, the contracting authority must include a statement of the outcomes which the contract is intended to achieve.
(6B) The contracting authority must commission an independent evaluation of whether each contract delivered the outcomes mentioned in subsection (6A), unless the contract is excluded by regulations under subsection (6D).
(6C) An evaluation under subsection (6B) must—
(a) be performed by an independent body in accordance with UK Government Evaluation Standards, and include a clear recommendation on whether similar further public contracts should be begun, renewed or extended;
(b) be commissioned in time to be completed within six months of contract termination, renewal or extension;
(c) be published in full by the contracting authority immediately it is received from the independent external body.
(6D) The Secretary of State may by regulations specify types of contracts that do not require independent evaluations under subsection (6B).
(6E) Where the independent evaluation under subsection (6B) recommends that similar public contracts should not be begun, extended or renewed, any contracting authority which nonetheless intends to do so must publish its reasons not less than 30 days before the agreement is begun, extended or renewed.”
Government amendments 51 to 55.
Amendment 13, page 78, line 12, leave out clause 119.
Amendment 8, in clause 122, page 82, line 5, at end insert—
“‘Real Living Wage’ means the hourly wage rates for London and for outside London calculated annually by the Resolution Foundation and overseen by the Living Wage Commission (or their successor bodies);”.
This amendment inserts a definition of the Real Living Wage for the purposes of Amendments 4 to 7.
Government amendment 56.
Amendment 64, in schedule 6, page 106, line 7, at end insert
“or an offence under section 86, 88 or 92 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017.”
This amendment is intended to ensure that the full range of criminal offences for money laundering are properly captured for the purposes of exclusion from public procurement.
Amendment 65, page 106, line 12, leave out “or 6” and insert ”, 6 or 7”.
This amendment includes the failure of commercial organisations to prevent bribery as an offence which is a mandatory exclusion ground.
Amendment 66, page 106, line 14, at end insert—
18A An offence under Schedule 3 of the Anti-Terrorism, Crime and Security Act 2001 (sanctions evasion offences).”
This amendment is intended to make criminal offences for sanctions evasion grounds for mandatory exclusion from public procurement.
Government amendment 57.
Amendment 15, page 110, line 12, at end insert—
“National security
42A A mandatory exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person poses a threat to the national security of the United Kingdom.”
This amendment would move national security from among the discretionary exclusion grounds in Schedule 7 to the mandatory exclusion grounds in Schedule 6.
Government amendment 58.
Amendment 18, in schedule 7, page 113, line 2, at end insert—
“1A A discretionary exclusion ground applies to a supplier if a contracting authority determines that a supplier, within a year leading to the date of tender—
(a) has been found by an employment tribunal or court to have significantly breached the rights of an employee or worker engaged or formerly engaged by it with one or more aggravating features, or has admitted to doing so; and
(b) has not conformed with applicable obligations in the fields of environmental, social and labour law established by national law, collective agreements or international environmental, social and labour law provisions; and
(c) has not taken steps to rectify the situation through—
(i) paying or undertaking to pay compensation in respect of any damage caused by the breach of rights; and
(ii) clarifying the facts and circumstances in a comprehensive manner by actively collaborating with any relevant employment tribunal or court process and the parties thereto; and
(iii) taking concrete technical, organisational and personnel measures appropriate to prevent further breaches of rights of a similar kind.
1B In making a decision on whether a discretionary exclusion ground applies to a supplier under paragraph 1A, a contracting authority must—
(a) evaluate the adequacy of any action taken by the supplier in accordance with sub-paragraph (c) of that paragraph, taking into account the gravity and particular circumstances of the breach or breaches of rights, and
(b) make reasonable provision for the employer and the employee or worker concerned to make representations, which may be made by agreement by a trade association or trade union.”
This amendment would give contracting authorities the discretion to exclude suppliers who have significantly and repeatedly breached the rights of staff in the last year unless they have “self-cleansed”.
Amendment 67, page 113, line 17, at end insert—
“Financial and economic misconduct
3A A discretionary exclusion ground applies to a supplier if the decision-maker considers that there is sufficient evidence that the supplier or a connected person has engaged in conduct (whether in or outside the United Kingdom) constituting (or that would, if it occurred in the United Kingdom, constitute) any of the following offences—
(a) an offence under section 327, 328 or 329 of the Proceeds of Crime Act 2002 (money laundering offences);
(b) an offence under section 86, 88 or 92 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017;
(c) an offence under Schedule 3 to the Anti-terrorism, Crime and Security Act 2001 (sanctions evasion offences);
(d) an offence under section 2, 3, 4, 6 or 7 of the Fraud Act 2006 (fraud offences);
(e) an offence under section 993 of the Companies Act 2006 (fraudulent trading);
(f) an offence under section 1, 2, 6 or 7 of the Bribery Act 2010 (bribery offences).”
This amendment is intended to allow relevant Ministers and Contracting Authorities the power to exclude suppliers from procurement where they have evidence of financial and economic criminal activity, such as fraud, money laundering, bribery or sanctions evasion, but there has not yet been a conviction by a court.
Amendment 16, page 116, line 6, at end insert—
“Sanctions offences
14A(1) A discretionary exclusion ground applies to a supplier if the decision-maker considers that the supplier or a connected person has engaged in conduct constituting—
(a) An offence established in any regulations made under Part 1 of the Sanctions and Anti-Money Laundering Act 2018;
(b) An offence established under Part 5 of the Customs and Excise Management Act 1979.
(2) A discretionary exclusion ground applies to a supplier if the decision-maker considers that there is sufficient evidence that the supplier or a connected person has engaged in conduct outside of the United Kingdom that could result in such an offence being committed if that conduct occurred in the United Kingdom.”
This amendment would create a discretionary exclusion ground where a supplier (or connected person) has violated UK sanctions or export controls, or would have done so if they were in the UK.
Amendment 3, page 116, line 10, at end insert—
“Involvement in forced organ harvesting
14A(1) A discretionary exclusion ground applies to a supplier if a decision-maker determines that the supplier or a connected person has been, or is, involved in—
(a) forced organ harvesting,
(b) unethical activities relating to human tissue, including anything which involves the commission of an offence under sections 32 (prohibition of commercial dealings in human material for transplantation), 32A (offences under section 32 committed outside UK) or 33 (restriction on transplants involving a live donor) of the Human Tissue Act 2004, or under sections 20 (prohibition of commercial dealings in parts of a human body for transplantation) or 20A (offences under section 20 committed outside UK) of the Human Tissue (Scotland) Act 2006, or
(c) dealing in any device or equipment or services relating to conduct mentioned in paragraphs (a) or (b).
(2) “Forced organ harvesting” means killing a person without their consent so that their organs may be removed and transplanted into another person.”
This amendment is designed to give a discretionary power to exclude suppliers from being awarded a public contract who have participated in forced organ harvesting or unethical activities relating to human tissue, including where they are involved in providing a service or goods relating to such activities.
Government amendment 59.
Alex Burghart
It is a genuine honour to take the Procurement Bill through Report stage. As the House will know, this is a major piece of post-Brexit legislation that enables us, for the first time in many decades, to reform our procurement system, to the benefit of contracting authorities, suppliers and taxpayers.
I begin with new clause 15 and amendment 52. We are inserting into the Bill a new clause that allows us to meet the UK’s international obligations on record keeping. We are strengthening record keeping obligations in the Bill to more fully reflect our obligations in both the agreement on Government procurement—the GPA—and the comprehensive and progressive agreement for trans-Pacific partnership. They both require records to be kept for a minimum of three years. New clause 15 sets out the obligation on contracting authorities to
“keep such records as the authority considers sufficient to explain a material decision made for the purpose of awarding or entering into a public contract.”
A material decision is one that requires a contracting authority
“to publish or provide a notice, document or other information in relation to the decision”,
or decisions, that are required to be made under the Bill. Records must be kept for three years from award of, or entry into, a contract—or, if the contract is awarded but not entered into, from the date of the decision not to enter into it.
The primary goal of the Bill is to streamline procurement regulations and ensure the overall efficiency of the system, while avoiding overwhelming businesses and contracting authorities with a multitude of rules and regulations—a point that we will no doubt return to this afternoon. As such, and in line with international requirements, the obligations attach only to the award of, and entry into, contracts; they do not apply to the management stage of a contract.
Information on the management of major contracts will of course be put into the public domain, thanks to the Bill’s considerable transparency obligations. That includes information on key performance indicators, such as performance against them; information on amendments to contracts; and information on contract termination, which will require reporting on performance. The time limit already in the Bill on the duty to maintain records of communications with suppliers is being relocated to sit alongside the new record keeping duty. The record keeping requirement is intended to act as a minimum; contracting authorities may of course keep records for longer, and indeed may be required to do so under other legislation.
Government amendments 24 and 25 change the point at which, under clause 52(1), contracting authorities are required to publish key performance indicators. They will no longer have to do so before entering into a public contract. Instead, there will be a requirement to publish them under proposed new subsection (2A) of clause 52. Clause 53, on contract details notices, provides that the details of KPIs will be specified in regulations under clause 95. That is because it is not possible to publish the KPIs before entering into the public contract, as they arise as part of the process of entering into the contract.
Government amendments 19, 20 and 56 make a necessary technical adjustment to ensure that the City of London Corporation is caught by the Bill in respect of its public sector functions, but not its commercial functions. The Bill is intended to apply to local authorities—clause 2 makes it clear that publicly funded bodies are caught by it—but due to its evolution and structure, the corporation does not operate solely as a local authority. It has significant private sector trading activities—for example, it operates private schools and undertakes property management—that are clearly not intended to be caught by the Bill. Unlike district and county councils, being a local authority is not the corporation’s raison d’être; rather, it has some local authority functions bolted on to its wider organisational functions. Without the amendments to clause 2 and schedule 2, there would be a risk of unintended consequences; the Bill would apply to either all the corporation’s activities, including its commercial activities, or none of them, depending on whether the corporation’s balance of income was derived mainly from its trading activities or from public funds in any one year.
Government amendments 21 to 23 resolve a drafting inconsistency between clause 19, which governs the award of contracts following a competitive procedure, and clause 43, which has rules allowing a contracting authority to switch to direct award if no suitable tender was received in a competition. Under clause 19, a tender may be disregarded in a competition if it breaches a procedural requirement set by the contracting authority—for example, if it is submitted late or is over its word count. Abnormally low tenders can also be disregarded, provided the tenderer has advance notification and the chance to respond, pursuant to subsections (4) and (5).
The changes proposed to clause 43 will ensure that only a material breach of procedural requirements will render a tender unsuitable: for example, being 10 words over the set count should not result in an unsuitable tender permitting direct award. Abnormally low tenders cannot be deemed unsuitable unless the supplier has had an opportunity to demonstrate that it will be able to perform the contract for the price offered, as is required under clause 19.
Moving on to amendment 59, paragraph 2(3) of schedule 10 inserts new section 14(5A) into the Defence Reform Act 2014. The DRA, and the Single Source Contract Regulations 2014 made under it, make provision for the pricing of defence contracts to procure goods, works and services that are not let competitively and meet the necessary criteria, including a financial threshold. New section 14(5A) is being introduced to address uncertainty about when an agreement for new goods, works and services should be regarded as an amendment to an existing contract within the scope of the DRA regime, and when it should be regarded as a new contract in its own right. The proposed new subsection currently addresses the situation by identifying two specific categories of existing contract not subject to the DRA regime that, when amended on a non-competed basis to add further goods, works or services, would become subject to that regime.
A third such category of contract not currently addressed by proposed section 14(5) has subsequently come to light. That category covers a single source contract that was below the financial threshold set by the SSCRs that is subsequently amended to add new goods, works and services that take it above that threshold. Amendment 59 will ensure that such contracts are brought within the regulation-making power. A hypothetical example would be a contract that was let competitively for £6 million a few years ago and was not subject to the regulations, where proposed section 14(5) and section 14(3)(b) —which excludes contracts let through competitions—did not apply, and a single source amendment was subsequently placed a few years later for £10 million of new work. That kind of amendment is referred to in section 14(5), and under the proposed new regulations, it would be treated as a new contract for the purposes of the regulations. Under the current wording of schedule 10, the agreement covering the new work would fall under the regulations.
Amendments 38, 32, 36, 37, 39 to 51, 57 and 58 significantly strengthen the exclusions and debarment provisions for exclusion on national security grounds. As the Bill stands, placing a supplier on the debarment list on national security grounds will make it excludable from all contracts within the scope of the Bill. That means that the supplier will be identified as posing a threat to the national security of the UK, but contracting authorities will have discretion as to whether they exclude the supplier in each particular procurement. Having engaged with colleagues in the House and reflected on their concerns, I can confirm that the Government are content to further strengthen those provisions. The new amendments will enable a Minister of the Crown to take a stronger approach in response to a specific risk profile of a particular supplier and make targeted decisions about whether the debarment should be mandatory for particular types of contracts, depending on the nature of the risk.
Bob Seely (Isle of Wight) (Con)
I thank the Minister for the work he has been doing on the Bill, and for listening to colleagues—there is more work to be done, but we are certainly moving in the right direction. There is an issue about dual use stuff: we are talking about national security, but for technology such as cellular modules in Government cars that may or may not be being used by competitor nations to listen in to conversations, it is not just a narrow definition that we should be worried about, but a rather more expansive definition of some of the risks posed by that technology and where it is placed in either very specific national security contexts or, more broadly, among things that are critical to our national infrastructure.
Alex Burghart
I thank my hon. Friend for his remarks, and for the constructive dialogue that we have had while preparing for today’s debate. As he hopefully knows from what we have already said on this subject—he will hear it again in what I am about to say—the structure that we are putting in place will be able to make exactly that sort of assessment.
If a supplier poses an unacceptable risk in relation to certain goods, such as network communications equipment, the Minister will be able to enter on the debarment list that that supplier is an excluded supplier for contracts for the supply or support of that type of equipment, but that will not necessarily mean that the supplier will be excluded from all other types of contract. Similarly, the entry may also—or as an alternative—stipulate that the supplier is excluded from contracts relating to certain locations or sites, or contracts let by certain contracting authorities. That removes discretion from contracting authorities regarding exclusions where a supplier poses a threat for particular contracts, thereby reducing the risk of a supplier being allowed to participate in a procurement when they should not be.
By allowing this type of targeted and proportionate approach, we can direct that suppliers must be excluded where the risks are unacceptable, and allow contracting authorities to make appropriate choices where a risk is manageable—for example, if a supplier is providing pencils or plastic furniture. We think that approach to national security exclusions is both proportionate and robust, and will allow us to effectively counter the risk posed by some suppliers, including those that many in this House are concerned about.
Damian Green (Ashford) (Con)
The Minister has said that he wants a proportionate response and I take that point. I also thank him for the talks we have had about this issue, which is the basis of my support for new clause 1. However, one thing he has not yet addressed is the timescale. Clearly, a lot of kit that we would regard as suspicious under the Bill needs to be removed. Can he give some indication of what sort of timescale we will need to remove it?
Alex Burghart
I thank my right hon. Friend for the constructive conversations that we have had in getting ready for today’s debate. He is slightly pre-empting some remarks that I will come to later. I hope that he saw the announcement that the Government made the other day. It is in the nature of the work that we are doing that, first, we wish to remove devices and components that pose a security risk to sensitive sites—I will say more about the timescale for that later. Secondly, we intend through the use of the unit and the provisions in the Bill to prevent similar devices and components from entering our sites in future. It is a two-part process: first, get rid of what is already there and, secondly, prevent other such services from coming in in future.
Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)
The Minister has mentioned sensitive sites. I do not quite understand what that phrase means—I am hoping that we will get a proper explanation in due course—but what I would observe is that, as far as I can see, every single Government site is by nature and definition sensitive. The Department for Work and Pensions is very sensitive because any disruption of its payments would render the UK in a terrible state. Is it not the case that all Departments of central Government are by nature sensitive sites and, therefore, should take upon themselves the reality that they must all rid themselves of these things?
Alex Burghart
My right hon. Friend makes a good point, and I thank him for his constructive engagement with me and the Minister for the Cabinet Office on this issue. We understand and hear his concerns about sensitive and non-sensitive sites—not least, we understand his view that the definition could incorporate a broader range of assets, where information gleaned on the movement of officials and politicians could be detrimental to our national security. We will continue to work on that issue with him, both in today’s debate and in the Lords debate that will follow it. I am sure that we can reach a sensible conclusion that will be to his satisfaction.
Bob Seely
If I remember correctly, in January, the security services took apart a UK Government vehicle because data was being transferred via a Chinese cellular module, a Chinese eSIM. We do not know who was in that car—whether it was the Defence Secretary or the Prime Minister. Evidence from a separate Tesla car scandal suggests that it would be possible for Chinese engineers to record private conversations using cellular modules. Just out of curiosity—I suspect I know the answer—are we ever going to get an update on what happened to that car and what was happening with it?
Alex Burghart
My hon. Friend will know that I am not in a position to comment on matters of national security, but he will have heard me say in answer to my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) that we understand the view that the definition in the Bill could incorporate a broader range of assets, where information is gleaned on the movement of officials and politicians that could be detrimental to national security.
Amendment 34 will commit a Minister of the Crown to keep suppliers under review for potential investigation for debarment on national security grounds. We recognise that proactive consideration of suppliers will be highly advantageous in minimising the risk of suppliers who pose a threat to our national security being awarded public contracts. The amendment will therefore commit Ministers to proactively consider a new debarment investigation where there is evidence of risk, so that the Government can act effectively and on time.
I am also pleased to announce that the Government will be creating a new specialist unit with dedicated resources within the Cabinet Office to take on and manage this new approach. That new national security unit for procurement will regularly monitor Government supply chains and review pertinent information to determine which suppliers should be investigated for debarment on national security grounds. The unit will be able to draw on the full range of expertise within government and access the latest intelligence, including that from Five Eyes partners. It will be able to respond swiftly to emerging threats. The unit will also carry out investigations of suppliers for potential debarment, which will be overseen by a committee. Following the outcome of an investigation, the committee will make recommendations to the Minister as to whether the supplier should be added to the debarment list. The final decision will be made by the Minister.
Anthony Mangnall (Totnes) (Con)
The Minister is making an excellent speech and I agree with the broad thrust of everything he is saying, but in terms of the practical application—how we debar businesses and organisations bidding in through a procurement process—can he just tell us how long an investigation would take? I realise it would be a case-by-case process, but if a procurement tender is put out, and a business or entity bids into it, how long would it expect that investigation to go on before that business or entity is debarred or not?
Alex Burghart
My hon. Friend will know that is a length of a piece of string question. In setting up the unit and providing it with resource, we are mindful of the need for it to be able to respond swiftly to emerging threats and to new entities. The unit will not serve its purpose if investigations go on too long. I cannot give him any guarantees on maximum length of time for investigation, but I can assure him that those concerns are very much in our thoughts as we go about establishing this new way of working.
The new unit will also have a role in supporting and upskilling contracting authorities. By directly engaging with them and providing guidance, the unit will help contracting authorities confidently implement the national security exclusion and debarment regime correctly, maximising its effectiveness.
Amendments 26, 27, 29, 30, 31, 33, 35, 38, 53, 54 and 55 are minor and technical amendments to ensure that the exclusions and debarment regimes can function effectively.
I take this opportunity to thank all colleagues who have engaged with us on this, including my hon. Friend the Member for Rutland and Melton (Alicia Kearns), who is not in her place today. She has been instrumental in helping us to formulate these ideas in regard to national security and in particular our commitment to the national security unit for procurement.
The Government are taking national security extremely seriously, as the Bill and the amendments just mentioned make clear. Concerns have been expressed in the House regarding the use of surveillance equipment provided by entities subject to the national intelligence law of the People’s Republic of China, the risks of which we fully understand. I take this opportunity to remind the House that, in November, the Government published a written ministerial statement asking Departments to consider the removal of visual surveillance equipment from Government sensitive sites and to cease any future procurement of such equipment.
Today, we are going further. I commit to this House that, within six months of the Bill’s Royal Assent, the Government will set out the timeline for the removal of surveillance equipment supplied by companies subject to the national intelligence law of China from sensitive sites. I make it clear that we are taking firm and decisive action on this important matter and that we will be held to account for that action. That is why we will provide a clear plan for delivering on it, adhering to the timeline requested by my right hon. Friend the Member for Chingford and Woodford Green. I hope that addresses his and other Members’ wishes that the Government take appropriate action.
If I may, I will address two final points. First, I thank each of the devolved Administrations for their constructive engagement during the drafting and passage of the Bill. I am pleased that the Senedd and the Scottish Parliament have agreed to the procurement aspects of the Bill, which are the vast majority of the clauses. However, despite our best efforts and several amendments, we have been unable to secure full legislative consent motions for the concurrent powers in the Bill relating to the implementation of international obligations. That is disappointing, but not unexpected, given that it is consistent with the position taken by the Scottish and Welsh Governments on the recent Trade (Australia and New Zealand) Act 2023.
I reassure the House that, as with current practice, we will continue to engage and consult with the devolved Administrations if they choose not to legislate for themselves in implementing the UK’s international obligations, in so far as they relate to areas of devolved competence. In the absence of a Northern Ireland Executive, a legislative consent motion for Northern Ireland was not possible. However, the permanent secretary for the Northern Ireland Department of Finance has written to the permanent secretary of the Cabinet Office to welcome the Bill as drafted and the close working relationship that has developed between officials.
Secondly, I take the opportunity to clarify the rules for private utilities where they have been directly awarded rights, for example, through a directly awarded contract at the request of the Department for Transport. Private utilities are within the scope of the Bill only where they have been granted a special or exclusive right to carry out a utility activity, effectively creating a monopoly situation. Clause 6(4) clarifies that the right is not special or exclusive where the right is granted following a competitive tendering procedure under the Bill or otherwise on the basis of a transparent procedure and non-discriminatory criteria. That has the effect, for example, that, if a contract for a utility activity with an incumbent supplier is renewed or replaced without competition, the supplier will have been granted a special or exclusive right. The supplier would therefore be classed as a private utility under the Bill. An example would be where an incumbent train operating company awarded a contract following competition has been directly awarded a new contract under DFT legislation.
Florence Eshalomi (Vauxhall) (Lab/Co-op)
Three years ago, in the aftermath of the covid-19 pandemic, vital frontline staff across our NHS were struggling against dangerously low stocks of personal protective equipment. We all heard the stories of frontline workers in the early stages of the pandemic. These stories show us the impact of not procuring adequate reserves for a pandemic such as covid-19, and they show us why we need the right culture to rapidly respond to emergency procurement demands whenever they may show. Sadly, what we saw during the pandemic did not live up to standards. What followed, with the horror stories of frontline workers in the early stages of 2020, was a case study in wasteful and inefficient emergency procurement.
In January, the National Audit Office found that nearly £15 billion was wasted on unused covid supplies. That is £15 billion that could be going towards tens of thousands of full-time nursery places. It is £15 billion that could be going towards clearing the backlog in our NHS. It is £15 billion that could hand every single person in this country £220 and still have change left over. Instead, the incompetence we saw from this Government cost this country a fortune. In fact, the Government’s record keeping was so flawed that the Public Accounts Committee’s July 2022 report on the awarding of contracts to Randox during the pandemic stated it was
“impossible to have confidence that all its contracts with Randox were awarded properly.”
It is not just incompetence that costs the country. During the pandemic, the Government created a VIP lane for those offering to provide PPE. The system was extremely useful for some suppliers, with the Public Accounts Committee finding that one in 10 suppliers coming through the high-priority lane were awarded a contract. That compares with just one in 100 for the ordinary lane. The Cabinet Office and the Department of Health and Social Care also accepted that leads that went through the high-priority lane were handled better. Who was in that lane?
In the Public Account Committee’s report on PPE procurement, it stated
“The British Medical Association and the Royal College of Nursing told us that their organisations did not have access to the high-priority lane, even though they were being contacted by, and therefore would have been able to put forward, credible leads based on the knowledge of their members. The British Medical Association also noted that suppliers which had contacted them, including suppliers trusted by doctors, tried the normal channels of reaching out to the Government but had ‘hit a brick wall’. Care England told us that it had similarly shared the details of potential suppliers but there had been no follow-through.”
Instead, those with contacts with Government Ministers and officials, MPs and Members of the House of Lords were given access to this VIP lane. That included PPE Medpro, a company set up only a few days before but—surprise, surprise—with links to a Tory politician, which was awarded more than £200 million of public money. In total, £3.4 billion of taxpayers’ money in the form of contracts went to Conservative donors and friends. At a time when we were asking people up and down the country to come outside and clap, the Tory Government were giving cash to their donors. The Bill must be used to ensure that that never happens again.
Danny Kruger (Devizes) (Con)
I applaud what the hon. Member is saying about SMEs. She is absolutely right that it is important that we support the small business sector. However, she has tabled amendments that would favour the insourcing of public services. She seems to think that we should require the public sector to deliver public contracts, rather than SMEs. Which is it?
Florence Eshalomi
The hon. Member is absolutely right: those SMEs will work with local councils in a local area, and they know the local area. In some cases the contracts that are outsourced are not value for money. This is about ensuring that, in public contracts, public money is spent in the right way. If we are to lower the risks faced by SMEs seeking to enter the supply chain, it is vital that the measures in the Bill have an impact.
Sir Iain Duncan Smith
One of the biggest problems during the pandemic, which came out of China and became a global pandemic, was the question of everybody scraping around trying to find PPE, most of which was manufactured in China. Is it therefore part of the hon. Lady’s argument that we should have strategic manufacturing of PPE—either here or certainly in democracies that we can trust—to which we get earlier access, or will we just leave it to be produced somewhere else?
Florence Eshalomi
I agree with some of the amendments the right hon. Member has tabled on the issue of China and national security. Throughout the Committee stage, we argued consistently for removing risks from countries with a high national security risk, but we have concerns about the approach of naming specific countries in the Bill. It is important that we work with the whole House to get the right framework. I urge the Minister to consider our amendment 17, which is a careful mechanism for assessing the impact of the new rules that he is championing.
Throughout the passage of the Bill, national security has been an issues of extreme interest to the House. On Second Reading, we heard a tour de force from the Chair of the Foreign Affairs Committee, the hon. Member for Rutland and Melton (Alicia Kearns), on national security. In Committee, I raised multiple concerns with the Minister about the place of national security as a discretionary exclusion ground and its role in the debarment system. I am pleased that the Minister was listening to all those points, and we welcome amendment 57 and similar Government amendments, which we believe will address many of the concerns raised in Committee. I welcome the amendments originally tabled by the hon. Member for Rutland and Melton, which will establish a list of high-risk suppliers as part of the Bill. Our amendment 15 would exclude suppliers identified as a security threat from public contracts. Although that offers some benefits over alternative proposals, there is a balance, so we are not minded to press amendment 15 to a Division.
Procurement practices affect not only our services, but the many workers who rely on procurement-related roles for their jobs and livelihoods. Public money, and the jobs that will create, should not be given to those who treat their workers unfairly. Our amendment 18 would give contracting authorities the power to exclude suppliers that have significantly and repeatedly breached the rights of their staff. It would affect only those who have not taken self-cleansing measures to correct their conduct and the causes of breaches. The amendment would ensure that authorities have the right to turn away the worst offenders on workers’ rights, and would ensure that publicly funded jobs are protected jobs.
It can only be right that those seeking public contracts in the UK are transparent about where they pay their tax. The public would not expect their hard-earned money to go to those seeking not to pay into the system themselves, but a study from the Fair Tax Foundation found that, between 2014 and 2019, one in six public contracts were won by companies with links to tax havens. Our new clause 10 would mean that multinational companies bidding for large public contracts need to provide information about their tax arrangements in the UK. That would be open to the public and create greater transparency on how public money is spent. Amendment 16 would create a discretionary exclusion ground for suppliers that have violated UK sanctions or export controls, ensuring that authorities have the power to exclude from the procurement system those who continue to profit off businesses in places such as Russia. New clause 11 would require authorities to undertake a public interest test whenever deciding to outsource public services, to ensure that it truly offers value for money. Finally, new clause 14 would allow public authorities to choose not to buy goods or services from countries on the basis of their human rights records. That would give authorities the power to set clear policies, not to hand public funds to those committing atrocities around the world.
I pay tribute to members of the Committee for their engagement on this very long Bill. We have definitely shone a light on it, and had many discussions about paperclips. In particular, I thank my hon. Friends the Members for Birkenhead (Mick Whitley) and for Brighton, Kemptown (Lloyd Russell-Moyle), who embellished the Committee with a wealth of examples of procurement practices from their constituencies. I hope the Minister will listen to us on why additional amendments are important to strengthen the Procurement Bill in the interests of all taxpayers across the country, and I look forward to hearing from other Members.
Sir Iain Duncan Smith
I rise to speak to the amendment in my name and those of 26 others in the House of all parties.
The real issue here is the existence of a specific law in China that makes pretty much all companies in China, but particularly those involved in technology, a public risk in procurement to the United Kingdom. Article 7 of the People’s Republic of China national intelligence law 2017 states:
“Any organisation and citizen shall, in accordance with the law, support, provide assistance, and cooperate in national intelligence work, and guard the secrecy of any national intelligence work that they are aware of.”
In other words, under the Chinese national intelligence law, they must completely comply with all demands and requests for information in the business they are in, and deny they have done that to any other country or authority that asks. We have had Chinese companies coming to the House and lying to Select Committees about what they are doing, all saying that they have no obligations under the national intelligence law. They do have obligations under that law and they will lie for their country as a result.
We need to start by understanding the problems, and I thank my hon. and right hon. Friends on the Front Bench for having listened to the arguments and changed the terms, first by referencing the national intelligence law, which is very important, because many Departments will play fast and loose unless what they must do is made very clear. We have been encouraging the Government, who came out with views on Hikvision, Dahua and other companies supplying surveillance equipment to the UK, knowing that they are a surveillance risk not because they are cameras in a particular fashion but because what they glean is available completely to the Chinese authorities under the national security laws.
We have heard from my hon. Friend the Member for Isle of Wight (Bob Seely) about the small devices—a growing threat that I have not referenced but which also gets caught by the national intelligence law. China is leading in this technology, which is one way in which it can keep track of its own people, but they are now using it more broadly. I had a suspicion and heard that the cars that my hon. Friend was referencing were Downing Street cars. There is a very good chance that the Prime Minister and others may have been tracked by the Chinese Government without our knowledge.
We must therefore remember that first and foremost China poses a significant threat to us, our interests and the way we live our lives. Until we all agree and come to those terms, we simply cannot move on; that is the key. Government Departments and the Government have dragged their feet over this because we do not want to upset the Chinese—but it takes a lot to upset the Chinese because they carry on as before. The amendment is intended to get the Government to accept that we should reference the national intelligence law because that defines all Chinese business and companies and therefore they are a threat.
There are other Chinese companies that are a problem that will not be named, and surveillance cameras are part of this. I must confess that when my brother-in-law went around an area of a farm looking at the surveillance cameras, he spotted that they were Hikvision cameras—they are not listed in the contract because the contract provider is a UK organisation, but we discovered that they are everywhere.
Once I heard the news that the Government clearly wanted Departments to get rid of those cameras, I made a set of freedom of information requests to all Departments about whether they had cameras, where they were, whether they were on their buildings, and what plans they had to get rid of them, having spotted that a lot of Departments still had them, including the Ministry of Defence. All Departments—bar I think the Wales Office, which came clean and said it did not have any or was getting rid of them—claimed that, under section 24 of the Freedom of Information Act 2000, they did not have to answer because it was a security risk. The security risk is having the cameras, not answering the damned question! Excuse my language, Mr Deputy Speaker. It is all about where the cameras are and what they are doing, and that is the point of the amendment.
I hope that Ministers will take this matter forward and tell Departments to stop obfuscating. If they are asked a direct question they should tell the honest truth and explain that under the new rules under the Bill they will be getting rid of those cameras, which is absolutely critical.
Kirsty Blackman (Aberdeen North) (SNP)
The right hon. Gentleman makes an excellent point on national security, particularly the risk posed by this equipment. I credit him and others across the House who have worked to encourage the Government to move on this matter. As well as the national security issue, does he share my concern that companies such as Hikvision are involved in human rights abuses in China, for example with the Uyghur Muslims?
Sir Iain Duncan Smith
I did not send the hon. Lady a copy of my speech but I am glad she has jumped into this because I want to move on to that point now.
Finishing on the point I have been making, however, it is good that the Government are moving on this, but I do not think they have moved enough because I am very worried about the word “sensitive”, which the Minister is talking about. I will come back to that, but this move will begin to bring us into line with the United States, who moved on this under their Hikvision Act, which banned it back in 2019. It is worth reminding colleagues, too, that the European Union is also ahead of us on this now, because the President has said that they must do some “de-risking” on the issue of threats from China. So we are coming back into line on doing that and the west is waking up to this threat.
It is not just about all the threats that are clear under the obligations and the data China collects—it data-harvests, by the way. When the Government said that they were banning TikTok from Government telephones, I made the observation that that is not enough because people might still have TikTok on their own phones. Having run a Department for six years, I know that Ministers’ telephones sit on their desks next to their Government telephones, and therefore the Chinese will be data-harvesting on the back of that. One of my Government colleagues said that he wants to get in touch with the younger people; fat chance they are going to listen to a word they are saying. The truth is he should get rid of TikTok like the rest and be real about it. We must now make it clear that Government telephones and the telephones of Ministers should no longer have TikTok.
Damian Green
I am glad that my right hon. Friend has moved this amendment, which as he knows I strongly support. To return to my point about timescale, security cameras are normally replaced every five to seven years. Does he think we have five to seven years in which we can leave these cameras in place in public sector buildings, or would he like their removal to be accelerated?
Sir Iain Duncan Smith
The Cabinet Office must now decide the pace of this change. I hear that it is talking about six months and will come forward with a clear and explicit decision. In line with what my right hon. Friend has just said, it ought to explain the timescales for how Departments are going to take them away and how quickly, and an endpoint. That is critical, because otherwise, as I saw with the FOIs, Government Departments will do whatever they can not to do this because they are frightened and they say it will cost them extra. What really costs us is if they fail to do it.
John McDonnell (Hayes and Harlington) (Lab)
On telecoms, not TikTok in this instance. According to reports last week, the UK telecoms arm of CK Hutchison, 3 mobile, is merging with Vodafone. Vodafone is extensively involved in Government contracts and evidence by Unite the union published this week is basically saying that CK directors supported the suppression of democracy in Hong Kong. In fact, the chair of the company, Victor Li Tzar-kuoi, is adviser to the Hong Kong Chief Executive. The right hon. Gentleman knows that John Lee, the Chief Executive, has been involved in the suppression of protests and in the arrest of trade union colleagues of mine, members of Unite. Does he share my concern that people linked to this company now are going to have access to Government contracts in the UK?
Sir Iain Duncan Smith
That is not the subject of the amendment but I will touch on it briefly. I have already spoken to the unions on this and I am very much in line with their position. The Government need to look very carefully at what has taken place, particularly because it reduces competition in the market. The links to the authoritarianism of the Chinese is one of the big worries, so I suggest that the Government have a serious look at that.
Returning to the point made by the hon. Member for Aberdeen North (Kirsty Blackman), these cameras are also being used in internal suppression in China. We know about the suppression of the Uyghurs; that is a genocide that is taking place. Even though the Government will not say it is genocide, everybody else believes it is: Parliament here has said it; the Americans have now said it; and so, too, have many other countries. I do not know why we cannot say this is genocide, but that is a question for another debate. The fact is that many of these instruments are being used as part of that suppression in the camps as well as to watch carefully so that suppression can take place. Right now, forced labour, forced sterilisation and re-education in camps are all taking place in China.
The hon. Member for Vauxhall (Florence Eshalomi) referred from the Dispatch Box to the Opposition’s amendments. It is worth reminding her that China poses a risk in just about every single area with its human rights abuses and abuses of workers’ rights, yet so many of our companies want to ignore that.
While I welcome much of what the Government have done, I do not plan to move new clause 1 today, but only because I want more from the Government. I think they understand that.
I come back to the “sensitive” point. The truth is that, by definition, all Government Departments must be sensitive. As I said, I spent six years in charge of the DWP, and what I know is that there is arguably no more sensitive Department, because stopping payments for one or two days from the DWP would wreak havoc across the United Kingdom. People would not be able to get money to pay their rent, to buy their food or to live—all those things of vital importance. So a foreign power might be able to use information to target a Department such as the DWP that is not on the list because it may not appear as sensitive as the Ministry of Defence, GCHQ or—God bless us—the Foreign Office, when in reality, it is much more sensitive.
When we try to use a word like “sensitive” to give ourselves a little bit of a break, the problem becomes: who defines sensitive, and how often we will redefine it? I recommend that the Government describe all Departments as sensitive or else get rid of the word. That would put the onus on the Departments to come to the Cabinet Office to say, “We need an exemption for a period” or, “We can’t do this as fast.” The current wording means that they will not have to do that if they are outwith the term “sensitive.”
The reality is that we have had a number of Dispatch Box commitments from a load of Government Ministers about interpreting these things, but they never come to fruition. We were promised guidance in the other place on slavery during the passage of the Nationality and Borders Bill, but that was never put in. We really want the Government to commit at the Dispatch Box to changing what they are doing with “sensitive” when the Bill goes to the other place. “Sensitive” is too weak a position. It lets Departments off the hook and will put all the onus on the Cabinet Office. That must be reversed to ensure that this removal gets done.
Kirsty Blackman
I really appreciate the right hon. Member giving way again. Would he consider asking the Government for removal from all sites and, when they produce their timeline, to have them say, “These are our priority sites, which will be done first, but there will be removal from all sites off the back of that”? That would cover removal from all sites but allow the Government to prioritise if they cannot do things overnight.
Sir Iain Duncan Smith
I agree that that would be the common-sense way of doing it; I think we are all on the same page on this one.
The thing about our new clause is that, without the word “sensitive”, the position is simple. The new clause uses the same language as the Cabinet Office’s announcement in November, which recommended the removal of Chinese CCTV from sensitive sites. Now, that was the wording. Okay. But when we ask, “What has happened? How many Departments have felt under pressure to do that?”, we start to discover that they are not doing it because it is too difficult, and they want the requirement to go away. My answer is: do not use the word “sensitive” in that respect. It is about national security law, and Government Departments must either be completely defined as “sensitive”—if we want to use that word—or be bound to rid themselves of all companies obligated under the national security law. If they are unable to do that, they must make their case so that we can question that publicly and comment about what is going on.
I conclude on this simple point. The new clause is there to try to make it clear that we face a most significant and dangerous threat from the Chinese Communist party in control of China today. It is everywhere. It is using slave labour to produce polysilicon to collect solar rays. We all beat our chests proudly and proclaim that we are heading towards net zero, but on whose backs is that? It is people working in slave labour conditions to produce these things, people under surveillance, and people taken away on genocides. A Government already doing this internally are now referring it out to us. We must make it clear beyond peradventure that Government Departments must now rid themselves of equipment and never place contracts with other companies on equipment that comes under the rule of the national security law. I am looking for commitments from the Government today that, by the time the Bill gets to the other place, that will finally be resolved. If so, they will have my approval and that of many others in the Chamber.
Apsana Begum (Poplar and Limehouse) (Lab)
I rise to speak in favour of a number of new clauses and amendments to improve transparency and accountability regarding public procurement and providing value for money for the taxpayer, including those tabled by Labour Front-Bench Members. The House will be aware that trade unions and others have long raised concerns that existing procurement policy pushes public authorities to privatise and marketise public services, including through private finance initiative contracts, which allow private consortiums to make high profits out of public assets—often far above the true value of the asset.
A particularly controversial element of procurement policy has been the use of private finance initiative regimes in NHS contracts. The evidence is clear that many of them have left NHS trusts heavily in debt owing to the need to repay private companies for capital assets, with high repayments meaning that some NHS trusts pay 12 times the initial sum borrowed, giving some investors profits of 40% to 70% in annual returns. Indeed, the poor performance of many of the private outsourcing and consulting companies brought in at significant cost to the taxpayer to provide parts of the covid-19 response stood in stark contrast to the consistently proven effectiveness of our publicly run NHS, for example, but that did not stop more and more contracts being awarded to those seeking to make money off the back of our country’s worst health crisis. Amendment 2, which would prevent VIP lanes by ensuring that any contract awarded under emergency provisions or direct awards should include transparency declarations, is therefore critical.
Tim Loughton (East Worthing and Shoreham) (Con)
The hon. Lady has just described PFI contracts in harsh terms, and she is now going on to procurement. Will she explain why the vast majority of those PFI contracts for hospitals, medical facilities and schools were awarded under the last Labour Government?
Apsana Begum
The problem has existed through successive Governments. However, I recognise it through my NHS trust, which is still paying sums that are much higher than the true value of the assets. It has been a problem under successive Governments, and the Tory Government have had years to sort it out if they had wanted to do so.
The Bill does not exclude private companies from getting contracts even where they are failing to abide by international labour law and other environmental standards. I therefore support amendment 4, which would ensure that no public contract would be let unless the supplier guaranteed payment of the real living wage, as calculated and overseen by the Living Wage Commission, to all employees, contracted staff and subcontractors. That is critical because about 4.8 million workers across the country are paid less than the real living wage.
There are a number of amendments and new clauses relating to national security. Indeed, we have heard a lot about national security in the debate. I want to mention briefly the victims of the brutal repression in Hong Kong, some of whose architects may shortly become suppliers to the Government, as mentioned by my right hon. Friend the Member for Hayes and Harlington (John McDonnell). Recent years have seen curbs on the work of trade unions, the jailing of protestors and arrests of independent media outlets. The Hong Kong Confederation of Trade Unions was persecuted until it was dissolved. Many of its affiliates had been involved in industrial action, including a successful 2013 dock strike for pay and conditions at Hongkong International Terminals, owned by the Hong Kong-based CK Group.
Hon. Members may wonder what relevance this has to a debate about Government procurement in this country, The Minister will no doubt be aware that Vodafone is a so-called strategic supplier to the Government and an approved supplier on two framework agreements, providing a range of telecoms services, including mobile voice and data services. As such, Vodafone has an official Crown representative, appointed by the Cabinet Office, who liaises with it on behalf of the Government.
Bob Seely
It is a pleasure to follow the hon. Member for Poplar and Limehouse (Apsana Begum), and I think that some of the things she said will be echoed on the Government Benches.
I want to speak, in the time I have, to new clauses 1, 13 and 16, and I will try to theme them. Before I do so, I want to thank the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Brentwood and Ongar (Alex Burghart), for his excellent work on the Bill. People moan about Parliament, but we have a Government bringing forward this legislation and Back-Bench MPs from across the House trying to shape it for the betterment of the nation. There is a lot of good in the Bill and I thank the Minister for listening, as he has clearly and obviously done.
I want to talk about the strategic, political and human rights ramifications of supply chain dependency. I thank the Government for their excellent work and the fact that they are moving on this. We will have a national procurement centre, which will look at high-risk firms not only from China but potentially elsewhere. I congratulate my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) and my hon. Friend the Member for Rutland and Melton (Alicia Kearns) on their really good work on this.
However, my criticism is that while the Bill is a start, the new clauses that I am speaking to would allow us to go further, and I want to explain why that is. We urgently need to understand the UK’s economic dependence on systemic threats or competitors—namely China, but not only China—and the political, economic and ethical ramifications and risks of that dependency. Not to do so is to betray our national interests. I am concerned at the lack of urgency on this issue, which has become significantly more pressing in the last five years. I thank the Government for focusing more on it, but more needs to be done. I think we are at the starting gate. The reality is that we have high levels of dependency and they are increasing, not decreasing.
Here are some facts. First, as an act of state policy, China is aiming to become less dependent on others, while encouraging others to be more dependent on it. It is decoupling from us, but making sure that we are coupled to it. The Made in China 2025 plan had the goal of raising the domestic content of China’s core components and materials to 70% by 2025. In 2020, it set a goal to become largely self-sufficient in technology by 2035. At the same time, the belt and road initiative means that China is now the largest lender to developing countries and is effectively encouraging debt dependency, which we have talked about in the past. President Xi, at the seventh session of the Chinese Communist party’s finance and economy committee, said that China must develop “killer technologies” to strengthen the
“global supply chain’s dependence on China”.
So this is not a case of, “Gosh, is this happening?” It is stated policy. We do not need to debate whether it is happening; we are being told by the leader of the Chinese state and the Chinese Communist party that it is.
China is already the largest importer to the UK and many other countries. We import more than 50% of our supplies from China in 229 categories of goods. Some 57 of those categories are in sectors critical to the UK’s national security. I therefore agree entirely with what my right hon. Friend the Member for Chingford and Woodford Green was saying only a few minutes ago. It is difficult to say what is strategic and what is not. In the US, it might be agricultural production. Here it might be the details of 20 million people on the DWP’s databanks. The 57 categories of goods cover communications, energy, healthcare, transport, critical manufacturing, emergency services, agriculture, Government facilities and information technology.
I do not care that we are 85% dependent on China for plastic Christmas trees—although, I do worry about the environmental impact—but I do care that we are 96% dependent on China for phenylacetic acid, which is a basic building block for many drugs; 83% dependent for TV receivers and decoders; and 68% dependent for laptops. China controls near 90% of rare earth processing, which we are now beginning to worry about. And the point about solar panels was well made.
I asked the Foreign Secretary yesterday about having an annual statement on dependency, not just on China but on states in general. He said that one was not needed. With great respect to the Foreign Secretary, I profoundly disagree. We argued during the passage of the National Security and Investment Act 2021 that we need an annual statement of dependency. New clause 13 is about establishing an understanding of the nature of our extreme dependency. I did a report with the Henry Jackson Society a couple of years ago. We found that although we are the least dependent of all the Five Eyes nations, we still have a critical dependency on China in 230 areas of our industry, manufacturing, information technology and so on.
Sir Iain Duncan Smith
Just to add to my hon. Friend’s list, as we move to electric vehicles we are about to make ourselves even more dependent. Even battery factories in China are turning themselves into car factories selling to the UK.
Bob Seely
I agree completely and I thank my right hon. Friend for that point. I would not even like that dependency on our allies. Would I like that level of dependency on the United States? No. On Australia? No. But to have that level of dependency on a Communist dictatorship that is investing massively in AI and big data to spy on their own people and increasingly on us as never before, to threaten peace in the Pacific, and to have a stated aim of dominating while freeing itself from dependency on the west, is really an extraordinarily dangerous position for us to find ourselves in.
We know that Chinese Communist party companies such as Huawei actively seek to gain a monopoly position by systematically destroying economic rivals. That is not fair trade; it is trade as a weapon for a Communist party dictatorship. It did it with Huawei, undercutting and deliberately destroying rivals on price through cheap subsidies. It is now doing the same with cellular modules, seeking to dominate and take control of the market. It does that through IP theft, economic espionage, subsidy, access to super-cheap finance, shared technology and other forms of state support.
Companies such as Quectel and Fibocom—the manufacturers of cellular modules—will, like Huawei, claim to be private. They are not. Nothing is private, as my right hon. Friend the Member for Chingford and Woodford Green said, in a Communist state. It was profoundly depressing for me, a couple of years ago, to hear two former senior Conservative Ministers, who should know better, say that Huawei was a private company. That is a rather more serious way of accidentally misleading the House than whether somebody ate cake or not, but that is another matter.
What are the dangers? We know that the Chinese leadership see themselves as being in competition with the west. Why? Because they tell us. A 2013 “Document No. 9” concludes that western constitutional democracy and universal values were a fundamental threat to the PRC. Of course our values are a threat to dictatorships. Our values are always a threat to communists. Earlier this year, a work report delivered to the National People’s Congress set out the belief that
“external attempts to supress and contain China are escalating”,
and the term “self-reliance” appeared multiple times. Again, the idea is to create dependency on China for us, while at the same time freeing China from dependency.
What is the worst-case scenario? Frankly, it has happened in Russia, so we should at least be alive to the idea that the worst-case scenario may be happening in the Pacific.
President Xi has told his army to be ready to re-take Taiwan by 2027. As I said, let us please stop pretending that dictators do not mean what they say, because they have a depressing habit of meaning what they say. I wish they did not; I wish they would overpromise and underdeliver, but they tend to do what they promise.
Either the UK is militarily involved or it is not. Either way, an assault on Taiwan, either by slow strangulation—a sort of Berlin scenario—or direct invasion, would profoundly alter the state of the world. We would have to put on the mother of all sanctions. The minute we do that, we will risk not only a global economic meltdown, but an economic meltdown probably worse than covid. It will strain to breaking point our relationship with the United States, the European Union and Australia—and not just our relationship but the interdependent relationships.
I am not saying that will happen—although, I think we are heading in that direction—or that we should stop trading with China; I am saying that it makes a great deal of common sense, frankly, to know what our levels of dependency are. That is why I would love the Minister to commit to at least developing an understanding of what our trade dependency is.
There is another reason to be concerned about supply chains: what is happening in the Xinjiang Uyghur autonomous region, which other Members have rightly mentioned. A 2022 UN report found serious human rights violations in the region. They seem to be about the most significant human rights abuses currently happening in the world, whether we use the “G” word or not—genocide. The Xinjiang Production and Construction Corps alone produces 8% of the world’s cotton. China overall produces 20% of the world’s supply of cotton. Effectively, this is a new slave trade in cotton, as shocking as that sounds. It is not happening 200 hundred years, in the 19th century, in the southern United States; it is happening now, in the early 21st century, in Chinese-controlled central Asia.
There are many other things coming out of the Xinjiang province that tell the story of using forced labour, as both Opposition and Government Members have eloquently spoken about. There is forensic technology available, which we could be using in this country, that can pinpoint the region of origin for items tainted by modern slavery, such as cotton. When it comes to new clause 60, on eradicating slavery and human trafficking in supply chains, I ask the Government to set an example by saying that we will, at the very least, commit—a good Government word—to bringing in that forensic technology within a period of time. That would enable us to understand whether western companies are using slave cotton—an incredibly horrible phrase to use in this age—in their manufactured goods.
Finally, we have spoken about Chinese surveillance technology, and I speak again in support of new clause 1. We have got to get this stuff out of the country for a start. As my right hon. Friend the Member for Chingford and Woodford Green says, with all the dual-use capabilities and new styles of conflict, not just in conventional military but in data domination, it is really difficult nowadays to say where security starts and finishes.
In summation, we need to understand, as a critical matter of national importance, our supply chain dependency on any country, but specifically China. I implore the Government to use the Bill, even at this late stage, to bring in a statement of dependency so that we can begin to understand and to take measures to work out not how to stop trading with China, but how to trade more safely. That way, if we need to take sanctions in future, and for the health of our relationship with that superpower, we can begin to work out how to diversify our supply chains in future and, at the same time, do something about the horrors happening in Xinjiang.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I rise to speak to my new clause 12 on the protection of subcontractors’ payments under construction contracts. As the explanatory statement describes, the new clause
“ring-fences moneys due to subcontractors in construction supply chains through mandating the use of project bank accounts and ensuring that retention moneys are safeguarded in a separate and independent account.”
Tim Loughton (East Worthing and Shoreham) (Con)
I will speak primarily to new clause 1, in the name of my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), my name and those of other right hon. and hon. Members.
I have a deal of sympathy with some of the points raised by other Members, not least those eloquently put by my hon. Friend the Member for Isle of Wight (Bob Seely) about trafficking and supply chain risks, as well as those to do with organ harvesting, which all feed back to the subject of China. I appreciate the good work of the Minister, who has listened to some of the representations made, particularly by those of us who have continued grave concerns about the influence of China and its insidious involvement in so many aspects of our society.
We appreciate and are grateful for what has happened so far, but it does not go far enough. That is why I want to speak to some of the themes raised by my right hon. Friend the Member for Chingford and Woodford Green and reinforce how this can only be a staging point and not the end result of what we need to achieve. We very much hope that these provisions will be greatly strengthened in another place.
The new clause that we propose is not extreme or prescriptive. It asks for a serious and realistic timeline, not a completely open-ended one. It passed with a comfortable majority in the House of Lords. It would require the Government to publish a timetable within six months of the Bill receiving Royal Assent for the removal from the UK procurement supply chain of Chinese technology camera companies that are subject to the national intelligence law of People’s Republic of China. It would catch Hikvision and Dahua Technology cameras that are currently in use across the UK public procurement supply, including in NHS trusts, schools, police forces, jobcentres, prisons, military bases and many local council buildings.
Human Rights Watch has found that Hikvision is one of the principle Chinese companies involved in the construction of the Chinese surveillance state and the camps that house over a million Uyghurs in Xinjiang, as we have heard. A recent report by Big Brother Watch found that about 2,000 public bodies in the UK—some 61%—currently use Hikvision and Dahua surveillance cameras. Other public bodies that have confirmed, in response to freedom of information requests, that they use those cameras include more than 73% of local authorities, more than 63% of schools, more than 66% of colleges, 54% of higher education bodies, 35% of UK police forces, and more than 60% of NHS trusts. There have also been subsequent reports that Hikvision cameras are being used on UK military bases.
Sir Iain Duncan Smith
My hon. Friend is making an excellent speech. May I return him to the procurement point about what is national security and what is not? He will know, as I do, that if we go to Hong Kong we can see that HSBC, for instance, is already, in a way, in league with the authorities. The changes it is imposing include freezing the pension funds of people who are over here under British National (Overseas) passports and, at times, freezing their bank accounts. It says that it has to obey the Chinese Government. Is that not what we are saying? There is no particular definition. They are all operating, once these companies are in China, under the rule.
Tim Loughton
My right hon. Friend is, of course, right. He and I and others in this place who have been sanctioned in China and beyond have drawn attention to how effectively respectable global British companies are becoming complicit in the suffocation of the democratic principles, freedoms, liberties and rule of law that we all take for granted, and they need to answer for it. Are they on the side of the rule of law, of international freedoms and liberties in all the areas we have described, or have they thrown in their lot for a mess of pottage—or whatever we want to call it—with the Chinese Communist Government, notwithstanding their complete abrogation of any pretence to democratic accountability and freedoms for the individuals who not only happen to live within its borders but against whom they are increasingly able to extend their tentacles globally, not least in this country?
Hikvision and Dalua are both subject to China’s National Intelligence Law, which stipulates that
“any organisation or citizen shall support, assist, and cooperate with state intelligence work according to law”.
The law also permits authorities to detain or criminally punish those who “obstruct” intelligence activities. The presence of vendors who are subject to extrajudicial directions from a foreign Government which conflict with UK law may risk failure by the carrier to adequately protect networks from unauthorised access or interference.
In the UK, Uyghur people face a sustained campaign of transnational repression in the form of threats, harassment, cyberattacks, and online and in-person surveillance. LBC and the Financial Times have recently reported instances of Uyghur people seeking refuge in the UK being offered thousands of pounds a month and blackmailed by Chinese security officers to spy on Uyghur advocates. In that context, the Government must take seriously the threat posed by the presence of this equipment to British national security and the safety of exiled and dissident populations seeking refuge in the United Kingdom. Without urgent action, the UK risks facilitating a system of surveillance designed to extend Chinese domestic policy across borders.
The evidence, which is presented by reputable sources such as IVPM, Axios, The Intercept, The Guardian and the BBC, is deeply troubling. These and other reports paint a harrowing picture of the situation in Xinjiang and provide substantial evidence of Hikvision’s involvement. IVPM’s investigation reveals that Hikvision, a leading provider of surveillance technology, has actively contributed to the surveillance state in Xinjiang, where more than a million Uyghurs are estimated to be held in what we now know to be internment camps. Hikvision’s technology is reportedly used to monitor and control the Uyghur population, facilitating its repression. Worse, it is credibly accused of constructing the surveillance state in Xinjiang in close partnership with the Xinjiang Production and Construction Corps, a report corroborated by The Guardian, which published leaked documents outlining Hikvision’s close collaboration with Chinese authorities in developing and implementing surveillance technologies in Xinjiang. The evidence suggests a concerted effort by Hikvision to profit from this oppression.
Axios, in its comprehensive reporting, explains that Hikvision’s surveillance cameras are integrated with sophisticated artificial intelligence systems to track, profile and identify individuals in Xinjiang. Let me be clear: this technology is trained to recognise Uyghur-looking faces with a view to profiling them, flagging them when they are doing things of which the Chinese Government do not approve, and then facilitating their persecution through mass surveillance and control with the aim of suppressing their cultural, religious, and political freedoms.
The scale and sophistication of Hikvision’s surveillance technology exacerbate the already dire human rights situation in the region. The Intercept’s exposé provides damning evidence that Hikvision’s technology has been directly used in the internment camps, enabling the Chinese Government to monitor and suppress the Uyghur population. One source revealed that Hikvision’s cameras were installed throughout the camps, capturing every move and expression of the detainees. This raises alarming questions about the company’s complicity in the perpetration of human rights abuses that our own Government have described as
“torture…on an industrial scale”.
The evidence leaves no room for doubt. Hikvision’s involvement in the surveillance and control of the Uyghur population in Xinjiang is deeply troubling, and, even without the security concerns so ably highlighted by my right hon. Friend the Member for Chingford and Woodford Green, would warrant the company’s removal from our supply chains, consistent with our modern-day slavery commitments. We cannot turn a blind eye to the suffering of millions of innocent people, and help those who persecute them fill their pockets with public money.
Bob Seely
I have a genuine question for my hon. Friend, who is making a brilliant speech, and for the Minister. Given Hikvision’s frankly repugnant role in the ethnically based oppression of an entire people, why on earth is it not covered by our Modern Slavery Act 2015 and how did we let such a repugnant company into this country under any guise?
Tim Loughton
My hon. Friend poses a very good question. Whether it is on moral grounds, on the basis of what this House has voted for in the past or on the basis of legislation that is topical in many areas around modern day slavery at the moment, we should not be anywhere near that company or similar companies. Our Government, our public bodies and our procurement agencies need to take much more notice of what Governments do and say. Much more must be done, and urgently so.
It is incumbent on the House to call for a comprehensive investigation into Hikvision’s activities and its complicity in the suspected atrocities against the Uyghurs. We must work alongside our international partners to hold Hikvision and the Chinese Government accountable for their actions. Most importantly, we should use the purchasing power that we have as a Government and the interest we have in public bodies to disincentivise companies from behaving in the way Hikvision has towards the Uyghurs. At the moment, we are not merely failing to hold these companies to account; we are actually making them richer. The Government’s decision to remove Chinese state-owned surveillance at sensitive sites is welcome, but not sufficient. The widespread use of Hikvision equipment by police forces, hospitals and local councils risks providing malign states—
Mary Robinson (Cheadle) (Con)
I am grateful to my hon. Friend for giving way. He has set out an alarming set of issues around the extensive use of this surveillance equipment across various sectors. I know that the Government are listening, so if they were to go ahead as he suggests, should they not, in a parallel way, also ensure that the capacity to fill the gap is there and incentivise other companies to fill it?
Tim Loughton
I do not wish to alarm my hon. Friend, but I am afraid that what we have heard is alarming. The trouble is that it is true. It is based on evidence and the sources that I have given.
We have to achieve a balance here, but we need to show greater urgency to dispel the current installations that we have. We need to ensure that they are replaced with reliable equipment from trusted sources as a matter of urgency. It is that urgency that we are not seeing. My hon. Friend the Minister said that within six months the Government would produce this list—a limited list of action that they are going to take. They could come up with a timeline that is still several years away. That is not realistic or sending out the right messages, and we can and need to do far better.
The widespread use of Hikvision equipment by those different agencies risks providing malign states with a back entrance into UK security and imposing an unwanted reliance on those countries. By contrast, the White House has taken a strong stance on those companies by refusing to support Chinese companies that undermine the security or values of the United States and its allies. Embracing and reasoning would allow the UK Government to be consistent with their commitment to protecting core national security interests and democratic values. That is why this new clause is so important. I hope that the Minister will respond positively to that and give us a reassurance and an offer, if we are not taking the new clause to a vote today. My right hon. Friend the Member for Chingford and Woodford Green has rather let the cat out of the bag by saying that he will not press his new clause to a vote. If that is the case, more has to be done in the other place. We need much tougher measures than we have seen so far, because I am afraid that the Chinese are laughing at our failure to treat this with the seriousness and urgency that it requires.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I rise to speak to a number of amendments. It is worth highlighting that the bread and butter of the work of the Public Accounts Committee, which I have the privilege of chairing, is looking at procurement—failed procurement in particular—and making sure that we get on the record and into the brain of Whitehall the lessons learned from those failures. We have also been at the forefront of looking at procurement during covid, and we did our first inquiries into that as early as June 2020. I want to place on record my thanks for the hard work of the National Audit Office, which immediately pivoted to online working to enable us to continue our scrutiny of the Government as a cross-party parliamentary Committee.
John Penrose (Weston-super-Mare) (Con)
The hon. Lady is being very complimentary about an amendment that I tabled and she kindly signed to show cross-party support. Does she agree not only that the cost of evaluation is a rounding error but that the savings from weeding out dud contracts early would dwarf any possible cost? In any case, we already have a network of so-called what works centres, which are arm’s length, independent bodies that have been doing precisely this for ages. The problem is that they cover only about 8% of all that we buy, but they are already in place, so the additional marginal cost would be even smaller.
Dame Meg Hillier
I agree with the hon. Gentleman. Of course, if evaluation is built in from the beginning, the company that has been contracted to do the work would be required to collect data. They will say that that involves more cost but, over time, it would wash out. We need a better standard of data collection on all sorts of issues.
Take the example of a contractor that was asked to run a prison. The Government provided data on the prison’s maintenance, but the data was not right as it did not count the number of windows and toilets, and so on, that needed to be fixed, so the company had to come in and count them. In that case, the company had not banked on prisoners breaking more windows than the average in other buildings. There is lots of data, and we keep pushing for it to be collected, and that data could be built into evaluations.
The hon. Gentleman is bang on about making sure we do not send good money after bad. If something is not working, we need the evidence and the political courage, sometimes, to end the contract. We need to make sure that the people delivering a contract are clear that they are delivering the contract’s aims. Evaluation should have the impact of tightening procurement, tightening the management of contracts by the civil service and sharpening up those who bid for contracts to do a better job and to be proud of that job, in the knowledge that doing a good job may well mean that the contract is extended, but not if they do not do a good job. We should also reward good behaviour. I am keen to hear what the Minister has to say about that.
My right hon. Friend the Member for Barking (Dame Margaret Hodge) tabled amendments that would ensure that organisations involved in nefarious activities are excluded from public procurement. It is extraordinary that companies that are making money in nefarious ways can bolster their activity and give themselves credibility through public procurement. Others have talked a lot about the issues around China, so I will not go into that much more. My right hon. Friend has a strong reputation in this area, and her amendments speak for themselves.
We do not want to miss this opportunity. I recognise that not everything in procurement is about legislation. It would give me some comfort, as Chair of the Public Accounts Committee, if the Minister showed that that is being thought about a bit more deeply across Whitehall.
Danny Kruger
This has been a very interesting debate, veering from grand geopolitics to the sourcing of public services and paperclips. All of this is, in a sense, the responsibility of an independent country, so the debate is one benefit of Brexit, for which I am sure we are all very grateful.
I am pleased with the Bill and the Government amendments. I think of it as the patriotic Procurement Bill, which is exactly what we need. I particularly welcome the explicit commitment to national security that has been added to the Bill, and I pay tribute to my hon. Friends the Members for Rutland and Melton (Alicia Kearns) and for East Worthing and Shoreham (Tim Loughton), and my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), for their work and their contributions today. I am particularly grateful to my hon. Friend the Member for Isle of Wight (Bob Seely) for his tremendous speech about the dangers we face from a more hostile China.
In the Government amendments, and in Government policy in general, we see a necessary new realism in UK policy. Security is the new watchword of our times, and to me it means much more than defence against hostile states. We face all sorts of other threats to our security, including, as my hon. Friend the Member for Isle of Wight mentioned, our extreme dependence on supply chains around the world, not only but particularly those in hostile states.
Conservative Members tend to regard “protecting” and “subsidising” domestic industry as dirty words and unorthodox policies. Nevertheless, we see around the world a growing tide of tariff barriers and domestic subsidies. Our great friends in the United States have committed to spending $500 billion on domestic manufacturers, particularly to wean themselves off Chinese imports. I welcome the Prime Minister’s commitments this week to a new US-UK economic collaboration arrangement to secure our common interests and to ensure that we have safe supply chains. We will need to rely more on our allies in future.
As we move from a just-in-time procurement model, we need to recognise, particularly on this side of the House, the role of Government in ensuring economic security. The fact is that £300 billion a year makes the Government the biggest player in the UK economy. As we have heard today, and I pay tribute to the speeches made by Opposition Members, the Government are often not very good at procurement and spending public money for public goods. We could go into the sources and origins of that, but we should recognise that since the late 1990s, and under the Blair and Brown Governments in particular, the model of new public management has created a new doctrine of how Government money should be spent on private sector providers. The principle of introducing internal markets—the purchaser-provider split—was an attempt to ensure greater efficiency, greater value for money and greater responsiveness to the users of public services, and it engendered all sorts of difficulties, too. The hon. Members for Poplar and Limehouse (Apsana Begum) and for Oldham East and Saddleworth (Debbie Abrahams) listed some of them, and I recognise them from my previous work. Providers have to jump through really bureaucratic processes.
There is a concentration of big suppliers. My right hon. Friend the Member for Chingford and Woodford Green has done a lot of good work, although he did not speak about it today, on the importance of SME procurement. Large charities in particular can game the system, in the way that large companies can, to secure Government contracts. The Government often do not buy the best; they buy the service that gives commissioners the least risk. Those suppliers often run rings around Government. In the way services are designed and delivered, we see cost deferrals, with payment pushed back beyond the budget cycle; cost shunting, with different parts of the public sector having to carry the cost for a bad contract; the creaming of the high-value, low-cost clients or services; and the parking of high-cost, low-value services. So the providers, whether they are charitable or commercial, game the system. We see that all time, so all this needs improvement and this Bill takes important steps towards ensuring that.
Sir Iain Duncan Smith
I am fascinated by the speech my hon. Friend is making, because he is right in one sense about this. We did a report at the Centre for Social Justice about four or five years ago where we looked at productivity. So often we make international comparisons, but the whole figure for productivity contains that which a country wants to put into it. For example, France does not put health or education into its productivity measures. Health and education have shocking productivity outcomes in terms of cost, which means that France is able to declare itself as having a higher level of productivity. London and the south-east have the highest productivity in Europe, but the real story is that the rest of the UK does not meet the average for the whole of the Europe, which tells us what our problem really is.
Danny Kruger
My right hon. Friend makes important points, and I recognise the difficulty of comparing our productivity figures with those of other countries. The comparison I am making is with our own recent history, but he is absolutely right in what he says. Indeed, the point about what is measured matters enormously. In our debates, we often make the mistake of thinking that the only things that matter are those that can be easily quantified. That is a great challenge we face, particularly in the social sector.
The Government are rightly committed to improving the efficiency and productivity of the public services—I absolutely support them on that—but we face another great challenge that does not get enough of a mention: the need to reduce demand on the system as a whole. We are spending so much not just because we are inefficient, but because the demand on the system is so high. I do not need to run through all the details of the enormous budgets we spend on social breakdowns and the consequences of social problems that we should have averted, in criminal justice, in the health budget, in what is called “social protection”. Some £150 billion is categorised under “social protection” in the public finances—not pensions, but paying for people who have tough lives. We should be seeking to reduce the cost of those budgets, because each one of those costs represents, in a sense, people in trouble. Both for financial and social reasons, we should be trying to reduce that expenditure.
How do we do that? We need social reform. I am not going to bore the House with long thoughts on that, but we need public sector reform, as has been mentioned a bit today, and that includes procurement reform. I acknowledge what Labour is suggesting in some of its amendments and in some of the speeches we have heard: an objection to the whole model of outsourcing. I recognise the objections to some of the failures of public service management—new public management—over the past generation, and some of the challenges of outsourcing and of competition in the public sector or for public services. However, I do not think insourcing everything is the answer. Reverting to a pre-1990 model of everything being delivered by the central state, as one of the amendments and Unison are championing, is not the right model. We need a better model of outsourcing that relies much more on civil society and, in particular, on the local, community-based services in which the UK is so rich and which do such a great job. We need to be able to measure their value properly and commission their services effectively. That is what this Bill aims to do.
I declare an interest, in that I set up and ran for many years projects working in prisons and with youth services. I have personal acquaintance with the challenge of EU procurement, not only social fund commissioning, but central and local government contracts. None of this is easy and I am familiar with all of that. I am familiar with the frustrations of getting on the frameworks; expressing interest; bidding through tenders; and being treated as bid candy on a long contract. I am also familiar with going through a pointless competition process where there is only one obvious provider—the one that helped to design the service—which still has to jump through loads of competitive hoops only for some other random provider to come in and swipe the contract; I speak bitterly from experience. The challenges that small social enterprises face are significant.
The difference between procurement and commissioning is not often acknowledged. We often have procurement departments doing work that is too complicated for them on their own. We need to have proper commissioning where people who are paying for a service work collaboratively with providers, stakeholders, service users and other parts of the system. Everybody needs to bring their assets, resources, skills and experience to co-design the service that is needed locally. The Bill brings us much closer to that model. I greatly welcome the measures that have been included, especially around the simplification of tendering. The single portal is an important development and it is good for transparency as well. The Tell Us Once registration is essential, as is the help that will be given to SMEs and social enterprises, including the active reduction in the barriers to tendering, lower reporting requirements and so on.
Most of all there is the shift from the most economically advantageous regime to the most advantageous regime. That small excision of the word “economically” is an important recognition of the point that my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith) was just making about the need to go beyond a purely commercial estimation of the value of social projects. I would go further. In 2020, I wrote a report for the Government who were trying to maximise and sustain the enormous contributions that communities were making during the first lockdown. I suggested that we recognise and declare that the whole of Government commissioning—the whole of public service spending—is to deliver social value for the public. Essentially, that is what we all believe and it should be stated much more explicitly in my view. I just bring the House’s attention back to the Conservative Government’s Social Value Act 2012, which gets those principles right.
I recognise that we need to take enormous steps forward. I honour what the Government have been doing around national security. I also honour the steps that have been taken to ensure greater opportunities for SMEs and social enterprises, and I commend the Bill to the House.
Caroline Lucas (Brighton, Pavilion) (Green)
I wish to associate myself with the remarks made by hon. and right hon. Members across the House about the dangers of sourcing from high-risk countries and parts of countries and those implicated in serious human rights abuses. The appalling persecution of the Uyghurs in Xinjiang is a very powerful case in point that has been echoed by many Members around the House, and I agree very strongly with that.
I rise to speak to amendment 60 and new clause 17. I welcome the provisions in the Bill that aim to help small and medium-sized enterprises to access public contracts. SMEs are often best placed to meet the needs of the communities in which they operate, providing numerous social and economic benefits. Those benefits, often referred to as a social value, cannot simply be reduced to a tick-box exercise. Nor can we allow social value to amount only to crumbs of compensation from corporate giants, while they extract wealth from our communities. Wider economic, social and environmental priorities need to be built in from the start of every procurement process.
The UK spends about £300 billion a year on public procurement. We could question whether that is a good thing. That has already been hinted at—whether some of these services at least would be better off delivered in-house by public bodies themselves rather than via contracts. However, this is probably not the place to go into that debate. I want to focus on the need to use that procurement spend as a force for good—to keep wealth in local economies, to ensure that public money goes to responsible companies and not those that exploit people and nature, and to help us meet our climate goals and to preserve a liveable future for all of us. I want to see values, not just value, at the heart of the public procurement process in public life.
That brings me to amendment 60 on the national procurement policy statement, which sets out the strategic objectives that the Government want public procurement to achieve. The amendment would require the Government to assess and report on the impact of the national procurement policy statement on meeting environmental and climate targets and to set out any steps that they intend to take to meet them.
Thanks to the efforts of climate campaigners across the country, we are now seeing the net zero goal and the need for climate action acknowledged in strategies and policy statements across the public sector. But these acknowledgements remain meaningless unless we assess the real world impact of those statements. Are our plans to reduce emissions actually being implemented and are they working? The amendment would signal to contracting authorities and businesses that the Government are serious about aligning procurement with climate and environmental goals. It would also enable Government to see where policy might need to be strengthened if it is not having the intended impact.
New clause 17 would require public contracts that include the supply of food to be aligned with nutritional guidelines and to specify options suitable for a plant-based diet. We know that animal agriculture is one of the largest contributors to global heating and biodiversity loss, representing around 15% of all greenhouse gas emissions according to the United Nations Food and Agriculture Organisation. More and more people are choosing to move to more plant-based eating and almost one quarter of people in Britain now follow a mainly or entirely meat-free diet.
The 2022 progress report to Parliament by the Climate Change Committee urges the Government not to ignore the role of diet and notes:
“Government can influence diet shifts, through mandating plant-based options in public settings”.
My amendment would require public contracts for the supply of food to be in line with the Eatwell Guide, which drew inspiration from the nutritional guidance of what was then Public Health England, developed in conjunction with the devolved nations. Analysis by the Carbon Trust found that, thanks to lower consumption of meat, dairy and sugary foods, the environmental footprint of the Eatwell diet is around one third lower than the current national diet.
In settings such as hospitals and schools, where good nutrition can make all the difference, our public sector should lead the way by offering nutritious and sustainable food. That is too often overridden by a narrow notion of value for money, resulting in vulnerable people being given food that does not meet nutritional guidelines. As we all remember, during the pandemic the Government were forced to U-turn on school meal vouchers after widespread outrage at the poor quality and quantity of food being distributed to families. That was not just one isolated failure; it was symptomatic of a political culture that thinks we can package up children’s nutrition, health or any public service and hand it over to whichever corporate giant says it will do it most cheaply. That is the culture that has to change.
Last year the all-party parliamentary group on the green new deal, which I co-chair, produced a report setting out how local community-based solutions are key to climate action. As part of that inquiry we heard from the Sustainable Food Places network, as well as from community farms and kitchens. A key recommendation that came up again and again was to use the procurement system to support more local food and plant-based diets.
The Government’s own food strategy proposes a target of at least 50% of food spend to be on food produced locally or to high environmental standards, a move I certainly applaud. However, nine months on from the Department for Environment, Food and Rural Affairs consultation, we are still awaiting the Government’s response.
Pioneering local authorities and public bodies are leading the way, and my constituency has had some notable successes. In 2020, Brighton received the first-ever Sustainable Food Places gold award. It has brought in improved standards for procurement as part of a wider campaign to get more people eating more vegetables and its school food supplier meets the Food for Life gold standard for championing healthy, local, climate-friendly food.
A more joined-up approach to food, climate and nature and a real commitment to supporting local businesses and community organisations would have huge benefits for our health and our local economies. In addition to the provisions in this new clause, I would therefore hope to see much more support for public bodies that want to put social value at the heart of procurement, to help them to find out how best to get sustainable food from local producers into public sector canteens.
John Penrose (Weston-super-Mare) (Con)
I rise to speak to my amendment 68, which was tabled with not just my signature on it, but those of the Chairman and the deputy Chairman of the Public Accounts Committee.
The amendment is about value for money and evaluation. We have heard during the course of this debate that this excellent Bill, which covers an enormous amount of much-needed reform in this area, deals with about £300 billion-worth of taxpayers’ money every year. That is a vast amount of cash and it is vital that we spend it as effectively as we possibly can. It matters not just for the value for money that taxpayers get, but for the efficiency and effectiveness with which our public services are delivered. That ought to be a compelling dyad if there ever was one.
The aim of amendment 68 is to achieve that evaluation, which we have already heard about from the Chairman of the Public Accounts Committee. I stress that this is not just a cross-party amendment, with support from both Labour and Conservative Members and from the cross-party Public Accounts Committee. It also has a very unusual political coalition behind it, which includes not only the Centre for Policy Studies, the TaxPayers’ Alliance and the Adam Smith Institute—all good, solid free-market, centre-right think-tanks—but Transparency International, Spotlight on Corruption, the Campaign for Freedom of Information and the Centre for Public Data. In other words, it is a very unusual political coalition, backing something because it is right in principle and because it yields better value for taxpayers’ money.
I urge Ministers to give the amendment much closer attention. I appreciate that it is different from the equally important questions that we have also addressed during the course of this debate, about exploitation of workers, exploitation of Uyghurs and human rights abuses around the world. However, domestically, in the middle of a cost of living crisis, it really matters to everybody in our constituencies, the man and woman in the street and hard-working families up and down the country and it can make a prompt difference.
Mary Robinson
Value for money is, of course, at the heart of procurement, and we all want to see it. The Royal Institute of British Architects has recommended post-occupancy evaluation. That would be an effective tool for public buildings such as hospitals and schools. Could it form part of the evaluations that my hon. Friend is talking about?
John Penrose
Absolutely; that is a good and broad-based example that proves the concept’s breadth of applicability.
The whole idea behind that is based on the What Works Network, which is currently backed up by the evaluation taskforce—a joint unit between the Cabinet Office and His Majesty’s Treasury. That is long-standing expertise—over 10 years’ worth—in arm’s length evaluation of Government contracts. It is a great idea in principle, and it has its roots very firmly in successful examples such as the National Institute for Health and Care Excellence, which does a crucial job relating to the medicines bought by the NHS.
But—and it is a very big and important “but”—just how much of that £300 billion-worth of public expenditure is properly evaluated each year? The answer, or the “stat of shame” as it is described in the civil service, is 8%—£1 in every £12. That is shocking and should worry us all. Whether or not we are concerned about value for money or the effectiveness of our public services, 8% is far too low. It is true that some major projects have their own arrangements, including gating agreements and a much more structured approach, which we hope will drive improvements, but for everything else—the annual contracts granted on a three-year rolling basis, then renewed, extended and renewed again—that is where the opportunity is, that is where the magic is, and that is where the potential for massive savings and better value for money really lies.
It is an old marketing truism that most marketing and advertising directors will say that they know that they waste roughly 50% of their advertising budget, but they just do not know which half. This will be an opportunity for us, when it comes to Government expenditure, to break that particular truism in half and say, “We will know.” The amendment allows the Minister to exclude contracts if he thinks they are too small or are governed by national security, but for everything else in that £300 billion, or as much of it as we can possibly manage, we will know up front what the contract is supposed to achieve, which is, after all, a rather basic thing—one would think that that would be automatically recorded, but at the moment it just is not.
We have to say up front what we are trying to do, and we are supposed to say at the end of the contract, “Well, did we do it?” That has to be evaluated by an arm’s length body according to the existing independent criteria laid out in something called the Magenta Book, which is long established and well respected. If we do that evaluation, we can then ask, “Did it work?” If it did not, we get a learning loop; an opportunity—as the new economy specialists and entrepreneurs call it—to “fail fast”, to ensure that we spot the duds and do not renew or extend them, or allow them to carry on rolling over willy-nilly. Instead, we say, “We are going to change something because this did not work.” That will be published, and then we will not renew that contract in that form. We will change it to fix the faults that would by then have been identified. At the moment, those faults are not being identified and are allowed to continue to roll and roll.
That is a blessedly simple idea. It will also pay for itself, as I said earlier when the Chair of the Public Accounts Committee was giving her speech, because the amount of money that it would save would pay rapidly not just for the existing costs of the What Works Network, but probably for a huge expansion, were Ministers so minded, of such evaluations to other parts of the national procurement effort. It would therefore cost the taxpayer net not a bean, it would dramatically improve value for money, and it would improve the credibility of our public service delivery, which all Governments of every stripe always struggle with. It would be a ready-made arm’s length route for politicians of any party to say, “We are doing the right thing. This is done independently. We will make sure that, next time around, we weed out the bad and expand the good.” That could be genuinely revolutionary.
Sarah Olney (Richmond Park) (LD)
The Liberal Democrats support the provisions in the Bill that will speed up and simplify procurement, and create greater opportunities for new entrants, such as small businesses, to access public contracts. However, we have concerns about those areas of the Bill that create opportunities for circumventing the rules that govern the procurement regime. The Government’s shambolic procurement of personal protective equipment during the pandemic exposed the weaknesses in our procurement system, and showed what can happen when Ministers are awarded too much power, and face too little scrutiny. It is vital that safeguards are in place to ensure that billions of pounds of taxpayers’ money does not go to waste.
Amendment 1, which is in my name, seeks to prevent the use of VIP lanes in the procurement of public contracts. The bypassing of the usual procurement rules via VIP lanes during the pandemic saw £3.8 billion of taxpayer funds handed over to 51 suppliers, many of whom were closely tied to Conservative Ministers and their friends. We all know of the scandals that emerged off the back of those contracts; they included reports of excessive profits and conflicts of interest. The Public Accounts Committee, of which I am proudly a member, has, under the chairmanship of the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier), carried out an inquiry on the management of PPE contracts. We found that at no stage was any consideration given to potential conflicts of interest between individuals making referrals through the VIP lane and the companies that they were referring.
The Prime Minister said that he was “absolutely shocked” to read of the allegations against Baroness Mone, but future scandals will not be a shock unless the Government take action to ensure that our public procurement regime cannot be exploited, and prevent Ministers from giving special treatment to their friends without proper scrutiny. Transparency of procurement decisions is paramount. I therefore urge the Government to accept amendment 1, ban VIP lanes and crack down on future cronyism and sleaze.
New clause 9 would ensure that the national health service complied with the public procurement rules set out in the Bill—I would like to press it to a Division this afternoon. Liberal Democrats in the Lords successfully amended the Bill to bring the NHS into its scope, so I am extremely disappointed that the Government have overturned the Lords amendment and are reinstating a huge carve-out for the NHS. Without new clause 9, the Secretary of State for Health will be able to make up their own rules for huge swathes of NHS procurement via secondary legislation. Handing over such a wide-ranging power to the Secretary of State without ensuring proper scrutiny is not the hallmark of a Government who wish to govern with integrity and transparency.
The Government argue that the procurement rules are important for all procurement decisions, so it is unclear why they believe that the NHS, which has a procurement spend of many billions of pounds, should fall outside the new regime. Surely it is essential that the largest public organisation in the country follow the same procurement rules as all other organisations. I therefore urge the Government to accept the new clause, and support the Liberal Democrats in ensuring that NHS procurement represents value for the taxpayer and is subject to proper scrutiny.
To conclude, the Liberal Democrats support efforts to reform our procurement regime, and to introduce new rules to increase transparency and create opportunities for small businesses, but there is too much room in the Bill for the rules to be circumvented. The Prime Minister’s pledge to act with integrity and professionalism risks becoming an empty promise unless the Government take action to prevent the use of VIP lanes. Further, it would be ludicrous for NHS spending to be left outside the regime that governs all other public bodies. Public procurement is the largest area of public spending, totalling approximately £300 billion a year. It is vital that the taxpayer has confidence that the Government are taking due care, and confidence that money is spent in accordance with fundamental principles of transparency and fairness.
Nigel Mills (Amber Valley) (Con)
It is a pleasure to follow the hon. Member for Richmond Park (Sarah Olney). I rise to speak to amendments 61 to 67, which stand in the name of the right hon. Member for Barking (Dame Margaret Hodge)—sadly, she cannot be here today, so Members are stuck with me. I cannot do an impression of the energy she would have brought to this debate, but I can try to present the arguments that I think she would have made.
What we are trying to do with these amendments is strengthen the provisions in the Bill to help tackle economic crime. One would think, quite logically, that in a Bill on public sector procurement, the risks of economic crime would be quite a significant issue that we would be trying to deal with. I think it is quite right that we use the Bill to tackle issues of national security or modern-day slavery, but equally, I think it is wrong that we do not have the full protections we need for economic crime in the UK.
This is not just a theoretical problem. In a survey from about five years ago, about a quarter of councils said that they had been victims of corruption in their procurement processes. We estimate that the losses are around £876 million a year—the biggest cause of financial loss in local government—so there is clearly plenty of scope for improvement in our performance. We welcome the fact that under the new UK procurement regime, we have an exclusion and debarring regime that is much better, probably much tougher, and hopefully much easier to use. Those provisions do exist in the EU procurement regime, but they have been extraordinarily rarely used in the UK. I think we all hope that we will be much more effective at using the protections that we are putting in place through the Bill.
Mary Robinson
Exclusion and debarment could be a very effective way to incentivise good governance within suppliers, but also to enable local authorities to crack down on and get rid of corruption and fraud in procurement. Indeed, the United States goes a lot further to protect procurement by encouraging whistleblowers to come forward with information through the False Claims Act. In doing so, the US has recovered about £50 billion in respect of fraud in Government procurement and spending. Does my hon. Friend agree that a stronger whistleblowing framework and anonymous whistleblowing, perhaps through a hotline for procurement, could potentially save taxpayers millions of pounds?
Nigel Mills
I agree with my hon. Friend and commend her for the considerable amount of work she has done on whistleblowing—she truly is an expert. In general, the Americans have some good ideas on this. I was at a briefing last week where someone took me through those powers: if someone brings a private prosecution and the Government take it on halfway through, that person gets to keep 20% of the proceeds that are recovered, and if the Government do not take it on and that person is successful, they get to keep 40%. That creates a real incentive in the system for someone to take the huge risk to their personal wellbeing and career of exposing wrongdoing. I think we could learn a very great deal from the American position in that respect.
The amendments I want to speak to can be covered in three different groups. Amendment 67 would give contracting authorities the power to exclude suppliers when they have evidence of economic crime-related wrongdoing, not just a conviction for it. The Bill contains various measures by which authorities that are going through a procurement exercise do not actually have to see convictions—they can see credible evidence. We have ended up in the rather bizarre situation where I can exclude somebody from a procurement if I believe they have been part of a cartel in South America even though they have not been convicted, but I think they might well have been if they were in the UK; however, I cannot exclude somebody who I have real evidence has been committing economic crime in the UK, because there has not been a conviction for it yet.
The problem with that model is that convictions for crimes such as fraud have fallen by about two thirds in the past decade. We have not had a successful prosecution of a large corporate for fraud for a decade, I think, although we have had some deferred prosecution agreements. If we are relying on excluding dodgy companies from the process only where there has been a conviction, we are going to end up in the rather unfortunate position of there not being enough convictions to make the regime successful.
To me, it seems quite reasonable to allow an extension of the more wide-ranging rules in the Bill to apply to an authority that has credible evidence that an economic crime has been committed, especially if that prosecution process is ongoing when that authority is doing the procurement exercise, instead of it not being able to exclude that party from the exercise even though there is a real chance that they could be convicted quite soon. I just think that situation would be a real weakness. I am not saying that we would mandate exclusion in that situation, but empowering authorities to not go ahead with that party or bidder when they have credible evidence seems like quite a reasonable thing to do.
When this issue was raised in the House of Lords, the Government’s response was that it would impose an unreasonable burden on contracting authorities, but as I have just said, the Bill already imposes quite significant potential burdens to try to work out if somebody has been guilty of cartel-like behaviour. I suspect that would be harder than working out whether they have been guilty of actual fraud in the UK. We have the new unit being created that could support authorities in that process. That would not be mandatory. It would be an option that they could use in situations where they have that evidence, so there would not necessarily be any burden at all. I urge the Minister to give real consideration to whether a system that only allows successful prosecution of excluded companies that behave terribly in these areas of crime is the right balance to strike.
Ms Marie Rimmer (St Helens South and Whiston) (Lab)
This House, this country and the British public have a long history of supporting human rights. That is why I rise to support amendment 3 in my name. It is signed by Members from across this House.
Up to 100,000 people are brutally butchered for their organs in the People’s Republic of China. It is industrial-scale, state-sponsored organ harvesting, now a nationwide industry worth more than £800 million. The average age of victims is 28. That is not a mere coincidence: 28 is considered by the Chinese Communist party to be the best age for organ harvesting. Hundreds of thousands are kept in internment camps until they are ripe for slaughter. Two or three organs from healthy young adults—28—are worth up to half a million pounds.
The evidence for this crime is growing by the day. The China and Uyghur tribunals, chaired by Sir Geoffrey Nice KC, former lead prosecutor at The Hague, concluded that Falun Gong, a peaceful religious movement, was the primary target. Worse still, the Chinese Communist authorities have now added the Uyghurs in Xinjiang, some Christians and other prisoners of conscience. The tribunals heard reliable evidence of Uyghur Muslims being subjected to comprehensive blood testing and the collection of DNA, which would allow the oppressive regime to create an organ bank, ready for withdrawals on demand.
Forced organ harvesting is an evil practice that this Government should be doing all they can to stop. At present, there are no specific restrictions on suppliers who are involved in forced organ harvesting. In Committee in the Lords, the Minister stated that this Bill was not the appropriate place to address this issue. I could not disagree more. The hard-earned money of our constituents is free to be used propping up this evil atrocity, but that is not right in a country that prides itself on supporting human rights. We all have a duty to our constituents to make sure they are not inadvertently supporting organ harvesting, or any crime indeed. The Minister also said that forced organ harvesting would already be covered on the grounds of professional misconduct. We have heard that before, only for it to turn out, once a Bill becomes law, that it is not covered. On professional misconduct, may I provide just one example? Once when a surgeon was removing organs, he noticed—he went into a cold sweat—that the body he was operating on was in shock: he was still alive. Professional misconduct!
Forced organ harvesting is not an issue to take such a chance on; it needs specific references relating to this crime against humanity. Last month’s G7 heard our Prime Minister state that we need to work together with our allies to “de-risk” ourselves from China. In the United States, Congressman Chris Smith has introduced a Stop Forced Organ Harvesting Bill, which the House of Representatives almost unanimously supported—straight across. This amendment keeps us in line with our allies. Last November, the Prime Minister delivered his big foreign policy speech and said, on our relationship with China, that
“we will make an evolutionary leap in our approach. This means being stronger in defending our values… And it means standing up to our competitors, not with grand rhetoric but with robust pragmatism.”
This amendment is robust pragmatism in practice. It is not grand rhetoric, but action— action to make sure we are strong in defending our values; action to make sure public money is not supporting a crime against humanity; action that this whole House can be proud of, as it always has been on human rights.
I urge Members from across the House to support amendment 3 to keep our hands clean from this evil practice of forced organ harvesting. We must not continue to turn a blind eye to these horrendous breaches of human rights. Governments across the world need to step up on this. We need to be working together, for—believe you me—China would be far more difficult than Russia.
Kirsty Blackman
It has been an incredibly wide-ranging debate. Everyone has had the opportunity to speak on their own amendments and I find myself trying to speak on everyone’s amendments. I will do my best but if I miss anyone’s it is not personal—it is just that there are a lot of them. I will try to focus on those we are expected to vote on and some that we feel most passionately about.
I was glad to hear the Minister talking about the positions of the Welsh and Scottish Parliaments and recognising that they are consistent with previous positions on trade deals. We consistently believe there is overreach in extending into devolved areas and that is why legislative consent has been withheld on this occasion. Since Brexit particularly, the UK Parliament has been meddling in devolved areas, or allowing itself the power to do so, far more than previously. That is one of the many unfortunate consequences of “bringing back power”: it is power to the Executive, not so much to the devolved Administrations or the rest of us in Parliament.
This Bill is key because the spending of taxpayers’ money for the benefit of, and on behalf of, taxpayers is a hugely powerful and important method the Government can use to ensure that they serve citizens in the best possible way, and that they support behaviours that they want to support and reject those they want to reject, in much the same way as tax laws and new tax measures can be created and implemented to discourage or encourage certain behaviours. There is an opportunity in the Procurement Bill and public procurement to do more than the Government have done in encouraging behaviour.
A number of amendments from Opposition Front Benchers specifically focus on that. I am pleased to see the tax transparency amendment, new clause 10. It makes sense to ask companies to be open and upfront about how much tax they are paying. It is very difficult to find out some of this information and it makes a huge amount of sense that decisions around public procurement could and should be made on the basis of considering whether companies are actually paying the tax they are or should be liable for here.
Amendment 2 from the Opposition on transparency declarations is also incredibly sensible. A number of Members around the House have mentioned the VIP lanes and the fact that there were fast-track contracts in relation to covid. The amendment strikes the right balance. The Government say we need to have fast-track processes and to be able to award contracts quickly. Amendment 2 would still allow that to happen. It would allow the speed that is necessary in emergencies and crises such as covid. It would allow procurement to happen speedily, but would increase the transparency; whether it is an MP, a peer, a senior civil servant or a Minister, a transparency declaration would be required. We wholeheartedly support that amendment.
I turn to amendment 18 on breaching staff rights. The amendment is once again about trying to encourage the behaviour we want to see. We want to see public money, public spending and public contracts going to companies who treat their workers fairly and do not breach workers’ rights. The amendment sets a high bar on exclusion from public procurement as it is specifically about excluding those companies found guilty by an employment tribunal or a court; it not just on the basis of one whistleblower whose case may not yet have been proven. Once again, we wholeheartedly support that.
Alex Burghart
It is a pleasure to wrap up a very interesting Report stage on this landmark piece of post-Brexit legislation that will allow our country to rewrite its procurement rules for the first time in decades.
It is a pleasure to follow the hon. Member for Aberdeen North (Kirsty Blackman), who had interesting reflections on the Bill. One could be forgiven for being able to listen to her remarks and not understand that the SNP has absented Scotland from the legislation. That is a great shame, and I believe that deep down she recognises the potential of the legislation. As the years go by, and small and medium-sized enterprises, and other businesses and contracting authorities in England, Wales and Northern Ireland benefit from the new regime, we will take pleasure in reminding businesses and contracting authorities in Scotland that it was the SNP that chose to keep Scotland out of it.
I touched on new clause 1, tabled by my right hon. Friend the Member for Chingford and Woodford Green (Sir Iain Duncan Smith), in my opening remarks. I am grateful for his saying that he will not push the new clause to a vote today. In return, I am pleased to reaffirm what I said earlier: we are happy to talk to him and other colleagues who are concerned about the definition of “sensitive”, to ensure that it captures the issues about which he is concerned. We do not consider “sensitive” to attach itself just to sites of military significance or intelligence centres controlled by the agencies. It goes further, and we will take his points away regarding ministerial movements.
Sir Iain Duncan Smith
May I be clear? On the question I was asking, and have been asking, the Government have moved, particularly in reference to the national security laws of China, but my key point is that the Government should consider that all Departments fall into that category. There should not be any “B” definition. It would be far better if everybody were incorporated into that definition by the time the Bill got to the other place. Supplication would then have to be made for a variation or change, which the Cabinet Office will make a decision about. Start with the power; then let them come and ask for it to be changed. That is the way to do it.
Alex Burghart
I thank my right hon. Friend for his comments. He will have heard me say earlier that we understand his views that “sensitive” could incorporate a broader range of assets, where information gleaned on the movement of officials and politicians could be detrimental to our national security.
I reaffirm our commitment to make a statement in the House within six months of Royal Assent, setting out the timeline for the removal from sensitive sites of surveillance equipment supplied by companies subject to the national intelligence law of China. I state again my gratitude to my right hon. Friend for his important work in this area and for the constructive dialogue that we have had with colleagues on the matter.
Amendment 3, tabled by the hon. Member for St Helens South and Whiston (Ms Rimmer), introduces a new ground for the exclusion of suppliers involved in forced organ harvesting. The amendment replicates an amendment made to the Bill in the other House, and subsequently removed by Committee of this House. I reassure her that the Government are not turning a blind eye to the extraordinarily important subject that she raises and highlights consistently.
We are in full agreement that complicity in the abuses associated with the overseas organ trade must not be tolerated. The Government have taken action to address that issue on a number of fronts. The Health and Care Act 2022 prohibits commercial organ tourism. I know the hon. Lady was involved in discussions leading to those provisions being included in the Act. The Government continue to monitor and review evidence relating to reports of forced organ harvesting in China, and maintain a dialogue with leading NGOs and international partners on that very important issue. I reassure her that forced organ harvesting is already covered by the exclusion grounds for professional misconduct. These grounds cover serious breaches of all ethical and professional standards—whether mandatory or not—that apply to different industries and sectors. The mandatory grounds in relation to corporate manslaughter and human trafficking are also relevant in this context. We have sought to limit the grounds—particularly those which, like this one, require an assessment of factual circumstances by the contracting authority—to those where there is a major and particular risk to public procurement. We are not aware of any evidence that a supplier to the UK public sector has been involved in forced organ harvesting, but I want to reassure the hon. Lady that the Bill will be able to deal with this horrendous practice appropriately.
Debbie Abrahams
I just want to make sure that the Minister has not forgotten my new clause 12.
Alex Burghart
I absolutely have not, and I am very much looking forward to getting to it after I gone through the intervening amendments. I appreciate the hon. Lady’s enthusiasm.
The mandatory grounds for exclusion cover the types of misconduct that raise only the most serious risks for contracting authorities. We have strengthened the mandatory grounds significantly in comparison with the EU regime, but they cannot and should not cover every offence that could raise a risk to contracting authorities. However, I can offer reassurance that the offences in question could justify discretionary exclusion on the ground of professional misconduct. This means that contracting authorities would have the flexibility to consider excluding the supplier, but could also factor in the nature of the contract being tendered and other relevant considerations in exercising their discretion.
Amendment 67 seeks to add a discretionary exclusion ground where there is evidence of financial and economic crime activity but there has not been any conviction of the listed offences. These concerns would already be caught by the ground of professional misconduct, which permits contracting authorities to weigh up the available evidence in the context of their procurement and use their discretion in determining whether an exclusion would be appropriate.
New clause 9, tabled by the hon. Member for Richmond Park (Sarah Olney), revisits the issues we discussed in Committee on the application of this Bill to certain healthcare services. New Clause 9 would insert a new clause 119 that would amend the Health and Care Act 2022, effectively deleting the power that enables the Department of Health and Social Care to make bespoke procurement regulations for the purposes of certain healthcare services, known as the provider selection regime. Amendment 13 deletes the existing clause 119 that provides a Minister of the Crown with a power to disapply the Bill to enable the provider selection regime regulations to be applied to those healthcare services.
The combined effect of these two amendments would be to stop the Department of Health and Social Care making separate procurement rules for certain healthcare services, and make the Procurement Bill apply to all healthcare services instead. As was discussed in Committee, the idiosyncrasies of healthcare delivery necessitate some special rules. The decision to create a free-standing scheme of healthcare-specific rules was taken in 2021 to give the NHS the tools required to deliver more joined-up patient pathways through the health system and to avoid some of the problems of double regulation of both the existing healthcare rules and the standard procurement rules. Significant effort has been expended and invested in consulting on and developing that free-standing scheme over several years now. All sides of the marketplace, including commissioners and providers in the healthcare industry, are expecting this new scheme to be delivered promptly to meet the policy aspirations that they have been so extensively consulted upon.
The Procurement Bill does not address any special measures tailored to support the healthcare reform made by the Health and Care Act 2022, as these measures have always been intended to be provided for in the new provider selection regime regulations. For example, the provider selection regime would permit direct awards to be made in defined circumstances, such as critical A&E services, that cannot be disrupted or when a certain provider is required to play a pivotal role in an integrated healthcare system. It would be incredibly unhelpful for both schemes at this critical stage, when both these healthcare regulations and the Procurement Bill are on the cusp of delivery, to start attempting to unpick it all now. Doing so would add unacceptable and entirely avoidable costs and delays to both programmes, for no tangible benefit. It would also mean more NHS contracts being subject to the rules of the Procurement Bill without due consideration of the exemptions and specific arrangements required to safeguard sustainable and joined-up delivery of NHS services to patients.
Of course Parliament will have its rightful opportunity to scrutinise the provider selection regime regulations, but it cannot be right to do this through the Procurement Bill for the purpose of killing off a near-ready scheme that supports important healthcare reforms that have already been debated and agreed by Parliament in the Health and Care Act.
Amendment 14, also tabled by the hon. Member for Richmond Park, would explicitly name the NHS in the definition of a contracting authority, a matter also discussed in Committee. Although I understand and entirely agree with the view that NHS bodies should be contracting authorities within the scope of this legislation, there is no need for any amendment in this respect, as the Bill already applies to NHS bodies in its current form.
New Clause 10, tabled by the hon. Member for Vauxhall, would require the submission of a tax report where a bidder is a multinational supplier. The tax reports of winning bidders would then be published. I understand that the aim of this amendment is to encourage contracting authorities to favour suppliers that can demonstrate responsible tax conduct. However, hon. Members will know that the basis on which contracts must be awarded under the Bill is by reference to award criteria that relate to the contract being tendered, not to other matters such as where a supplier pays tax. This is the right principle to deliver value for money for the taxpayer. Crucially, it is also a feature of the UK’s international obligations under the World Trade Organisation’s Government procurement agreement. Of course, the Government expect businesses to take all necessary steps to comply with their tax obligations. It is for His Majesty’s Revenue and Customs to enforce the law on tax, and indeed UK-based multinational enterprises are required to make an annual country-by-country report to HMRC.
Turning to amendment 2, tabled by the right hon. Member for Ashton-under-Lyne (Angela Rayner), we consider that the Bill already has the balance right in terms of achieving greater transparency on direct award. Indeed, save for the small subset of user-choice contracts, it will now be mandatory to publish a transparency notice declaring an intention to award a contract in every case. This will include confirmation of the contracting authority having undertaken a conflicts assessment prior to signature of the contract.
In addition, the Bill also requires the conflicts position to be kept under review and to be revised at key points in the procurement, which will be confirmed via the contract details notice, after the contract is signed. This further ensures contracting authorities comply with ongoing statutory requirements contained in the Bill. Of course, we are all aware that MPs and peers are already required to register their interests, and civil servants are required to confirm annually that their declarations of interest are up to date. Furthermore, the Bill includes an additional safeguard in clause 83(4) so that where
“a contracting authority is aware of circumstances that…are likely to cause a reasonable person to…believe there to be a conflict”
these must also be addressed. We take these matters very seriously, and there is no need for additional provision to cover this issue. We will continue to work with contracting authorities to show that they know the requirements around conflicts of interest and that they are implemented effectively.
On new clause 12, I welcome the ongoing efforts of the hon. Member for Oldham East and Saddleworth (Debbie Abrahams) to improve liquidity for small businesses, including by advocating for and championing the increased use of project bank accounts. We recognise the energy and enthusiasm she brings to that campaign.
As I said in Committee, project bank accounts are most often an effective way to ensure fair payment and to protect suppliers, and they are already the Government’s preferred vehicle for construction contracts where it is cost-effective and cost-efficient. Government Departments have made a commitment to use PBAs in construction projects unless there are compelling reasons not to do so. However, it is not the Government’s position that PBAs should be mandated across all contracting authorities, as they are not always suitable or cost-effective, particularly where the subcontractor is very small or is paid more frequently than monthly, or where the supply chain is short. Instead, we intend to continue educating contracting authorities, through guidance, on the circumstances in which we believe PBAs are practical and effective.
Debbie Abrahams
I remind the Minister that new clause 12 covers contracts worth over £2 million, so it is not for all contracts.
Alex Burghart
I accept the hon. Lady’s point, but there are other circumstances to consider, which I have just outlined.
We are already working with industry to discourage the withholding of retentions by supporting zero retention for high-quality work pilot projects and reducing the default rate of retentions within certain types of contract to zero. However, we do not support dictating the operation of construction contracts to the degree proposed.
The Minister for the Cabinet Office and Paymaster General (Jeremy Quin)
I beg to move, That the Bill be now read the Third time.
I stand here today proud of the progress we have made to deliver an important manifesto commitment. The Procurement Bill constitutes a vital piece of legislation following our exit from the European Union, which allows us to set our own rules that will work best for the UK. I am delighted to say that we will sweep away bureaucratic regulations and broaden opportunity to small businesses right across the country.
One in every £3 of public money, some £300 billion a year, is spent on public procurement. For too long, modern and innovative approaches to public procurement have been bogged down in bureaucracy. We are changing that. The Bill simplifies our public procurement rules, cutting down the 350 different procurement regulations to create a single rulebook. This will create a more efficient, innovative and friendly procurement system, increasing value for money and opening up public contracts to small businesses, in turn supporting the Prime Minister’s commitment to grow the economy.
Jeremy Quin
I keep promising my colleagues that I will be brief, but I will always give way to the hon. Lady.
Debbie Abrahams
The Minister is being very generous with his time. He will not be surprised by my question. I was a little disappointed that my new clause 12, on introducing and mandating project bank accounts, was disregarded. I mentioned the estimate that 6,000 small construction firms will go into insolvency this year. What is the Department’s analysis of how that might be prevented by project bank accounts?
Jeremy Quin
I am sure I could try to produce a one-hour solution, or I could be more direct with the hon. Lady. I know she has raised this issue on numerous occasions, but she and I have not spoken about it one-on-one. If she wishes to speak to me about it, we could have a meeting, if that would help. I might learn something from it or I might be able to inform the hon. Lady, but if she wishes to do that, I will make certain that we have that opportunity.
Sir Bill Wiggin (North Herefordshire) (Con)
On that point, will my right hon. Friend give way?
Sir Bill Wiggin
Construction businesses are terribly important. If the Government could do something about the ban on building, for example because of pollution in the River Wye, then those construction businesses would find new opportunities and would flourish.
Jeremy Quin
My hon. Friend is vociferous on the issue of the River Wye. He never misses an opportunity and has proved his dexterousness yet again, in doing so in this debate.
We, on the Government Benches, are proud to be the party of small business. I am delighted that, as part of this Bill, authorities will now have to have regard to small and medium-sized enterprises and the barriers that they face.
Finally, the Bill will put in place a new exclusions framework that will help to make it easier to reject bids from suppliers whose performance on previous contracts has been unacceptable, or who have been involved in serious wrongdoing, such as fraud, collusion or modern slavery. Crucially, on Report, we introduced a package of vital amendments that will protect our national security and ensure that public contracts do not go to suppliers who pose a risk to our country.
We will also create the national security unit for procurement, which will proactively investigate suppliers for national security threats, and we will publish, within six months of the passing of the Bill, a timeline for the removal of all the surveillance equipment provided by suppliers subject to the national intelligence law of China from sensitive Government sites, protecting places that are most vulnerable to sinister interference and espionage. Together, these changes constitute robust protections against the ever increasing national security threats.
I would like to take this opportunity to thank all hon. Members across the House for the quality of the debates and the scrutiny provided throughout the passage of the Bill. I am indebted to my hon. Friends and to those across the House for the helpful engagement and the comments they have made, which have undoubtedly refined this crucial piece of legislation.
I am particularly grateful to my hon. Friend the Member for Brentwood and Ongar (Alex Burghart) for his excellent work on Committee and on Report in this House, and to Baroness Neville-Rolfe for her tireless work in the other place. The Bill has had a long progression, so I would also like to thank our predecessors, Lord Agnew and my right hon. Friend the Member for North East Somerset (Sir Jacob Rees-Mogg), for their work on the Bill in its earlier stages.
I thank the officials who have worked on this Bill, particularly the Bill manager, Katrina Gayevska, Sam Rowbury, Ed Green, Janet Lewis and other officials who worked on this legislation, as well as the staff in the private offices of all the Ministers in the Cabinet Office, for their support and help throughout.
When he entered office, the Prime Minister said that he would deliver on the manifesto on which we were elected. I am proud today to be doing just that, and I wholeheartedly commend the Bill to the House.
Madam Deputy Speaker (Dame Rosie Winterton)
I call the Deputy Leader of the Opposition.
Angela Rayner (Ashton-under-Lyne) (Lab)
I start where the right hon. Member for Horsham (Jeremy Quin) left off, by saying thank you to all right hon. and hon. Members who have spoken today, in particular my hon. Friend the Member for Vauxhall (Florence Eshalomi) for her contributions throughout the stages of the Bill. I also thank the brilliant Clerks and the House staff, and everyone who has been involved and on hand to support every step of the Bill.
It has been a long and complex process, and I know the Cabinet Office has been very busy in recent weeks, so I welcome the opportunity to debate something of more substance today. Unfortunately, the substance of the Bill, while necessary, is a little bit of tinkering around the edges of a broken system. I understand the need for a new Procurement Bill, to consolidate the patchwork of former EU rules and to bring the spaghetti of procurement regulations into one place, but it seems this distracted Government are more concerned with the civil war than writing good legislation.
Britain faces huge economic challenges—challenges made worse by years of economic incompetence, a disastrous kamikaze Budget and a Government on the side of vested interests. Wages have flatlined, prosperity has turned to stagnation and Britain has the highest forecast inflation in the G7. Procurement is one of the biggest and most effective tools available to Government to drive up standards across the economy and create world-class, affordable and effective public services.
As the Minister said in his response, we are talking about £300 billion of public money a year, a third of public spending and more than the NHS budget. What we should be debating this evening is a bold new set of rules to direct investment to the places that need it most. We should be discussing how we can clear the pipes and flush out the system with transparency after years of cronyism and waste. We should be debating legislation that pumps money back into the pockets of local communities, creates decent jobs and skills in our towns and cities, and hands wealth back to the people who built Britain.
Instead, what we have before us today is a damp squib. This Bill fails to close the loopholes that saw obscene waste of taxpayers’ money through the VIP lane, it fails to mandate social value to secure investment in good British business, and it fails to create robust protections for workers. Labour recognises the need for a new procurement Bill, and for that reason we will not oppose this one, but surely we can do better than this.
This evening the Government chose to vote against a Labour amendment that would have blocked VIP lanes, for the third time. They have had three opportunities to show that they have learnt from the waste and the cronyism that we saw during the pandemic, and on all three occasions they have refused. In fact, loopholes included in this Bill will make it easier for Ministers to bypass existing transparency rules. The Tory VIP lane is at the heart of why we need a procurement Bill. It exposed the true weaknesses in the system and showed us why we desperately need a more agile and transparent procurement system.
Jeremy Quin
It is a bit late in our proceedings, but I really would encourage the right hon. Lady to read the Bill, even at this late stage.
Angela Rayner
I think the Minister knows full well that I have read the Bill, and it is a real shame that in the conversations that my hon. Friend the Member for Vauxhall and I have had with him and his team, they have refused to help stop this loophole. The Tory cronyism on the VIP lane is still there in this legislation. The VIP lane enabled a shameful waste of taxpayers’ money and profiteering by unfit and unqualified providers, and as a result the Government have written off £10 billion of public funds spent on personal protective equipment that was unusable, overpriced or undelivered.
While I welcome the moves in the Bill to issue “transparency notices” before awarding a contract, these are just baby steps; they barely scratch the surface. We must see end-to-end transparency. And it is not just me who thinks that. The amendment that the Government voted down today is a proposal by the National Audit Office, a totally independent body calling for the Government to end their murky practices that saw taxpayers’ money wasted at eye-watering rates.
This Bill also gave us an opportunity to reimagine the way we spend public money in order to promote decent work across the economy, to reward businesses that treat their workers right, and to use procurement to raise the floor on working conditions for all. Any suppliers given taxpayers’ money should provide their workers with decent pay, respect, dignity and fairness, as well as access to a trade union. Economies across the world expect that from their employers. In France, Germany and the Netherlands, for example, more collective bargaining, stronger workers’ rights and a fair share of wealth lead to higher growth, productivity and staff retention. President Biden’s Government direct investment to companies with a track record of treating their workers with respect, so why can’t we?
But over the last 13 years, the Tories have failed to use the levers of government to drive up standards for working people. In fact, things have got worse. I am disappointed but not surprised that the Government today voted down our amendment, which would have held suppliers to account when they repeatedly abuse workers’ rights. Taxpayers do not expect their money to be handed to suppliers with a track record like that. They want to see their money going to suppliers who pay their staff properly and who uphold fair conditions, job security and union access. That is the bare minimum.
I also want to take this moment to welcome the Government’s last-minute amendments on national security. I could not help but recognise some of those amendments. I would also like to pay tribute to the hon. Member for Rutland and Melton (Alicia Kearns), whom I worked closely with to highlight the need for change in managing the risk in procurement. I welcome the Minister’s recognition that the current system leaves the door open for foreign threats to enter our supply chain and for taxpayers’ money to be spent with no oversight on whether they are properly vetted. That said, I hope the Minister can tell us what criteria his Government will use to identify suppliers who pose a risk to national security, and I hope he will consider the inclusion of cyber-security criteria in that assessment.
In closing, I would like to once again thank all hon. and right hon. Members for their contributions today. While procurement might seem a dry topic, it is absolutely central to the way that our country works, and when Ministers abuse the procurement system, it is taxpayers who suffer. As we saw during the pandemic, the VIP lane for PPE contracts was a scandal of epic proportions that allowed the shameful waste of taxpayers’ money and inexcusable profiteering, yet instead of learning the lessons of this failure, this evening Ministers voted for a third time to protect the loophole that allows the VIP lanes to exist. The Government have a duty to learn the lessons from the pandemic and, quite frankly, Ministers have abdicated that duty here today. While the Tories are too distracted to govern, Labour in power would flush cronyism out of the system and protect taxpayers, to ensure that every pound is spent in the national interest.
Question put and agreed to.
Bill accordingly read the Third time and passed, with amendments.
Energy Bill [Lords]: Ways and Means
Resolved,
That, for the purposes of any Act resulting from the Energy Bill [Lords], it is expedient to authorise—
(1) the imposition, by virtue of the Act, of charges or payments under licences issued under the Gas Act 1986;
(2) the making of provision under the Act requiring electricity suppliers to make payments, or to provide financial collateral, to the Secretary of State;
(3) the making of provision under the Act in relation to income tax, corporation tax, capital gains tax, stamp duty, stamp duty reserve tax, stamp duty land tax or value added tax in connection with a transfer of property, rights or liabilities by a scheme under the Act.—(Andrew Bowie.)
Electronic Trade Documents Bill [Lords]: Second Reading
Motion made, and Question put forthwith (Standing Order Nos. 59(3) and 90(5)), That the Bill be now read a Second time.
Question agreed to.
Bill accordingly read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
Electronic Trade Documents Bill [Lords] Committee
Ordered,
That the Electronic Trade Documents Bill [Lords] Committee shall have leave to sit twice on the first day on which it shall meet.—(Robert Largan.)
Business without Debate
Petitions
Helen Morgan (North Shropshire) (LD)
I rise to present this petition to the House of Commons about access to bus services for my constituents across North Shropshire. Shropshire has some of the poorest services in the country. The petition was signed by 1,611 of my constituents who are frustrated by the lack of available transport. Many people struggle to get to medical appointments and high streets, while some businesses are dealing with significant shortages in recruitment for the simple reason that staff cannot get work without public transport connections. This petition declares that rural communities should be provided with improved access to bus and public transport services to better connect towns and villages, particularly to public services.
The petition states:
The petition of residents of North Shropshire,
Declares that residents are concerned by the poor bus services in North Shropshire; express their frustration at struggling to use public transport to travel to key amenities like hospitals and schools; convey their difficulties in securing work opportunities due to lack of transport connections; and note that currently only one bus service operates on Sundays throughout the constituency.
The petitioners therefore request that the House of Commons urge the Government to take their concerns into account and act to ensure that bus connections are available to the residents of North Shropshire seven days per week, connecting local villages and towns.
And the petitioners remain, etc.
[P002837]
Sir Jake Berry (Rossendale and Darwen) (Con)
I rise to present a petition on behalf of the residents of Rossendale and Darwen regarding roadworks in the Rossendale valley. My petition has had more than 1,700 signatures, both on paper and online.
The petition states:
The petition of residents of the constituency of Rossendale and Darwen,
Declares that there are major traffic issues across the Rossendale Valley which are caused by temporary traffic lights, thus holding up traffic and causing congestion; further declares that this could be solved by using a Statutory Instrument to allow Lancashire County Council to adopt a ‘lane rental scheme’; furthermore, this would mean that utility companies would have to pay to close the road to carry out their work and repairs; notes that this scheme is already in place across London and has proven to reduce traffic significantly by incentivising companies to carry out work quickly and efficiently.
The petitioners therefore request that the House of Commons urge the Government to take into account the concerns of the petitions and take immediate action to give Lancashire County Council the power to charge companies who dig up roads.
And the petitioners remain, etc.
[P002838]
Heating Rural Homes
(11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Sir Bill Wiggin (North Herefordshire) (Con)
It is a great pleasure to be able to address this important issue. We all want to beat climate change, cut emissions and leave the planet in a better condition than we found it, so we do need to address the challenge of heating rural homes. It is perhaps ironic that we should be discussing this topic during a heatwave, but
“pleasant as it may be to bask in the warmth of recovery… The time to repair the roof is when the sun is shining”.
As North Herefordshire is a rural constituency, I urge the Government to ensure that there is an equitable solution for heating rural homes. Around 1.1 million homes in England are not connected to the gas grid and currently use some of the most carbon-intensive heating fuels, such as oil and coal. Some rural homes do not even have the option of an electricity supply.
In the past year, we have seen the price of fuel fluctuate wildly due to Russia’s illegal and brutal invasion of Ukraine. In the wake of the invasion, heating oil hit an unprecedented 110 pence a litre, well over double the regular cost.
Dr Neil Hudson (Penrith and The Border) (Con)
I congratulate my hon. Friend on securing this important debate and on highlighting how different rural areas are from urban areas. As he mentioned, so many households —up to 76%—are off grid and on things like heating oil. Does he agree that decisions made in urban Whitehall need to understand that rural areas are different? Some well-intentioned schemes, such as the sustainable warmth scheme, have not worked well in practice. There needs to be flexibility in these policies so that, when we talk about phasing out heating oil or, indeed, phasing out petrol and diesel vehicles—things that are so vital to rural areas—we can make sure the Government listen to rural areas.
Sir Bill Wiggin
My hon. Friend is a rural champion, like myself. With his background in animal welfare, he feels the beat of the countryside in his veins. He is absolutely right about having that rural priority for vital things such as climate change, where we all want the right things. We all want to do the best we can for our constituents, but what works in inner London is so different from that which would affect his constituents, those in Brecon and Radnorshire, or the wonderful people of North Herefordshire.
As I said, the fuel price hit an unprecedented 110 pence per litre, double the regular cost, or even more. The Government moved commendably quickly to help secure our energy supply and to protect consumers through the energy price guarantee. However, for those off grid, that support was not forthcoming. The energy price guarantee ensured that gas and electricity bills were capped at about half of what they could have been, but those using alternative fuels received a £200 payment and there was no cap on the price. As a result, they were subjected to massive price increases, with little to safeguard them from factors completely out of their control. During this period, I received emails from people in Herefordshire whose houses are off the mains grid and who were deeply concerned by the rapidly increasing price of alternative fuel.
With the UK target of reaching net zero by 2050 in mind, the Government are pursuing a heat pump-led approach to secure energy independence for the UK. Their well-meaning boiler ban, set to take effect in 2026, will force homeowners to replace their gas and oil boilers with low-carbon alternatives. Although that ban may be well-intentioned and appears to align with the target of reaching net zero by 2050, we have forgotten the impracticality of such a ban for those people living off grid. With 75% of rural properties off the gas grid, these homeowners rely on alternative heating methods. Of all the off-grid homes in the UK, 55% are heated with heating oil, just 18% with electricity, 11% with solid fuel and 10% with liquid petroleum gas. That means that 76% of off-grid households will soon have to replace their heating systems.
Greg Smith (Buckingham) (Con)
I congratulate my hon. Friend on securing this important debate for the 15% of households in my constituency who are off the gas grid. Does he agree that the best way the Government could rise to the challenge he is powerfully making is to adopt the proposal from my right hon. Friend the Member for Camborne and Redruth (George Eustice) to permit the use of hydrotreated vegetable oil and other sustainable fuels in existing oil burners and indeed new oil-burning boilers, so that customers and residents of all our constituencies are not forced to spend tens of thousands of pounds on a technology that may not actually work?
Sir Bill Wiggin
All I can say is that those 15% of my hon. Friend’s constituents are lucky to have such a champion in their MP—what a hero for rural sensibility. We are truly blessed to have an intervention such as that. Later in my speech, I may touch on the subject of HVO. What he is saying is absolutely right. We need to be much broader in our outlook about what works for people, not through force, but through choice, so that the people who want to do the right thing can do so, rather than being curmudgeonly bullied—
Mr Carmichael
I am grateful to the hon. Gentleman for giving way. I should perhaps declare an interest, as someone who owns a house that is also heated by oil-fired central heating, however inadequately. The point he makes illustrates well what happens when Government intervene to set targets and to insist that things must be done by a certain deadline. We see that time and again. I can tell him and others now that one of the biggest problems will be the lack of available skilled, qualified labour in rural areas and in other places to install the equipment for these things. Would it not be better if on this occasion we were to use a little more of the carrot and a little less of the stick, as he and I did when we were Whips together?
Sir Bill Wiggin
Indeed, Madam Deputy Speaker, there is no finer advocate of the pointy carrot than the right hon. Gentleman. But he is right. Again, it is as though he has read my speech because I will touch on the shortage of qualified technicians. One of the problems that we face is that, by insisting on one technology, all those various engineers who can do different things are being forced to do the same thing and, of course, that is far from practical or ideal. I will touch on that in a moment.
Those off the gas grid may face unique challenges that will prove a huge obstacle if the ban comes in. According to the Government’s heat and buildings strategy, at least 20% of off-grid homes will not be suitable for heat pumps. Rural areas tend to have limited infrastructure, meaning that it is impractical and uneconomical to deploy heat pump installations in every home. Many rural homes, particularly older or listed buildings, are not designed to accommodate these systems. Heat pumps work best in well-insulated and energy-efficient properties, which rural homes, sadly, tend not to be.
More than 35% of rural properties have an energy efficiency rating of F or G, compared with just 2.1% of properties in urban areas. That is a massive difference. In part, that is because properties located in these areas are proportionately more likely to be older, of traditional construction, detached and potentially larger than urban properties. But it is also because the current stupid, useless and inappropriate energy performance certificate assessment is based on modern construction. More than 60% of homes were built before 1970 and before the first thermal regulations, so these properties are extremely disadvantaged when it comes to energy efficiency ratings.
Sir Jake Berry (Rossendale and Darwen) (Con)
On the issue of the flawed nature of EPC, that is an important point. My hon. Friend will be aware that thatched buildings are often given a very low EPC rating because there is no ability to calculate the thermal quality of thatch. Thatch is a brilliant insulating material, so it is complete nonsense that thatched buildings should be given such low rating. This would be of passing interest were it not also the case that the Government are rapidly bringing forward legislation to prevent landlords from renting out properties if they have a low EPC rating. On that point, I draw the House’s attention to my entry in the Register of Members’ Financial Interests. There are also reports from the Department that it will in future be more difficult to get a mortgage if a property has a low EPC rating, with the voluntary code being suggested to the current clearing banks later to become a compulsory code. In many areas of the countryside, the net effect of that policy will be that someone will have zero chance of getting a mortgage unless these ridiculous EPC ratings and mechanisms are updated.
Sir Bill Wiggin
Madam Deputy Speaker, I saw you thinking that that was perhaps a bit of a long intervention, but it was pure gold. My right hon. Friend is absolutely right: these energy performance certificates are not just stupid and useless, but absolutely evil when it comes to the fundamental right of people to want to own their own homes—something in which we on the Conservative Benches believe passionately. Worse than that, if someone cannot get an EPC rating of C, they cannot rent a house either. All of this will be no different from the land clearances, when people were shipped off into the cities because they simply could not or were not allowed to live in the countryside. It is an appalling situation and my right hon. Friend is absolutely right to highlight it. I hope the Minister is trembling on the Front Bench at the vehemence of loathing that I have for EPCs, not least because, when I last got one, it said that we should have built a windmill in the garden. How stupid can you get when it comes to really mindless environmental legislation. I care very much about this because, if we are going to do a good job of saving the planet, we cannot be handicapped by cretinous legislation such as EPCs. I ask the Minister to please fix it.
To go back to the speech in hand, we have covered traditional features in old homes. Indeed, it is even more troublesome and expensive to retrofit a listed building, of which there are around 500,000 in England. They have solid floors and walls and are much more difficult to rectify. The House will be aware of the debates I have held on environmental standards for listed buildings and the most welcome progress that was made to allow double glazing by Historic England—a small step, one might think, but to have 500,000 houses in this country banned from having double glazing just reinforces why I rage at EPCs. There are all the other environmental steps that we want to take but are banned from taking.
Sir Bill Wiggin
I would be delighted to give way to my hon. Friend; I have hardly started.
Greg Smith
I am very grateful to my hon. Friend for giving way twice. Does he agree that many of the houses that are challenged by the EPC regime simply cannot have the retrofitting he talks about, such as those built out of cob or witchert, a form of cob unique to the Vale of Aylesbury—to declare an interest, my own house is partially made out of witchert—where the walls need to breathe? Therefore, people cannot put in place the measures that would allow a higher EPC rating or allow a heat pump to work in the first place.
Sir Bill Wiggin
I feel for my hon. Friend. When we buy a washing machine or dishwasher and look at the energy rating on it, it is a helpful guide to what we should expect our fuel bills to be. However, the EPCs for houses are off the scale in their inability to provide anything useful and I am mustard-keen for the Minister to tackle them.
My fear is that Historic England, that wonderful body that has been trying to make Leominster a nicer place, may go back on its guidance on double glazing and on the curtilage of listed buildings. That would be a shame because, while there is an industry built up with secondary glazing, it is really important that as a Government we help people to do the right thing. Something that saves energy, improves fuel efficiency and makes houses nicer places to live in is obviously a sensible step.
I am sure the Minister does not find it hard to see why the boiler upgrade scheme has been such a disappointment. Tragically, £90 million-worth of subsidy is being given back to the Treasury due to the difficulty of uptake. The Government’s latest scheme offers households grants of between £5,000 and £6,000 for low-carbon heating systems such as heat pumps—kind, well-meaning and hopelessly inappropriate. Ofgem figures show that fewer than 10,000 installations were completed under the scheme between its launch in May last year and March this year.
Households with a broken boiler could wait up to six months to source a certified installer, as the right hon. Member for Orkney and Shetland (Mr Carmichael) said, receive a grant, if they are lucky, purchase the heat pump, if it is available, and have it installed, by which time they may have suffered without heating during the coldest months of the year. That is never going to deliver on our ambitions, not least because every broken boiler is a missed opportunity. It means people will go out and buy another fossil fuel boiler because the option to buy a heat pump was just too difficult.
We cannot afford to drop the ball like that. Every time someone needs a new boiler, surely the right thing is for them to say, “Thank goodness for the Minister! She made it so much easier for me to get a super-efficient, clean boiler, which is not just keeping me toasty in the winter, but saving the planet for my children and grandchildren.” That is where we need to get to, and I know the Minister is listening and smiling with delight because that opportunity is opening up before her.
While the Government may have set the ambitious target of 600,000 installations of heat pumps per year by 2028, it will not be achieved unless they address the extortionate cost and impracticality of installation. A poll by Liquid Gas UK discovered that more than two thirds of people living in off-grid rural homes fear that they would not be able to afford a heat pump if required to install one. The average cost of installing a low-carbon heating system such as a heat pump is estimated to be between £15,000 and £30,000. That probably includes the £5,000 grant, as installers are not going to ignore the subsidy, either. For many families, that is an expense that they simply cannot afford. Twelve per cent of houses in rural areas are in fuel poverty—a rate 43% higher than on-grid homes.
On top of the expensive cost of heat pumps, there is a lack of skilled engineers available to install and manage them. I recently received an email from a heating engineer who works in an off-gas grid area of Herefordshire. They are deeply concerned that the Government’s proposals are impractical because it is so expensive and difficult to install heat pumps. In rural areas, it will therefore be extremely difficult to source a nearby engineer to install a heat pump when one’s current oil boiler breaks.
Homeowners should have the freedom to choose their heating systems based on what suits their needs, preferences and budgets. Rather than installing an expensive heat pump, they might find it more suitable to have a hybrid or cocktail of alternative energy sources, such as biomass boilers, which are eligible for the Government’s renewable heat incentive—
Sir Bill Wiggin
My right hon. Friend mutters “not any more”. That renewable heat incentive for domestic properties would be a wonderful step forward and would encourage biomass in all its different forms.
The Government already provide financial incentives such as grants for reducing the up-front cost of solar panels, making solar power an affordable choice for many households. I welcome the Government’s encouragement of rooftop solar by cutting VAT on solar panels, which saves households more than £1,000 on installation, in addition to the £300 annual saving on their energy bills. Now that we have left the EU, the Government have been able to remove the 5% VAT charge on energy-saving materials, including solar panels, heat pumps and insulation. However, a bigger tax break on UK-manufactured environmental solutions is needed to encourage people to do the right thing when it comes to heating their homes.
Sir Jake Berry
It is absolutely within our power to encourage people to install solar panels, but does my hon. Friend agree that another thing that the Government could do is to bring solar panels within the permitted development regime? Often, the expense of a planning application and of delays puts many people off.
Sir Bill Wiggin
I cannot think of a reason why putting solar panels on the roof of a house should not be permitted development, but it is not. That is a simple step that would really help. I remember when the onshore wind debate started. The then Labour Government refused to allow even the smallest electricity-generating windmill on the side of people’s homes in case it made the electricity meter go backwards. We lost the public at that point. They wanted to do the right thing, but they were prevented from doing so. Solar panels on rooftops should be a natural step forward. They should be permitted development and part of the planning permission for every new build.
If we are to embrace the technology of solar panels, let us ensure that they are made in Britain. Let us stop making the Chinese richer because we want to do the right thing for the environment while they build coal-fired power stations. Bigger tax breaks on UK-manufactured environmental solutions are needed to encourage people to do the right thing.
As solar panels are not always suitable for certain types of building or locations across the country, alternative options should also be supported. Hydrotreated vegetable oil, for example, is a sustainable fuel that can, at a small cost, be used in a conventional boiler. HVO has been trialled in over 150 homes across the UK in the last 18 months, yet it has been given no special tax treatment to encourage its usage. Bringing HVO fuel duty rates in line with kerosene—paraffin, or “heating oil”—would significantly lower its cost.
It is also clear that we need a better solution to incentivise both the take-up and production of UK-made heat pumps. Currently the boiler upgrade scheme subsidy is merely pushing up prices, when supply-side reforms and intelligent incentives would clearly be better options. Stimulating a home-grown heat pump industry similar to our natural gas boiler industry, which produces 90% of all gas boilers in this country, will increase supply and bring down costs for consumers.
A number of British businesses are already striving to make renewable energy cost-effective and affordable, such as Caplor Energy in my constituency, which provides a full range of renewable energy solutions nationwide. We should encourage British-based companies through big tax breaks, rather than continuing to import heat pumps from abroad and filling the pockets of Chinese companies. A holistic approach to rural home energy systems that involves a mixture of technologies would allow homeowners to transition to a fully electric product once the correct thermal efficiency levels have been reached. They could then avoid having to make drastic changes to the fabric of their house all at once, with or without the local council’s intervention.
In many cases, a hybrid heat pump would be most appropriate, as they efficiently switch between renewable and fossil fuel. Hybrid heat pumps are a good middle ground; they ensure a reduction in carbon emissions without leaving people at the mercy of the weather or subject to power outages, yet the renewable heat incentive scheme no longer extends to hybrid heating systems, or any other systems that could have eased the transition to entirely electric heating.
The Government propose a “rural first” approach to the transition. They aim to phase out the replacement of fossil fuel boilers in rural homes from 2026. That is almost a decade earlier than the date for equivalent homes connected to the gas grid. That is extraordinarily unfair. It is far too difficult for the Government to phase out fossil fuel heating in off-grid homes from 2026. The Government consulted on the proposal to phase out the replacement of fossil fuel boilers from 2026 for off-grid homes in January last year, but we are yet to see their response to the consultation. When will they publish it, given that it has been over a year since the consultation? In the absence of a response, can the Minister confirm that the Government will delay the 2026 boiler ban until there are effective and affordable alternatives for heating rural homes?
To conclude, I commend the Government on their net zero policy and on our environmental agenda. We must pursue a more flexible, cost-effective and practical approach to heating rural homes that considers the unique circumstances of these areas. The Government’s 2026 boiler ban is a misguided policy that fails to consider the practical implications and financial hardships that it would impose on people living in rural communities. We must ensure that the voice of rural homeowners is heard, and that their concerns are addressed. I urge the Government to re-evaluate their strategy, drop the ban, and develop a plan that prioritises practicality, affordability and choice for rural homeowners, and ensures that those living in rural homes are not unfairly disadvantaged because of where they live.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Amanda Solloway)
I thank my hon. Friend the Member for North Herefordshire (Sir Bill Wiggin) for his impassioned speech. We have heard a lot from the rural champions who are here, so it is a great pleasure to be here. I point out that the issue is not in my portfolio; however, I will take back to the Department any question that I cannot answer, and will of course respond in due course to anybody I do not manage to respond to directly tonight. This is an incredibly important debate on heating rural homes. I thank my hon. Friend for our conversation earlier, in which he explained the problem.
Decarbonising off-gas-grid properties that use fossil fuel heating is a key priority for us, as they are some of our biggest polluters. The use of oil and other high-carbon fossil fuels to heat our properties also reinforces our dependence on foreign sources of energy. The Government recognise that off-gas-grid households have been particularly exposed to high and volatile energy bills, due to the impact of rising global fossil fuel prices following Putin’s illegal invasion of Ukraine. That is why we have taken decisive action to support rural households facing higher heating costs through the winter. The energy price guarantee is currently protecting customers from increasing energy costs by limiting the amount that suppliers can charge per unit of gas or electricity used. In addition, the alternative fuel payment scheme delivered £200 to households that use alternative fuels such as heating fuel, petroleum gas or biomass, helping around 2 million off-grid households across the United Kingdom.
Going forward, the Government intend to move away from universal energy bill support and towards better targeted support for those most in need. Therefore, to keep prices down for ordinary households in the long term, we need to make sure that we are relying on sources of energy that are affordable, clean and—above all—secure.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The Minister is very gracious in giving way, and she is making a most interesting speech. Could I recommend to her something that would be helpful, namely whisky? In the rural community of Wick, in Caithness in my constituency, we have a distillery called Old Pulteney—it is an excellent whisky, but that is not the subject of this intervention. Old Pulteney helps to heat at least 200 houses in Wick, as well as Caithness General Hospital. It is an imaginative solution, so I suggest that the Minister looks at how that is done, takes herself on a tour of other distilleries that are not doing the same, and samples their wares for inner warmth, but also sees how they can contribute to outer warmth.
Amanda Solloway
I confess to being a whisky drinker, so I feel a visit coming on, but that might not be allowed. Of course, I will look into that.
Transitioning rural, off-grid properties to low-carbon heat will help to move us off imported oil and build energy independence; help protect consumers from high and volatile energy bills; and keep us on track for net zero. However, I want to take this opportunity to reassure my hon. Friend the Member for North Herefordshire that we recognise the challenges involved, which he has described so eloquently. Decarbonising rural, off-grid properties in a way that is fair, affordable and smooth for consumers will require a range of different technologies and policy approaches.
While we expect that most off-grid properties will ultimately switch to heat pumps, affordability is a key challenge that we need to address, particularly while the cost of installing a heat pump remains higher than the cost of replacing an oil system. That is why we are taking a range of steps to grow the heat pump market to 600,000 installations a year by 2028, and to make installing a heat pump a more attractive and affordable choice for heating a home. I acknowledge the challenge of building the skills that installers will need; I will take that point away and—with your permission, Madam Deputy Speaker—come back at a later date in a different manner. The steps we are taking include providing support through schemes such as the boiler upgrade scheme and home upgrade grant. We want to make sure that people make green choices.
As we take action, we want to ensure that the economic benefits of the transition to net zero are retained in the United Kingdom, which will create new, highly skilled jobs in the low-carbon economy. That is why we are investing £30 million in the heat pump investment accelerator, which will bring forward investment in heat pump supply chains and aim to ensure that at least 300,000 heat pumps are manufactured annually here in the UK by the end of the decade. I also take this opportunity to reassure my hon. Friend that no one will be required to install an unsuitable technology in their home or business. Heat pumps will not work everywhere—some off-grid properties are simply too poorly insulated or have certain characteristics that would make installing the technology challenging. We are therefore looking closely at the potential role of low-carbon heating solutions, such as high-temperature heat pumps, hybrid heat pumps, solid biomass or renewable liquid fuels. They could play a part in the low-carbon heating mix, particularly where heat pumps cannot be used. However, sustainable biomass is a limited resource, and we need to take care to prioritise its use in sectors that offer the greatest opportunity to reduce emissions and where there are the fewest alternative options to decarbonise.
There were some comments on the EPC, which is under a different Department, but I will take that away. However, I thoroughly believe we should always be looking at ways to improve methodology, and I am happy to have further conversations on that, if that is helpful. The forthcoming biomass strategy will review the amount of sustainable biomass available in the United Kingdom and consider how the resource could be best utilised across the economy to help achieve the Government’s net zero and wider environmental commitments. My hon. Friend also mentioned the consultation on the boiler ban. The Government have a commitment to transition to clean heat for the future. My hon. Friend asked me about a date, which I am unable to give at this stage, but I will look into that consultation and get back to him as soon as I can.
We will continue to work with industry stakeholders to build further evidence that will allow us to evaluate what roles these fuels may play in heat, especially where heat pumps cannot be used. Earlier this week, I visited Certas Energy, the UK’s largest distributor of heating oil. I thank it for supplying off-grid customers this winter. I also learned about its plans to transition to low-carbon renewable liquid fuels, and I will take away lots of points from that visit. Through the support we are providing, I assure my hon. Friend that we are acting and will continue to act to ensure that the transition to clean heat is smooth, fair and affordable for rural off-grid households and businesses.
Madam Deputy Speaker (Dame Rosie Winterton)
I think the Minister had finished. I am sure the hon. Gentleman will have a quick chat with the Minister afterwards—I can feel it.
Question put and agreed to.
Draft Building Safety Act 2022 (Consequential Amendments etc.) Regulations 2023
(11 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Parliamentary Under-Secretary of State for Levelling Up, Housing and Communities (Lee Rowley)
I beg to move,
That the Committee has considered the draft Building Safety Act 2022 (Consequential Amendments etc.) Regulations 2023.
It is a pleasure to serve under your chairmanship, Sir Robert. The regulations will make technical but important changes to the language used in existing legislation, bringing it into line with the new terminology and processes introduced by the Building Safety Act 2022.
I will start by providing some context. After the Grenfell Tower tragedy, the Government recognised the need for an overhaul of our building safety regime. The Hackitt review identified the need for significant change, including recommendations focused on the building control process. Part of the Government’s response to those building control recommendations included the introduction of provisions in section 33 of the 2022 Act that repeal section 16 of the Building Act 1984. The Government consulted on those provisions and they were subject to pre-legislative scrutiny ahead of the laying of the 2022 Act.
Section 16 of the 1984 Act made provision for the deposit of plans with local authorities before starting building work, as well as the passing or rejection of the plans. The information provided to building control was not always consistent, nor was it always sufficiently detailed for the work being carried out.
Section 33 of the 2022 Act—that section is yet to be enacted—repeals section 16 of the 1984 Act and provides instead for a new system of applications for building control approval. For higher-risk buildings, that effectively means a more stringent system that makes the Building Safety Regulator the sole building control body. Applicants cannot proceed with work without having explicit approval from the regulator. For non-higher-risk buildings, there is no significant change from the existing procedure. Local authorities and approved inspectors will remain responsible for supervising that work, and work can begin before approval is granted.
Hilary Benn (Leeds Central) (Lab)
As the Minister and we all know, one thing that we have learned during the cladding crisis is that there are loads of jerry-built buildings that were not built according to the building regulations at the time. Will he explain how the new system and the role of the Building Safety Regulator will ensure that, in future, the basic rules are indeed followed, not just when the plans are submitted and approved, but so that the buildings are built according to those rules?
Lee Rowley
I am grateful to the right hon. Gentleman for his pertinent question. He is absolutely right that we have to bring in new regulation and ensure that that is effective, compared with what happened previously. The purpose of centralising everything in the Building Safety Regulator for buildings that are over 18 metres is to make sure that there is a consistent approach. That approach will take the form of a multiple-stage process, known as gateways, whereby the developer is required to have an interaction with the regulator to make sure that the system works as it goes along. For example, for gateway 0, initial plans have to be submitted for consideration and comment by the regulator, and the exchange goes backwards and forwards. It is a much more iterative and discursive-based approach. There is also a stop in the process, whereby if the Building Safety Regulator is not content with what is happening, approval will not be provided to allow the developer to continue.
Hilary Benn
I am grateful to the Minister for that explanation. I have a follow-up question: what will that mean for inspection? This is about what the builders are doing on any given day, including putting in or not putting in the fire break—in many cases, they did not do that, even though it was in the plans. What role will the building safety inspector have in ensuring that, as the buildings are built, they are inspected to see that what is on the plans is actually built?
Lee Rowley
I am grateful to the right hon. Gentleman for raising that question. That will be in subsequent gateways and a subsequent part of what the Building Safety Regulator does. We are introducing a succession of regulations and statutory instruments, and on top of that, the Health and Safety Executive, which is where the Building Safety Regulator sits, will provide further information and guidance, and so on. That is a very important question, and the answer will become clearer in the coming months. If the right hon. Gentleman has any remaining concerns or suggestions from his experience, I will be happy to consider them and pass them back to the HSE.
Alun Cairns (Vale of Glamorgan) (Con)
The right hon. Member for Leeds Central makes some important points, but as the Minister introduces further guidance associated with the regulation, will he agree to work with the industry to ensure that the additional red tape that is necessary to meet the safety needs does not inhibit business development and the construction industry adversely, adding costs well in excess of what was envisaged? Will he work with industry to come up with novel solutions in respect of how to meet the need, but not at an adverse cost?
Lee Rowley
My right hon. Friend makes an incredibly important point. We have to ensure that the regulations are effective in solving the problem, which manifested itself in such a tragic way a number of years ago, and that they do so in a way that ensures that we still build and that developers can still bring forward the houses that we badly need for the next generation. We have started that process. A couple of a months ago, I spoke at a conference convened by the Health and Safety Executive—where there were nearly 1,000 people from the industry, regulators and local councils—to make sure that that conversation is under way. We need to continue that and ensure that there is clarity on that issue.
The purpose of the regulations is to align the Highways Act 1980, the Clean Air Act 1993 and 13 local Acts with the terminology and processes that will be established when section 33 of the Building Safety Act is enacted. Provisions in the Highways Act that relate to the payment of charges for street works when building control plans are deposited are amended to refer to the new system for building control approval.
Section 16 of the Clean Air Act is also amended. That section requires local authorities to check the height of proposed chimneys to ensure that they are tall enough to prevent smoke and particulates from becoming prejudicial to health. The changes replace references to the deposit of plans with, again, references to the new process for building control approval. Similarly, 13 local Acts are amended to do the same. Of those local Acts, 11 contain provisions relating to appeals to the magistrates court. To align the Acts with the new procedure for appeals, the provisions are amended to direct those appeals to the first-tier tribunal.
This instrument also contains a transitional provision to ensure that consequential amendments do not apply to plans for building work that were deposited before the date on which the regulations come into force.
I say to the right hon. Gentleman for Leeds East—
Lee Rowley
Central—I almost got my points of the compass correct. To address the question from the right hon. Member for Leeds Central, I reassure all right hon. and hon. Members that they will be provided with the opportunity to scrutinise the new system’s specific requirements—we have talked about this briefly today—for applications for building control approval. Those were subject to a consultation in 2022 and will be set out in a number of statutory instruments in the coming months. The Government intend to bring the consequential amendment regulations and the regulations that create the new system into force in the autumn.
Without these consequential changes, the provisions of the Highways Act, the Clean Air Act and the 13 local Acts will not operate as they do now, as they will no longer have meaning once section 33 of the Building Safety Act is brought into force. For that reason, I commend the changes to the Committee.
Matthew Pennycook (Greenwich and Woolwich) (Lab)
It is a pleasure to serve with you in the Chair, Sir Robert. I shall be extremely brief because this statutory instrument is entirely uncontroversial. The Minister has provided us with a fairly detailed explanation of the purpose of the instrument, and we are satisfied that it is simply a series of consequential amendments and changes to terminology to ensure consistency across the statute book in respect of part 3 of the Building Safety Act, and specifically, as he mentioned, the provisions relating to the making of applications for building control approval.
That is not to say that the Opposition do not have a number of outstanding questions and concerns about the resourcing and functioning of the new regime for high-rise buildings that is due to come into force on 1 October, but this Committee is probably not the appropriate forum to air those. We will seek further opportunities to do so, including in relation to the further regulations that the Minister mentioned. On that basis, we take no issue with these regulations and will not oppose them.
Lee Rowley
I am very grateful to the hon. Gentleman for confirming his support for the regulations. I look forward, hopefully, to the Committee’s commendation of them.
Question put and agreed to.
Diocesan Stipends Funds (Amendment) Measure
The Second Church Estates Commissioner (Andrew Selous)
I beg to move,
That the Committee has considered the Diocesan Stipends Funds (Amendment) Measure (HC 1413).
It is a pleasure, as always, to serve under your chairmanship, Dr Huq. I hope that you will permit a very brief piece of historical context setting on the Measure before us today. In medieval times, clergy were paid mainly from income from land owned by the Church, known as glebe land, from the Latin gleba, meaning soil. The amount of land varied from parish to parish and from 1571 onwards, the amount of land a parish owned was recorded in a glebe terrier. With the industrial revolution and the growth of cities, wealthy industrialists were often willing to give significant amounts of money to support the local church, often helping to build and endow the church in question, such as, for example, St Mattias church in Stocksbridge, which opened in 1890 thanks to the generosity of Samuel Fox, the founder of the local Stocksbridge works.
To come forward a bit, the Endowments and Glebe Measure 1976 transferred glebe land from the parishes to diocesan boards of finance in exchange for the payment of a standard stipend to each member of clergy in the diocese. That left a very unequal distribution of wealth, with the Oxford diocese, for example, having £166 million in its diocesan stipends funds capital account, and Lincoln having £100 million and the highest assets per capita of any diocese. At the other end of the scale, Liverpool, for example, had only £1.6 million in its diocesan stipends funds capital account. Those are all figures for the end of 2019.
Regardless of their wealth, each of the 42 dioceses in the Church of England is required, under the Diocesan Stipends Funds Measure 1953, to maintain two accounts. The first is a capital account that holds the glebe land, legacies and other assets. The second is an income account that holds the proceeds from the capital account. The funds in the income account may be used only for specified statutory purposes, the principal of which is the paying of parish clergy stipends. Today’s amending Measure is concerned with the income account only.
The existing legislative position means that the funds in the income account can be used only within the diocese. In 2020, the Church began to looks at ways to enable a richer diocese to support a poor diocese by way of donating funds directly for the payment of clergy stipends. The recommendation of the Church’s Mutuality in Finances Group was to bring a simple Measure for Synod’s consideration that would remove the geographic restriction on the use of the funds so as to enable one diocese to donate to another. This brief Measure does that by amending the 1953 stipends funds Measure by inserting a new single section 5B.
Subsection (1) of the new section provides that where a diocesan board of finance is satisfied that funds that sit in its stipends income account do not need to be used for another statutory purpose it may transfer those funds out of the diocese. Subsection (2) provides that when a transfer takes place, it may only be directly to the stipends income account of another Church of England diocese or to the Archbishops’ Council or another Church charity.
Adam Afriyie (Windsor) (Con)
I thank my hon. Friend —and the Minister, I guess, at the moment—for giving way. I have one quick question. When the Measure says that these stipends might be transferred to other charities or organisations, do they have to be within the remit of the Church of England or could the money be given to Oxfam?
Andrew Selous
I am the Second Church Estates Commissioner rather than the Minister, so I am speaking on behalf of the Church of England rather than the Government, to clarify my hon. Friend’s first point. The answer to his second question is that the funds can go only to another diocese or another part of the Church of England specifically for parish clergy—not for central funds, not for diocesan administration, but entirely for the benefit of clergy in another diocese.
As I was saying, subsection (3) requires that where the Archbishops’ Council or another charity receives such funds, they must decide which diocese or dioceses to transfer the funds to, and then do so directly to the stipends income account of that diocese. It is important to emphasise that this power is entirely permissive; there will be no obligation on a diocese to use it. That said, the Church is confident that those dioceses that are able to be generous will be so.
The Measure has received overwhelming favour in the General Synod, and the Ecclesiastical Committee, which is composed of Members of both Houses, including myself and the right hon. Member for Exeter, considered the matter in its sitting on 25 April, and we found the Measure to be expedient. I hope it will also find favour with this Committee.
To reiterate the point I made to my hon. Friend the Member for Windsor, we are talking only about money for the payment of clergy stipends, meeting small expenses in relation to the maintenance of clergy houses, paying national insurance contributions for clergy, and paying some small expenses of a parish in vacancy. On transparency and accountability, each diocese has a diocesan synod made up of elected clergy and laity in the diocese, who will have to consider and give their approval of these measures. There is therefore democratic, if you like, scrutiny, diocese by diocese, of what is proposed. We estimate that dioceses in the top quartile will help those in the lower quartile, perhaps with the Archbishops’ Council acting as a sort of broker to enable that to happen.
Cat Smith (Lancaster and Fleetwood) (Lab)
I hope it is in order to ask the hon. Gentleman representing the Church Commissioners whether the Church of England has done a gender pay audit of clergy, and whether there is a gender pay gap.
Andrew Selous
If what I say is incorrect, I shall write to the hon. Lady, but as far as I am aware, we do not distinguish by gender. The rate for our clergy is the rate for our clergy, whether they are a woman, a man, or have another declared gender. Given that this Measure is purely concerned with parish clergy, I feel I can say with complete confidence that there is absolutely no gender pay gap. What the Measure is about is helping poorer dioceses—the Liverpools, the Newcastles and so on—to receive some largesse from other dioceses like Oxford and Lincoln. I hope she is reassured.
Mark Tami (Alyn and Deeside) (Lab)
It is a pleasure to serve under your chairmanship, Dr Huq.
I enjoyed the history lesson. It was very helpful to us all. Clearly this is a highly technical Measure to which we have no objection. This is probably the first example of levelling up actually working under this Government, so we will not vote against the Measure and we wish it well.
Crispin Blunt (Reigate) (Con)
I hope I do not strain the Committee’s patience by asking my hon. Friend the Second Church Estates Commissioner how the Measure will work in practice. His gilded words were that the Archbishops’ Council may act as a broker, but all the quiet pressure that can be brought to bear on bishops and others in authority who have a career in the Church of England and perhaps have more attractive posts ahead of them may influence their decisions. How will they be gently persuaded to part with their funds? If it is via the archbishops’ funds, might it not, in practice, end up more a mechanism of centralisation of Church funds into the archbishops’ funds than one of distribution?
Without provoking the concern of the hon. Member for Ilford South, I believe that my cousin, his father, will possibly be in receipt of some of these funds. I am not sure what the state of the funding is in the relevant diocese, but I just wonder how this works in practice. Is the salary bill of the Church of England in the wider public interest for us to reinforce? Do we not have quite enough of them already?
Mr Ben Bradshaw (Exeter) (Lab)
It might have been helpful if the explanatory notes had been available for Members to have a little look at before the debate. I have a similar question to the one that the hon. Member for Reigate just asked: how will the brokerage work, and how will we avoid a situation where individual dioceses or bishops feel under pressure, for whatever reason, to do the right thing?
I also wish to make an appeal to Church House for full transparency about the figures. It would be much easier for people to accept some of the redistribution—in principle, that is a very good idea for the reasons that the Second Church Estates Commissioner has outlined—if the relative wealth of dioceses was made public and the public and parishioners could have access and make comparisons, so that there is not mischief making in dioceses, with people saying, “We’re much poorer than the diocese next door, but we seem to be paying more into the pot.”
It would also be helpful if the Second Church Estates Commissioner clarified what he said about charities. He referred to them a couple of times but he gave the impression afterwards that this money could be used only for clergy stipends in relation to a much more narrow range of things. He also confirmed, I think, that diocesan synods will have a veto. My understanding was that that had not been accepted by Synod because it thought that that would make the situation too bureaucratic. Perhaps he can just double-confirm that diocesan synods would have a veto on this matter. And at what level is the initial decision taken? Is it made by the diocesan board of finance?
Sam Tarry (Ilford South) (Lab)
The hon. Member for Reigate gave me a decent segue into discussing this matter, and I want to raise two issues. First, there is a bit of important historical context. I would speak in favour of the proposals if they were about making the finances of the Church of England more egalitarian. Historically, there have been far wealthier dioceses across the whole of England. In fact, when my father moved from being the area dean in Redbridge in my Ilford South seat, he went from St John the Evangelist just over the border to Barking, where he became the rector of St Margaret’s. Historically, St Margaret’s was the seat of William the Conqueror when he first came to England to begin his conquest, but for many years—unfortunately, probably just before my father moved there—it paid a stipend that was more than the Archbishop of Canterbury received. I give that little memoire as a way of illustrating the discrepancies in wealth and power in many parts of the Church of England.
That leads me nicely to the question on which I want some reassurances. I talk to many clergy—not just through my family networks—including in the diocese of Chelmsford. It has been brought to my attention on a number of occasions that many clergy—not those heading towards retirement, but those in earlier stages of their career—are being made redundant, and they are regularly seeking support and advice from the vicars’ section, I suppose, of Unite the union. I seek reassurance that the measure might mean that we see fewer redundancies. The situation is a bit different—I do not know whether vicars can go on strike—but it is certainly concerning that vicars have to join a trade union, rightly, to fight back against the Church of England, which people would have thought would be a fairly benevolent power in making sure that egalitarian standards were upheld.
I would like to hear reassurance that the redistribution of wealth across the Church of England will mean that we see fewer redundancies and that grassroots clergy in parishes—particularly in poorer parishes—are given the support that they need to continue their great work.
Andrew Selous
I shall try to go through everyone’s questions, but if I do not answer them satisfactorily, please intervene on me again, because there were quite a few—I tried to note them down as we went through.
I can tell my hon. Friend the Member for Reigate that the Oxford diocese, for example, has already tried to be generous, but because we need clarity on the law—so what they do is legal—we have this measure today. A willingness has already been demonstrated by the wealthier dioceses to do this, so I am not really fearful of what he suggests. We are talking about the remuneration of parish priests, and I think the Church of England as a national organisation, which, through the Church Commissioners, already moves money towards poorer communities, will welcome the measure as an additional action to promote a policy that is already in place. Salaries of clergy are incredibly important. They are and will remain a priority.
I note the point that the right hon. Member for Exeter made about the explanatory notes. I am sorry that they were not available in printed form. I have spoken to House and Church officials and we will try to ensure that they are available in print in future, so I ask the right hon. Gentleman to accept my apology. They are available on the website, but that is not quite good enough and they should be here in paper form for Members.
Crispin Blunt
Will my hon. Friend give a little more historical context about the size of congregation per stipendiary rector or priest? How big is the flock of those who attend a church with a priest for guidance, compared with, say, 1900, 1950, 1975 and today?
Andrew Selous
I do not have those figures in front of me because they are not strictly relevant to the Measure. I have the populations of each diocese—I referred earlier to the amounts per capita in each diocese. Again, the Church of England publishes attendance figures, so they are publicly available, but because they are not germane to the Measure, I do not have them in front of me. The amounts in diocesan stipends funds are a matter of public record. The figures that I cited were from 31 December 2019—slightly out of date, but I do not suppose they have changed significantly. They can be looked at.
On the question about diocesan synods, they do not have a veto, so I did not explain myself as clearly as I should have done. If a diocese proposes to move money from its diocesan stipends fund to another poorer diocese, that money will be in that diocese’s budget, and the whole budget goes before the diocesan synod. Just as we have a debate in the House on the Budget, so, diocese by diocese, clergy and laity who are elected to the synod in each diocese will have an opportunity to question what is happening.
On the comments of the hon. Member for Ilford South, it is always a massive sadness when we do not have enough clergy. I hope that the Measure will lead to the retention of more clergy, or the ability to employ more clergy. It is one more means, alongside parish giving, where the majority of our income comes from, as well as the Commissioners’ money, which contributes about 18% of the Church’s funds, to help ensure that clergy are properly looked after. It is absolutely our intention to provide as many clergy as we can.
I hope that I have satisfactorily answered the questions put to me, and I commend the Measure to the Committee.
Question put and agreed to.
Storm overflow spillage
Name | 2022 Classification |
|---|---|
Hastings Pelham Beach | Good—Generally good water quality |
St Leonards | Excellent—The highest, cleanest class |
Bexhill | Sufficient—The water meets minimums standards |
Digital Markets, Competition and Consumers Bill (First sitting)
Tuesday 13th June 2023
(11 months ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Bill 2022-23 View all Digital Markets, Competition and Consumers Bill 2022-23 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
We are now sitting in public and the proceedings are being broadcast. I have a few preliminary announcements that Mr Speaker has asked me to draw to your attention. Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Please switch electronic devices to silent. Date Time Witness Tuesday 13 June Until no later than 9.55 am Competition and Markets Authority Tuesday 13 June Until no later than 10.25 am Which?; Citizens Advice Tuesday 13 June Until no later than 10.55 am Chartered Trading Standards Institute; National Trading Standards Tuesday 13 June Until no later than 11.25 am News Media Association; Publishers Association; DMG Media Tuesday 13 June Until no later than 2.45 pm Professor Jason Furman, Harvard University; Professor Philip Marsden, College of Europe; Professor Amelia Fletcher, University of East Anglia Tuesday 13 June Until no later than 3.30 pm The Consumer Council; Consumer Scotland; National Consumer Federation Tuesday 13 June Until no later than 3.45 pm Professor Geoffrey Myers, London School of Economics and Political Science Tuesday 13 June Until no later than 4.00 pm British Retail Consortium Tuesday 13 June Until no later than 4.15 pm Open Markets Institute Thursday 15 June Until no later than 11.45 am techUK Thursday 15 June Until no later than 12.15 pm Coalition for App Fairness; Geradin Partners Thursday 15 June Until no later than 1.00 pm Match Group; Gener8; Kelkoo Thursday 15 June Until no later than 2.30 pm XigXag; Paddle Thursday 15 June Until no later than 2.45 pm Google
Today, we will first consider the programme motion on the amendment paper. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the oral evidence session. In view of the time available, I hope that we can take those matters formally, without debate.
Ordered,
That—
1. the Committee shall (in addition to its first meeting at 9.25 am on Tuesday 13 June) meet—
(a) at 2.00 pm on Tuesday 13 June;
(b) at 11.30 am and 2.00 pm on Thursday 15 June;
(c) at 9.25 am and 2.00 pm on Tuesday 20 June;
(d) at 11.30 am and 2.00 pm on Thursday 22 June;
(e) at 9.25 am and 2.00 pm on Tuesday 27 June;
(f) at 11.30 am and 2.00 pm on Thursday 29 June;
(g) at 9.25 am and 2.00 pm on Tuesday 4 July;
(h) at 11.30 am and 2.00 pm on Thursday 6 July;
(i) at 9.25 am and 2.00 pm on Tuesday 11 July;
(j) at 11.30 am and 2.00 pm on Thursday 13 July;
(k) at 9.25 am and 2.00 pm on Tuesday 18 July;
2. the Committee shall hear oral evidence in accordance with the following Table:
3. proceedings on consideration of the Bill in Committee shall be taken in the following order: Clauses 1 to 36; Schedule 1; Clauses 37 to 59; Schedule 2; Clauses 60 to 121; Schedule 3; Clauses 122 to 124; Schedule 4; Clause 125; Schedule 5; Clauses 126 to 131; Schedule 6; Clause 132; Schedule 7; Clauses 133 to 136; Schedules 8 to 10; Clause 137; Schedule 11; Clause 138; Schedule 12; Clauses 139 to 142; Schedules 13 and 14; Clauses 143 to 200; Schedule 15; Clauses 201 to 207; Schedule 16; Clause 208; Schedule 17; Clauses 209 to 217; Schedule 18; Clauses 218 to 247; Schedule 19; Clause 248; Schedule 20; Clauses 249 to 276; Schedule 21; Clauses 277 to 287; Schedule 22; Clauses 288 to 292; Schedule 23; Clauses 293 to 300; Schedule 24; Clauses 301 to 308; Schedule 25; Clauses 309 and 310; Schedule 26; Clauses 311 to 317; 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 18 July.—(Kevin Hollinrake.)
The Chair
The Committee will therefore proceed to line-by-line consideration of the Bill on Tuesday 20 June 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.—(Kevin Hollinrake.)
The Chair
Copies of written evidence that the Committee receives will be made available in the Committee Room and 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.—(Kevin Hollinrake.)
The Chair
Before we start hearing from the witnesses, do any Members wish to make declarations of interest in connection with the Bill? No.
We will move straight on then to hear oral evidence from the Competition and Markets Authority. This morning, we are privileged to have a trio of stellar CMA executives: Sarah Cardell, the chief executive; George Lusty, the senior director for consumer protection; and Will Hayter from the digital markets unit.
Before calling the first Member to ask a question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion that the Committee has agreed. For this session, we have until 9.55 am. Could I ask our three witnesses, starting with the chief executive, to introduce themselves for the record?
Sarah Cardell: I am Sarah Cardell, chief executive of the CMA.
George Lusty: I am George Lusty, senior director for consumer protection at the CMA.
Will Hayter: I am Will Hayter, senior director for the digital markets unit at the CMA.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Sarah Cardell: I will start off, and Will might come in with a specific example. We are talking here specifically about the provisions around digital markets in the Bill. What we have got with the design of the provisions here is exactly as you say—something that is really quite bespoke, quite targeted and flexible. I think that is really important. When we look at the issues that we are seeking to tackle in digital markets, there are many benefits that come from them, but there are real competition concerns. We see a concentration of market power. We see the characteristics of these markets, where there are substantial economies of scope and of scale, and the aggregation of data, and that results in potential harm, both for consumers, in terms of their ability to access a broad range of products and services, and for competing businesses that want to be able to compete and grow and innovate on a level playing field.
What does the Bill do? The Bill enables us to tackle those concerns in a very targeted way. That is critical. You asked about the comparison with the European Union’s Digital Markets Act. In terms of the underlying concern, what we have in the EU is designed similarly—there is no fundamental difference there—but it is a more blanket approach, with a blanket list of prohibited conduct, whereas what we have here is a Bill that enables the CMA to designate particular companies in relation to particular activities, and then to design conduct requirements to manage their market power in relation to those specific activities. That is a much more bespoke system from the outset—it is targeted at the individual company and the individual conduct that is a cause of concern.
I think this Bill also has a greater degree of future-proofing. That is obviously critical in these markets, because they evolve so rapidly. The system in the EU is a slightly more static approach. You have a set of provisions that prohibit certain conduct as things stand at the moment. What we will have is the ability to bring in new conduct requirements if we see new concerns emerging, and to vary those or remove them when they no longer apply. That means that the system over time will be much more responsive and much more future-proofed. Will might want to come in with a couple of specific examples.
Seema Malhotra
Q
Sarah Cardell: My view is that it is entirely the opposite. Competition and open competitive markets are the foundation of an economy that encourages investment, innovation and growth. We see that from a vast range of economic literature and economic research. The work that the CMA already does is very much tied to driving innovation, investment and growth.
So the starting point is that open competitive markets are good for innovation, good for investor confidence and good for growth. We then need to make sure that the design of the regime delivers that, and that the implementation of the regime, by the CMA, delivers that. I think the design does, for the reasons that I broadly outlined, and obviously the scrutiny is then, rightly, on the CMA to make sure that in practice we deliver the regime in a way that inspires that confidence.
I think we will do that in a number of ways. The first is to look at the outcomes that we deliver, which will ensure that businesses, large and small, are able to grow, invest and thrive in these markets. The second way is to make sure that we have really strong stakeholder engagement. This is not a regime where we want to operate behind closed doors. The whole design of the regime is a participative approach where we will engage with a broad range of stakeholders, businesses and consumers as we consult on designation, design the conduct requirements, and then enforce against them.
Seema Malhotra
Q
Sarah Cardell: If I quickly take accountability, George might come in on secondary tickets. Accountability is key. The Bill gives us greater responsibility and power, and with that must come greater accountability. That comes in a number of forms. Parliamentary accountability is critical. We are accountable to Parliament. We do that already through a number of appearances and engagement with Committees, but I am sure that there is more that we could do in the design of that, and we are very keen to work with colleagues in Government and across Parliament to ensure that that happens. Accountability for our decisions through the courts is another important element, and accountability to stakeholders, going back to the previous point, is key as well.
George Lusty: On secondary tickets, the CMA has taken a lot of action in this area. It has taken Viagogo to court. We found ourselves up against some of the inherent weaknesses in the existing consumer protection toolkit when we did that. We effectively had to initiate an attempt to start contempt of court proceedings to get Viagogo to comply with the court order that we had secured. We think that many of the changes in the Bill will address those weaknesses directly by giving us civil fining powers for the first time. We set out specific recommendations back in August 2021 about other things that we think could be done, but ultimately it is a matter for the Government to decide what they want to include in the legislation.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Sarah Cardell: On digital markets, the design works very well, because you have an engaged approach where we will work with businesses to secure compliance with the conduct requirements. We hope that that will be a constructive engagement, and that much of that compliance will be achieved without any enforcement activity. That is the aspiration and the goal. Of course it is important to have enforcement as an effective backstop and that that enforcement happens rapidly for the reasons that you stated. The Bill envisages a six-month time limit for enforcement, which is important so that everybody knows that that timing is ringfenced.
On appeals, let me take a minute to talk through the JR standard and why I think that it is effective, because there has been a lot of debate about that. It is critical that the CMA faces effective judicial scrutiny for our work. That should go on the record. We think that the JR standard achieves that. The JR standard applies to much of our work already, including our merger control and market investigations. It applies to a number of regulators for their regulatory work already, so there is an established approach for JR.
What JR is not, certainly in our experience, is a very light-touch procedural review. It looks at process questions, but it also looks fundamentally at whether we have applied the right analytical approach, the kind of evidence that we have reviewed, how we have weighed that evidence, and the rationality—the reasonableness—of our decision making. Take the example of the Competition Appeal Tribunal review of our merger decision, which was a review of the acquisition by Meta of Giphy. We had 100-plus pages in that judgment, with 50-plus pages looking at our analytic framework, how we looked at the effect on competition, the kind of evidence that we took into account and whether we weighed it effectively. It was a very detailed critique of our assessment.
What JR does not do is start a full merits from first instance court process. It does not say, “Back to the drawing board—we are going to set the CMA’s decision to one side and then conduct the process all over again.” That is much more similar to the full merits review that we have at the moment on Competition Act 1998 cases. Our experience there is that it results in very protracted litigation—we often have cases that are in court for five or six weeks. But, fundamentally, it also changes the incentives to the parties that we are engaging with, because all eyes are on that litigation process. That means that, in our process and our own investigations, it is a lot harder to reach constructive, collaborative outcomes, because every point that we are investigating is thrown into an adversarial contest. It means that we have to turn every stone, check every piece of evidence and make sure that every point is covered, which means that our investigations themselves are more protracted and the litigation is much longer.
The benefit of judicial review in this process is that it provides absolutely robust and effective scrutiny, but it also supports an environment that is aligned with the aspirations of the Bill more broadly—to encourage engagement early on and to encourage constructive, collaborative outcomes. Then, of course, parties absolutely have the right to challenge and appeal our decisions and, where they do so, that is resolved effectively through a JR process.
Paul Scully
Q
Sarah Cardell: Absolutely.
Alex Davies-Jones (Pontypridd) (Lab)
Q
Sarah Cardell: I will give a high-level response, and Will might come in on some of the specific priorities for the DMU. It is really important to highlight the difference between accountability and independence. The CMA is independent when we take our individual decisions, but, as you say, it is absolutely accountable for those decisions, both to Parliament and to the courts. That is accountability for the choices that we make about where we set our priorities, accountability for the decisions that we take when we are exercising our functions, and accountability for the way that we go about doing that work. I think it is important to have accountability across all three areas.
On the strategic priorities, since I came into the role as chief executive and our new chair, Marcus Bokkerink, came into post, we have put a lot of focus on really setting out very clearly what our strategic priorities are, looking at impact and beneficial outcomes for people, businesses and the economy as a whole. We see those as a trio of objectives that are fundamentally reinforcing, rather than in tension with one another.
We also take account of the Government’s strategic steer. That is in draft at the moment. You can see that there is a lot of commonality between our own strategic priorities that we set out in our annual plan and in the Government’s strategic steer. That sets a very clear framework for our prioritisation.
Will might want to come in on how we will set the priorities for the DMU.
Will Hayter: We are obviously thinking very carefully about where to prioritise action under the strategic market status regime. We cannot jump too far ahead with that, because Parliament is going through this process now and we have to see where the Bill comes out, but, as Sarah says, we will be targeting our effort very firmly at those areas where the biggest problems and the biggest current harmful impacts on people, businesses and the economy are likely to be.
You can get a bit of a sense of what those areas might be from the areas we have looked at already, particularly the digital advertising market, search, social media, interactions between the platforms and news publishers, and also mobile ecosystems. We did a big study there, where we see a range of problems stemming from the market power of the two big operating systems.
We will continue to update our thinking as we go through the next year-plus, building on our horizon-scanning work and understanding of how developments in the markets are shaping up and what that might mean for where the problems are.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
Q
My question is about innovation. If you speak to some of those who are likely to be designated SMS—strategic market status—businesses, many of them might say, “Well, this will inhibit innovation from our businesses.” I think part of that is about the power to look ahead at where this may take us. What do you say to that? If one of those platforms was opening a new type of supermarket, for example, it might be claimed that this would limit innovation. How would you respond to that?
Sarah Cardell: I have a couple of points, and Will might come in. The general point is that this regime is very much pro-competition and pro-innovation, both from the major platforms, which are likely to be designated in relation to some of their activities, and across the economy. It is important that we encourage innovation that supports competing businesses, large and small. You can have innovation that supports an incumbent by allowing that incumbent to offer additional services, but sometimes at the cost of entrenching their market position. We want to ensure that we have an environment that enables those major players to continue to innovate, sparked and incentivised by the competitive pressure that they are facing, but equally allows smaller competitors to thrive and innovate too. That is the broad point.
As we have said, it is a very targeted and bespoke regime. We will be focusing only on areas where there is substantial and entrenched market power already. Therefore, the principal point is that businesses, large and small, will continue to be free to innovate and to develop their products and services. Of course we want to ensure that that happens in a way that does not reinforce positions of market power. Will, you might want to come in on that.
Will Hayter: As Sarah says, this is all about creating a fertile environment for innovation, and you can think about that at at least three levels. First, it might be that those companies are innovating on top of the platforms that we are talking about here—in mobile ecosystems, through app stores, mobile browsers, and so on. Secondly, there are companies that are seeking to compete directly against some of the big platforms, and we want to ensure that there is a possibility that the current incumbents will be knocked off their perch by tomorrow’s innovators. Finally, increasing competition should increase the pressure on the incumbents—the most powerful firms—to innovate further themselves, in a way that delivers the greatest benefits for people, businesses and the economy.
Kevin Hollinrake
Q
Sarah Cardell: I do not think that there is anything in the Bill that prohibits innovation. The fundamental design, and certainly the way that we would intend to operate it, is entirely pro-innovation. We want to ensure that, as the designated companies continue to seek to develop and grow their businesses—of course they will want to, and that brings many benefits—that happens in a way that does not entrench their position, which is disadvantageous either to consumers or to competing businesses. That does not inhibit innovation, but it puts some guardrails around that innovation to ensure that the impact of that is beneficial and positive.
The Chair
We now come to a quick-fire round. We have six minutes left and four Members seeking to ask questions, so we want quick questions and quick answers.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q
Sarah Cardell: The short answer is yes. We are well funded in terms of our budget. We are carrying out significant recruitment, and we have a good breadth of expertise, which is particularly important to developing our digital data technology expertise. We have done a lot of that already, but it remains a key focus.
Neil Coyle
Q
Sarah Cardell: We have very substantial legal resources internally. We have a legal directorate of around 150 people. We will be growing our resource by more than 200 people over the next two years, and growing substantially outside London, which will be key for us.
Vicky Ford (Chelmsford) (Con)
Q
Sarah Cardell: The brief answer is that in our annual plan we set out our measure of outcomes: benefits for people in terms of great choices and fair deals; benefits for businesses in terms of enabling them to compete, innovate and thrive; and benefits for the economy as a whole in terms of growing productively and sustainably. That applies across the new suite of roles, powers and responsibilities. If you are looking at outcomes for people, what is the impact on prices and choice? Can people access their data? Can they move between services more effectively? What is the impact on businesses? Can they get fair and reasonable terms when they are reliant on the infrastructure of some of these major players in order to innovate and grow? Are we seeing innovation coming from smaller businesses as well as the incumbents? When we look at the benefit for the economy as a whole, do we see the flow-through of greater competition, improving productivity and improving growth? We have our “State of UK competition” report, which reports on that, and that will continue to be an important metric.
We are taking on responsibility for an annual consumer protection study, again looking at areas of consumer concern and the impact of interventions we are taking. You mentioned international benchmarks; I think that is really important. Obviously, a lot of these issues, especially on the digital side, are international in nature. We want to see benefits in terms of changes in international trends—there is a real opportunity here for the UK to set the model for positive regulatory intervention in digital markets, and for that to be adopted by others—and real benefits for UK businesses in terms of their ability to grow and innovate, and the investment that that attracts from overseas.
Vicky Ford
Q
Sarah Cardell: As one of our factors, absolutely.
Jerome Mayhew (Broadland) (Con)
Q
Sarah Cardell: I firmly believe it will draw investment in. Will, do you have a couple of examples of people you have spoken to?
Will Hayter: You have app developers who are wanting to provide a service through these mobile ecosystems that have pent-up business—I think you are talking to one of them later—waiting to be invested in and to grow. There is also a UK-based search engine looking for opportunities to expand. Those are exactly the kind of businesses that are trying to grow and want this kind of regulatory infrastructure to create the conditions to do that.
Dean Russell (Watford) (Con)
Q
Sarah Cardell: It is opening up choice; it is opening up access to the fullest range of services. It is enabling them to have confidence that their data will be used in an effective way and that they can move between different products and services so that they do not get locked in. When we think about the consumer side, daily we hear and see so much about consumer detriment. We are working as hard as we can to address that, but the consumer reforms will enable us to take a massive step up in terms of the impact we can deliver, the speed with which we can tackle their concern,s and the effectiveness with which we can deliver improved outcomes for people.
Dean Russell
Q
Sarah Cardell: Both. On engagement, we work very much with bodies such as Which? and Citizens Advice, which I know you are hearing from shortly, so we have a lot coming in. That is really important, because when we make the choices about the work we are doing, they need to be informed directly by consumer concerns, not be something that we just think is the right thing to do. We want to deliver that visible impact.
George Lusty: I think your constituents will see the CMA directly taking decisions. When we find that something has broken the law, they will find that we are taking direct orders to get their money back for them, and we will be imposing deterrent fines on the firms that do not do the right thing.
The Chair
I thank our three stellar witnesses very much indeed for their time this morning. We wish you continued success at the CMA.
Examination of Witnesses
Rocio Concha and Matthew Upton gave evidence.
The Chair
I welcome Rocio Concha, director of policy and advocacy and chief economist at Which?, and Matthew Upton, acting executive director of policy and advocacy at Citizens Advice. Thank you for coming this morning. Would you be kind enough to introduce yourselves to the Committee for the record?
Rocio Concha: I am Rocio Concha, the director of policy and advocacy, and the chief economist at Which?.
Matthew Upton: I am Matthew Upton. I am the acting executive director of policy and advocacy at Citizens Advice.
Seema Malhotra
Q
Rocio Concha: Let me start by saying that we are fully supportive of the Bill. We think that it will modernise competition policy and consumer policy in the UK, and that it will deliver clear benefit for consumers, businesses and the economy.
We are very supportive of part 1 of the Bill, which you discussed with the previous panel and which is about the additional powers to introduce a pro-competition regime. That is very important and we think that the regime will be proportionate and flexible, and will deliver benefit to consumers by providing more choice and lower prices.
One thing to say is that it important to look at the regime in its totality. The CMA explained that the regime is very proportionate and consultative. For it to work, it is important that the appeal process is on a judicial review basis, which is what is proposed in the Bill. That should be maintained as the Bill goes through Parliament. Obviously, we are very supportive of the new powers for the CMA to fine directly companies that breach consumer law. Why? Because that is a stronger deterrent to those businesses that may decide to ignore the law.
We are also very supportive of the Secretary of State having the power to act on the practices set out in schedule 18 that are clearly unfair. Why? Because we need a flexible system, particularly in the digital space where things move very quickly. We need that flexibility in the system as we identify additional areas.
You mentioned fake reviews. We welcome the commitment to include fake reviews in the Bill, but basically the commitment is that that will be introduced by the Secretary of State. We do not think that we should wait. Clearly, fake reviews are harmful, so the buying, selling and hosting of fake reviews should be included in schedule 18. We think that drip pricing is another practice that is very harmful. There is a lot of evidence that that is the case, and it should be included on the face of the Bill.
How will we measure this? When we look at our work and at the areas we want to focus on, we do quite a lot on consumer detriment; we also work with the Government and the CMA to see what the big areas of detriment are. We expect to see changes in the behaviours of some companies that decide not to follow the law. With the previous panel, you talked about, for example, the measures that the CMA took in the past on secondary ticketing companies, such as Viagogo. That took six years—six years of harm for consumers. We expect that, after the Bill becomes an Act, we will see action and that all those crimes that do harm will be resolved more quickly.
Seema Malhotra
Q
Matthew Upton: We have been asking for action on subscription traps for a long time. Any action is positive, but we are seeing this in the context of a cost of living crisis, where anything that takes cash out of people’s pockets stops them getting by from day to day. To be honest, we think that the intent is right, but this is potentially a huge missed opportunity for action on subscription traps. We have to understand how high the incentive is for firms to trap people in subscriptions. There is a huge amount of money to be made, to the extent that it changes the whole incentive structure so that for many firms, rather than thinking about how to provide a quality subscription, the rational thing to do is think about how to design the worst possible customer journey and to trap someone, whether through an online process that makes it difficult to cancel something—you will all have experience of this—or, to give a slightly facetious example, a process whereby you can cancel only when you ring between 2 and 2.30 on a Tuesday and you have wait for 45 minutes in the queue.
Obviously, we want to change that incentive structure so that we have a flourishing subscription economy, which should be encouraged, where consumers want to stay in subscriptions and firms focus on providing quality subscriptions. We do not think that the Bill as it stands will do that. For example, it says that exit has to be timely and straightforward. We do not think that that will work. We have been here before, if we think back to utility bills four or five years ago, when there was a big push to stop people rolling on to expensive contracts and to get them to switch. Regulators were focused on trying to dictate what went into letters to consumers about their renewals. Firms could make so much money by obeying the letter but not the spirit of the regulation that they would find ways round it, and switching rates did not go up. We think that the same will happen here.
The specific change that would make a huge difference and is legislatively straightforward is to provide that, at the end of an annual trial subscription, the default is that the consumer opts out. That is not about things like car insurance, where there is a detriment to people opting out, but for basic subscriptions, opt-out should be the default. That would allow firms to use all their ingenuity, power and influence to persuade consumers to stay in. They could go for it—send as many reminders as they wanted; that is absolutely fine. If the subscription is good, a consumer will stay in. That change will make the difference. We have done some polling on this and about 80% of people agree that that should happen. We think that it will put millions of pounds back in people’s pockets, that it is proportionate and that it will encourage a flourishing subscription economy.
Kevin Hollinrake
Q
Rocio Concha: A provision on fake reviews in the Bill should apply to both products and services. There is evidence to show that fake reviews also harm services. I do not think that there is a major risk. We and the CMA have produced a lot of evidence about how fake reviews are endemic on some sites. We have demonstrated the harm that they cause. It is clear what is needed. We know that we need to look at selling, buying and hosting. I do not see a risk to including such a provision on the face of the Bill. Then, in secondary legislation—
Kevin Hollinrake
Q
Rocio Concha: If there is something that needs to be improved, you can always do it with the Secretary of State’s power later. There is quite clear evidence to provide a clear steer on what is an unfair practice. Obviously, as with anything in schedule 18, you have that power to modify, to add to the practice as more evidence comes in. We will provide enough evidence to the Committee to show that it can be introduced on the face of the Bill.
Kevin Hollinrake
Q
Matthew Upton: I think it could, but we worry that it will not in reality. It is quite difficult to decide, for example, what constitutes easy and timely exit from a contract. You cannot necessarily measure it incredibly specifically, and I could imagine enforcement being really complicated. I could imagine firms dragging their feet, despite the way powers would speed up the ability of the CMA to act, as I say, because the incentive structure is so great.
One reason for the growth of the subscription economy is that it is a great way to provide services, but another is that it is such an easy way to make money by trapping people in. That is our firm belief and what our evidence shows. I just think a simple default would be much more effective than basically having the CMA chasing its tail and chasing firms. It would not be of any detriment to good firms who want to provide really solid subscriptions that people should want to stay in.
Richard Thomson (Gordon) (SNP)
Q
Rocio Concha: Our view is that it should be on the face of the Bill. We do not know why the right to redress has not been transposed into the Bill. From our perspective, we do not want to leave it for the Secretary of State to decide once we have an Act. It should be included.
The other thing is that the right of redress does not cover all the practice in schedule 18, only misleading practice and aggressive practice. It does not really cover all the list of unfair practice in schedule 18. I think that the right to redress should also cover that.
Richard Thomson
Q
Rocio Concha: You mean how—
Richard Thomson
How could we legislate create the framework by which the problem of fake reviews could be best addressed?
Rocio Concha: I think it needs to be in the list on schedule 18, and there is a very simple way to draft that amendment. We are going to suggest an amendment to help you with that, so I do not think that it is a major difficulty to include it on the face of the Bill.
Dean Russell
Q
Rocio Concha: I can give you some examples from the past so that you can see what consumers face. I already talked about the secondary ticketing problem, but I will give you another example. During covid, there were a lot of issues about people getting their refunds that they were entitled to by law. Many people could not really get them. I will give you another example on the digital side—that was on the consumer side.
At the moment, as you have heard from the CMA, digital advertising is basically controlled by two companies, Google and Facebook. Google has doubled its revenue from digital advertising since 2011 and Facebook used to make less than £5 per user—more recently, it has been around £50 per user. Google charges around 30% more for paid-for advertising than other search engines. All that cost translates into the products that we buy. We expect that once this pro-innovation, pro-competitive regulatory framework is put in place we will see it translate into prices.
We will also see it translate into more choice, in particular on data. At the moment, it is very difficult for consumers to have a choice on how much of our data is used for targeted advertising. You will have seen examples of that. When we talk to consumers in particular on the issues surrounding data, they feel disempowered. When we talk to consumers about the problems that they face in some of the markets where there are high levels of detriment, they also feel disempowered.
Matthew Upton: To be clear, there is a lot of good in the Bill. I echo Rocio’s first comments that there are a lot of positives. It has been a long time coming, and is a testament to the civil servants in the Department who have stuck with it. The main lens through which we see the impacts of the potential changes in the Bill is the cost of living. It is not exactly headline news that people are struggling with their bills. One of the main measures that we look at is whether one of our clients is in a negative budget: whether their income meets their essential outgoings. About 52% of our debt advice clients can no longer meet their essential—not desirable—outgoings with their income.
There are two areas where the Bill can make a real difference. One of the frustrations is that a debt adviser will go in detail through someone’s income and where they spend their money, helping them to balance their bills, and so on. You see the impact of other Government interventions, such as energy price support, putting money in their pockets and uprating benefits. You are combing through their expenditure and you find something like a subscription trial taking £10 a month—a huge amount for a lot of our clients—unnecessarily out of their account. They did not even know that it was there. Often, it is people who are not online, are not savvy, and are not combing their bills every month because they have a lot on. That is hugely frustrating, and things like this, especially if strengthened, could tackle that.
You will see similar things where people are just about balancing their monthly income with their expenditure and they get hit by some big scam bill or are let down by a company. Such companies are too often not held to account in the right way. It is a bit of a tangential example in some ways, but the hope is that the CMA’s increased ability to act and, in effect, to disincentivise poor behaviour towards consumers will lessen such instances as well.
The Chair
We have 12 minutes left, and five Members are seeking to ask questions, so we need to increase the pace.
Neil Coyle
Q
Rocio Concha: Definitely. Legislation is required to ensure that online platforms take responsibility for the products that they sell on their platforms. We have done lots of reviews and gathered evidence that shows that consumers in the UK can buy very unsafe products on those platforms. Online platforms should be doing more to tackle that issue. The issue probably requires separate legislation, but I want to make it clear that we need legislation, and we need it now.
Neil Coyle
Q
Rocio Concha: No, I do not think that what is in the Bill will really tackle the issue.
Jerome Mayhew
Q
Matthew Upton: In a sense, I disagree with you because I agree with your point about it being outcomes-focused. In a sense, you are right; it leaves it fairly open, which gives some space for people to interpret, but I think what will end up happening is that firms will get around those provisions in various ways. They will tweak the subscriptions to find other ways to find people to step in. We will have a game of whack-a-mole, where we chase around trying to clamp down, a little bit like we had in the utility-switching space of four or five years ago. Ultimately, whether people agree or not, that led to much heavier intervention in the market.
Just taking one step to move towards opt-out—in a sense, you are right; it is a process step—is incredibly simple in terms of aligning the incentives. I think that would mean you would have to do less of the tweaking, constant interventions and prodding of firms. It just sets up the incentives in a much more simple way.
Jerome Mayhew
Q
Matthew Upton: I disagree, because I think the simplicity of simply saying, “You opt out at the end of a period” gives clarity. I think it is easier for firms to interpret. In reality, under the current set-up, I do not think you will see a lot of firms thinking in a positive way about how to interpret it. I think they will think about how they can push as far as possible.
Customer journey design is so complex—this is the challenge of emerging digital markets. It is not a case of being able to say, “You have two click-through screens versus three,” so that constitutes easy or hard. There are incredibly subtle ways to make it difficult. I think a lot of firms would continue to put their efforts into thinking about how they can stay as close as possible to the law to avoid CMA sanctions, while effectively still making it psychologically and in reality difficult for consumers. An opt-out would just simplify it, and would take that thought process off the table for firms.
Alex Davies-Jones
Q
Rocio Concha: In what respect? On why we want them there?
Alex Davies-Jones
Yes. What you would like to be in there.
Rocio Concha: As I said, we would like to see fake reviews and drip pricing included, because there is clear evidence on them. There is also this issue of greenwashing. That should also be considered to be put in schedule 18 —we feel that we know enough to include it there. We have not done as much work in that area as we have on drip pricing and fake reviews, but we would be very supportive of including it in schedule 18.
Why do we want these areas in the Bill, versus them being included later under the Secretary of State’s powers? If they are not in the Bill, they will not be criminal offences, and they should be, because that will be a more credible deterrent for stopping these practices.
Vicky Ford
Q
Rocio Concha: Absolutely. That is one of the powers of that power. Basically, companies will know that they will not be able to drag the system for years, as happened with Viagogo and some anti-virus subscriptions. They will know that the CMA will be able to act directly. Hopefully, that will make businesses that do not want to comply with the law think twice.
Matthew Upton: I really agree. I cannot share a specific example, but we have had a lot of conversations with regulators and competition authorities after we have uncovered bad practice. We have said, “Listen—go after them.” We were met with a frustrated shrug of the shoulders—“There’s no point because they will run rings around us for a huge amount of time and we will end up with nothing. We have to use our powers where we can more clearly have impact.” As you say, that should now end. In a sense, we are more positive about the disincentive for poor behaviour than the fines themselves.
Rocio Concha: There is an opportunity in the Bill to make that deterrent even stronger. At the moment, in part 1 of the Bill there is the opportunity for private redress, which will allow businesses or consumers to apply to the court for compensation from companies that have breached the conduct requirements in part 1. It is very unlikely that consumers like each of us or a small business will use that power in the courts. But if we allowed collective redress—the co-ordination of consumers and businesses to get redress—that would be for those companies a credible additional deterrent against breaking the law. That is in part 1, in relation to competition.
There is also the opportunity to include a provision within the breaches of consumer law. At the moment, collective redress is allowed for breaches of competition law, but not for breaches of consumer law.
Anna Firth (Southend West) (Con)
You have given us a simple, practical way to end subscription traps through the opt-out. Do you have any other simple, practical amendments in the locker that would help better protect my consumers in Southend-on-Sea?
Matthew Upton: I have a very simple one, which echoes what Rocio said earlier: to add drip pricing to the list of banned practices.
Rocio Concha: For me, it would be fake reviews. As I said, we will suggest the drafting of amendments, to make that easy to include in the Bill.
The Chair
I thank our witnesses very much indeed for your precious time this morning; we appreciate it.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Energy Bill [ Lords ] (Eighth sitting)
Tuesday 13th June 2023
(11 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
Order. We resume consideration of the Bill. I am speaking slowly in the hope that the shadow Minister may appear at the last moment—
The Chair
Hopefully, then, he will be here very shortly.
We will resume our marathon consideration of the Energy Bill this morning with the Question that clause 171 stand part of the Bill. That, of course, is grouped with a number of other things: clauses 172 to 174, amendment 101, schedule 16, clauses 175 to 179, and new clause 39. To remind the Minister in case he slips again, the Question will be that clause 171 stand part of the Bill.
I welcome the shadow Minister to his place—all I have done so far is announce the first group. I call the Minister to speak to it.
Clause 171
Relevant heat network
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 172 to 174 stand part.
Amendment 101, in schedule 16, page 335, line 37, at end insert—
“(aa) their interests in systems that deliver heat efficiently;”.
This amendment defines consumers’ interests expressly to include efficient heat delivery in order to ensure that regulation covers systems that are operational but are operating inefficiently to the detriment of customers.
That schedule 16 be the Sixteenth schedule to the Bill.
Clauses 175 to 179 stand part.
New clause 39—Guarantee for consumer protection—
“(1) Within three months of the day on which this Act is passed, Ofgem must set out a new licence to operate for heat networks that guarantees equivalent protections for heat network customers compared when compared with electricity and gas customers.
(2) Protections under subsection (1) must include but are not limited to—
(a) a price cap for heat network customers;
(b) a licence condition to “treat customers fairly”, analogous to Licence Condition 0 of the electricity and gas supplier licences; and
(c) a licence condition addressing “ability to pay”, analogous to Licence Condition 27A of the electricity and gas supplier licences.”
This new clause would guarantee that heat network customers receive equal treatment to electricity and gas customers.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
Thank you, Mr Gray. It is a pleasure to serve under your chairmanship yet again in this marathon but exciting and engrossing Committee.
Part 7 of the Bill relates to heat networks. The purpose of clause 171 is to define a heat network, clarifying the scope of heat networks regulation. As well as defining “relevant heat network”, the clause includes definitions for both communal and district heat networks.
A heat network provides heating, cooling or hot water to a building or collection of buildings, and its users. A communal heat network supplies heat to one building whereas a district heat network supplies two or more buildings. In both cases, the network must serve separate consumers or premises within the building or buildings to be considered a heat network. The clause provides a clear distinction between communal and district heat networks, which may require different legislative approaches. The definitions explicitly include networks that use heat pumps.
Clause 172 appoints the Gas and Electricity Markets Authority—Ofgem, for the avoidance of doubt—as the heat networks regulator for England, Scotland and Wales, and the Utility Regulator as the regulator for Northern Ireland. The Secretary of State—or, in Northern Ireland, the Department for the Economy—can, via regulations, change the regulator or change who carries out some of the regulator’s functions, assigning them to another body. For ease and clarity, whenever I refer to “the Department” in relation to heat network clauses, I am referring to the Department for the Economy in Northern Ireland.
Clause 172 also provides consequential regulation-making powers for the Secretary of State and the Department to amend this part of the Bill if the regulator is changed or some of its functions are reassigned. This is important to ensure that heat networks regulation remains agile.
Clause 173 provides the Department for the Economy in Northern Ireland power to amend the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 to provide for the regulator in Northern Ireland to be the competent authority for the purpose of those regulations. Amendments made under this power would enable the regulator in Northern Ireland to appoint a body as the alternative dispute resolution body in Northern Ireland.
The purpose of clause 174 is to allow the Secretary of State or the Department to regulate relevant heat networks and grant powers to those carrying out activities related to building or maintaining heat networks. Schedule 16 provides further details on the planned use of those powers. Under the clause, the Secretary of State or the Department will be required to consult on any changes before making any regulations under clause 171. Clause 174 also requires UK Ministers to consult Scottish Ministers when legislating in areas that are devolved to Scotland.
Alan Brown
I thank the Minister; he almost invited the intervention. This is about consultation on matters that are fully devolved. We had a meeting, and the Minister expressed sympathy for our position on the need to find a way to strengthen the “consult” language so that it is not the Secretary of State imposing something. I wonder if he has any further information on that.
Andrew Bowie
I thank the hon. Member for his question. I received a letter from the Energy Minister in the Scottish Government, Neil Gray, just last week—I am formulating a response just now—on the very issue of consultation and consents. Discussions are ongoing as to the exact form that will take.
Clause 175 outlines the parliamentary procedures required for the regulations made under clause 174.
Clause 176 establishes that the Gas and Electricity Markets Authority—commonly referred to as GEMA—and the Northern Ireland Authority for Utility Regulation can recover the costs of regulating heat networks using gas and electricity licence fees. The Bill allows the recovery of costs for other bodies operating within the regulatory framework, such as the code manager and other bodies appointed to administer specific functions in regulation. The Government previously consulted on their proposed approach to cost recovery and received broad stakeholder support. The clause will facilitate the implementation of that approach and ensure that heat network regulation is sustainably and fairly funded.
Clause 177 provides power for the Secretary of State to designate, via regulations, GEMA as the licensing authority for the purposes of the Heat Networks (Scotland) Act 2021. The Scottish Government and other stakeholders have agreed to Ofgem being the regulator across all of Great Britain.
Clause 178 enables the Secretary of State to amend, via regulations, the Heat Networks (Scotland) Act 2021 to give the licensing authority compliance monitoring and enforcement powers under that Act. We intend to designate Ofgem as the licensing authority. That designation and the regulations will allow Ofgem to carry out this regulatory role in Scotland. Regulations under this clause must provide that offences created by the regulations are triable summarily only and punishable by a maximum of three months in prison or a fine not exceeding £200, or both.
Alan Brown
I thank the Minister for giving way again. He mentioned the possible imprisonment of up to three months. That seems to cross over into the Scottish justice system, because the Scottish Government have effectively set a presumption against short sentences. This would clearly be a short prison sentence, so how would that work in reality, against the wishes of sentencing legislation in Scotland?
Andrew Bowie
The hon. Member makes a good point. As I said, the Scottish Government have agreed to Ofgem being the regulator across Great Britain. I will go away and find a detailed answer to his point, which is well made—indeed, it is important to my constituents—about how the crossover will work with the Scottish justice system. It is a completely devolved competency, which we, of course, respect.
Clause 179 provides definitions for the interpretation of this chapter’s clauses. The clause defines “the Department” as the Department for the Economy in Northern Ireland and “the NIAUR” as the Northern Ireland Authority for Utility Regulation.
Schedule 16 covers heat network regulation. Part 1 of the schedule provides definitions of the terms used in the schedule. Part 2 allows the Secretary of State to make regulations about the regulator’s objectives. The main objective of the regulator will be to protect the interests of current and future heat network consumers. Part 3 covers heat network authorisations. The authorisation regime will ensure consistent standards across the industry, raising consumer protections. To carry out regulated activities, persons will be required to comply with conditions of authorisation, and the regulator will have the powers to enforce compliance.
Part 4 covers code governance in relation to heat networks, and part 5 covers the installation and maintenance of licences. Holders of licences will have the additional powers required for installing and maintaining heat network equipment. The regulations may require the regulator to be satisfied that the person applying for the licence is suitable, as well as the criteria they must use when making this judgment.
Part 6 covers the enforcement of conditions in licences or authorisations. The regulator is able to issue orders and penalties when a person is likely to contravene or has contravened a condition. Orders can be used to require compliance with a condition. If breaking a condition has caused damage, loss or inconvenience for a consumer, the regulator can make a consumer redress order.
Part 7 covers the regulator’s powers of investigation. Although it is not considered appropriate to introduce a price cap on the cost of heat provided by heat networks now, the Government do intend to provide for the regulator to investigate whether the prices charged are disproportionate. That enables the regulator to take enforcement action against authorised persons charging disproportionate prices.
Part 8 covers step-in arrangements. The purpose of the arrangements is to facilitate the transfer of a regulated activity in relation to a heat network to a new entity, should the old entity no longer be able to carry on that activity. Part 9 covers the special administration regime. Similar to the provision for other essential services such as gas and electricity markets, this alters the normal administration process to allow for the continued supply of heat. It provides the ability to deploy a backstop should other actions to protect heat supply fail.
Part 10 allows regulations about the supply of heat to premises, including new connections and the metering of supply, and part 11 covers protections for consumers. Part 12 covers payments from the sector to support the special administration regime. It allows for regulations that will authorise the regulator to charge heat networks, via their authorisation conditions, to fund the regime. In that way, the regime spreads the cost of a firm failing across all companies. This is a fair and proportionate way of funding the regime.
Finally, part 13 covers a range of topics, including consultation and co-operation, the objectives of the Secretary of State and Departments across the UK in carrying out their functions, and the creation of offences. I hope Members agree that heat networks play an important role in decarbonising heat and supporting the delivery of our net zero commitments.
The Chair
There is no interest from elsewhere. The Question therefore is—[Interruption.] If the shadow Minister wishes to take part in the debate, he needs to let me know; otherwise, we will move on.
Dr Alan Whitehead (Southampton, Test) (Lab)
I did raise my hand, but it was my left hand rather than my right hand.
Dr Whitehead
I should start by apologising to you, Mr Gray, for being marginally late. Those who know me will know that although I am usually rather close to the line in getting to my seat, I am rarely not actually there in time. I apologise for that slight problem this morning; I blame the lifts in Parliament.
The regulation of the whole system of heat networks, and combined heat and power for district heating schemes, is an important part of the Bill, which is long overdue in its arrival. Members will be increasingly familiar with district heating schemes in their constituencies, which provide heat, power and sometimes cooling both to properties and to industrial and commercial premises within a network scheme.
District heating schemes are by no means new. A number of them have been operating for many years, such as the system in Pimlico—the system in Westminster has been going for many years. Partly because such schemes have been going for many years, they have fallen out of the spotlight in terms of regulation and bringing their provisions into line with what customers expect from elsewhere in the energy system, particularly in relation to customer-facing retail and so on.
Because district heating schemes are enclosed, they are essentially monopoly providers of heat within their own area. They are generally advantageous to customers because they provide reliable heat, usually at a considerably lower price than the general market. The Government are seeking to promote the idea of local authorities extending heat networks for precisely those reasons. They are potentially very low carbon, and agnostic in terms of heat sources for the network. The key is that the network goes around a particular area, providing heat directly to people’s homes, and, as I said, to offices and industrial premises.
In many ways the schemes just do not fit: they stand aside from what customers are normally expected to pay attention to these days, and the energy, gas, heat and power that they receive. As I said, that is because the heat networks in this country, and indeed the combined heat and power systems relating to heat networks, quite often provide electricity as a by-product of the heat-engine process. But they predominantly provide heat for customers.
A number of problems relate to the customer arrangements, and customer expectations, regarding that closed system. Because each of the individual extant networks in the country is effectively a mini-business in its own right, they have at their heart an arrangement whereby a company, not-for-profit or local authority, in some instances, that runs a scheme is responsible for procuring the fuel as if it were a retail energy company for the network, and then supplying it to customers through the heat engine and the network that goes into people’s homes.
The issue for customers is quite often, first, whether the company that is providing supplies for the heat network has procured them in a reasonable and cost-efficient manner. Secondly, is the system that is delivering the heat for customers efficient in its own right? Particularly in older schemes, there are a number of circumstances in which the system provides heat to customers, but not efficiently. The pipework may be old, furred up and not functioning well. Of course, it is extremely difficult for the customer to recognise whether the system is efficient. Sometimes its inefficiency comes to light only when people start being charged unreasonably large bills. The company that is providing the service will then go through its reasoning about the supplies coming in and the service being provided, but not the efficiency of the service.
There is little customer redress in the systems because they generally are not regulated. They have voluntary regulation, run by the Association for Decentralised Energy, whereby heat networks sign up to a redress programme, but currently it covers only a minority of the total heat networks in operation. Bearing all those things in mind, as well as the system’s likely future, the system is long overdue being regulated in a way that delivers for customers the certainty of a good service, redress where the service is not so good, and access to an understanding of how the system as a whole works, and what the companies that provide the service are doing—hopefully in the interests of customers, but in some circumstances not.
The system as a whole works pretty well: most of the companies that run heat networks are honourable organisations, often set up on a not-for-profit basis to provide a district heating scheme. The issue is at the margins of those schemes that do not run their service particularly well, or that do not provide decent redress for their customers and have a monopoly situation as far as their supply is concerned.
Alan Brown
It is a pleasure to serve under your chairmanship, Mr Gray. Like the shadow Minister, I broadly welcome these clauses and the principles behind them. I made a couple of interventions on the Minister. I cannot quite remember, but I have a feeling that clause 174 is not one of those referenced in the letter from Neil Gray, the Energy Minister in Scotland. I will go back and check that. The Scottish Government have concentrated on some of the key clauses, but I will check and reserve the right to come back on this issue on Report if need be. I appreciate that the Scottish Government are working with the Minister. I also appreciate the Minister saying he will come back on my query on clause 178.
As the shadow Minister said, heat networks have been debated in this place for a few years. I have found a couple of speeches of mine from two years ago, when matters were raised in Westminster Hall—primarily by Tory MPs—so this is welcome. If the Committee wants, I can give the thrust of my two speeches from back then, because it is still relevant, or I can just condense them if the Committee prefers. I will take the Chair’s guidance on that.
Alan Brown
Why do we need this? This is why I also support new clause 39. As far back as 2017, the then director of the Department for Business, Energy and Industrial Strategy director stated that
“whatever you do you end up with 17- 24 per cent district heating”.
That means that some 6 million homes will have district heating, so it is important that we actually facilitate that to allow the transition to net zero. It is even more important that we provide protection for those 6 million homes, or people will not accept the principle of district heating and we will not get to net zero. At the moment, around half a million homes have some form of either district heating or communal hot water.
The numbers we are talking about mean that I agree with new clause 39 that a price cap is needed. It would give surety and protection to customers, and help avoid bad news stories as well. Even when I spoke two years ago, consumers and landlords were reporting price rises of up to 700%, according to a Heat Trust report. That illustrates the need for a cap and protection, so that people cannot just continue to ramp up costs.
Amendment 101 is a simple amendment, and I hope the Government will consider accepting it. It is almost administrative, but it does have qualities. I have in the past reported the fact that communal heat networks sometimes operate inefficiently because they are not subject to technical standards. Some contractors choose to complete heat system installations that come at the lowest form of capital cost, rather than the more efficient, longer-term operational systems that give whole-life savings. I wonder if amendment 101 would protect against that. Could the Minister advise us on how the new regulations will ensure that it is the most efficient systems that will be installed, to the benefit of customers and consumers?
Previously, the Government’s green energy support programme had to address the fact that some people in district networks were classified as commercial customers. That was because, as the shadow Minister has said, it is in effect small independent companies that operate these networks. We need to ensure that those classified as commercial customers are protected as much as domestic customers. I should have intervened on the shadow Minister, but I hope that new clause 39 would provide that protection. We welcome the provision, but in order to convert people to district heat networks, we really need wider, joined-up Government policy.
Andrew Bowie
I welcome the broad welcome given by His Majesty’s official Opposition and the Scottish National party to the clauses. I tend to agree with the hon. Members for Southampton, Test and for Kilmarnock and Loudoun. These measures are long overdue, so I thank them again for their positive responses.
I will turn to the points made by the hon. Member for Kilmarnock and Loudoun regarding consent and consult. Notwithstanding my commitment to get an answer for him regarding the criminal justice system in Scotland and how it will interact with these new regulations and their administration in Scotland, I confirm that in the recent letter from the Energy Minister, Mr Gray, the Scottish Government have in fact dropped consent requests on heat networks, so they are very happy to proceed as drafted here. I wanted to give confirmation of that. I will turn to the hon. Gentleman’s other points later.
I thank the hon. Member for Southampton, Test for his amendments, which provide an opportunity to discuss in detail what we are doing here today and why we are not going as far as he suggests we should.
I turn to amendment 101. If not designed and built to high standards, heat networks can experience inefficiencies such as heat losses from the pipes that deliver hot water from the energy centre to homes and businesses. That can lead to consumers paying higher prices and experiencing unreliability of heat supply, as the hon. Member for Southampton, Test said. I reassure him and others that we already have a robust plan to address that issue. The Bill provides for the introduction of technical standards on the design and build of heat networks, which we committed to implementing as part of a regulatory framework in our 2020 heat networks regulation consultation. That will require all new heat networks to be designed and built to minimum standards, and existing networks to make efficiency and performance improvements over time.
As a regulator, Ofgem will enforce the requirement. Heat networks will be required to submit documentation to Ofgem demonstrating that their compliance with technical standards has been certified. As I have set out, the Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems and similar characteristics, or if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. Ofgem will also enforce minimum standards on the reliability and quality of the heat supply. I hope that reassures hon. Members, including the hon. Member for Southampton, Test, that the Government are already taking steps to improve efficiency on heat networks and—to address some points made by the hon. Member for Kilmarnock and Loudoun—to protect consumers from high prices and unreliability.
I turn to new clause 39, which was tabled by the hon. Member for Southampton, Test. Ensuring heat network consumers are protected from high prices and unreliability is our principal reason for introducing heat networks regulation, so I am pleased to see hon. Members recognising the importance of addressing the issue. I appreciate that they will want to see the sector regulated as soon as possible, which is one of the reasons we are progressing the Bill at this pace. However, it would not be possible nor sensible to ask Ofgem to require a licence regime within three months of the Bill receiving Royal Assent. Secondary legislation authorisation conditions are needed to enable Ofgem to operationalise as a regulator. We will conduct public consultations with industry and consumer groups on secondary legislation and authorisation conditions before they come into force. We expect heat networks regulation to come into force shortly after that.
I recognise that hon. Members want to ensure that heat network consumers do not pay disproportionate prices. However, we do not believe that a price cap is suitable for the sector, given its nascent and incredibly diverse state across the country. A price cap also risks heat network insolvencies prior to step-in arrangements being embedded into the regulatory framework. The Bill provides the Secretary of State with powers to introduce a price cap in future, should one become appropriate once the market has matured. I reassure hon. Members that we are taking steps to tackle high prices across the board.
Alan Brown
Can the Minister give us more information on the mechanisms in the Bill that allow the Government to bring forward a cap in future?
Andrew Bowie
As has been set out in the Bill and explained this morning, the powers will be given to the Secretary of State, determined at a point in future when the sector matures, which is exactly the process by which he can introduce a price cap. I think we have gone through that this morning.
Alan Brown
Will the Minister write to me to give a little more detail on that?
Andrew Bowie
Yes, I am happy to write to the hon. Gentleman and provide more detail on exactly that point.
The Bill and subsequent secondary legislation will give Ofgem powers to investigate and intervene in networks where prices for consumers appear to be disproportionate compared with systems with similar characteristics. It will also be able to investigate and intervene if prices are significantly higher than those consumers would expect to pay if they were served by an alternative heating system. We are taking action to address current high prices in the heat network sector. The energy bills discount scheme, which runs from 1 April 2023 to 31 March 2024, provides support to heat networks with domestic end consumers.
On conditions around treating customers fairly and ability-to-pay assessments, I am pleased to inform hon. Members that the Government already plan to consult on introducing comparable levels of service and protection to consumers in other regulated utilities as part of a public consultation on heat network consumer protection rules. We will publish that consultation in due course. I hope that reassures hon. Members that the Government are already taking steps to deliver regulation and tackle high prices in this sector. I therefore ask the hon. Member for Southampton, Test not to move his amendment 101.
Question put and agreed to.
Clause 171 accordingly ordered to stand part of the Bill.
The Chair
We now come to the Question on clauses 172 to 174 stand part—we have just debated them. With the leave of the Committee, I will take them together.
Dr Whitehead
Do you want to know whether I am going to withdraw amendment 101, Mr Gray?
The Chair
No. The hon. Gentleman should not interrupt me while I am putting the Question. In answer to him, however, his amendment 101 comes after the decision on clauses 172 to 174. I thank him for his intervention, but he is wrong.
Clauses 172 to 174 ordered to stand part of the Bill.
Dr Whitehead
I will include an indication of our position on new clause 39, Mr Gray, although I understand that any vote on the new clauses will take place at the end of our proceedings and not today. That is right, is it not? I will also say something on amendment 101.
The Chair
The hon. Gentleman has already spoken to amendment 101 as part of the group that we have just debated.
Dr Whitehead
Yes. I am seeking to state why I might wish to withdraw amendment 101, or otherwise, and in so doing I was seeking clarification, Mr Gray. My understanding is that new clause 39, which is included in the group, will not be up for a vote now, because that would come at the end of our proceedings.
The Chair
That is correct. New clauses come at the end of proceedings. If the hon. Gentleman wishes to move amendment 101, he may do so now. Immediately after that, we will come to the Question on schedule 16 —that is the next thing to happen. The Question on new clause 39 comes at the end of our proceedings, so is for a decision later. Right now, the only question is whether he wishes to move amendment 101.
Dr Whitehead
Right.
On amendment 101, I do not think that there is anything explicit in schedule 16 relating to the position of efficiency in regulation. Having had a look at the schedule again, I am confirmed in that view. I take what the Minister said about the intention to ensure that that is part of regulation, but I am afraid we are a little in the hands of what the Minister may decide about the regulations as far as efficiency goes. The Minister is an honourable one, so I am sure that he will seek to carry out what he has said today to the letter. I am therefore happy not to move amendment 101, but I note that that was one of the purposes of regulation should have been made rather more explicit in the schedule.
The Chair
The amendment is therefore not moved.
Schedule 16 agreed to.
Clauses 175 to 179 ordered to stand part of the Bill.
Clause 180
Regulations about heat network zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Chapter 2 of part 7 covers heat network zoning in England. Heat network zoning is a key policy to deliver the scale of expansion of heat networks required to meet net zero. The process brings together local stakeholders and industry to identify and designate areas within which heat networks are expected to be the lowest-cost solution for decarbonising heating.
The clause provides a definition of heat network zones, gives the Secretary of State the general power to make regulations about heat network zones, and outlines the parliamentary procedures that must be followed when doing so.
Regulations made in relation to any of the following three matters will be subject to the negative procedure: first, any requirements on zone co-ordinators to consult on zone designations, revocations, or reviews; secondly, reviews of the designation of areas as heat network zones by zoning co-ordinators or the heat network zones authority; thirdly, any requirements for zone co-ordinators and the authority to consult on the zoning methodology, and reviews of the heat network zoning methodology by the Secretary of State. All other regulations will be subject to the affirmative procedure.
Dr Whitehead
I do not have much to say other than that we now move on to heat network zones as opposed to heat networks themselves, and we will be debating what the term means and how the zones work. Clause 180 sets the stage, and as we will be debating amendments on a future clause, I have nothing further to say about this one.
Question put and agreed to.
Clause 180 accordingly ordered to stand part of the Bill.
Clause 181
Heat Network Zones Authority
Dr Whitehead
I beg to move amendment 102, in clause 181, page 152, line 27, after “the Secretary of State” insert
“or the Gas and Electricity Markets Authority”.
This amendment is to ensure that the Gas and Electricity Markets Authority may be designated as the regulator for heat network zones.
The Chair
With this it will be convenient to discuss the following:
Amendment 115, in clause 181, page 152, line 30, at end insert—
“(5) The Heat Network Zones Authority shall be responsible to and regulated by the regulator.”
This amendment makes the regulator responsible for Heat Network Zones.
Clauses 181 and 182 stand part.
Dr Whitehead
We have tabled two amendments to clause 181. As far as I understand it, the clause adds to the heat network system, which, as I have said, has evolved over the years into a number of heat networks in various parts of the country.
A good idea for future heat network development would be to have a much more systematic approach and an understanding of where our heat networks may be most appropriately sited and the best conditions for them to be established. We know a number of potential good and bad conditions for heat networks. For example, a certain density of population, buildings and so on is needed for heat networks to be efficient, although there are in existence small heat networks that serve very small communities. Indeed, heat networks can range from being marginally larger than a few properties to covering large parts of cities.
There are five major heat networks in my city of Southampton, one of which serves the whole city centre and surrounding areas, and has an 18 km heat delivery pipe network. It is connected to a geothermal scheme in the city centre, so it efficiently provides heat to that whole area. It is connected not just to domestic properties but to a number of commercial users, which I think includes the nation’s only geothermally heated supermarket, civic centre, health authority centre, and so on.
One component of a decent heat network is what is in the network to validate the load that is supplied. A heat network may be just for domestic properties, as is the case in some housing developments in Southampton, but that is not the most efficient way of developing a heat network because the load from domestic properties changes seasonally. If a heat network is connected both to a number of properties—an estate or whatever—but also has industrial or commercial users, the load can be spread out and equalised over the years.
The Southampton schemes operate quite efficiently within the right places for zones. Nevertheless, it is—or should be—a function of local circumstances that heat networks are more likely to be applied in constituencies where there is a considerable gathering of industrial and commercial activities and population zones, and are less applicable in large rural constituencies, although there are some heat networks in small towns and villages. Within that zone understanding, there may be arrangements that pertain to local circumstances: for example, zones may be organised in such a way that ensures the likelihood of success for the heat network is relatively high.
I understand that this section of the Bill seeks to ensure that local authorities are required to look at research, to consider where it would be good to have a heat network and to produce a heat network zone plan, so that as we develop heat networks for the future we have a much better picture of where the schemes would work well, where investment may best go and the extent to which success is likely to be high, rather than someone perhaps taking a flyer on something that probably will not work well for the future.
We are happy with the idea of heat network zones being put into the Bill, that we approach them in the way that I have described and that they complement the regulation of the system in as much as the whole system now is much more in the mainstream of energy planning and energy futures as a whole. I hope that our amendments are complementary to the general scheme of things. They simply try to align the regulation of the heat zone development process with that of heat zones themselves, proposing that the process of heat zone discovery and development should be regulated by the same regulator that regulates heat as a whole: the Gas and Electricity Markets Authority.
It is important that there should be a regulator for this particular activity so that it does not stand alone from everything else happening as far as heat networks are concerned. I do not think that would impede the development of heat networks—on the contrary, it would assist them by making sure that the way we were bringing forward heat zone arrangements was generally of assistance to heat networks as a whole.
What if a local authority or similar body involved with developing heat network zones were not interested in heat networks? It might locally regulate heat zones in a way that did not take seriously the whole question of heat network development. The regulation of heat zone arrangements under the circumstances that I am discussing would ensure that there was a pretty uniform approach as far as heat network development was concerned. Those engaged in it would know that someone was looking over their shoulder to make sure that they were doing the job properly. That is all we want to add to the measure and I think the Minister will agree that it is a pretty positive addition. It certainly does not detract in any way from the validity of the heat network process and the idea that there are right and wrong places for heat networks. We must get them in the right places so that they can succeed for customers as well as they possibly can.
Andrew Bowie
I thank the hon. Member for his amendments, all of which are designed to ensure that the regulatory frameworks for heat networks and the building-up of capacity in this country for heat network zoning gets to a place that will support the growth of the industry in the future. I resist the amendments only because I feel that the powers in the Bill meet the required level of engagement and regulation necessary at this stage for what is currently a nascent but will in time become an incredibly important part of the wider energy mix.
I turn first to amendment 102, which relates to designating GEMA as the heat network zones authority. The zones authority will be a national body responsible for zoning functions that require national-level standardisation or are most efficiently or effectively carried out at a national level. This approach will allow for national standards and consistent rules to apply in the initial identification of a potential heat network zone.
As for who could fulfil the zones authority role, clause 181(3) is explicit that
“The Secretary of State may, but need not, be designated”
as the zones authority. Therefore, the clause, as drafted, already provides that regulations may appoint GEMA as the zones authority.
The zones authority will fulfil a different function from the heat network regulator, which we propose, as set out in clause 172, should be fulfilled by GEMA for Great Britain. That role will cover all heat networks, both within and outside heat network zones. We do not envisage a separate regulator for heat network zones in England.
We will specify the zones authority’s functions and responsibilities within the regulations when they are brought forward. That will be subject to further consultation in due course as we continue to develop our policy proposals, and we look forward to engaging with Parliament on that. Appointing the zones authority in regulations will allow for amendment, should that be required, as and when its functions change over time and as heat networks become more established throughout the United Kingdom. I hope that has helped to clarify our proposed approach and the scope of the powers already provided for in the Bill.
I turn to amendment 115, regarding the relationship between the Heat Network Zones Authority and the heat network regulator. As I have said, we intend for GEMA to fulfil the heat network regulator role in Great Britain. The zones authority will be a national body responsible for certain zoning functions. We will consult on who should fulfil the zones authority role in due course, but we do not consider that the zones authority should itself be subject to oversight by the heat network regulator. I hope this has helped to clarify our proposed approach regarding the zones authority and how its role relates to the heat network regulator, and I therefore ask the hon. Member for Southampton, Test to find it within himself to withdraw his amendment.
Dr Whitehead
Once again, the bona fides of the Minister are not in any question at all, but what he is saying to us relies quite a lot on the regulations that will follow from the Bill and how the Secretary of State may designate under clause 181 a person to act as the Heat Network Zones Authority. If the Secretary of State decides that there should be a Heat Network Zones Authority, we are not sure exactly how that will come about. It may be that we do not have an authority as such, but the Department effectively operates as the authority, or a complete Heat Network Zones Authority could be set up with offices and civil servants or quasi-civil servants, although that might be a bit bureaucratically overbearing.
Again, the Bill does not specify how that authority, whatever it is, will be tucked into the system as a whole. The Minister says, “I’m sure it will be, because we are sensible people and we will make sure we do it,” but that has not been put on the face of the Bill, which is always good practice. Whatever our intentions may be today in this Committee—and they are good intentions—a piece of legislation has to stand in circumstances where those intentions may not be so good under a future Government. That is why we tabled our amendment, but I hear what the Minister has said, and that is on the record. Given my boundless trust in the Minister’s good intentions for the future, I hope that he will do what he has said regarding heat network zones authorities, and their regulation and operation. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 181 and 182 ordered to stand part of the Bill.
Clause 183
Identification, designation and review of zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 183 gives the Secretary of State the power to make regulations to establish the process for creating heat network zones, which we have just discussed. In the legislation that is referred to as identifying and designating a zone. The clause also gives the Secretary of State the power to make regulations to establish the process for the review of zone designations. A review of zones could lead to changes in the boundary—for example, making the zone larger or combining two existing zones.
Subsection (2) provides that the regulations must require the identification of zones to be done in accordance with the zoning methodology, which is established under clause 184. Subsection (3) outlines further matters that the regulations may specify in relation to the designation of areas as zones. Subsection (4) outlines what may be specified in regulations regarding changing or revoking zone designations. Subsection (5) outlines regulations that can be made about the review of zone designations.
Clause 184 gives the Secretary of State the power to establish a methodology for identifying heat network zones. The methodology will standardise the identification of zones nationally. Proposals for the use of, and approach to, that national methodology received widespread support from stakeholders during the Government consultation.
Clause 185 allows the Secretary of State to make regulations about the ability of the zones authority and zone co-ordinators to request the information required to support the national methodology for the identification, designation and review of heat network zones. The clause, and the regulations that follow, will facilitate the zones authority and zone co-ordinators in requesting and receiving the necessary information to ensure that heat network zones are situated in the right locations. As I discussed in the context of zone reviews under clause 183, the location of heat network zones can be changed as necessary to reflect the impact of changing technologies and neighbourhoods over time.
Dr Whitehead
The Minister reflects that circumstances may change over time so it is necessary to have such a power. He is right that circumstances are not static; indeed, we may well miss a lot of good opportunities if we place too much emphasis on the static nature of what we have designated for the future. I think that we will debate, in a future clause, circumstances concerning the development of heat networks within zones, but on the changes that may be necessary in order to keep heat network zones up to date, this is a sensible provision that we support.
Question put and agreed to.
Clause 183 accordingly ordered to stand part of the Bill.
Clauses 184 and 185 ordered to stand part of the Bill.
Clause 186
Heat networks within zones
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 186 allows the Secretary of State to make regulations about heat networks within heat network zones. That includes specifying which buildings may be required to connect to a district heat network within a designated zone. Subsections (2)(a) and (2)(b) allow regulations that specify the types of buildings within zones that will be required to connect to heat networks, when they must connect, and how they are notified of that requirement.
Subsection (2)(c) allows the regulations to specify when and how the zone co-ordinator can grant exemptions from the requirement to connect to the heat network. Subsections (2)(e) to (2)(h) allow regulations to make provision about requiring heat sources in zones to connect to a heat network. Subsections (2)(i) and (2)(j) allow regulations that provide for the zoning co-ordinator to set local limits on emissions from heat networks and any grace period to comply with that limit.
Subsection (5) allows regulations to specify when the zoning co-ordinator may or must ask a heat source to connect to a heat network, the types of heat source that can cover, and how the heat source owner can appeal against the requirement to connect. Subsection (6) allows regulations to specify how local limits on emissions from heat networks in zones are set. Subsection (7) provides details about what regulations can be made about grace periods for local emissions limits.
Clause 187 allows the Secretary of State to make regulations about the delivery of district heat networks within heat network zones. Those regulations will give structure to the zoning co-ordinator’s role and responsibilities. “Delivery” refers to the design, construction, operation and maintenance of heat networks. His Majesty’s Government recognise that there are several feasible models for delivering heat networks in zones depending on local circumstances, including the level of involvement of the zone co-ordinator. The clause, and the regulations that flow from it, aim to provide a flexible approach to zone delivery.
The engagement we have had with the heat network industry and with local government has highlighted a desire for flexibility in how heat networks are delivered within zones, as there are a range of ownership and delivery models that could be employed in the future. The Government’s expectation is that the regulations will define what decisions zoning co-ordinators and other bodies can take regarding zone delivery, with guidance from the zones authority to help inform their decisions. The clause provides that regulations may determine when zone co-ordinators may decide what heat networks are delivered in their zones, and by whom, including circumstances in which the zoning co-ordinator may deliver heat networks themselves.
The Government recognise that there is a risk that leaving decisions about zone development solely in the hands of zone co-ordinators could risk a heat network zone not being developed. Therefore, subsection 5(g) allows regulations to define the circumstances in which zone co-ordinators may lose the ability to make decisions about heat network delivery in zones. The intent is that that will happen if the zone co-ordinator has not taken certain steps to develop the zone following a set period after the zone designation.
Dr Whitehead
Clause 186 rather reminds me of Bertrand Russell’s definitions of propositions that are automatically members of their own class and propositions that are not automatically members of their own class, but I do not think we will debate that to any great extent this morning.
Dr Whitehead
For no other time, probably. Clause 186 is a relevant and necessary proposition concerning the development of heat zones and heat zone authorities, but one thing that does rather concern me is that although it is important that heat networks are able to develop in the most appropriate way and under the most appropriate circumstances, it is also important that the connections between heat networks can develop in the most appropriate way within a particular area.
I mention that point because there are circumstances in which heat networks may develop independently in parts of cities. The geographical and other siting considerations could lead to the development of interconnections between heat networks so that their joint efficacy is improved. If an extensive heat network, such as the one in Southampton, has a number of independent networks relatively nearby that have developed under different circumstances but are providing the same thing, there is considerable advantage in ensuring that they are interconnected so that they can share heat production and, if necessary, heat network inputs.
As I am sure the Minister is aware, heat networks are agnostic as to the fuel that goes into them. It could be from a heat engine, a geothermal source or a low-carbon source—hopefully, we will develop those to a much greater extent—such as multiple ground source heat pumps or hydrogen engines, which are already in existence and can replace gas engines in heat networks.
Andrew Bowie
I thank the hon. Member for his questions. He made mention, almost in passing, of heat network zones doing their own thing within zones. It is important to point out that in clause 186 there are several protections against heat network zones doing their own thing. Zones will inherently represent areas where heat networks are expected to provide the lowest-cost low-carbon heating solution. Customers will be able to apply for exemptions from the requirement to connect where it would be inappropriate. Ofgem’s consumer protection framework will provide protection for domestic consumers and microbusinesses, and we will consider consulting on whether protections should be extended to other consumer groups, such as larger non-domestic consumers, which are in scope of the requirement to connect to a heat network. I know that the hon. Member’s points were not specifically directed at that issue, but he mentioned zones being able to do their own thing, and it is important to ensure that consumer and business protections are built into the regulations.
We talked about hospitals, albeit in passing. We are not setting out specifically which buildings will be required to connect to a network, but we can require certain buildings in zones to connect to a heat network. Doing so encourages investment in the heat networks and accelerates the deployment of low-cost, low-carbon heat. The categories of buildings chosen to connect will strike a balance between this investment certainty and individual consumer choice. That will develop as the heat network market in England grows. We may need to refine these categories. This is a nascent industry in the early stages of its development, so describing them will provide that flexibility. The Government will consult later this year on which types of buildings can be required to connect and in what circumstances.
On the hon. Member’s substantive point about why the Bill does not make provision about heat network delivery in zones, we are providing that zone co-ordinators shall have powers to decide what heat networks are built in zones and by whom. There are many ways in which heat networks could be delivered in zones and many ways in which zone co-ordinators could exercise their decision-making powers around delivery. As set out in the green finance strategy, we envisage heat network zoning bringing forward a significant increase in private sector investment in heat networks in England. Decisions around delivery may have significant implications for the scale of heat networks built in a zone, the pace at which networks are built and the effect on consumers. The Government intend to consult later in the year on how a zone co-ordinator may take those decisions, so that we get it right. Again, I emphasise that we will be consulting on this later this year.
Also, the way in which decisions are made may need to change over time, reflecting how the market matures and, indeed, learning from experience. The regulations will, of course, be subject to the affirmative procedure, which will allow for parliamentary scrutiny. I am sure that the hon. Member will play his part in such scrutiny, as will his colleagues.
Question put and agreed to.
Clause 186 accordingly ordered to stand part of the Bill.
Clause 187 ordered to stand part of the Bill.
Clause 188
Enforcement of heat network zone requirements
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
These are quite a simple couple of clauses. Clause 188 will allow the Secretary of State to make regulations about enforcing the requirements to apply within zones. It will support the previous two clauses on the delivery of heat networks in zones and the requirements placed on networks, buildings and heat sources within a zone. The clause includes the ability for the zoning co-ordinators to issue notices to people if they are suspected of not complying with the relevant requirements; to issue notices to outline what the person must do to satisfy the requirement; and to issue penalties to those who do not comply with the notices.
Clause 189 will allow the Secretary of State to make regulations about the penalties that apply for not complying with zone requirements under clauses 186 and 187 or for not complying with an information request under clause 185. That includes regulations about the maximum penalty amounts, the process for issuing a penalty, grounds for appeal, recovery of penalties, and to whom the penalties are paid.
Question put and agreed to.
Clause 188 accordingly ordered to stand part of the Bill.
Clause 189 ordered to stand part of the Bill.
Clause 190
Records, information and reporting
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This is another simple clause. The Government consider that various types of data will be essential for the identification and designation of areas as heat network zones and for the development of heat networks within them. Clause 190 will allow the Secretary of State to make regulations about zone co-ordinators and the zones authority collecting, storing, and sharing information about zones, including information relevant to identifying areas that would be suitable for the construction and operation of one or more district heat networks, as well as areas designated as heat networks under clause 185. It also includes information requests made to owners of thermal heat sources under clause 186. Information gathered by the zone co-ordinators and the authority, when carrying out activities related to the wider heat network regulations, would also be in scope of these regulations, as would information gathered in relation to the zoning methodology, including its review and update.
There are two circumstances in which information may be shared. First, a zone co-ordinator may be able to share zoning information with other zone co-ordinators, the zones authority and the regulator. Secondly, the zones authority may be able to share zoning information with zone co-ordinators and the regulator.
Question put and agreed to.
Clause 190 accordingly ordered to stand part of the Bill.
Clause 191
Interpretation of Chapter 2
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 191 is the final clause in chapter 2, which concludes part 7 and the clauses on heat networks. The clause covers definitions for the heat network zoning clauses.
Dr Whitehead
I have nothing to add, other than “Hooray, we’ve got to the end of that part!” We now have lots of regulations in place, which is a good thing.
Question put and agreed to.
Clause 191 accordingly ordered to stand part of the Bill.
Clause 192
Energy smart appliances and load control
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 192 introduces part 8 of the Bill, which relates to energy smart appliances and load control. It defines the key concepts relating to that part, namely energy smart appliances, energy smart function, load control signals and load control.
The smart energy market is in its early stages but is growing rapidly, as we discussed in detail on Thursday. As the take-up of electric vehicles and other devices such as heat pumps increases, we need to remain agile in responding to new developments in the market. This is to ensure that we maintain grid stability and protect consumers from cyber-security risks. Transitioning to a smart and fully flexible electricity system will play a vital role in decarbonising the power system by 2035. Such a transition could reduce costs by up to £10 billion a year by 2050.
I will briefly set out some key definitions. Energy smart appliances are electrical consumer devices that are communications-enabled and capable of responding automatically to signals such as energy price changes. In response to such signals, they can adjust their electricity consumption or production in line with consumer choice and cost preferences. Load control refers to the act of sending and receiving those signals and adjusting the consumption of the product in response.
Subsequent clauses in part 8 will limit powers to make regulations to products with functions such as refrigeration, cleaning, battery storage, electrical heating, and air conditioning or ventilation.
Dr Whitehead
We have now moved smoothly and efficiently to the question of energy smart appliances and load control; I will have something to say about load control later. The arrangements for energy smart appliances are important, given the increasing range of activities that appliances can now undertake. The specified purposes set out in clause 193—refrigeration; “cleaning tableware”, or dishwashing; “washing or drying textiles”, or using washing machines; and energy storage—are all circumstances in which things can be added to devices to allow them to operate independently, to operate at particular times and to respond to dynamic demand requests. For example, a chip can be put in a refrigerator to allow the appliance to respond to signals from outside saying, “Switch yourself off between 3 am and 4 am,” which will save some power or regulate the power in a better way.
Appliances increasingly have the potential to operate as mini-computers in their own right: they have IP addresses and various other things. It is possible to capture a series of washing machines that are smart-enabled and use them as locks under certain circumstances. Indeed, I think there was a recent prosecution of some young men who had done just that; I am not quite sure for what purpose, but they secured a number of smart devices in order to operate them in concert. It is important that we have energy smart regulations that enable us to deal with such circumstances and get them in hand. Of course, this is potentially a subset of the debate about AI and the extent to which our devices in the home may be subject to the control of other authorities entirely.
From the customer’s point of view, it is important that they know that they are in control of their own devices. Smart appliances offer various exciting advantages such as allowing people to change central heating controls before they get home, by pressing a button when they are 50 miles away, but the principle behind the security arrangements should be that the customer—the person in the home—is the eventual arbiter of how those things work. Does the Minister think that the way the clause is drafted will ensure that the customer—the person who is operating those smart systems, or who thinks they are—actually has eventual control, and particularly the consent for the operation of those smart devices in the way that we have described?
Alan Brown
I realise that this is an introductory clause and the Minister was doing some scene setting. The clause mentions load control signals and digital communications. I draw the Minister’s attention to my written parliamentary question No. 186867, submitted following a meeting I had with representatives of the Energy Networks Association. They tell me that to take forward a proper smart grid, the energy network companies need additional radio spectrum access. The Government need not just to put in place regulations, but to facilitate that radio spectrum access.
In response to my question, the Minister for Energy Security and Net Zero, the right hon. Member for Beverley and Holderness (Graham Stuart), said that the Government are moving forward on the issue with a study and a calculation of costs. I know that the Under-Secretary cannot write a blank cheque, but the reality is that radio spectrum access will be needed. I just put that on his radar.
Andrew Bowie
I thank hon. Members for their questions and points. The hon. Member for Kilmarnock and Loudoun is right that this is just an introductory clause; we will talk about the regulations in much more detail during the rest of the morning and this afternoon. I thank him for putting that point about radio spectrum access on my radar.
The smart energy market is at an early stage. That is why we are regulating. We need to ensure that consumers and businesses, and indeed the grid and access to it, are protected. We intend to regulate in close consultation with industry and in a way that allows the market to evolve and supports innovation.
Question put and agreed to.
Clause 192 accordingly ordered to stand part of the Bill.
Clause 193
Energy smart regulations
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clauses 193 to 198 establish the regulatory regime for energy smart appliances.
Clause 193 provides powers to introduce energy smart regulations in Great Britain. The regulations will mandate that energy smart appliances with specific purposes must comply with a set of requirements. The appliances that will need to comply with the requirements include those with specific purposes, such as electric vehicle charge points, or devices that are used in connection with the following specific purposes: refrigeration; cleaning battery storage; electric heating or ventilation, and air conditioning or ventilation.
Subsection (3) sets out a number of factors that the Secretary of State must have particular regard to when making regulations. Those include, for example, ensuring that the energy smart function does not undermine the delivery of a consistent and stable supply of electricity. Where an energy smart appliance does not meet the requirements set by the regulations, its placing on the market may be prohibited.
Clause 194 builds on clause 193, setting out that energy smart regulations may refer to technical standards and published documents. Energy smart regulations may also refer to requirements imposed under Acts of the Scottish Parliament. The clause establishes that prohibitions imposed by energy smart regulations may extend to load control for appliances that are not compliant with the regulations, and to any appliances modified in a way that would make them non-compliant with the regulations.
Energy smart regulations may prohibit the placing on the market of appliances that do not comply with the requirements of the regulations. The regulations may also prohibit the placing on the market of non-smart electric heating appliances and electric vehicle charge points. Finally, the clause specifies that energy smart regulations do not provide for enforcement action of any kind against the end user of an energy smart appliance.
Clause 195 makes provision for the enforcement of the requirements of energy smart regulations. The clause allows the Secretary of State to designate enforcement authorities that will ensure compliance with the requirements or prohibitions made under the regulations.
Alan Brown
Before the Minister goes on too far, what timescale does he anticipate for the introduction of regulations under clauses 193 and 194 to mandate smart appliances?
Andrew Bowie
I am not able to give any firm dates right now, but the Government’s hope is that we will move quickly to consultation on the regulations as soon as the Bill receives Royal Assent.
Relevant economic actors will be required to monitor and report on their compliance with the terms of the regulations, as well as to take specified steps to remedy any non-compliance. Clause 195(2) includes provision for a range of investigatory powers to track and assess non-compliance for use by enforcement authorities. Those include powers of entry, inspection, search and seizure, and powers to enable the testing of energy smart appliances by enforcement authorities. Finally, the Secretary of State may make payments or provide resources to the enforcement authority for the purpose of enforcing the energy smart regulations.
Clause 196 establishes that energy smart regulations may impose a range of sanctions for non-compliance. A full list of offences will be set out in the final regulations, on which the Government will consult publicly and which will be subject to debate in both Houses. I hope that answers the question from the hon. Member for Kilmarnock and Loudoun. The clause sets out several offences, including contravening requirements imposed by enforcement authorities or knowingly providing false information to enforcement authorities. Punishments for such offences will be provided for in regulations. The punishments will not include imprisonment. Regulations may also allow enforcement authorities to recover their costs by means of civil fines.
Clause 197 makes provision for the regulations to include a right of appeal to a court or tribunal against a requirement or civil penalty made by an enforcement authority. The right of appeal to a court or tribunal against a requirement or penalty for non-compliance, as set out in energy smart regulations, can include, but is not limited to, provisions set out in subsection (2). The right of appeal can be extended by the regulations beyond those parties against whom the requirement has been imposed. The Secretary of State may revoke or amend subordinate legislation, including an Act of the Scottish Parliament or the Senedd, where they consider it appropriate for the purpose of any provision falling within subsection (2).
Clause 198 sets out the procedure by which energy smart regulations will be made. The clause begins by setting out that energy smart regulations made under clause 193 may provide for exemptions or exceptions in their coverage. It requires the Secretary of State to consult before making regulations that subject a specific type of energy smart appliance to regulations or that amend the list of relevant purposes in clause 193. It also sets out the cases in which the affirmative scrutiny procedure is to be used when making regulations under clause 193. I commend the clauses to the Committee.
Question put and agreed to.
Clause 193 accordingly ordered to stand part of the Bill.
Clauses 194 to 198 ordered to stand part of the Bill.
Clause 199
Power to amend licence conditions etc: load control
Dr Whitehead
I beg to move amendment 160, in clause 199, page 170, line 3, at end insert—
“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”
The Chair
With this it will be convenient to discuss the following:
Amendment 161, in clause 199, page 170, line 21, after “section” insert
“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.
Clause stand part.
Clauses 200 to 203 stand part.
That schedule 17 be the Seventeenth schedule to the Bill.
New clause 40—Designated load controller—
“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—
(a) the direction is necessary in the interests of national security; and
(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”
This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.
Dr Whitehead
We now come to the section of the Bill concerning licensing of load control. Load control is very much associated with the previous debate, inasmuch as it relates to how energy smart appliances operate overall, and such appliances will often operate under the aegis of a load controller—a body or person who is responsible for the network within which they work. It is important that we regulate and license not only the appliance but the bodies and people that control the load arrangements that smart appliances potentially give rise to.
Alec Shelbrooke (Elmet and Rothwell) (Con)
On a point of order, Mr Gray. I apologise to the hon. Member for Southampton, Test, but I want to make this point of order before the sitting concludes. We will shortly move on to discuss energy performance certificates and insulation of privately rented properties. In the past, I have been advised that I did not have to register the fact that my wife has a rental property and that her family have rental properties, but I seek your advice, Mr Gray, for the next sitting: will I have to make some sort of declaration before I comment on those areas of the Bill? I wanted to get that in now, so that a ruling can be made for this afternoon.
The Chair
If the interests are declared in the Register of Members’ Financial Interests and the right hon. Gentleman believes that they are relevant to the debate, it would be prudent for him to call the Committee’s attention to the register. That is not enforced entirely, but the question is whether there might be a perception of bias. Therefore, if the Member has interests that he believes might be of importance, it is probably worth his calling them to the attention of the Committee before he speaks.
Dr Whitehead, will you be concluding in the next 20 seconds?
The Chair
In that case we will adjourn, it being as close to 11.25 am as it can possibly be.
Energy Bill [ Lords ] (Ninth sitting)
Tuesday 13th June 2023
(11 months ago)
Public Bill CommitteesRead Full debate Energy Act 2023 View all Energy Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Chair
Before proceedings commence, may I indicate that I am very relaxed and if Members wish to remove their jackets, that is fine by me?
Dr Alan Whitehead (Southampton, Test) (Lab)
On a point of order, Ms Nokes. It has come to my attention that an article published today by Politico says that the Secretary of State has
“signaled a coming U-turn on the government’s plan to put a levy on household energy bills to support the nascent hydrogen gas sector in the U.K.”
The article reports the Secretary of State as saying that
“while hydrogen was a ‘great opportunity’ for the U.K. it was ‘unlikely’ that the gas would be a major future source of domestic heating.”
Pertinent to this Committee, he said that the Government did not want to see
“a situation where a levy is penalizing people who don’t use it”
—almost the exact words that were discussed in Committee—and added that hydrogen would be
“a better bet for heavier industry”
and transport.
The Secretary of State was also reported as saying:
“We’ll look at ways to create a levy or a financing that works for everybody as best as possible”.
What I take from that is that the Government are actively looking at ways to undertake a form of levy different from the one we discussed in Committee recently. You will recall, Ms Nokes, that you had to cast the deciding vote on the relevant amendment. I am sorry that the Minister was unable to give us the information that the Secretary of State has given us in that article, in particular that the Government are actively looking at developing an alternative levy arrangement. It is more than conceivable that had that information been available to the Committee at the time, that vote may have had a different outcome. In particular, the convention of the Chairman casting the deciding vote in favour of the status quo, which you quite correctly did at that time in your position as Chair, Ms Nokes, could have meant that a vote could have been cast for a different status quo—that is, one in which the Government were actively looking
“at ways to create a levy or a financing that works for everybody as best as possible”.
The original formulation in the Bill would therefore have fallen, in effect.
Ms Nokes, do you have any guidance on how we could rectify this problem? Might we invite the Government to table a new clause, which could be discussed at the end of our deliberations on the Bill? As Chair of the Committee, would you accept a new clause later in the Bill that might allow a debate to take place in the light of the information we now have before us? It is entirely in your hands to decide, Ms Nokes.
Alec Shelbrooke (Elmet and Rothwell) (Con)
Further to that point of order, Ms Nokes. It is great to serve under your chairmanship. I am sure the hon. Member for Southampton, Test recalls the comments that I made in the fourth sitting when I abstained on the vote. Hansard will confirm the exact language that I used, but I believe I said that the Government had said to me that they were actively looking to table an amendment on Report. The article that has been produced today ties in with the comments that I made on the record a few sittings back, and I am relieved to hear that because it shows that we are moving forward. I do not believe there is any material change in what has happened because, as I said, I was told that the Government were actively looking at making an amendment on Report.
Dr Whitehead
Further to that point of order, Ms Nokes. I thank the right hon. Member for Elmet and Rothwell for his point of order, which related to mine. Far be it for me to downplay his importance in proceedings but, although he is quite right, the material difference is that I was quoting what the Secretary of State said, even though the right hon. Gentleman was clearly well informed in what he said to the Committee.
The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Andrew Bowie)
Further to that point of order, Ms Nokes. I said in Committee at the time, in response to contributions from the hon. Member for Southampton, Test and other right hon. and hon. Members, including on the Government Benches, that we are listening and carefully considering the situation regarding that specific clause. We are listening to all the concerns raised in Committee, on the Floor of the House on Second Reading and in the other place. I gave that commitment in this Committee and see nothing that contradicts that in what the Secretary of State said to Politico this morning.
The Chair
In response to Dr Whitehead, I want to confirm that what I cannot do as Chair of the Committee is go back in time. It is of course open to the Government to table further amendments in the later stages of the Bill, and I think we have had an indication from the Minister that that is potentially what might happen. I will say no more than that.
Clause 199
Power to amend licence conditions etc: load control
Amendment moved (this day): 160, in clause 199, page 170, line 3, at end insert—
“(f) regulate or prohibit the provision of load control in relation to appliances that are provided by high risk vendors.”—(Dr Whitehead.)
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 161, in clause 199, page 170, line 21, after “section” insert
“‘high risk vendors’ means vendors of appliances that pose potential or actual security and resilience risks to energy networks,”.
Clause stand part.
Clauses 200 to 203 stand part.
That schedule 17 be the Seventeenth schedule to the Bill.
New clause 40—Designated load controller—
“(1) The Secretary of State may give a designated load controller direction only if the Secretary of State considers that—
(a) the direction is necessary in the interests of national security; and
(b) the requirement imposed by the direction are proportionate to what is sought to be achieved by the direction.”
This new clause ensures that load controllers undergo national security checks to establish the nature of connections to potentially hostile actors and the threats they may pose.
Dr Whitehead
It seems rather a long time since I got through the first half of my remarks on this clause, but I am happy to continue. I will recapitulate briefly what is in the clause, and then we can move on to the next business.
Members will recall that, with amendments 160 and 161 and new clause 40—I appreciate that it will be voted on later in proceedings, not today—we are drawing attention to the possible risks attached to certain load controller activities relating to appliances that are under the authorisation of load controllers. As we have discussed, appliances that are used in smart energy networks may be able to undertake autonomous information and data transmission activities—and, indeed, activities relating to their own operation—independently of the consumer or the person who installed the device.
I previously drew attention to a company that secured a 6% or 7% share of the market in SMETS2 smart meters by putting its price 30% below the market average, thereby ensuring that energy companies have an interest in commissioning third parties to purchase and install that brand of meter. I pointed out that that company, Kaifa Technology, has very close links to—indeed, is controlled by—the state-owned China Electronics Corporation, which has been sanctioned by the United States regarding high-risk activities concerning data and electronics. Kaifa smart meters are not available for installation in the United States as a result of that sanction, yet in the UK we are apparently going ahead with no concerns whatsoever.
I am not saying that Kaifa smart meters are necessarily a source of the possible transfer-link use of data. I pointed out this morning that there are remote-switching facilities within smart meters, so it is possible that a smart meter could be switched off by an outside agency, or that its data could be transferred for not necessarily very good purposes. We have a pretty strong regulatory regime, which was recently strengthened by an information security Act. I am certainly not pointing the finger at Kaifa smart meters and saying that they are definitely not to be pursued, but we do not have any method in our current legislation—nor, indeed, in this Bill—that would enable scrutiny to be brought to bear on companies such as Kaifa in relation to national security and resilience, so that our questions can be answered. We should be as certain as possible that, should these things come to be a part of our smart energy network environment they do not, as it were, just slip in under the carpet. It should be done consciously through a review of what they mean as far as our energy security is concerned and, indeed, in respect of the security of smart energy networks.
Alec Shelbrooke
The hon. Gentleman is making an important point about energy security and the ability for outside players—certainly, if we consider this from a Chinese perspective—to take control. On energy security, does he share my concern about the fact that 98% of the materials used in renewable energy come directly out of China? Does that not in itself represent a similar security risk to the one he is outlining?
Dr Whitehead
I thank the right hon. Member for his intervention, but I do not quite share his implied view that everything that comes out of China needs to have that level of security clearance. There are concerns about the proportion of our solar panels that are made and manufactured in China, for example, and a concern that one particular country has effectively captured the market in solar panels. It would be a good idea for those purposes, not for the purposes I am talking about, to rectify that situation. China is also increasingly manufacturing components for wind turbines and various other renewables, so yes, it would be a very good idea to have a much more diverse supply chain for renewables. As far as China is concerned, that is an issue of commerce; I am talking about a potential issue of national security and resilience. Yes, it involves the same country, but there are different concerns and, indeed, concerns about other countries that may be in the same position as I outlined as far as their smart energy technology offerings are concerned.
Andrew Bowie
It is an absolute pleasure to serve once again under your chairmanship, Ms Nokes. I thank the hon. Member for Southampton, Test for his amendments; he is of course right to consider the security impacts of load control devices. We share his concern that grid security should be protected, which is why I am happy to reassure him that we have already spent considerable time preparing means to manage the risks associated with hostile actors and the transformation of our energy system.
The outcome of our recent consultation on delivering a smart and secure electricity system confirmed our intent to regulate all organisations that remotely control large electrical loads, using the Network and Information Systems Regulations 2018, or the NIS regulations. Under those regulations, load controllers would be required to take appropriate and proportionate security measures to manage risks to their network and information systems. They would also be required to report to the relevant authority incidents that disrupt the continuity of services and take action to rectify those incidents.
The application of the NIS regulations in the energy sector in Great Britain is based on outcome-focused principles, using the cyber assessment framework developed by the National Cyber Security Centre. This approach focuses on proportionate risk management. Moreover, the licensable activities established through the powers in the Bill could impose security requirements on those organisations within its scope. The licence would complement our separate enhancements to the NIS regulations made through the Bill.
Finally, the National Security and Investment Act 2021 includes a broad range of powers enabling the Secretary of State to intervene in transactions that give rise to national security concerns. That includes the power to scrutinise transactions based on national security risks for electricity purposes. That incorporates acquisition of ownership of load controllers, who control electricity on behalf of their customers. On that basis, a power to direct a load controller on national security grounds, which new clause 40 would introduce, would be excessive in comparison with the rest of the electricity sector.
The Secretary of State does not have powers to direct private companies outside of an energy emergency or crisis scenario. Establishing such a precedent may risk undermining the development of the sector, with little compensatory benefit in additional security protections. Given our existing measures to control foreign investment, and our intentions to increase the cyber-resilience of load controllers, an additional power for the Secretary of State to direct on national security grounds would be disproportionate.
Amendments 160 and 161 centre on alleviating any security risks posed at the device level in the provision of load control. Amendment 160 would give the Secretary of State the power to regulate or prohibit the provision of load control by or to appliances supplied by vendors that are deemed to be high risk. Amendment 161 would define that group as
“vendors of appliances that pose potential or actual security and resilience risks to energy networks”.
I assure the hon. Member for Southampton, Test that measures to maintain the security of energy smart appliances are already in place. For example, the Electric Vehicles (Smart Charge Points) Regulations 2021, which are already in effect, require most private charge points for domestic and workplace use to meet minimum device-level cyber-security requirements. In addition, we committed through our response to the consultation on delivering a smart and secure electricity system to ensure that licences for the purpose of domestic and small non-domestic load control should include cyber-security requirements. We are confident that, taken together, the existing regime is sufficiently robust and that a further power to amend the licensing condition is unnecessary. I hope that with those reassurances the hon. Member will be able to withdraw his amendment.
Clause 199 sets out how the Secretary of State may modify conditions of licences granted under the Electricity Act 1989 and certain licences granted under the Gas Act 1986 for purposes of load control. It also provides powers for the Secretary of State to modify industry codes that are maintained under those licences for such purposes. More generally, the powers give the Secretary of State the flexibility to amend existing regulatory arrangements to reflect the introduction of a new licensing regime for load control. That new licensing regime will be introduced using the powers provided for in schedule 17.
Clause 200 sets out the process that the Secretary of State must follow before making changes to the conditions of licences, or documents maintained under them, for load control or related purposes, as set out in clause 199. The requirement to consult the parties listed in subsection (1) before making changes to licence conditions or documents maintained reflects standard practice in such cases and is consistent with other clauses. When modifying the conditions of a licence, the Secretary of State must specify the date on which the modification will take effect and publish the details of any modifications as soon as reasonably practicable after they are made.
Clause 201 establishes that the Secretary of State may make a modification to a standard condition of a licence using clause 199. It also establishes that that does not prevent any other part of the condition from continuing to be regarded as a standard condition. In essence, the power will allow the Secretary of State to make targeted changes to parts of a licence, without changing the overall status of that licence, or changing any other standard conditions to that licence. When the Secretary of State makes changes, the Gas and Electricity Markets Authority will amend future licences so that the amended standard conditions apply to future licensees. The authority will also publish the modification to the licence.
Clause 202 extends the regulatory provisions in relation to licensing that were established in the Gas Act and the Electricity Act to load control. The clause amends the Gas Act, the Electricity Act and the Utilities Act 2000 to apply several provisions of those Acts to the Secretary of State’s exercise of regulatory powers to load control. More specifically, the clause will extend several of the duties and obligations on GEMA within the Acts, particularly those in relation to protecting the interests of current and future consumers of electricity. GEMA would need to apply to the Secretary of State when exercising powers under clauses 195 to 197. Finally, clause 202 defines “gas licence” and “electricity licence”.
Clause 203 introduces schedule 17, which makes provision for the regulation of the load control of energy smart appliances. Schedule 17 amends the Electricity Act, allowing the Secretary of State to make regulations that amend the list of activities subject to the licensing framework to include activities connected with load control. The schedule sets out the terms of that regulation-making power, including the extent to which the regulations can make consequential or transitional provisions.
Dr Whitehead
I heard what the Minister had to say about the amendments. I am pleased to hear that the Government are taking this seriously, and I hope that the measures that he suggests by which they will do so are sufficient for the purpose. I think that the Secretary of State in question for the National Security and Investment Act is the Chancellor and not the Secretary of State for Energy Security and Net Zero, so the option to do anything about it will be at one remove from his Department, although I am sure the Secretary of State would be able to communicate with the Chancellor were there serious issues.
On the understanding that the Government are going to pursue this as a serious issue as part of the development of energy smart networks, and will incorporate that view at the heart of the arrangements, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clauses 199 to 203 ordered to stand part of the Bill.
Schedule 17 agreed to.
Clause 204
National Warmer Homes and Businesses Action Plan
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
The Government have carefully considered the effect of the clause, which was added on Report in the Lords. On 17 May, I tabled an amendment indicating my intention to oppose the clause. The Government do not consider that it would be effective in helping to deliver our commitments to improve the energy performance of buildings and to deliver net zero. However, I know that opinions among Committee members differ, and I look forward to the discussion that we may well be about to have.
The heat and buildings strategy, published in autumn 2021, sets out how the Government plan to reduce emissions from buildings and provides a clear long-term framework to enable industry to invest and deliver the transition to low-carbon heating. The Climate Change Committee already plays a key role, providing independent advice and scrutiny, and holding the Government accountable by publishing statutory progress reports to Parliament. Those are comprehensive overviews of the Government’s progress. The clause would simply duplicate those efforts.
The Government have already set out our aim to phase out the installation of new and replacement natural gas boilers from 2035, in line with natural replacement cycles, while scaling up the installation of low-carbon heating. We recognise that there are many options with the potential to play an important role.
The Government remain committed to the aspiration for as many homes as possible to reach energy performance certificate band C by 2035 where cost-effective, affordable and practical, as set out in the clean growth strategy. There has been good progress towards achieving that aim, with 47% of homes in England having reached EPC band C, up from a measly 14% in 2010.
In our net zero growth plan and energy security plan, the Government announced that we will publish a consultation on options for upgrading houses in the owner-occupier sector by 2023. The content of the consultation has not yet been finalised, and we need to gather further evidence on the potential impacts of interventions in that sector. More time is needed to ensure thorough consideration of options in this area, and the clause would not allow that time.
We are also taking significant steps to encourage businesses to reduce their energy demand through voluntary schemes and regulations. In the 2020 energy White Paper, the Government proposed that the trajectory for the minimum energy-efficiency standard for non-domestic rented buildings should be EPC band B by April 2030, with an interim milestone of EPC band C by April 2027.
We are evaluating the responses to our consultation and will publish the Government response in due course. It is important that the impacts, such as those on business and supply chain readiness, can be fully considered. The clause would pre-empt the response and commit the Government to a timeframe for implementation different from the one that has been consulted on.
The Government have set an aspiration to introduce the future homes standard by 2025. We will publish a full technical consultation for it in 2023. We intend to introduce the necessary legislation in 2024, ahead of implementation in 2025.
I thank Baroness Hayman and Lord Foster of Bath in the other place for raising these matters.
Dr Whitehead
We are in a curious position with this clause, which is a bit akin to my writing to the then Energy Minister to ask him to reintroduce the Bill as soon as possible. The Government at the time seemed not to want to introduce their own Bill as soon as possible, whereas we wanted them to do so. Clause 204 was introduced as an amendment in the House of Lords, so it has come to us as a substantive part of the Bill. We therefore find ourselves in the position—if I can persuade Opposition Members to vote accordingly—that we support the Bill as it stands and the Government apparently do not.
That is made more curious by what the clause actually says. With one small exception to do with dates, it takes things that the Government have already agreed to do—by the way, as far as I know, the future homes standard is not an aspiration; it is something the Government have already said will be mandatory by 2025—and says that the Secretary of State must produce an action plan for how they will be done. That seems to me a pretty good idea in any legislation, and in anything that anybody says will be the case in legislation. It is really not good enough to go around saying that things may well happen and that there might be legislation, and then not have any idea how that legislation can be properly discharged.
The clause puts that right by making sure that there is some kind of plan in place for these things to be achieved. It draws attention to the following targets: achieving
“100% of installations of relevant heating appliances and connections to relevant heat networks by 2035,”
which is in the energy security strategy; achieving
“EPC band C by 2035 in all UK homes where practical, cost effective and affordable,”
to which the clean growth strategy and the heat and buildings strategy contain specific commitments; achieving
“EPC band B by 2028 in all non-domestic properties”—
that is in a consultation that has already taken place, and the Government intend to produce either regulations or legislation to ensure that it happens, as I have mentioned—and introducing
“Future Homes Standard for all new builds in England by 2025,”
which the Government have already said they want to do.
In a sense, the clause is a bit of a break with how things have been done before, but in another sense it is not, because it just recapitulates things that already exist, puts them in order and states that we need some form of plan to ensure that they happen. Frankly, I am really surprised that the Government have decided that they want to knock the clause out. It is not superfluous. In fact, it supports the Government in delivering their plans and ensures that we all know where we stand.
That brings me to the purpose of this Committee. The amendment that the Government tabled to remove the clause has not been selected, which means that the only way for them to achieve their desired outcome is for the Committee to vote against clause stand part. That puts Committee members in a different position from that of voting on an amendment.
The likelihood of anybody having a go at any member of this Committee for voting in favour of this Bill is remote. Therefore, I would have thought that Committee members should be allowed to exercise their own judgment as to whether they support or oppose the clause. By asking us to vote against clause stand part, the Government are in effect asking the Committee to vote against itself. If members on both sides of the Committee support the Government’s targets and aspirations—and I would have thought that everybody does—and if they think that it would be a good idea to encapsulate them in an action plan, I do not think that they should be sanctioned for voting in favour of that and, in a sense, securing Government policy.
That is code for saying that no one should be pulled up by the Whips—although perhaps the Whips have a different idea—if they vote in favour of the Bill. I assume, although I do not know this yet, that every Opposition member of the Committee will vote to retain the clause, and I would hope that every Government member will also—
The Chair
Order. May I gently suggest, Dr Whitehead, that you have moved away from the substance of the clause and are somewhat straying into whipping arrangements?
Dr Whitehead
As always, you are right, Ms Nokes, so I will temper my remarks. I hope that common sense will prevail and that a thumping majority will ensure that the clause is retained so that the Bill can progress to its next stage intact. The clause is important to Government policy, so it should not be taken out and disabled in the way suggested.
Olivia Blake (Sheffield, Hallam) (Lab)
It is a pleasure to serve under your chairship, Ms Nokes. I rise to speak in defence of clause 204, and I agree with the shadow Minister, my hon. Friend the Member for Southampton, Test, that the Government have suggested an interesting tactic.
Our housing stock has been described as the least energy-efficient in Europe. That means we are the least prepared to absorb future price hikes, like those experienced in recent years, and to address future temperature changes. In England alone, more than 13 million homes—59% of them—are below a C rating on the energy performance certificate standard. As a result, housing is one of the main sources of carbon emissions in the UK, accounting for around 20% of total emissions.
We should be making massive efforts and strides to improve in this policy area, yet energy efficiency programmes have been cut and home insulation rates have plummeted over the past decade. In 2013, the coalition cut energy efficiency programmes, after which insulation rates fell by 92%. The number of energy efficiency insulations peaked at 2.3 million in 2012, yet fewer than 100,000 upgrades were installed in 2021. That is rather pathetic, it has to be said.
The Bill and clause 204 in particular provide a golden opportunity to put in place the financial structures and programme to give the necessary upgrades to the 19 million homes in our country that are below band C on the EPC scale. Clearly, that is what a Labour Government would do.
Mark Jenkinson (Workington) (Con)
Has the hon. Lady heard of our ECO4 scheme?
Alan Brown (Kilmarnock and Loudoun) (SNP)
Has the hon. Lady heard of the issues with the ECO4 scheme? The energy companies have not met the target number of properties because it needs to be rewritten.
Olivia Blake
Those are the exact problems. In recent years a number of Government schemes have either failed because they have not had the workforce to deliver them, or experienced challenges because people have been drawn into other roles, particularly in the building sector and in relation to cladding issues and so on. That is exactly why the Opposition would be very pleased if the clause were protected. We need that action plan. Delivery is only worth something when it happens. We cannot just have targets that we repeatedly continue to miss. It would be exceedingly challenging to argue to the public that we should not prioritise getting their bills down by £1,000 a year or come up with an action plan to deliver that.
Katherine Fletcher (South Ribble) (Con)
Yes, the British public would experience significant benefits through bill reductions as a result of insulating their homes, but who is the hon. Lady suggesting should pay for the intervention that would produce that benefit? It would be a significant scheme, especially given that 30% of the housing stock is really old. Who would foot that bill?
Olivia Blake
Moving away from this Bill, Labour has a fully costed plan for achieving that and it is targeted at the 19 million homes.
Andrew Western (Stretford and Urmston) (Lab)
Does my hon. Friend agree that although the Government are reticent about placing this clause on the statute book, surely the fact that they are Government targets means the money will be found anyway?
Olivia Blake
Absolutely, and I will come to that point. This issue is so significant: it is important that we find the funding for these sorts of interventions because almost 9,000 neighbourhoods in England and Wales have very low incomes but higher than average energy costs because of poor insulation. That requires Government action, and I fully support Labour’s plans, which I believe would cost £12 billion a year—I might be wrong about that.
Olivia Blake
Sorry, £6 billion—I have doubled my ambition. That is a large amount of money, but it would be very welcome in meeting the challenges we face.
I am not alone in my concerns about delivery in this space. In January, the Environmental Audit Committee rightly said that we need a national war mobilisation to improve energy efficiency and reduce carbon. The public are crying out for action to address fuel poverty and household emissions: 80% of respondents to National Energy Action’s polling supported funding retrofits for those on low incomes and, according to the New Economics Foundation, 64% of Conservative voters and 65% of people in the north support a national retrofitting taskforce.
Without the clause, the Bill will be another missed opportunity to tackle the cost of living crisis, to bring forward the emergency energy efficiency measures we need, and to start a national 10-year mission for home insulation. Delivery is important, and without an action plan I am not clear how those millions of homes, and the millions of people living in them, will benefit from better energy efficiency. We need to get on top of our carbon emissions and we need to ensure that housing is not forgotten, given its vast contribution to emissions.
It would be a mistake for the Government to remove the clause. All it is asking for is a warmer homes and a business action plan to set out how His Majesty’s Government intend to deliver energy efficiency. It is important to keep that clear ask in the Bill. I will be deeply regretful if the Government do not support the clause, because it will be another missed opportunity.
Andrew Western
It is a pleasure to serve under your chairship, Ms Nokes. At the risk of repetition, I too rise to defend clause 204. It is interesting that, in my first Bill Committee, we appear to be having something of a groundhog day moment. When we had a similar discussion about low-carbon heating last week, the Minister stood up and gave us various assurances that these things would be done, while resisting with all his might any attempts to compel the Government to do that in law.
It is incredibly challenging when the Minister says that superb progress is being made on these issues and that we have gone up to 40% over the past 13 years. In fact, on current projections we have something in the region of 200 years to go to upgrade the energy efficiency of the UK’s draughty housing stock. National Energy Action says that progress on energy efficiency is too slow, and the UK Business Council for Sustainable Development has calculated that the pace of the Government’s recently announced scheme would take almost 200 years to reach homes in need of upgrade. It is clear why the Opposition are so keen to see the targets in the Bill; clause 204 is therefore so important.
I warmly welcomed the addition of the clause in the other place because although the Minister talks about the energy White Paper, the net-zero strategy, the heat and building strategy that was published alongside it, and the future homes standard, none of those things actually compel the Government to act. That is the problem. The Government can miss their targets time and again because there is nothing that forces them to take the action needed. Warm words will not provide warm homes—it is that simple. This will not get us where we need to go unless it is on the statute book. We know that because we are already missing the targets.
Bim Afolami (Hitchin and Harpenden) (Con)
I respect the hon. Gentleman greatly. Obviously, it is a matter of political debate whether he accepts the warm words of the Conservative party—that is a legitimate, democratic debate that we should have—but what exactly does he propose would be the remedy for his not trusting the Minister’s word? Ultimately, that is his political point. He is entitled to make that point, and he has made it clearly, but trust cannot be legislated for, so I gently suggest that he accept that some things will always be a matter of political debate. I trust the Minister’s word. The hon. Gentleman does not have to do so, but that is ultimately what we are in politics to do—to argue and debate these things.
Andrew Western
I thank the hon. Gentleman for his intervention, but whereas trust cannot be legislated for, targets can. It would be a very simple remedy to place the targets in the Bill in order to remove any question of trust, and to give the industry and homeowners struggling under the weight of high energy bills certainty that the Government are taking the action required. In fact, I do not see this as a question of trust: it is a practical step. Indeed, if Conservative Members are so satisfied that the Government will take the action needed to meet the targets, why be fearful of their inclusion? If they have no issue with hitting a target, why not place it in the Bill? That is the fundamental point.
By not including the targets they have set, it opens up the argument that the Government do not feel they will meet them. In making that argument, I remind colleagues of the words of the National Infrastructure Commission, which says:
“Government is not on track to deliver its commitments on heat or energy efficiency…A concrete plan”—
which is what the clause would require the Secretary of State to introduce within six months of the Bill becoming an Act—
“for reducing energy demand is required, with a particular focus on driving action in homes and facilitating the investment needed.”
Katherine Fletcher
I share the hon. Gentleman’s zeal and passion for insulating the UK’s homes, but he has referred again and again to a concrete plan and investment, and I cannot believe that either of those things come with a price tag of zero. Given that it is important to be fiscally responsible, will he outline how he plans to fund the implementation that he wants to write into the Bill?
Andrew Western
The same applies to the Government’s targets. The fact is that we are being asked to take the Minister’s word that the Government will deliver on the targets, so there must already be a plan to do so. There must already be the funding to deliver, so what is the problem with enshrining this in law? That is the point we are advancing. Either the Government are putting the targets forward in a performative way, with no hope, plan or funding to deliver on them, or they are so assured that the targets will be achieved that there is no need for them to be placed in legislation—it is one or the other. Either way, I am sure that Conservative Members would want to satisfy themselves that the funding is in place; otherwise, the targets are a total waste of time anyway.
When we hear from the Minister, I would be grateful to know where the funding will come from to achieve the targets. Indeed, can we stand by the targets in any way, shape or form? That is the central point that I do not understand, because if the Government are going to deliver on this, what is the problem? If they are not going to deliver, all Committee members should be seeking to hold the Government’s feet to the fire.
Alan Brown
It is a pleasure to serve under your chairmanship, Ms Nokes. I was not going to speak, but the more this debate has gone on, the more confused I have got, so I thought I may as well throw some words out there anyway. Obviously, it is the job of the Opposition to hold the Government to account, but I find it bizarre that it now seems to be the job of the Opposition to make the Government stand by their own targets.
I understand that the clause was inserted in the other place. The Government keep telling us that the other place is very important and that we should rely on the expertise in the Lords, which is supposed to be a revising Chamber. That is ironic, because it was the Lords who brought forward the Bill in the first place. If we have to trust their ability and that it is a revising Chamber, it would seem logical to agree with the revisions that the Lords make. Otherwise, it undermines the point of having the Lords in the first place—which takes us to the position of the SNP: we would abolish it—but the Government tell us that it is an important place. We have heard only this week about how many people are scrambling to get into the Lords and are disappointed not to get in. Then we talk about trust and not being about to legislate for trust. Ironically, Nadine Dorries seemed to be saying yesterday that there is a real lack of trust in this Government.
The Chair
Order. I gently suggest that we need to be debating this clause, not the aspirations of some former Members.
Alan Brown
I know; I was just linking to where the clause came from and wanted to put these matters out there.
I do support the clause, although the future homes standard is effectively only for England. I have already raised my concerns that the Government are not moving fast enough, because they are still at the consultation stage. Subsection 1(d) is really important. The Government should publish an action plan showing how they are going to bring forward the future homes standard. That will give certainty to developers. They need to plan ahead for the technical requirements that they need to apply to new housing developments. It is important that a look-ahead is given to developers as soon as possible.
In terms of all the other targets, given that some of them go beyond the life of this Government anyway, I find it hard to understand why the Government are so reticent to accept the targets for energy efficiency installs. We can argue about whether Labour did more installs than are currently happening in terms of the number of energy efficiency measures, but the most important thing is the upgrading to EPC band C, to which the clause refers.
The Government can talk about the progress they have made in getting properties to EPC band C, but it is still only hovering around the 50% bracket, and that is after 12 years in government. If they are going to hit the target by 2035, there is no doubt that much more structured delivery plans will have to be put in place. Clearly, the properties that we can tackle today are the ones that are most easy to upgrade. It is going to get harder and harder the further into the programme we go. It is important that the Government are held to account on their targets and that they come forward and say how they are going to meet those targets.
Finally, on ironies, I agree with what the Labour party has been saying on energy efficiency, but this has come just after it has done a U-turn on the green new deal and the green investment it promised us all. I will leave it there, but there are a lot of contradictions on both sides, I would say.
Andrew Bowie
It is a pleasure to respond to the debate. There is some confusion at the minute. Indeed, I was slightly confused at the beginning of the debate, given that the hon. Member for Southampton, Test seemed at one stage to be whipping on behalf of the Government and giving advice to Conservative Members— I urge all colleagues on this side not to listen to his words. If I am not mistaken, he was suggesting that the clause we are against was tabled by the Government in the other place; Baroness Hayman is a Labour peer and Lord Foster of Bath is a Liberal Democrat peer.
Dr Whitehead
For clarity, I did not say that it was introduced by the Government, nor would I say that, because it certainly was not. The point I was trying to make was that it is now a part of the Bill, not that it was introduced by the Government in the other place.
Andrew Bowie
I am glad that is clarified for the Committee. For further clarification, we are seeking to revise the Bill back to its original state as drafted and remove an amendment that was made by Labour and Liberal Democrat Members of the House of Lords. I believe that is a relatively regular occurrence for the House of Commons. There should be no confusion on that.
Again, as they were when we were talking about smart meters, the Opposition are such a glass half-empty kind of party. We have made huge progress in the energy efficiency of UK homes. I understand why the Opposition do not want to speak about this: when they left office only 14% of homes had an EPC grading of course; now, after 13 years of Conservative Government, the proportion stands at 47%, and we are driving forward to get it over 50% soon. As for the suggestion that we do not have a plan to move forward, the Government do have a plan. We have set out a heat and buildings strategy and we have announced further measures in the net zero growth plan, which was announced just recently.
Alan Brown
I thank the Minister for giving way again. In this clause that the Government are trying to take out, there is reference to upgrading homes—it is a condition that the Government must abide by—
“where practical, cost effective and affordable”.
Can he provide a definition of what is practical, cost-effective and affordable? I could not get that out of the previous Secretary of State for Business, Energy and Industrial Strategy.
Andrew Bowie
What is practical and affordable will obviously be determined by individual circumstances and the market conditions at the time. Let me also say that I would have welcomed any acknowledgement from the Scottish National party, who are in government in Scotland, that we are working together across these islands to improve insulation and that we have made great progress as an island nation in getting towards 50% of all homes being rated EPC level C or above.
As I was just going on to conclude, we will take no lectures from the Labour party on the costings of projects, given that just last week it had to announce a staggering U-turn on its £28 billion investment in green technology and jobs, and it is yet to come up with any answer about how it will fund the £100 billion of pledges that it has announced thus far.
In terms of costings, a plan, moving this country forward, delivering on insulation and delivering on this entire green strategy, I have much faith in the Government’s position and in what we are seeking to do here today. That is why I advise all my colleagues to vote with the Government this afternoon.
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 206 to 208 stand part.
New clause 41—Energy performance regulations relating to existing premises—
“(1) Within six months of the date on which this Act is passed the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2), all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028; and
(b) amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 (S.I. 2019/595) to raise “the cost cap” to £10,000.
(2) Exemptions to subsection (1) apply where—
(a) the occupier of any premises whose permission is needed to carry out works refuses to give such permission;
(b) it is not technically feasible to improve the energy performance of the premises to the level of EPC Band C; and
(c) another exemption specified in the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 has been registered in the PRS Exemptions Register.
(3) Within six months of the date on which this Act is passed the Secretary of State must make regulations—
(a) amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time;
(b) to expand the scope of the current PRS Exemptions Register and redesign it as a property compliance and exemptions database;
(c) to require a post-improvement EPC to be undertaken to demonstrate compliance;
(d) to require a valid EPC be in place at all times while a property is let; and
(e) to raise the maximum total of financial penalties to be imposed by a Local Authority on a landlord of a domestic PRS property in relation to the same breach and for the same property to £30,000 per property and per breach of the PRS Regulations.
(4) The Secretary of State may make regulations to—
(a) enable tenants in the private rented sector to request that energy performance improvements are carried out where a property is in breach of the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015; and
(b) make provision for a compensation mechanism where a tenant is paying higher energy bills as a result of a property not meeting the required standard.”
This new clause requires the Secretary of State to strengthen minimum energy efficiency standards in the private rented sector, expands the compliance regime available to local authorities, and gives the Secretary of State the power to create a compensation mechanism for tenants adversely affected by non-compliance. These measures are derived from the government’s preferred policy option in the 2020 “Improving the energy performance of privately rented homes” consultation.
New clause 42—Review of the “Improving Energy Performance Certificates: action plan”—
“(1) Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.
(2) Such a review must include analysis of the energy efficiency benefits of energy optimisation technologies and bi-directional charging from vehicles to premises.
(3) Where any energy efficiency benefits are identified by this review, the Secretary of State must make provision under section 207(1)(b) for recommendations to be made about the improvement of the energy efficiency and usage of new and existing premises.”
This new clause would oblige the Secretary of State to update its review of the EPC rating system; for this review to consider bi-directional charging; and for the Secretary of State to then use the existing power under section 207 to promote these improvements.
Andrew Bowie
Clause 205 will provide the Secretary of State with the power to make changes to the existing Energy Performance of Buildings (England and Wales) Regulations 2012 to ensure that they are fit for purpose and contribute effectively to improving the energy efficiency of premises. Following the UK’s withdrawal from the European Union, it is necessary to create new primary powers to permit changes to be made to the 2012 regulations, as that power was lost with the repeal of the European Communities Act 1972.
Clause 206 will enable the Secretary of State to make changes to the Energy Performance of Buildings (England and Wales) Regulations in relation to new premises. That includes new premises in the process of being constructed or changed, as well as new premises whose construction or adaption is planned but has yet to be started. The changes will ensure that the anticipated energy usage and energy efficiency of new premises are taken account of.
Clause 207 enables us to ensure that we have an effective enforcement regime underpinning the energy performance of premises policy by amending existing requirements. We will review the current enforcement regime to ensure that there are sufficient enforcement options in place, with a view to improving compliance with the energy performance of premises framework. The existing regime includes civil penalties, and the clause enables us to amend those penalties or provide for new civil penalties by enforcement authorities up to a maximum of £15,000.
Finally, clause 208 provides that the regulations made under part 9 may amend, repeal or revoke provisions made in primary legislation and that this must be done through the affirmative resolution procedure. It also provides that the affirmative resolution procedure will be used if new criminal offences or civil penalties are created. This will ensure that there is parliamentary oversight of the uses of the power. I commend the clauses to the Committee.
Dr Whitehead
Clause 205 is the beginning of the part of the Bill on the energy performance of properties. I must admit that I thought for a moment there was going to be a spectacular U-turn on the previous clause, but I was sadly disappointed when the Minister decided which way he was really going to vote. I fear the same result in respect of this part of the Bill.
Let me speak briefly to our new clauses 41 and 42, which would considerably strengthen the Bill’s provisions on the energy performance of premises. They relate specifically to energy performance regulations for existing premises. Rather like clause 204, which is now not in the Bill but contained previous Government aspirations and claims in respect of outcomes, new clause 41 relates to things the Government have already said about energy performance certificates for properties in the private rented sector, about what should happen in respect of the improvement of properties in that sector to bring them up to an appropriate band, and about the amount specified in legislation that private landlords should spend on getting their properties up to that level before they are exempted from having to make further improvements.
The really important bit in new clause 41 would require the Secretary of State to make regulations
“amending the Energy Efficiency (Private Rented Property) (England and Wales) Regulations 2015 (S.I. 2015/962) to require that, subject to subsection (2)”—
which contains exemptions—
“all tenancies have an energy performance certificate (EPC) of at least Band C by 31 December 2028”.
The new clause would also require the Secretary of State to make regulations
“amending the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019”—
which Members will recall introduced a £3,500 cap on the cost to landlords of achieving band E—to raise to £10,000 the amount that should be invested before landlords are exempt.
Those are reasonably ambitious outcomes for the private rented sector, but they were completely presaged by the Government’s previous proposals, which we supported at the time. Specifically, in September 2020 they consulted on improving the energy performance of privately rented homes in England and Wales. The consultation had proposed outcomes at its heart, but—well I never—there has not yet been a Government response. Only three years have gone by. We hope that there may be a response one day fairly soon, so that progress can be made.
The proposed outcome of the consultation—the favoured option at the time—was exactly as set out in subsection (1) of new clause 41: raising the energy performance standard of private rented properties to band C, a phased trajectory to get there by 2028, and a £10,000 average per-property spend under a £10,000 cap. Everything in the new clause is already there in what the Government said they would do in respect of private rented sector energy efficiency. The only difference is that the Government have not actually done anything about it.
I recently looked up the reaction to the proposals, and a number of commentators and advisers are saying, “Well, landlords, you perhaps ought to get yourselves steeled up to the idea that your properties, to be lettable in future years, will have to be band C, and that you may have to spend up to £10,000 to make your properties lettable at that point.” By the way, that seems a relatively small amount to have to spend, bearing in mind that this is essentially a question whether a property is of merchantable quality. In any other area of commerce, if it were not of merchantable quality, it would not be sold. These measures, if implemented, would ensure that properties were merchantable for letting purposes as far as efficiency standards are concerned, and landlords would be required to spend that relatively small amount before they were exempted and to use every endeavour to get their properties up to that point.
Mark Jenkinson
In my constituency of Workington, I have some wonderful conservation areas with lovely old stone-built houses. A Labour council will not allow the replacement of single-glazed windows with uPVC double glazing, for example, which we know works well for energy efficiency. Why does the hon. Gentleman think that they would not be of merchantable quality?
Dr Whitehead
If the hon. Member cares to go back to the consultation in 2020, he will see that there are certain exemptions, depending on things such as conservation areas, from getting properties up to the standard that we are discussing provided that other things are in place. I have no particular insight into the workings of the hon. Member’s local authority, but it may be that something like that is at the heart of those concerns.
The point is that in general, we would certainly support—and we did at the time—what is set out in the consultation and the Government’s declaration of policy intent. One area where energy efficiency needs to move forward quite rapidly is the private rented sector; after all, that is the housing sector with the worst energy efficiency record. It is just not good enough to stand by the idea that properties in band E, which is a very low energy efficiency band, should be at that level any longer—certainly not in the 2020s, when we are trying to get all the properties that we can up to a standard fit for 2050.
Alec Shelbrooke
Further to my point of order this morning about declarations of interest, I have spoken to the Commons Registrar who has informed that because I personally make no financial gain from property that my wife owns it does not have to be in the register; however, I have to declare an interest at this moment that my family has a substantial property portfolio. The comments that I am about to make, however, are based on the concerns of landlords, estate agents and letting agents in my constituency.
One of the problems is if we start to over-legislate at this time. The hon. Member for Southampton, Test pointed out that, importantly, the Government are still consulting on the report. We are in danger of focusing purely on the one area of energy efficiency in the private rented sector, and in effect making landlords do things that the owner of a private property does not have to do, with the cost being passed on to tenants. Subsection (3)(a) of new clause 41 would
“enable Local Authorities to give notice to landlords that they wish to inspect a property, requesting permissions from landlords and any tenants in situ at the time to carry out an inspection at an agreed time”.
In other words, that would enable constant inspections and attempts to move forward with insulation.
We have said throughout that we have to take the public with us on this agenda. In some areas, we move too quickly to legislate on something that the Government are consulting on and that has not been properly thought through. Several times, my hon. Friends have intervened to ask where the money is coming from to do such works. At the moment, as I look at the Bill and the £10,000 cap, it is coming from the tenant. At a time when there is a political argument on both sides of the House about how people can get on the housing ladder, increasing their rents even further because the landlord has to do something that people in the private sector do not have to do will not help that cause.
There is no doubt that energy efficiency will reduce the amount of fuel that has to be used to heat a home. That is a scientific fact. We hear that it could save £1,000 a year, but that assumes that everything stays level and that we do not have to put another levy on electricity bills. I remind colleagues that when nuclear power came along, it was said that it would be so cheap to produce that we would not be able to meter it. That turned out to be far from the truth.
Alec Shelbrooke
There you go, praise from the other side.
One of the points made by the hon. Member for Southampton, Test was about getting in and retrofitting now, and not having to do it again in 2050. New clause 42(1) states:
“Within 12 months of the date on which this Act is passed, the Secretary of State must conduct a review of the “Improving Energy Performance Certificates: action plan” that sets out how new technologies can improve the energy usage and efficiency of premises.”
I have no doubt of the intent with which that was written, but it can be interpreted very differently. It could mean that as time goes forward, the regulations will change and those with band C EPCs might now be told to come to a level that was not required at this stage of retrofitting.
Jo Gideon (Stoke-on-Trent Central) (Con)
On a point of order, Ms Nokes. I want to seek a little clarification after my right hon. Friend the Member for Elmet and Rothwell declared his interest. I am not planning to speak on the new clause, but before we vote should I make members of the Committee aware of my entry in the Register of Members’ Financial Interests as an owner of a rental property?
The Chair
I think that via that point of order you have made Members aware of your interests. As Mr Shelbrooke indicated, he sought advice from the registrar of interests and I always find it best to be cautious and over-declare rather than under-declare.
Andrew Bowie
I thank the hon. Member for Southampton, Test and my right hon. Friend the Member for Elmet and Rothwell for their comments on the new clauses. In answer to the question of why we have not produced a full response to the consultation, we are committed to raising standards in the sector in line with our ambition, set out in the clean growth strategy, and we will publish a summary of responses to the consultation on improving standards in the private rental sector this year.
Andrew Bowie
Yes, this year.
We are continuing to refine the policy design to ensure that the costs and circumstances relating to energy efficiency improvements are fair and proportionate for landlords and tenants, as my right hon. Friend the Member for Elmet and Rothwell pointed out. The economic headwinds that have been buffeting us, and the changing circumstances in the private rented sector in particular, have made it difficult at the minute, but as I said, we will be publishing our response—a summary of responses, anyway—this year.
New clause 41 seeks to require the Secretary of State to make regulations in relation to energy performance in existing rented premises. His Majesty’s Government agree on the need to improve the energy efficiency of buildings to lower energy bills and deliver carbon savings to meet our net zero and fuel poverty targets. Indeed, this is reflected in the Government consultation on proposals to raise the minimum energy efficiency standard for privately rented homes. Under the Energy Act 2011, the Secretary of State already has powers to amend the private rented sector regulations in order to raise the minimum energy efficiency standards and set the dates by which landlords must comply with the new regulations. The new clause would not allow us to reflect the valuable feedback that the Government received from the consultations in the final policy design, which is essential to ensure that the final policy design is fair and proportionate for landlords and tenants. As I have said, the Government have committed to publishing the summary of responses by the end of this year.
Let me turn to new clause 42. In September 2020, we published the energy performance certificate action plan, in order to ensure that consumers can trust energy performance certificates and to make sure that certificates are accurate and reliable. Certain actions are expected to require regulatory change under the new powers to be implemented. The energy performance certificate is designed to rate the energy performance of a building, as considered as an asset that passes from one occupant to another during sale or rental.
As those occupants may or may not possess energy optimisation technologies or an electric vehicle with bi-directional charging capability, it is not currently considered appropriate to assume a benefit from this in the calculated energy performance rating. Including this nascent technology, which relies on consumer behaviours and equipment not integral to the premises, would increase the complexity of the EPC scheme. Bi-directional charging is a promising technology, but it is not yet viable for use in the mass market.
Question put and agreed to.
Clause 205 accordingly ordered to stand part of the Bill.
Clauses 206 to 208 ordered to stand part of the Bill.
Clause 209
Energy savings opportunity schemes
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
We now turn to part 10 of the Bill, which deals with the energy savings opportunity scheme, which I will refer to as ESOS.
Clause 209 provides a power relating to ESOS. ESOS mandates energy audits of large undertakings at least once every four years, which cover their buildings, transport and industrial processes. The audits result in cost-effective recommendations for improving energy efficiency. The power would replace the repealed power in the European Communities Act 1972, under which the UK established ESOS in 2014, and without which ESOS is a frozen scheme and cannot be updated.
ESOS is important to the UK’s plans to meet net zero targets and reduce energy costs for businesses. The existing scheme’s net benefit is estimated at £1.6 billion. The power covers four core options, as set out in the July 2022 ESOS consultation response: to standardise ESOS reports, improve the quality of audits, add a net zero element to audits, and require public disclosure of information from ESOS reports. It also covers two potential longer-term options to mandate action and extend ESOS to medium-sized enterprises, which are for future consultation. The power will enable the amendment of ESOS, or the establishment of such a scheme, and sets out the general provisions to make regulations.
Clause 210 sets out the application of ESOS, including in relation to geographical application and determining responsibility for energy consumption for the purposes of ESOS. It allows regulations to set the description of undertakings that fall within scope of ESOS, and to provide for two or more participants to be treated as a single participant. It would allow ESOS to extend to a far wider range of undertakings, subject, of course, to future consultation. I therefore commend clause 209 to the Committee.
Dr Whitehead
I do not have anything to say on these clauses, other than to note that we are now into the energy savings opportunity scheme, and that the Minister is indeed right that schemes would have been frozen under EU regulations. However, I am not yet sure whether what would have been the case under the EU regulations is reflected accurately in the things coming forward. I hope that it is. The scheme looks okay to me, but I would like an indication from the Minister that, in effectively updating the scheme for the purposes of this legislation, nothing has been lost from what previously was there.
Andrew Bowie
I am happy to give that guarantee. Indeed, one of the benefits of our now not being in the European Union is that we can devise and implement schemes that are fit for businesses and, indeed, homeowners—people within the United Kingdom—depending on the circumstances that we are facing at the time.
Question put and agreed to.
Clause 209 accordingly ordered to stand part of the Bill.
Clause 210 ordered to stand part of the Bill.
Clause 211
Requirement for assessment of energy consumption
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 211 makes provision for regulations to set out when, how and by whom an ESOS assessment should be carried out, and other requirements. It introduces a new power for future details from ESOS reports to be published to increase the transparency of the scheme and promote the uptake of energy efficiency measures.
Clause 212 enables regulations to set out functions and requirements relating to ESOS assessors, including who may be an assessor, the maintenance of assessor registers, and requirements on designated bodies that maintain assessor registers. New powers are provided to the Secretary of State or the scheme administrator to ensure the standards of assessors. The powers will allow intervention where there is evidence that an assessor or designated body is not carrying out its responsibilities under ESOS regulations appropriately, to improve the overall quality of ESOS reports.
Clause 213 includes a power to introduce new requirements for ESOS participants relating to the production and publication of an ESOS action plan covering intended actions to reduce energy use or greenhouse gas emissions. The requirements aim to increase participants’ engagement with ESOS and stimulate greater uptake of energy efficiency measures.
Clause 214 introduces a power to impose new requirements on ESOS participants to achieve energy savings or greenhouse gas emissions reductions. It sets out two approaches: ESOS regulations may either require participants to take specific actions, or may set out other requirements, such as the public reporting of actions, that aim to encourage participants to take those actions. Regulations would be able to specify that the requirements should refer to a cost-benefit analysis. As stated in the Government response to the ESOS consultation, the former approach would be subject to further consultation before any decision was taken regarding its introduction. Regulations making such provision would, under clause 218, also be subject to the affirmative parliamentary procedure.
Dr Whitehead
I have nothing to add to what the Minister said. I am happy for the clauses to stand part of the Bill.
Question put and agreed to.
Clause 211 accordingly ordered to stand part of the Bill.
Clauses 212 to 214 ordered to stand part of the Bill.
Clause 215
Scheme administration
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
Clause 215 provides powers for the effective administration of ESOS. It enables regulations to make provision about the appointment of scheme administrators in any of the four nations of the UK, whose functions may relate to administration and compliance monitoring and/or the enforcement of scheme requirements. It also enables regulations to require businesses to have regard to the scheme administrator’s guidance or pay fees to cover the costs of the scheme’s administration.
Dr Whitehead
Clause 215 is about administrators and the administration of schemes, and those administrators will have at their elbow action plans determined by previous clauses. It is good to see in the context of this afternoon’s discussions that a part of the Bill has action plans as a requirement and that those action plans will be positively administered. Having a plan seems to be a bit of a sine qua non for administrators; we do not seem to have that in other parts of the legislation. The Opposition have been assiduous in trying to put that idea forward, but it is nice to see that that line has been breached at least as far as these clauses are concerned.
Andrew Bowie
I am very happy that the hon. Gentleman is very happy.
Question put and agreed to.
Clause 215 accordingly ordered to stand part of the Bill.
Clauses 216 and 217 ordered to stand part of the Bill.
Clause 218
ESOS regulations: procedure etc
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This speech is very short. Clause 218 requires the Secretary of State, before making regulations, to consult those likely to be affected, including the respective devolved Administrations where provisions relate to devolved matters. It also describes where the affirmative procedure would be required—for example, if extending ESOS to smaller businesses, mandating action by ESOS participants or creating offences.
Question put and agreed to.
Clause 218 accordingly ordered to stand part of the Bill.
Clause 219
Directions to scheme administrators
Question proposed, That the clause stand part of the Bill.
Andrew Bowie
This is another short one. Clause 219 provides the Secretary of State with a power to give directions to a scheme administrator, with which it must comply—for example, when views differ over the interpretation of legislation or when the Secretary of State wishes to order a scheme administrator to remove an individual from its designated register of persons who may be appointed as a lead assessor. Clause 220 enables the Secretary of State to provide or arrange for financial assistance to scheme administrators and ESOS participants.
Dr Whitehead
I will just mention in passing that there is an interesting progression in clause 219, relating to directions. Subsection (1) says:
“The Secretary of State may give directions to a scheme administrator.”
So far, so good. Subsection (2) says:
“The power to give directions under this section includes a power to vary or revoke the directions.”
From that, it appears that the Secretary of State has the power to revoke their own directions—
Dr Whitehead
Indeed, but presumably if the Secretary of State changed his mind, he would not start with subsection (1) in the first place, so it is a bit of a strange formulation. I think that had the Opposition moved that as an amendment, the Minister would have said it was superfluous and unnecessary. I do not know why that particular formulation has been put in but we know that subsection (3) says:
“A scheme administrator must comply with any direction given to it under this section”—
however confusing—so it is probably all right then. But I must admit that subsection (2) looks a bit odd.
Andrew Bowie
I understand the hon. Member’s question and the direct answer is yes, the Secretary of State can revoke his own direction. I think it is important to set that out in the Bill and, indeed, there is precedent for it in comparable provisions in section 51 of the Climate Change Act 2008, passed by the then Labour Government.
Question put and agreed to.
Clause 219 accordingly ordered to stand part of the Bill.
Clause 220 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Joy Morrissey.)
Digital Markets, Competition and Consumers Bill (Second sitting)
Tuesday 13th June 2023
(11 months ago)
Public Bill CommitteesRead Full debate Digital Markets, Competition and Consumers Bill 2022-23 View all Digital Markets, Competition and Consumers Bill 2022-23 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 13 June 2023 - (13 Jun 2023)
The Chair
Good afternoon, everyone. I need to call the Government Whip to move a motion to amend the Programme Order agreed this morning. The purpose of the motion is to enable us to hear from the witnesses who were unable to give evidence earlier today. Tuesday 13 June Until no later than 4.45 pm Chartered Trading Standards Institute Tuesday 13 June Until no later than 5.15 pm News Media Association; Publishers Association; DMG Media
Ordered,
That the Order of the Committee of 13 June 2023 be varied by the insertion of the following words at the end of the Table in paragraph 2—
—(Mike Wood.)
The Committee deliberated in private.
Examination of Witnesses
Professor Jason Furman, Professor Amelia Fletcher CBE and Professor Philip Marsden gave evidence.
The Chair
Good afternoon, everyone. Could each of the witnesses introduce themselves, please? One witness is in the room and two are joining us virtually.
Professor Fletcher: I am Amelia Fletcher, Professor of Competition Policy at the University of East Anglia. I should mention that I am also a non-executive director of the Competition and Markets Authority; I know you heard from our chief executive officer this morning. I am very much here, I believe, with my academic hat on and because of my role on what has become known as the Furman review, which kicked all this off.
Professor Furman: I am Jason Furman, Professor of Economic Policy at Harvard University; I am jointly at the Harvard Kennedy School and in the economics department. I was chair of the expert panel on digital competition, and I am thrilled to be with you—this morning for me, and this afternoon for you.
Professor Marsden: I am Philip Marsden, Professor of Law and Economics at the College of Europe in Bruges. I am deputy chair for enforcement at the Bank of England. I was a member of the panel here and was formerly inquiry chair at the Competition and Markets Authority.
The Chair
Thank you all very much for joining us. I call shadow Minister Alex Davies-Jones to kick off with questions.
Alex Davies-Jones (Pontypridd) (Lab)
Q
Professor Marsden: In the branch of legislation being considered internationally in this area, this is the only Bill with a pro-innovation approach written into it. That was our original intention in the Furman review—not to sacrifice any innovation by large tech platforms, but simply to unlock the opportunities for innovation from smaller, more diverse firms so that there were more ideas and more flow. I do not see any correct arguments at all that this will hinder innovation; if anything, it will do the opposite.
Alex Davies-Jones
Q
Professor Fletcher: I fully endorse that. When we did the review, we spoke to a lot of firms that were seeking to innovate in the digital space but were struggling. We heard that they really needed access to a whole number of things such as data. They needed access to customers and to be interoperable with systems out there. They needed access to finance. They found, essentially—some of them, at least—that the way in which the biggest platforms were working was making all that very difficult. They were concerned that although there had been a huge amount of innovation, at that point—and still, I think—firms’ ability to innovate was being gradually increasingly stymied by the conduct of the biggest tech platforms. We very much saw the Bill as a pro-innovation piece of regulation.
Professor Furman: This question is so fundamental. This legislation would have benefits for consumers in terms of price and choice, but far and away the most important benefit would be innovation. It was designed with that in mind; our recommendations, which the legislation took on, established firms with strategic market status. They would fall under these rules, which would give a lot of leeway to small and medium-sized UK businesses to really innovate and come up with their own models rather than being constrained. More competition would help innovation by the large platforms as well.
The other thing that is so important is that the speed in the digital sector is just so much faster than in other parts of the economy, so traditional anti-trust rules just take too long: by the time a case is settled or decided, everyone has moved on. Getting there at the front end and having something that is much more flexible and faster is critical in this sector.
The Parliamentary Under-Secretary of State for Business and Trade (Kevin Hollinrake)
Q
Professor Fletcher: Amazon would have to be more precise about what it thought in the Bill would stop that. I think the Bill has trod a very careful, innovation- focused line between stopping the biggest tech platforms from inhibiting innovation by third parties and facilitating them to innovate themselves. The Bill is designed to only address the very biggest platforms in the first place, but also only to address the elements of their business where they have very strong market positions and entrenched market power. I think that way is the right way. As far as I know, Amazon would not be inhibited by the Bill from setting up those stores.
Kevin Hollinrake
Q
Professor Fletcher: I think the concern is to ensure that it is entrenched market power that we are addressing. The CMA recognises, as do we, that these are intrusive measures and you do not want to do them unless you are trying to address entrenched market power.
Professor Marsden: Personally, I agree that there is an aspect where the five-year period, which I find a bit too long, can be gamed by some of the potentially SMS—strategic market status—firms, but I understand why it is in there. I probably would have been more comfortable with a two or three-year period, because that is traditional for competition authorities and as far as they can look ahead in terms of crystal ball gazing. But I understand why it is there.
Kevin Hollinrake
Q
Professor Marsden: They could game the system in the sense of one thing being done by just slowly walking backwards, for example—“We are introducing so many innovations and having so many thoughts and thanks from various small businesses.” They could drown the CMA with a range of evidence that actually does not go to the point, which is: who is being excluded, who is being locked out and what are we as consumers and citizens missing by relying only on three or four types of seed in the environment, as opposed to a whole globe of seeds? That is the metaphor I would like to use.
Professor Fletcher: It is worth highlighting that if you compare the UK regulation with the equivalent in the EU, the EU has taken a less bespoke, less evidence-based approach. It basically gets a quantitative presumption, and that presumption is going to be relatively hard to shake. What we have done is much more evidence-based, bespoke and proportionate. Whenever you do that, it makes it slightly less administrable and slightly harder to actually make stick.
Again, I think a very delicate balance has been trodden, and it is the right balance. I think all of us would agree on that, and on the fact that Brussels has made it easier for itself, but it is arguably then not proportionate nor sufficiently bespoke. It is a very delicate thing, but I think it is in the right place.
Kevin Hollinrake
Q
Professor Furman: Look at the tools that the Digital Markets Unit would have under these provisions; the conduct requirements, such as fair dealing and open choices, are not brand new inventions. They largely draw on existing roles under anti-trust measures. It is just that they would be more explicit and clearer up front, and enforced more quickly. To some degree, at least in terms of the conduct requirements, this is not about imposing some brand new set of rules; a lot of it is about taking existing things and ensuring that they can be enforced in a clear and transparent manner.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Q
Some conversations that we have had have been more explicit about the increased costs of innovation, and the difficulties when there is no interoperability or access, and increased costs being passed on to customers. Is that consistent with your experience, and what are the likely economic benefits to businesses and consumers of this legislation? I will take Professor Fletcher first, and then we will come back to Professor Furman and Professor Marsden.
Professor Fletcher: That was exactly our experience. We heard about the importance of interoperability with systems, and access to data and consumers, and how all those things were not always effective. Some innovation was fostered by big tech and some was less fostered by it, but the point is that they were in control of what happened in a way that we felt was not right for a proper, innovative environment, and certainly not right if you want to see real, disruptive innovation coming through—and I think that is what we do want to see.
We also thought that interoperability, data portability and data access were all pretty intrusive interventions. Therefore—unlike what has been done in the EU, where they have particular rules that require interoperability and require data portability on a fairly widespread basis—we instead thought that that should not be part of the core code of conduct, and that the aim could be achieved via pro-competitive interventions that were evidenced, bespoke and really well targeted. Again, that has been taken through into the Bill’s design, and shows that it is targeted at the barriers to innovation that we identified.
Seema Malhotra
Q
Professor Furman: The short answer is yes, I think it gets it right. It strikes what my colleagues have described—and I agree—as a delicate balance. It depends on who is the head of the DMU and who is the head of the CMA.
In general, my experience with the regulators in the UK is that they are very thoughtful in understanding the importance of markets, competition and taking evidence seriously. The legislation gives them a certain amount of discretion. As my colleagues have testified, that is unavoidable; in a market and an environment where things are changing very rapidly, it would be very difficult to try to write into the legislation every single detail. This sets the standard for what the world should do. Frankly, part of the reason I agreed to do this project is that I would love to see the United States following legislation like this. I hope the UK serves as a model for the world in this regard, and I think it is doing so.
On innovation, I agree with Amelia that what we heard from businesses and reviewed in the academic research is that it is not just a question of how much innovation, but what type of innovation. Are you trying to innovate so you can be acquired by Google or are you trying to become the next Google? There is one thing that motivated us. It is very hard to see the future of this space, but four years ago we thought the next big thing would involve artificial intelligence and machine learning. Unlike the past waves of innovation—where IBM was dominant, and then it became about PCs so it was Microsoft, and then it was about the internet so it became Google, and we saw one wave after the next displacing the previous—we were very worried that because artificial intelligence required large amounts of data, it would not necessarily lend itself to a new upstart competitor, but would instead entrench the power of the existing ones. So far, what we are seeing with OpenAI and the role that Microsoft plays in it, and with what Google is doing in this space, is that it is largely playing out along the lines that we were concerned about. That is partly motivating us looking forward.
Seema Malhotra
Q
Professor Marsden: Let me take your first point with respect to evidence related to economic benefits. We had a natural experiment before this, called open banking. You will have heard things about this before. No matter what hopes or disappointments people had about open banking, we seemingly had the power at the time to investigate a market that had competitive problems but no anti-trust violations, so there was nothing we could address with anti-trust law. We identified certain competitive structure problems, and there was an expectation on us perhaps to break up the banks, and we hear that with respect to some platforms.
That power is there in the Bill, but with the Furman review and this Bill, which has been kindly carried forward by the excellent civil servants, our emphasis is on the idea of opening up these markets with the same kinds of ex ante obligations on the larger platforms that we imposed on the big banks. Did we break up the banks? No. Did we see massive amounts of switching from one bank to another? No, but we have evidence that British people switch their spouse more frequently than they switch their bank.
What we want is more engagement. We want customers, users and small businesses to be engaged with their platform—with their bank—and that is what we will be seeing. We saw new offers coming in without the extensive capital requirements to bring in a full new entry, but there were new services offers in real intermediation and disintermediation of various products. If anything, open banking allowed consumers and users to—I hate this term—have affairs. It allowed them to check out where they could get the best mortgage, the best loan and those kind of things. That disciplines the incumbents, especially HSBC and Barclays, to provide competitive offers themselves. That is an example, to me at least, about how a pro-competitive, ex ante set of rules on very large platforms with a lot of data can help diversify the economy without harming the platforms. If anything, it puts a little bit of heat under them. I think that was a good achievement, whatever people think politically about it. It was supposed to be a balanced, gradual attempt to try to fix a market that had competitive structure problems, and I believe that is what the Bill does here.
In terms of global leadership, the UK is definitely still leading, despite a bit of a delay. It is the most bespoke, nuanced and balanced bit of legislation that has been proposed so far that I have seen, as we have already discussed this afternoon. At the same time—I completely understand your jurisdictional point—there is a real zeitgeist politically around the world to introduce measures like these of some sort. Of course, they depend on the economic, political and legal backgrounds of the society, but I cannot imagine like-minded authorities and Governments not trying to work hard or co-operate in this space.
We are seeing some examples of that already in the digital space. It is not really an area where there is a competition of competition laws; it is more that this is a regulated solution that we are putting forward in various jurisdictions through a democratic process. It does not depend too much on the discretion of the authority. It depends on the process that the authority undergoes to understand the markets and to then work with the tech platforms to find out which remedies would be available. That participative nature is a very important part of this, rather than an adversarial nature where we just chase after the companies after they have done something that is alleged to be wrong.
Seema Malhotra
Professor Fletcher and Professor Furman, do you want to add anything?
Professor Fletcher: A lot of jurisdictions around the world are looking at this space. We talked earlier about how some of what we will achieve through this is stuff that can be achieved through competition law, and almost all jurisdictions have competition law. In a way, the more jurisdictions that have regulation, the easier it becomes for other jurisdictions to achieve some of the same things through competition law, because it changes the costs and benefits for the firms to change their business model.
The firms have quite an interesting decision to make on a global basis anyway about how much they do the same thing globally as they are required to do locally. I think it will vary depending on what thing it is. If it is terms and conditions, they can easily change that on a local basis. If it is interoperability, it is quite hard or rather more hard to design a system so that it has different interoperability standards in different places. We may well see an extraterritorial effect—not a deliberate one—because of the cost considerations and reputational considerations of the firms themselves. That will have a positive benefit in terms of providing a more consistent framework globally for the third parties that we are hoping to innovate. The more consistent global framework they have to compete upon, the better it is for innovation.
Professor Furman: The ideal thing would be if the whole world sat down and agreed how it was going to approach this problem and there was a single global system, or lots of countries co-ordinated and did the same thing. In practice, that is impossible, so what one should aspire towards is having essentially correlated actions in different countries, where different countries have similar rules and are looking at each other and learning from each other.
This puts the UK in a position to be a leader in that global process, and that, frankly, is the way mergers work already. It is not like there is a single global merger authority; there are merger authorities in economies around the world, but they use similar rules, are looking at similar evidence, come up with similar decisions and all, to some degree, talk to each other. That is what this is—an emerging correlation of approach.
We have seen in the United States in both the House of Representatives and the Senate legislation being put forward and in some cases being passed out of Committee that would accomplish some of the different pieces of what this legislation would do, frankly, more comprehensively than anything I have seen in the United States.
The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)
Q
Professor Fletcher: I know this is something that Philip cares a great deal about. I will come in first and then let him have a go. We have talked about it being a delicate balance. I discussed the EU regulation, where they have gone very far towards ensuring administrability and enforceability by having the rules set out in the legislation with quantitative thresholds. That is how they have dealt with the need for administrability and enforceability.
We have tried to be more bespoke, as I have said, and more evidence based, but there is a real risk in terms of administrability and enforceability that we end up in the same place as we have been with competition law, whereby the cases get hugely burdensome and hard to bring to a conclusion within a sensible timescale, and there are insufficient agency resources really to do everything that is needed.
I think there is a real risk that if you play around with what might seem like tiny changes to the legislation, that could really threaten the administrability and enforceability of it, and we could lose the benefits of it over competition law and put us in a bad place relative to the EU—whereas at the moment I think we could show ourselves to be better in terms of getting the right balance by being more bespoke and evidence based. The appeals standard goes to that point. I strongly support the JR appeals standard because if we went for a full merit standard, it would be too far and would become inadministrable. I am sure the CMA would find a way to try to administer it, but I do not think it would be the right balance. I feel the same way about the customer benefits exception.
Paul Scully
Professor Marsden or Professor Furman, do you have any views on that? Professor Marsden, your screen has frozen. Professor Furman?
Professor Furman: That is unfortunate because everything I know about this topic has come from him. [Laughter.] I do not have anything to add.
Dean Russell (Watford) (Con)
Q
Professor Fletcher: It would make quite a lot of difference, but quite small differences. It would depend on the business that you were in. You might be an app developer. First of all, at the moment we have categories of rules rather than specific rules, so I cannot say exactly what it would do. For example, it could give you fairer access to app stores. If you were a seller through Amazon, which we were talking about earlier, it could give you fairer access to your own data on your own sales. I could probably talk for a long time about all the things that it could do, but I will highlight that you are, in that role, exactly who the law is targeted at helping.
Dean Russell
Thank you. I notice that we have lost one of our witnesses, so I will go to Professor Marsden—I mean Professor Furman. My apologies; I forget my own name sometimes!
Professor Furman: Fair dealing, open choices, and trust and transparency are three of the main conduct requirements. They are all designed to make sure you could not have a search engine hiding searches from your business, and that you could not have them preferencing themselves and directing to themselves instead of to you. You might benefit from some of the interoperability and data access by being given access to the data or access to a system that you could operate on, which right now one of your bigger competitors is doing, so I think it is preventing harmful and unfair things being done to you, but also affirmatively opening up some options. By the way, all that is good not just for innovation but for the consumer, because it will make things easier and more streamlined for them.
Dean Russell
Q
Professor Marsden: I will deal with that first, then I can go back to the appeal point, if you would like my views.
The Bill will make those big platforms compete, basically for the first time. You will hear a lot of guff about how they are in some sort of monogopoly competition with each other all the time, and some of that might be true, but they are not really—they really are not. We see that in the competitive structure of the market, in the profits and in the concentration levels and so on. We are not trying to reduce profits or anything like that; we are trying to allow others to have a chance. If anything, like with open banking, that will light a fire underneath some of the big platforms, which are telling you they are innovative, and they are, but they are usually innovative in a way that makes us more dependent on them. We are not that fond of dependence in such markets; we are fond of diversity, choices and allowing competition on the merits—for products to rise and fall based on their merits, rather than on whether they have satisfied the terms and conditions of a particular platform.
On appeal, briefly—I am sorry for cutting out; Zoom might not be a platform of strategic market status—I have heard many advisers to tech platforms that might be subject to the Bill argue that the appeal issue is not just a small thing in the legislation, but absolutely fundamental. I agree with them on two things: first, the Bill itself and the ex ante approach that we have been discussing are absolutely fundamental—that is the big change. Secondly, the change with respect to ex post enforcement—the review of the conduct requirements, the investigations, anything imposed on the platforms and so on—to me involves such an involved, open and participative process between the platform, the digital markets unit and other entities that it gives me a lot of comfort about due process. If anything, if there were a full appeal standard, we might as well move to a prosecutorial approach, where the DMU is a prosecutor and everything is adversarial, and takes 18 years in court.
That is kind of what we have now so, if anything, this is an opportunity really to understand the business models, to put in bespoke requirements, to test ably the remedies—that is an important aspect—and to release remedies if they are not working or if they need to be tightened up. That therefore shows internationally what the UK thinks about such practices, which might help with the global spread that Amelia was mentioning. However, I have to state firmly that I believe that judicial review takes a lot longer than a substantive appeal, and I think that if the Bill were amended to allow a substantive appeal or even a few years of substantive appeal, we might as well have not done the study at all and might as well not pass the Bill in respect of the digital prior arrangements, because it will just return us to what we have seen before, basically.
In contrast, the European Commission is allowing substantive appeal rights. If anything, I think that means that they will code for prohibitions. As Amelia said, the law is not as bespoke, so we are going to see: “Here’s your general obligation. I don’t think you are satisfying it.” Then there will be an appeal to the Court and a wait of 18 years for Luxembourg to make a ruling. Here, those issues we hope will be dealt with at the administrative stage, and whether the authority of the DMU or the process itself was fair and reasonable is something that the courts should obviously review. We welcome that scrutiny. In fact, if I were involved in any of this, I would very much welcome that kind of scrutiny at the judicial review level, which is itself a very intense form of review, so it feels perfect to have this JR standard, but I appreciate that you will have already heard a lot against that and will in future.
Jerome Mayhew (Broadland) (Con)
Q
Professor Furman: Political accountability is very much the broad approach. It is important that you have a body that approaches this transparently and predictably. I have a lot of respect for the role that you all play in the political system. You think that you should set the goals for consumer choice, innovation and so on, but it is important that what ultimately gets done is done in a much more judicial, regulatory way so that it is predictable for all the parties involved and does not change dramatically over time. In that, there is obviously the appeals process that was just discussed. That is not a political appeals process; it would be within the legal system.
I confess that I am not familiar with exactly how things would work in the UK. In the United States, Congress would have the head of the Federal Trade Commission, or whatever body was charged with this, up to testify. Generally, Congress would not ask, “Why did you bring that case yesterday?” but “Why aren’t you being more aggressive?” or “Why aren’t you being less aggressive?” They would try to oversee things at a strategic level, while leaving each case, decision and regulation to the regulator. Something like that system—I do not know exactly how you would do it in the UK—would be ideal.
Jerome Mayhew
Q
Professor Fletcher: I fully agree. I can see why there is concern about discretion, but the CMA has shown that it takes its responsibilities seriously. It also understands that it is answerable to the Government of the day on a strategic level, rather than on individual cases.
To follow what Philip said, JR is not a walk in the park. It is a pretty serious test, which the CMA has faced occasionally in the past. It is a very serious expectation on the CMA. I support the view that if you want investment and open and competitive markets, you must have a transparent, consistent framework, which has lots of legal certainty. I worry that too much political intervention risks undermining that.
Andy Carter
Q
Professor Fletcher: I have to confess that I am not aware of work that has specifically been done on that. It is worth seeing this as a global thing, and we are trying to play our part in creating a global environment that will foster global innovation. I think that by doing it here, we will set rules that foster much of that innovation and encourage it to come here. There will be people who have made estimates; my hunch is that most of them will be pretty back-of-the-envelope, but I confess that I have not seen them.
The Chair
Thank you very much. That brings the allotted time for this witness panel to an end. On behalf of the Committee, I thank you all very much for giving us your time.
Examination of Witnesses
Noyona Chundur, Peter Eisenegger and Tracey Reilly gave evidence.
The Chair
We will now hear from our next panel of witnesses. We have Noyona Chundur, chief executive of the Consumer Council; Peter Eisenegger, board member, National Consumer Federation; and, via Zoom, Tracey Reilly, head of policy and markets, Consumer Scotland. May I ask you to introduce yourselves for the record?
Noyona Chundur: I am the chief executive of the Consumer Council.
Peter Eisenegger: I am the director of the National Consumer Federation with responsibility for the digital perspective in the consumer world. From the nature of our response, you will see that we have also commented a lot on the standards world, so I think it is appropriate that I indicate my background there: I have participated in digital standardisation in the UK through the British Standards Institution, in Europe through CEN and CENELEC, and internationally through the International Organisation for Standardisation. We do our best to represent the consumer voice in those arenas.
Tracey Reilly: I am head of policy and markets at Consumer Scotland.
Seema Malhotra
Q
Noyona Chundur: Thank you for the great question. Perhaps I can start with a little bit of context. We believe that confident consumers will drive competitive markets. There is a lot that the Bill does really well. It is great progress, and I commend the work of colleagues in the Department, as well as partners in the CMA and Tracey from Consumer Scotland for their input in getting us to this point. There are eight areas that could be strengthened or clarified. There is building consumer confidence. There is the potential risk of only the CMA having direct enforcement powers. It is around the supervision of enforceable standards, practice and conduct of businesses. It is the ability to add and remove—
Vicky Ford (Chelmsford) (Con)
Slow down!
Noyona Chundur: Sorry, would you like me to step through each one? Would that be easier?
Seema Malhotra
You are going through them quite well, but could you go you through them slightly more slowly, because colleagues will want to write them down?
Noyona Chundur: The first thing for us is building consumer confidence as a priority, because prioritising consumer protection to build the foundations that create confidence in competitive markets will benefit both the consumer and the economy. We are looking at this through the prism of the cost of living crisis and through the heightened prism of vulnerability. In the packs that we provided, you can see that vulnerability has certainly increased in the last 12 months. The Consumer Council has dealt with over 33,000 consumers, and they are showing increasingly more complex and multifaceted needs. Income in Northern Ireland has—
Seema Malhotra
Q
Noyona Chundur: Understood. Did I get to adding to or removing from the list of banned practices in the Consumer Protection from Unfair Trading Regulations 2008?
Seema Malhotra
Could you start the list again?
Noyona Chundur: Okay. Building consumer confidence is a key priority for us. The second thing is the potential risk of only the CMA having direct enforcement powers. The third is perhaps expanding the Bill in some way to include the supervision of enforceable, standards, practice and conduct. The fourth is adding to or removing from the CPR list of banned practices.
Next is establishing enforceable minimum standards to alternative dispute resolution schemes. We welcome the mandatory accreditation as part of the Bill, but we would like to take it a step further. Then there is a question around better regulation of firms that exploit behavioural bias or nudge techniques for negative effect. Finally, we recommend going further on subscription traps with opt-in clauses after the trial or end-of-contract period.
Seema Malhotra
Q
Noyona Chundur: The key thing for us comes from research that the Government have published. I think the Department for Business and Trade estimated that 81% of UK households signed up to at least one subscription last year, and consumers are spending £1.6 billion per year on subscriptions that they do not want. That is a huge amount of money that a lot of consumers do not have in the current cost of living crisis. Our own research highlights the lived experience. In the online detriment research that we carried out, one consumer told us that they signed up for a 30-day trial but it took them six months to get the subscription cancelled. In the light of that, I think that it is appropriate for us to recommend that legislating for opt-in clauses after the initial trial or end-of-contract period is reasonable. I also believe that that may deliver the most immediate and material benefit to consumers in the short term, given the vast quantities involved.
Seema Malhotra
Q
Peter Eisenegger: Our overall approach here, at the more strategic level, is that the Bill contains lots of good stuff. It is a significant step forward. What we do not want is, as has happened with the Online Safety Bill, for it to hang around forever and not enter law. Our view is that we can talk about improvements in some areas. You mentioned one—the way that fake reviews are handled. To delve into that detail, however, would just prolong the process of getting it into law. We recommend that the Bill gets enacted as soon as possible, that we recognise it as a step forward, and that the CMA and this Committee look at areas of improvement beyond it. There is something that would relate to online reviews in terms of whether the information being provided is accurate, but it is good enough. Let us press on and get it done.
That said, I have not heard a discussion about the role of standards and supporting regulation. We are in the digital world, and an awful lot of regulation is supported by standards. You will find that General Data Protection Regulation is leaning very heavily on work in Europe to adapt and put some final European tweaks on the work that has gone on at the ISO level, and similarly with AI. If you want to be a leading player in this area, particularly an innovative one, from our perspective—we play in international, European and UK standards—you have to be very well aware of, and participating in, all those arenas.
To make an innovation comment—having spent two thirds of my career in product management and innovation, I am now doffing the consumer cap and putting the real-life innovation one on—good innovation practice is to look at what other people are doing and pinch as many legitimate ideas as you can from them. Quite honestly, the fact that the EU has the same sort of intent but a slightly different approach is great. Just keep an eye on its members to see whether there is good stuff. To be fair, I will say the same to them, because I am participating in the AI standardisation at the moment.
Seema Malhotra
Q
Tracey Reilly: Broadly speaking, we welcome the Bill. As your previous panellists said, it has lots of good stuff in it. It should provide the CMA with more flexible powers, which can be used in a more responsive and timely way to prevent detriment. On how the Bill will affect individual consumers, we hope that it will lead to consumers experiencing lower levels of detriment and being less subject to unfair, misleading or aggressive trade practices so that if and when such practices occur, they can be stamped out more quickly and easily, and it is easier for consumers to seek redress through ADR systems that are appropriately regulated and standardised.
In terms of how the Bill will affect Scottish interests, in many ways the level of detriment experienced by consumers across the UK is similar. The consumer protection survey is UK-wide and the patterns of detriment for Scottish consumers are generally not hugely different from those experienced in the rest of the UK. That said, there are obviously differences between the two nations in the regulatory enforcement and judicial landscapes, and it is important that we understand and pay attention to them. Equally, I understand that the Department has been engaging with Scottish stakeholders. We welcome that and would obviously like that to continue through the implementation process.
Some markets operate differently in Scotland, either because they are entirely devolved because there are fewer providers and therefore lower levels of competition, or because consumers access services differently, for example, due to geography. It is important that, within the overall UK framework, the system can respond to those regional differences or local issues. We hope that the additional levels of flexibility granted to the CMA under the Bill will allow for a more flexible and targeted response, particularly if any local practices cause detriment. We look forward to liaising with the CMA on that. Noyona may wish to make additional comments, given that she is in Northern Ireland.
Kevin Hollinrake
Q
Noyona Chundur: There is a heightened risk, Minister, if the new direct enforcement powers sit only with the CMA. Ultimately, the purpose of those powers is to be much more agile, flexible and responsive to consumer detriment in the market. Is there a heightened risk that enforcement will default to the CMA because perhaps it may deliver a solution that is much more agile and responsive and much more in keeping with the pace of detriment in the marketplace compared with a courts-based system? The sector regulators and trading standards could therefore have the same or similar powers. The question is about agility and responsiveness to detriment, which is exploding in the marketplace. We see it increasingly, particularly in digital markets, which evolve so quickly. That is our perspective.
Neil Coyle (Bermondsey and Old Southwark) (Lab)
Q
Peter Eisenegger: The Bill has clauses that allow us to address that in terms of, “Has the information put before the consumer been complete and accurate?” If something does not comply with safety standards, that has been omitted. It is a question of interpretation that we would have to nail down and make clear.
Neil Coyle
Q
Peter Eisenegger: This is an area where I have had a lot of conversation with Electrical Safety First, which is very concerned about it. We have started to outline, at a very preliminary stage, what constitutes an online market set of functionality for which people should be held responsible and—what do you know—Amazon fits that. We find that online retailers do not perform all the functions, but they perform enough to be reasonably interpreted as having a retailing responsibility in the traditional physical world. But they have to do the heavy lifting of getting stuck into the detail and mapping it out.
I am afraid I come back to the standards world, which tends to be set up to provide that level of detail for the regulation to lean on. There are standards for complaints handling, for alternative dispute resolution, for dealing with vulnerable consumers and for online reviews—all issues that touch on what we have said. They are there, and mainly my UK consumer colleagues in British Standards either instituted them or were very influential in getting them taken forward.
A personal expert view? Yes, I think it can be interpreted that people like Amazon have a retail responsibility. To provide the evidence and analysis to support that position, however, is work that we have started with Electrical Safety First, but we are a bit busy and neither of us has had the time to finish it off.
Neil Coyle
Q
Noyona Chundur: May I add something? Electrical standards are not my area of expertise, unlike consumer expectations around standards generally, so I will make a comment about that. Consumers expect minimum standards, particularly in new markets. It is worth saying that when we are talking about new digital markets, everyone is vulnerable, so there is no “vulnerable consumer” per se.
An interesting point to make is that we did a joint project with the Utility Regulator for Northern Ireland on what consumer expectations might be of future regulation and decarbonisation. Consumers were very clear that, in addition to trusted accessible information and concerns about costs or financial health, they wanted absolute protection from safety fraud, obsolescence or mis-selling, but they also wanted clear and robust standards on certification, registration and standards for installers, and protection against damage and disruption during installation. That is moving away from something that is perhaps more price-led and economic to where we need to have a minimum enforceable standard that works for everyone, so that we bolster the safety net and create confidence in markets. The more that we do that, the more consumer spending we have in the economy, which is good for everyone.
Peter Eisenegger: May I make a comment about enforcement? A backstop is in action at the moment: the class actions that our law now allows for the consumer world. My colleague Arnold Pindar, the chair of the NCF, is part of an advisory group that is taking on Mastercard at the moment. Another colleague, Julie Hunter, is fronting the case against Amazon about the way it presents its own products unfairly in its online marketplace. These names are in the public domain; I would not mention them otherwise. To a certain extent, the powers being provided to the CMA to be a bit more responsive and active make sense where we have class actions, which really is a major “after the horse has bolted” situation. We hope that the CMA will prevent more horses from escaping. Thank you for the opportunity to comment.
Vicky Ford
Q
Peter Eisenegger: Okay. The industry-led—
Vicky Ford
Are they industry-led?
Peter Eisenegger: You only get good standards when you have proper stakeholder engagement—that is a comment that we address in our supporting paper. You need standardisation bodies that actually work hard at getting their stakeholders involved. BSI is good at that, and the European system is pretty good. In the digital area, because there are so few of us with the right background and expertise, you find that the consumer voice is not getting through. I have two consumer colleagues who are on the BSI mirror committee for AI; they feel that the international standard is not reflecting what they are trying to input, because we do not really have anyone effective at the international level on the consumer side.
You need very careful insight into where there is decent stakeholder engagement and where there is not. Where there is, you are quite right: I have worked on a number of committees where the good guys and gals from industry have just been saying the right thing, and you end up just tweaking a little of what they already understand in their industry is good practice. There is no problem with working with the good people in industry, but—particularly in the digital space—you do get the big players coming in and influencing things, whereas the small and medium-sized enterprise stakeholders are not as fully represented. When a standard is put forward, careful understanding is needed of who the people are who are really contributing to it.
Vicky Ford
Q
Peter Eisenegger: Exactly.
Vicky Ford
Q
Peter Eisenegger: Yes, I can. It was a consumer-initiated standard on complaints handling. If you want the number, I can blind you with it: it was ISO 10002. It was initiated by the consumer side of ISO. It is clearly written for the big company: it has lots of good practice where you divide all the responsibilities, the analysis of the complaints and things like that. There is an annex for SMEs. I have been through the main part of the document and counted the number of requirements: there are more than 250. For the SMEs, there are eight.
Where you look at the consumer and it is your small local trader, you go, “That’s fine,” because they know you personally—you know where they live, basically, and that changes the whole local relationship. But you do not really see that many standards where the practicalities for the smaller company are reflected. I am quite pleased that the consumer world did a decent job for the SMEs there, because they are very important to us in terms of local service and providing competition to the big guys.
Seema Malhotra
Q
Peter Eisenegger: Do as much as you feel you can make time for, while getting the Bill implemented as quickly as possible. I come back to the key clauses that relate to the appropriateness of the information provided. Is it complete? Is it misleading? As a charity, we have looked at how heat pumps are being advertised at the moment. About 80% of the online information did not provide the right contextual information for your heat pump decision; some did not even mention it at all, and a few hid it away behind several layers of interaction with the website before you found it out. That would fall under the incompleteness clause, but again, you are going to come back. The CMA would be able to apply an interpretation, which would probably go through some sort of intense dialogue with the industry people concerned, but if you do not have time to cover all those other aspects as explicitly as you would wish in the Bill, I think there is a clause that gives the CMA some capability for addressing it.
Noyona Chundur: Maybe I can add to that. This talks to the point in the earlier session on how quickly or whether fake reviews should be automatically added to the list of bad practices, or should we go through full consultation. In all these things, we need to have appropriate consultation and the appropriate due diligence carried out. It needs to be done as quickly and thoroughly as possible so there is no doubt. I am completely supportive of what was said earlier today that there is a lot of detriment as a result of fake reviews, and the sooner that is resolved, the better. None the less, we need to be careful about setting the right precedents. We need to have consistency in procedural application. For all those things—I believe we are all in agreement that drip pricing is of huge concern, as are misleading green claims—we need to follow the right process and get through it as quickly as possible.
Seema Malhotra
I think Ms Reilly wants to come in as well.
Tracey Reilly: I simply want to endorse much of what Noyona said. There are issues around fake reviews, drip pricing and greenwashing that we all want to see addressed, and for that to happen as soon as possible. However, there is also a need to ensure that the definitions are right and the provisions are effective. We would hugely support the Secretary of State having the power, which is in the Bill, to amend the schedule by regulation. I realise that is a Henry VIII clause, which is not always popular, but in this case I think it is an acceptable use of that power, and it comes with appropriate safeguards in terms of the affirmative statutory instrument procedure and the requirement to consult first.
Touching briefly on greenwashing in particular, we acknowledge that existing regulators have powers to tackle that and that there are existing programmes of both education and enforcement. However, greenwashing claims are hugely prevalent and there is a lot of work to be done. It is an issue that, for us, has real risks associated with the net zero transition, because we are going to get consumers to make quite different choices around what they eat, what clothes they buy, how they heat their houses and what vehicles they drive. Some of those are quite big-ticket items in terms of cost, so there is a real risk for consumers and a real need for them to be able to trust the information they are given, which links back to the points my colleague Noyona was making about consumer confidence.
Seema Malhotra
Q
Tracey Reilly: Just a couple of quick points. There is a need to produce very clear guidance on the new plans and have very clear referral processes to the CMA for the use of those plans, so that advocacy and advice bodies have almost a direct line, if you like, into the points of contact. Essentially, it is about pathways and signposting, and ensuring that the routes from an individual consumer experiencing detriment to those who are able to take action on it are as quick and flexible as possible.
Noyona Chundur: From my perspective, I would ask for two things. The first is greater connectivity across the ecosystem. We all have a lot of data; we all have a lot of intelligence; we all have a lot of on-the-ground insights that should be shared and published in a more connected and co-ordinated way. Ultimately, that is more holistic, but it gives the level of granularity we need on a four nations basis. The other is greater focus on the broader issues of online behavioural bias and the exploitation of behavioural bias—you know, nudge techniques—to negative effect. To my mind, the Bill does not adequately cover that, so I believe this is an area of potential development.
As has been touched on already, vulnerability is not just about personal characteristics or social circumstances; the behaviour of organisations can cause harm and put you in a vulnerable position. That is a key area that we would love to see explored in more detail as the Bill passes through scrutiny.
Peter Eisenegger: In terms of support, having mentioned standards, there is a Government mechanism for providing the consumer arm of BSI with money to support its experts. Keep a careful eye on that, and work with BSI and its consumer arm to ensure that that is suitable for the level of really important issues we need to address.
There is another area of the consumer world, which is about the smaller, really voluntary charities, such as ourselves and the Child Accident Prevention Trust, which have no regular income and live hand to mouth. We have been on the brink of extinction every now and then, and although we have managed to haul ourselves back, it is a very precarious position. When we and others in a similar position contribute to this sort of arena or talk to regulators, our voice is valued and has something to offer, but we are very precarious. If Parliament looks at the people who really represent the grassroots and different perspectives and are without a regular income, and if something can be done, that would be extremely useful. Some of these voices drop out.
Vicky Ford
Q
Tracey Reilly: I think that is a very difficult question. Without remotely passing the buck, I think that ultimately it is a judgment for your Committee to take as to whether it considers there is sufficient clarity in the definitions proposed during the amending stages to allow for those decisions to be made now. If the Committee is confident that there is sufficient clarity, and the soundings you are receiving from stakeholders indicate that they are content, it is a matter for the Committee to decide. Ultimately, our position is that we want to see it as soon as possible, but we also want to see it done correctly, because as we all know it is very difficult to amend primary legislation once that is in place.
Vicky Ford
Q
Tracey Reilly: It is a very complicated area, not just in terms of how you define fake reviews but in terms of the precise powers that regulators need in order to determine where, how and when fake reviews are occurring. AI will make that an even more complicated picture, so it is important to get that right.
Jerome Mayhew
Q
“may hinder the provision of improved subscription offers that are in the best interest of the consumer”.
Can you comment on that? I will test the NMA if no one else does regarding what exactly it meant by that, and ask for examples of how it might hinder improved consumer engagement, but if the NMA can substantiate that, would you accept that it has a point?
Noyona Chundur: Perhaps, but I agree with what Citizens Advice said this morning: if your product is good enough and consumers want it, they will seek it out. Another point made this morning was that the consumer journey sits across multiple markets and is quite complex. That is where we are coming from. We are looking at the end-to-end consumer journey. In that context, consumers also want minimum standards. If you do not have minimum standards—if the default position is that you are just rolled on to another contract, and there is no opportunity to review whether that contract is the best for you, has the best price, is the best product or suits your particular circumstances—I am afraid that that does not necessarily give the consumer the best deal from a price or quality perspective.
Jerome Mayhew
Q
Noyona Chundur: Respectfully, I would say that most people will want the reassurance that the deal that they are getting every year is the best deal possible, is coming at the best price, is being delivered with the best service in mind and meets their needs, rather than the assumption that an algorithm or someone else has made that decision for them. Certainly the consumers we speak to want transparency, accessible communication and more choice. This is one way of giving them exactly what they want. I echo the sentiment of what was said this morning: if the product or service is good enough, people will sign up to it. It is nothing to fear, but it will raise standards and make for better competition and a more sustainable economy. Those are all good things, because they are being viewed through the prism of consumer accessibility and affordability.
Andy Carter
Q
Tracey Reilly: I probably had two or three examples in mind. One would be legal services, which are entirely devolved, so they are regulated entirely differently. Key parts of that market around complaints are regulated differently. Another would be one that we share in common with Northern Irish colleagues: the prevalence of off-grid heating systems. There may be ones where how you access services is simply different according to where you live; for example, there is the perennial issue of postal delivery in Scotland and Northern Ireland. Those were the types of thing that I had in mind.
We have regular and very constructive dialogue with the CMA about local issues, and about regional and sub-national issues. We hope that the Bill’s provisions will enable the CMA to deal flexibly and responsibly with those concerns. The framework that they operate, as with any body that has limited resources, makes prioritisation decisions on a UK-wide basis. We would like to ensure that regional and national differences, and differences for specific communities within the nations, can be dealt with as part of that. I think Noyona would probably welcome coming in on that point.
Andy Carter
Q
Noyona Chundur: Absolutely. A key regional difference, both for Tracey and for me, is the microbusiness economy. In Northern Ireland, 89% of our businesses employ 10 people or fewer. We are absolutely a microbusiness economy. We know that the experiences of many consumers and of many small businesses and microbusinesses mirror each other in multiple markets. Tracey’s point is about ensuring that the prioritisation principles, or the applications of how the Bill is operationalised on the ground, need to be mindful of the diverse experiences that can happen among the four nations.
Andy Carter
Q
Noyona Chundur: It is when you are pressurised into purchasing a product or service without even knowing that it is being served up to you because of an algorithm.
Andy Carter
Q
Noyona Chundur: It can happen in retail; it can happen in any digital market; it can happen in telecoms. It is a technique that is growing, and there needs to be further investigation and exploration of what that means for regulation. That is not just the job of the CMA; it will need sector regulators to play a part. It needs the whole ecosystem to coalesce, but also trading standards and trading standards in Northern Ireland.
Andy Carter
Q
Noyona Chundur: That is probably an algorithm. A nudge technique is perhaps a little bit more sinister than that: it is where you are being prompted to purchase products and services that you never thought you might need, based on your previous purchasing patterns and purchasing decisions. That may not come at the best cost or the best specification, and it certainly may not be the best offer to use.
Dean Russell
Q
Noyona Chundur: A communications campaign is fundamental. The language that is used, how the messaging is framed and how it is targeted to the various consumer groups will be key, as will consistency of messaging across the regions, not just from a UK perspective. It needs to be mindful of how consumers absorb information and who they engage with, as well as being mindful of communities. Consumers want clear, transparent information in plain English, so we need to make it simple for them. We need to be careful not to just push the onus on consumers to make decisions. The job of the Bill, and of Government, is to make lives better, so that is what we want to do.
Dean Russell
I will leave my second question, because I am conscious of time.
The Chair
Thank you.
That brings us to the end of the time allocated for this witness panel. On behalf of the Committee, thank you all very much for taking the time to give evidence.
Peter Eisenegger: Thank you for listening.
Examination of Witness
Professor Geoffrey Myers gave evidence.
The Chair
We will now hear oral evidence from Professor Geoffrey Myers, visiting professor in practice at the London School of Economics and Political Science. For the record, Professor, could you introduce yourself?
Professor Myers: In addition to my role at the London School of Economics, I had a prior 30-year career working for public authorities, competition authorities and regulators, particularly Ofcom, so I have hands-on experience of being a regulator. For full disclosure, I should say that I am one of the independent digital experts whom the CMA has appointed to assist it in preparing to take on the duties should this Bill become law. But I am representing my own point of view, not the CMA’s.
Alex Davies-Jones
Q
Professor Myers: I think on balance it will help improve innovation, and I largely agree with the comments made by the witnesses in the first session this afternoon, Professors Fletcher, Marsden and Furman. We need to think about innovation by big tech companies, which are the targets of the regulation here. They are likely to become the firms with strategic market status and to become regulated companies, but there is also innovation by their customers, by their competitors and by new starters.
On the innovation incentives and the ease of innovation, I think the playing field has been tilted a bit too far towards big tech and against the other set of players, so making it easier for that other set of players to innovate is very valuable. One of the tasks in implementing this regime, which I think is about the CMA doing its job well, is taking seriously potential concerns about deterring innovation from the SMS firms and making sure that the potential risks are minimised. I think that goes beyond what is on the face of the Bill and is really a task for implementation by the CMA.
Alex Davies-Jones
Q
Professor Myers: I think it strikes a sensible balance. As you have already heard, there are great advantages in having flexibility and future-proofing because of that flexibility. That implies a structure—a framework—that is laid out in this legislation, which will put quite a bit of onus on regulatory discretion to implement it, and then there are sets of regulatory capabilities and accountability that are needed to make that all work. But I think the Bill is a very good attempt at striking a good balance there.
Alex Davies-Jones
Q
Professor Myers: I think it does, because it heightens those points about flexibility and future-proofing. There is always a trade-off, so it is not that one system is uniquely better than another in every respect. The Digital Markets Act is more prescriptive and lays down specific dos and don’ts, whereas this approach—the UK approach, which I very much favour—does not. It sets the framework and objectives, and then it is for the CMA to develop specific regulations, both on conduct requirements and on pro-competitor interventions, in a way that is more tailored to the individual circumstances. I think that aspect is highly valuable.
Alex Davies-Jones
Q
Professor Myers: I do not think I have seen that full timeline to 2025, but I guess what I would say in that respect is that, yes, this legislation has taken a while to come to fruition. At one point the UK looked like it was going to legislate before the European Union, but the CMA has done a lot of preparatory work, and I am sure that it recognises that it needs to hit the ground running as soon as this legislation is passed. It is doing market studies and other work now. It is a well-resourced regulator in this area. The digital markets unit is up and running and doing active work, and obviously my digital expert role is trying to assist them in that work. There will undoubtedly be a time for implementation, but the CMA is well aware of the need to get on with it.
Kevin Hollinrake
Q
Professor Myers: I do not think it is that likely. It would be interesting to hear specific examples. As for the one that was commented on earlier, I did not quite see why this Bill would prevent that, as Professor Fletcher outlined. It may be that I have not heard the full set of reasons as to why it might prevent Amazon’s innovation in the very different area of retail outlets. The reason, which again goes back to the targeted and tailored approach in the UK, is that when the CMA designates specific digital activities where there is substantial entrenched market power and indeed a position of strategic significance, that is not going to include peripheral areas. It is going to be focused on what some people call the core areas of market power of the large tech companies, because that is where the market power concerns are largest. There is significant freedom outside that.
There are concerns about leveraging market power in the core markets into other markets, and it is appropriate for there to be an ability to address that through things like conduct requirements. However, you cannot introduce a new regulatory regime without some risk around how the incumbents—the regulated companies—are going to respond. Obviously you are looking for good responses, but it is almost impossible to avoid some undesirable effects. The way this Bill is set up, however, looks to minimise those adverse effects.
Kevin Hollinrake
Q
Professor Myers: Again, I think the Bill strikes quite a good balance with the judicial review approach. To bring in some practical experience from my days at Ofcom, I have had a role as an expert witness in quite a number of appeals of Ofcom decisions, in front of both the Competition Appeal Tribunal and the High Court. At the Competition Appeal Tribunal, those have been under different standards: there used to be a full-merits review, but recently that was changed to a judicial review.
I think what matters, as well as the legal standard of review as laid out in this legislation, is the nature of the appeal body. In this case, it is the Competition Appeal Tribunal. Compared with the High Court, these are specialists—both judges and lay members—with specialist knowledge and experience of dealing with both competition and regulatory cases. They have a greater appetite to get into the detail and merit issues, to the extent that that is compatible with the judicial review standard, than the High Court would. Having appeared in front of the Competition Appeal Tribunal under a judicial review standard, I can say, as I think Professor Fletcher did, that that is not a walk in the park for the regulator. You get a thorough testing, and what the Competition Appeal Tribunal is looking to identify is clear errors of either law or reasoning. I think that that is an appropriate way to strike a balance here.
Seema Malhotra
Q
Professor Myers: You heard some evidence earlier this afternoon about the relationship between jurisdictions in different countries. Clearly, the Digital Markets Act in the European Union is being implemented at the moment and the effects of that will come in. The longer the UK legislation takes, the more that will condition the context within which the CMA will have to operate in implementing this regime. That is probably the most likely thing. There are obviously some other countries that are looking into that, but that is probably the main issue I would point to.
Seema Malhotra
Q
Professor Myers: I do not think that that kind of timeline of 2025 means it is all a waste of time and we should not bother; I think it will still be important. It is not a complete all or nothing. There are some digital services where the platforms will want to standardise globally, but there are others where they will be interested in making national variations. I think the CMA can influence things using its competition powers. An example of that at the moment is the competition case it has had about Google’s Privacy Sandbox and the use of third-party cookies on Chrome. That is a Competition Act case where the commitments that Google has agreed with the CMA are actually influencing how it is operating Chrome globally, so there is still some scope for the UK to have a role even before this Bill comes in. Then when it does, obviously that will increase.
Seema Malhotra
Q
Professor Myers: Perhaps one of the few things I did not entirely agree with in the evidence room was when Professor Marsden talked about the participative approach which, again, is obviously not in the legislation, but is envisaged in how the CMA will operate. I do not think what you want out of that is a cosy relationship between the regulator and the SMS firms. You need to have a constructive relationship, but that is going to be adversarial. To expect it not to be adversarial to some extent is probably over-optimistic and, indeed, probably undesirable, but it is also very important for the CMA to build a wider set of relationships with the industry, consumers and smaller stakeholders, who are not so used to dealing with a regulator. It is important for the CMA as a regulator to have a good overview of a cross-section of all the views in the industry and not just be captured by the SMS firms, which they are inevitably talking to an awful lot.
The Chair
That brings us to the end of this session. On behalf of the Committee, I thank you, Professor, for taking the time to give evidence.
Professor Myers: Thank you very much.
Examination of Witness
Graham Wynn gave evidence.
The Chair
We will now hear oral evidence via Zoom from Graham Wynn, assistant director for consumer competition and regulatory affairs at the British Retail Consortium. Graham, will you introduce yourself for the record?
Graham Wynn: I am Graham Wynn. I am assistant director at the British Retail Consortium, dealing with consumer affairs mainly and a number of other issues for some years now—about 20, I think. Today, I am representing the views of members.
Seema Malhotra
Q
Graham Wynn: As far as the Bill is concerned, it is about 50:50. We would like the Committee to examine about 50% of the issues particularly carefully. Generally, we support the Bill—we think it does some useful things—but there are one or two matters of detail. On the other hand, we think that some omissions need to be looked at, whether in the Bill or elsewhere; they are necessary for the Bill to succeed.
We have some concerns about the enforcement landscape as a whole, the resources available to trading standards, and whether the Bill and its focus on the CMA will mean that trading standards go even more into the background. Members tell me they find that enforcement activity by trading standards has declined quite dramatically over the years. The other day, someone said to me, “Online, it is the wild west out there.” Although people try to comply with all the regulations, they find that many businesses—many of their rivals—do not do so, and that no one enforces anything. One of the issues retailers hope will be looked at is whether the whole regime, with the CMA’s new powers, will lead to better enforcement to create a level playing field for consumers and for businesses.
We are concerned about fake reviews. We support the banning of them. We wish that what the Government propose for them was on the face of the Bill. It is also important that people understand exactly what a review or a website should and should not include. They should include both negative and positive reviews, but it is very difficult to define what a fake review is and to ensure that whatever we come up with is enforced. The key theme is enforcement. It is no good giving people protections if they are not enforced.
The other thing is the CMA’s new approach to consumer issues and admin powers. We have a good relationship with the CMA. Members are more—let us say—acquiescent with the proposal to move towards an administrative-based regime. They accept that it has been debated over many years now, and that the Government are determined, so the key thing is to make it work. The real thing is to make sure that there is a good appeals system, independent of the CMA at the end of the day.
Another concern about what is missing from the Bill is the requirement for the CMA to accept primary authority advice. The CMA refuses to do that. When a business has been given primary authority advice—assured advice—that governs what other local authorities and trading standards do in the area, but that is not the CMA approach. We think that with its new powers, it is important for the CMA to accept primary authority advice, or indeed, to devise its own system by which it gives advice to businesses that is assured advice. It will do that in the competition area—on sustainability—but we think it would be very important in the consumer area as well.
There are other issues, of course. The review of the blacklist is another that I would pick out as one we are slightly concerned about. One of the dangers in all politics is a knee-jerk reaction to a political issue, and we think that one such danger is in adding to and subtracting from the blacklist in schedule 18 by statutory instrument, rather than right up front in primary legislation. We argued this in the EU when it first came out with the unfair commercial practices directive. We argued that successfully in relation to much retail and commerce across Europe. The point is that we want to make sure that anything that goes into or comes out of the blacklist is properly debated and analysed and so on, rather than going through virtually on the nod, which is likely even with affirmative resolution. Those are some of the things you might want to bring out, such as unit pricing, and you might want to ask about those.
Seema Malhotra
Q
Graham Wynn: Yes.
Seema Malhotra
Q
Graham Wynn: I think it is important that they co-operate and that there is a clear line of responsibility for each and a clear demarcation. The real problem with trading standards is not so much their powers but their lack of resources. One business with over 2,000 stores —not a supermarket—said the other day that the number of inspections and the number of times they see a trading standards officer has come down dramatically in the last few years. It makes it very difficult for those who are responsible for compliance in the business to persuade those who are responsible for, say, marketing and promotions to keep in line. The lack of trading standards activity makes that more difficult and also leads to a playing field that is not totally level. The problem is resources.
Kevin Hollinrake
Q
Graham Wynn: The view is, as I said, that we do not want to see what I call knee-jerk reactions to Daily Mail items that are politically sensitive or are political problems. The obvious answer is to say, “Let’s add it to schedule 18 as a banned practice.” It really is important that the schedule and what is in it is clear, clearly understood and that we do not add or subtract from it just on the basis of needing to get over a political problem, for example.
You can make sure that you do proper consultation and all that sort of thing, but we can understand why the Government would want to be able to add to it more quickly—obviously, primary legislation takes a while. In Europe, we certainly argued against Governments or the Commission being able to add to it willy-nilly. We were keen to keep it as something that had to be put in the directive originally. On balance, we would rather it was debated fully and that it amended legislation. Alternatively, you could decide to make changes once a year, say, rather than as you go along. That might be an alternative answer to the danger of a knee-jerk reaction.
Neil Coyle
Q
Graham Wynn: I should say that Amazon is a member of the BRC, so I preface my comments with that. Amazon does tell me that it is using AI and other means of ensuring there are not fake reviews, and that it takes as much responsibility as it can for product safety on its sites and for illegal products. Clearly others have a different view and think that it would be possible to go further and Amazon should be legally obliged to take more responsibility.
Again, throughout the Bill, the issue will be resources for enforcement, as it is in general. Be it fake reviews, subscription traps or the responsibilities of marketplaces and platforms, unless there is real, effective enforcement, people get the impression that something has been done without really having the rights that the Government say they have—when I say people, I mean consumers.
Kevin Hollinrake
Q
Graham Wynn: Yes. I think it needs to be done, but without committing us, we would expect it to be done in the context of a product safety review and how you are going to deal with product safety issues in the future. It needs a thorough examination, including the role of marketplaces, their general obligations and what is practical and proportionate. I would not add that to this Bill now, because it requires more of an assessment and consideration than would be possible.
Seema Malhotra
Q
Graham Wynn: ADR is not something that our members are exercised about in the same way as some other people are. Those who are responsible for selling high-value items tend to be members of ADR schemes. Their criticism of the current arrangement has been that they are not convinced that there is a full assessment of the ADR providers, so everything that is necessary to give them the confidence to use the systems. They believe that that perhaps has held back ADR schemes from really taking off in some places.
Those who sell high-value items—kitchens, some white goods and furniture items—generally are members of ADR schemes. Those who sell groceries, as they are generally called these days, including food and non-food, tend to feel that it is not really appropriate for them because of the cost. When dealing with something worth only a few pounds, it is much cheaper and much more sensible to just deal with the consumer and, ideally, give them their money back if there is a problem, rather than take everyone through ADR. It is not necessarily the best approach. However, the accreditation system and making sure that companies abide by what they are supposed to do in ADR is vital to have confidence in general.
The Chair
I am afraid that brings us to the end of this witness session. Thank you very much for your evidence.
Examination of Witness
Max von Thun gave evidence.
The Chair
We will hear now from Max von Thun, Europe director of Open Markets. Max, would you introduce yourself for the record?
Max von Thun: Thank you for the opportunity to give evidence on this important piece of legislation. I am Max von Thun, the Europe director at the Open Markets Institute, which is a competition policy think- tank. We focus on the risks that arise from corporate concentration, and advocate for policies to tackle that. Prior to working at the Open Markets Institute, I spent several years in the private sector advising on competition and tech policy, and also here in Parliament advising MPs on economic policy. I have been following the UK digital competition debate for quite some time now.
Alex Davies-Jones
Q
Max von Thun: That is very important. We think the legislation as it currently stands is very strong. It very much represents the approach that has been recommended initially by the Furman review and then by the Digital Markets Taskforce, and will go a long way towards promoting competition in digital markets. There are a couple of areas where we have seen some campaigning—particularly from some of the larger platforms—including on the review standard, which a lot of people have talked about today.
There are a couple of other areas of the legislation that, although not necessarily designed to be loopholes, could have that effect. Other speakers have talked about the countervailing benefits exemption. You might want to see some changes to prevent that from being abused or from stymieing the enforcement of the new system. Similarly, I point to the five-year criteria that the CMA will need to use to establish whether a platform has entrenched market power. Although it makes sense to base market power not just on a platform’s dominance in any one year, at the same time making it forward-looking with such a long timeframe will give platforms opportunities to put forward arguments as to why they should not be designated as SMS. For example, they might point to new technologies like generative AI and say, “We look dominant now, but there’s all this disruption coming down the future, so you shouldn’t designate us.” That is another area you will want to make sure is fit for purpose. Overall, it is a strong Bill and the priority should be getting it through as quickly as possible.
Alex Davies-Jones
Q
Max von Thun: Sure. I mainly refer to some examples given by previous witnesses. I am thinking, for example, about issues we have seen with data in the digital economy, where dominant platforms such as marketplaces collect data on the sellers using their platforms and use that to compete against them or produce products that compete against them. The flipside of the coin is restricting data—sometimes generated by the users of the platform —by not allowing those users to use it to improve their business operations. Self-preferencing is another problem. That can be everything from a large dominant firm pre-installing its own app on its operating system and making it hard for competing providers to get their app on to the system. You see interoperability restrictions—for example, where it can be hard for a third party or a competing platform to have access to the fundamental software or hardware it needs to produce a good product.
With those sorts of practices, which we have seen over the past decade or so, there have been lots of competition investigations, particularly in Brussels, to try to solve them, but we have not really seen much success or the introduction of much competition in the market. With the conduct requirements and especially the pro-competition interventions, hopefully the Bill will be able to address that and help smaller players to really compete in the market.
Vicky Ford
Q
Max von Thun: Obviously if someone has produced a particular product or service that you can buy in a game, they should be entitled to profit from it. The main issue that we have seen with purchases from app stores, which are increasingly what people use to access these games through their phone, is that a small number of companies—basically Apple and Google—are using their control of the app stores to take a very big cut. They take up to 30%, which is not what you would be seeing in a competitive market. Sure, it is fair that they get a share of the proceeds, because they are putting in the time to maintain these app stores, but 30% seems quite steep.
Another issue is that it is hard for alternative payment providers to offer their services on these systems, because you will be forced to use Apple or Google’s payment solution, for example. That also makes it easier to charge high commission rates. I think it is about allowing the large platforms to play their role, but making sure that they are not using that power to exclude people.
Vicky Ford
Q
Max von Thun: I would say yes.
Vicky Ford
Interesting.
Max von Thun: But you do have games where one company will provide the fundamental game—the world that you play in—but allow third parties to interact with it and sell you an outfit to wear in the game, a weapon or something like that. That kind of interoperability is very feasible, and you can have different companies co-existing.
Vicky Ford
Thank you—and sorry, colleagues, for the family discussions.
Max von Thun: I am not a huge gamer, but that is my take.
Andy Carter
Q
Max von Thun: Overall, I think it would be very positive for those types of firm. As others have said, this Bill is very targeted: the actual regulatory obligations apply to only a very small handful of dominant firms. It is not legislation like the Online Safety Bill or privacy regulation, where you are creating a compliance burden for the whole tech sector; it is very targeted at dominant firms.
As I mentioned earlier, if you look at what the Bill is trying to do, it is very pro-innovation. It is really about introducing contestability into the market. The combination of the conduct requirements, which are more about stamping out some of the problematic anti-competitive practices that we have seen over a long period, and the PCIs, which we think are a more significant tool because they allow you to inject competition into the market through interoperability and opening up data, will be very good for start-ups. I think it will give them more confidence to launch businesses that directly take on the dominant tech platforms.
At the moment, if you are a smaller firm, your strategy will often be to grow to a certain point and then get bought up. That is how firms design their business model, and investors will often look at it that way, but if through legislation you change the picture, you will change the incentives and create more opportunities for companies in the UK to scale up to a global level.
Andy Carter
Q
Max von Thun: Yes, to an extent. The merger requirements for SMS firms are really just about reporting. They require SMS firms to let the CMA know if they are acquiring companies that meet certain thresholds. That will allow the CMA to avoid things slipping under its radar. Another part of the Bill is about what is called an acquirer-focused threshold, which is basically designed to prevent what have often been called killer acquisitions from taking place. Those are acquisitions that do not meet the UK’s merger control thresholds when it comes to turnover or market share, because they are very small start-ups that do not generate much revenue but that often produce very innovative technology.
The tech giants buy them up either to prevent eventual rivals from emerging or to use that technology to extend their dominance into new markets. The Bill will prevent some of that. That means, to an extent, that in some cases involving very large platforms it will be harder to be bought up if you are a start-up. It is important to acknowledge that to an individual founder being bought up by a big tech firm can often be attractive. Big tech firms can pay a lot of money to acquire you. They can offer all sorts of technical and logistical expertise to help you to grow, but if we look at the wider ecosystem, those deals can be very harmful, essentially by eliminating competition.
Think of what Instagram might have become had it not been bought up by Facebook. Rather than just being part of Meta’s business model, it could be challenging Facebook. To take a more local example, DeepMind, a leading AI company, was bought by Google in 2014. Had it not been, it would be an independent AI company. That would have put the UK at the forefront of a lot of the development in general AI. Obviously, the UK is already doing well in AI, but now DeepMind is part of Google’s empire and subordinate to Google’s business objectives. Those are some of the reasons we should care about this.
Also, if you make it a little harder for these companies to buy up start-ups, the market will respond. The UK already has a lot of alternatives. It has a very healthy venture capital scene—I think the best in Europe. If it is harder for big tech purchases to take place, investors will partly fill that space. I am sure that there are things that the Government can do as well to incentivise private investment—maybe investing themselves in some cases, as they did with the Future Fund, and so on. There are a lot of other routes that, in the long run, are better for the tech sector than these types of deals.
Kevin Hollinrake
Q
Max von Thun: Honestly, not really. If I look at what is in the legislation, focusing on the conduct requirements and the PCIs that the large firms will have to comply with, what I see is something that says, “You’re allowed to operate in the UK. You’re allowed to grow in the UK. You’re allowed to invest. You just have to play by the rules. You can’t use your dominance to unfairly exploit small businesses or prevent rivals from emerging.” It does not stop them investing lots of money in R&D or hiring top talent. We are seeing all the innovation that they are doing now, and I do not see anything in the Bill that will stop that.
More broadly, there is quite a lot of evidence, not just in tech but in other sectors, that more competitive and less concentrated markets are better for innovation because challengers invest a lot of money in trying to take on the incumbents because they believe that they can replace them. The dominant firms have to defend themselves, and they invest more to protect themselves. The Bill will have that effect.
Lastly, particularly since the whole debate around Microsoft and Activision, we have seen to an extent an attempt to conflate the interests of a small subset of dominant firms with the wider tech sector. That is often a mistake. What is good for a large majority of tech start-ups may not necessarily be good for big tech firms. It may be, but it is important to separate out the two.
The Chair
Are there any further questions? In that case, on behalf of the Committee, thank you very much for coming to give evidence.
Examination of Witnesses
John Herriman and David MacKenzie gave evidence.
The Chair
Thank you all very much. We will move on to our next session to hear from John Herriman, chief executive, and David MacKenzie, lead officer, from the Chartered Trading Standards Institute. Could you introduce yourselves for the record?
John Herriman: I am John Herriman, chief executive of the Chartered Trading Standards Institute.
David MacKenzie: I am David MacKenzie. My day job is with the Highland Council on trading standards, in the sunny north of Scotland. I also have a role with the CTSI across the UK for free commerce and related issues.
Seema Malhotra
Q
John Herriman: Obviously, as you have heard, we have been very publicly supportive of the Bill. The key point, which I know others have made, is that in the online marketplace and the landscape, it feels like a bit of a wild west out there—I know that term was used this morning—and there has been a lack of protection for consumers and clarity for businesses. We have also seen that dramatic change in business and consumer behaviours, particularly during the pandemic, which is good for consumers, businesses and the economy. Trading standards absolutely sees that first hand. Trading standards plays a very unique role in this discussion; we are at that interface between the business and the consumer, so the lens through which we look at this is consumer confidence. Essentially, that is what we are really taking a perspective on.
We very much welcome the Bill and the new powers, particularly for the scope of the CMA, which we work with closely. We think it provides clearer legislation and changes to CPRs. We think it will enable quicker and stronger action, and we think it is very supportive of competition and innovation but, as you have alluded to, we do think there are some opportunities in the Bill where it could go further and where it would not impact on competition and innovation, and also where it would be more supportive of consumer confidence. We are happy to talk in more detail about those.
It is probably best to explain that we are both here because I can take that very strategic view and answer questions about that. David is our lead officer for the online marketplaces, so when we get into more of the technical detail he will be able to answer some of those questions. Essentially, in those areas around drip pricing, fake reviews, subscription traps and greenwashing, we think there are opportunities to go further or for some further discussion.
We also think the Bill addresses the national issues around the CMA’s powers, but we do not think it is sufficiently robust in some areas to enable trading standards which, in the context of this conversation, does the place-based and local regulatory enforcement and support for local businesses and enterprise. That national system does not work effectively if you do not have the local system working effectively alongside it, because they are mutually supportive of each other as part of that same system.
Seema Malhotra
Q
John Herriman: It is a combination of both. David will be best placed to comment on the powers. Essentially, there are some issues there that we would like to consider, but it is also a factor of capacity. If I just focus on that, David can answer the second part of the question. From a capacity point of view, trading standards over the last 10 years or so—I think the National Audit Office reported back in 2021; it has also just done a very recent report—has been hit by about 50%. Relative to other regulatory services and local governments, regulatory services—according to the latest National Audit Office report—have been hit by about 25% cuts.
Trading standards has been hit exponentially harder than some of those other services. If we do not have enough capacity, we cannot do the enforcement activity. If we cannot do the enforcement activity, we cannot ensure that there is a level playing field for businesses. There is a definite capacity issue there. This Bill will make the legislation more robust, but we also need the capacity alongside that to make that system work effectively, because regulatory systems do not work effectively unless you have the right levels of enforcement capacity. David, do you want to answer the other part of that question?
David MacKenzie: We really welcome the strengthening of civil enforcement in the Bill. It introduces a range of potential punitive sanctions that can be imposed on businesses. That potentially strengthens our position, and we really welcome that.
At the same time, as John says, that is really dependent on our guys up and down the country being able to utilise that through civil enforcement, which is still a relatively newish thing for us. Our officers are very well versed, over many decades, in criminal law investigations and going for prosecutions. The civil law is relatively newer. Along with these new powers, there needs to be a bit of a campaign across the whole UK to ensure that local authorities have the skills and necessary legal backing to take these cases. I have certainly discussed that with the Department and will continue to do so.
Those are the good things in the Bill—giving us more powers and more sanctions. Our disappointment is what is not included: officers’ powers. The way that I like to characterise it is that the existing powers are very good, but are they very good for a world that is changing all the time? They are essentially based on one of our officers being on physical premises, doing the work.
The powers are all really good: powers of entry, of inspection, to test, to get documents, and all that kind of stuff. But we increasingly find that, when it comes to the documents side of things, if somebody still has a filing cabinet with bits of paper in it, that is fine—we can get that and use it as part of our investigation—but, as we would all expect nowadays, even small business do not operate in that way anymore. The information will be in the cloud; it will be somewhere else that is not necessarily accessible from those premises.
Seema Malhotra
Q
David MacKenzie: The current powers do not give us direct access to that—they just don’t. The Bill addresses that to a degree in that, in terms of entry under a warrant, as long as the files are accessible—again, from that physical premises—there is an extra power there. We welcome that. That is good progress. But it is important to realise that the vast majority of our investigations are done not under warrant, but using normal powers of entry, so the vast majority of situations are not covered by the change.
Even when the power is exercised through warrant, and we are able to use the new provision, that is only when the files are accessible from that premises, but we are increasingly finding that the local branch manager just does not have access to that information. I suppose that we are calling for a general power to access that information, in the same way as if it happened to physically be on those premises, and to be able to use it in all cases, including criminal prosecutions.
The other point that goes along with that is about online enforcement and takedown powers. I think it would really surprise the public if we told them that we do not have any formal powers of takedown at all for any online content. The only way we can do that is through ways and means—trying to get platforms to do the right thing and all that kind of stuff. It is long past time that we got a formal takedown power.
Seema Malhotra
Q
David MacKenzie: Absolutely, yes. It could be a whole website, an account on a website or just a narrow bit of content. The Bill contains the concept of online interface orders that the CMA can apply to the court for, and we think that that should be applied to other regulators—particularly trading standards, from my point of view, but to other regulators as well. I think that if we are to be taken seriously in—
Seema Malhotra
Q
David MacKenzie: Absolutely. A lot of the stuff in the Bill that replaces the consumer protection regulations is really good, and we really welcome it. There is still some stuff around the definition of “trader” that we think is a little bit of a missed opportunity.
There are two angles. When does a consumer become a trader? How many things do you have to sell in an online marketplace before you become a trader? That is a difficult judgment for us to make and we feel that some work should be done on that. The point you have made is equally important: the status of the seller in an online marketplace. We think there should be a requirement for the online marketplace to declare whether the seller is a consumer or a business because that makes a massive difference to the consumer rights of the buyer and it also makes a difference to what we do.
If someone is a business seller, they have to comply with all consumer law; if they are a private seller, they do not really have to comply with anything, so this is for both consumers and for us. To be fair to other businesses that operate on the site, we think this is a necessary change that is not in the Bill.
Kevin Hollinrake
Q
John Herriman: That was another point that we wanted to make. This is not the only legislation that impacts on the landscape: the product safety review is fundamentally important in this space. The key point there is being clear on where those boundaries are.
We will be contributing to the product safety review. It is fundamentally important that it should come out quickly, so that we can address it and respond to the consultation. We can then look at that in the context of this Bill and others that it might impact on as well. We think that some things would be best placed in the product safety review—anything to do with legislation there—and would not appear here. But it is important that those provisions work hand in hand over a similar period, so that we can make sure that there are not any gaps. Consumers will then be better protected and businesses will have the clarity that they need, which is really important for them.
David MacKenzie: I agree with everything John said, but if we leave all these issues to the product safety review, presumably that would apply only to unsafe products. There is a wider range of situations for which we need these take-down powers when it comes to fair trading—scams and so on.
Kevin Hollinrake
Q
David MacKenzie: No.
The Chair
If there are no other brief questions, I bring this session to a close. I thank the panel on behalf of the Committee. This is perfectly timed as there will be votes shortly and we will be away for quite a long time. Thank you very much. We have spared you having to wait an hour or so.
Examination of Witnesses
Owen Meredith, Peter Wright and Dan Conway gave evidence.
The Chair
Q
Owen Meredith: Hi. I am Owen Meredith, chief executive of the News Media Association. We represent companies across local, regional and national news media in about 900 brands across the UK.
Peter Wright: I am Peter Wright. I am editor emeritus of DMG Media. We are a major British and international news publisher.
Dan Conway: Hello, everyone. I am Dan Conway. I am chief executive of the Publishers Association. We represent publishers of books, journals and educational materials of all shapes and sizes in the UK.
Alex Davies-Jones
Q
Owen Meredith: First, it is important to welcome the Bill. As many people around the room know, alongside many other organisations across the economy we have been pushing for this Bill for some time, so it is pleasing to see it. It is in very good shape, albeit we will want some parliamentary scrutiny no doubt and the opportunity to tighten up some of the policy intent to ensure that it is fully reflected in the language on the face of the Bill.
Clearly, the imbalance of power that exists between news publishers and platforms is self-evident. It has been documented extensively from the Cairncross and Furman reviews through to various CMA reviews. At the moment, a handful of tech platforms are an essential gateway and a key discovery route for consumers to find news online. As consumers increasingly shift their consumption of news online, rather than from print—in the local market, north of 70%, and in the national market, north of 80% of consumers read news online—that is not fairly renumerated and rewarded back to the original investors and content creators of that journalism.
For society, we all understand the importance of that journalism, particularly in the online world combating mis and disinformation, but we just do not have a balance of power between those two players. On the one side, we have in particular smaller, local, independent news publishers, even up to large multinationals, but on the other, we do not have access to the right information or data about how our news is being surfaced and used on the platforms, including search and across social. We do not have an asymmetry of information to be able to negotiate fairly, so it is a take-it-or-leave-it approach by the tech platforms to how our content is used by them.
Peter Wright: You asked where the Bill possibly does not do the job. I would agree with Owen: it is a very good Bill and long overdue. I was on the Cairncross review five years ago, and it is great to see some of the things we were talking about bearing fruit.
One area you might want to look at is the final offer mechanism; there is a helpful table on page 38 of the explanatory notes. You can see it is a 13-stage process, and I think what to us might be the most important bit is information sharing, which comes at stage 8. If that process can be speeded up in any way, that would be immensely helpful.
The other thing that I would like to flag up and the thing that concerns most of us in the industry most of all is that you are likely to face concerted lobbying from the online platforms over the review process. From our point of view, that will not truthfully be about the justice of decisions made by the CMA; it is a delaying tactic. We hear that the platforms and the big City law firms will get together and to ask for a merits-based process, which would mean that every decision by the DMU is subject to appeals that are likely to involve weeks in court, with months or even years before decisions are taken.
If that happens, the whole purpose of the Bill—this whole structure, which we believe to be very good, and a great deal of work has gone into it; it is legislation that is likely to be copied around the world—will simply be nullified. It is vital that we stick with the judicial review process that is in the Bill.
Alex Davies-Jones
Q
Peter Wright: The crossover between the two Bills is not that great. The real risk regarding fake news is that the most expensive news to produce is the high-quality public interest journalism that I am sure everybody in this room wants to encourage. If you cannot fund it, and at the moment it is a great struggle to fund it, the space will be taken by people who are not proper journalists and are not working for responsible news organisations with complaints procedures and people you can sue if you get it wrong.
The really serious danger is that because the online platforms have over the last 20 years sucked billions of pounds out of the news production in this country, the internet will be filled with conspiracy theorists and people producing cheap, easy-to-manufacture news, largely copied from other outlets.
Kevin Hollinrake
Q
Owen Meredith: We broadly support the Government’s policy and intent as I understand it in terms of helping consumers to manage subscriptions, particularly subscriptions that they are not aware they are in or for services they are not using. My concern and our organisational concern is that currently it is set out in the Bill too prescriptively, and there is a real danger that you end up in a situation where consumers are being bombarded by subscription notices and they become blind to them.
I would put the analogy out there of the cookie banner, which I think they are hoping to get rid of through different legislation before the House at the moment. There is a danger that consumers are just blinded by the amount of information they are being presented with as stand-alone notices, with the frequency and nature in which they have been spelt out in legislation. While I do not fundamentally disagree with the Government’s policy intent, I do not think how it has been crafted in the Bill at the moment necessarily achieves that in the way we would need it to.
Kevin Hollinrake
Q
Owen Meredith: It would not make it more difficult for people to exit contracts; it would ensure that consumers still have access—
Kevin Hollinrake
The cooling off period was—
Owen Meredith: It would ensure that consumers still have access to the offers that would be available to them in the current system of processing. If you subscribe to a service that you are using and you wish to terminate it, there are multiple ways you can do that, either via online touchpoints for most of our subscribed services at the moment or via a call centre. If a call centre phoned you and said, “You’ve been using this service for 12 months. We can identify through data that you have been reading the content. Can we ask you what the reason for cancelling is and if we can retain you as a customer with the right promotion?”, I think that would be in the consumer’s interest.
Kevin Hollinrake
Q
Owen Meredith: The removal of the cooling off period for us is a concern around how that technically applies and whether consumers have had benefit that they are then seeking to be refunded for, despite having engaged with and received the benefit.
Dean Russell
Q
Peter Wright: They will benefit through the quality of the journalism they are offered. Every news organisation —we are no exception; we went through a period of redundancies earlier this year—is having to trim their editorial budgets, because you cannot make sufficient revenue in the present digital advertising market to support the scale of editorial resource that you would really like.
Commercial news publishers have seen revenues falling, despite inflation, over the last two decades. At some point, we need to have a mechanism that gives us—this particularly applies to smaller and regional publishers—a level playing field and levers we can pull to bargain with these vast companies. I have colleagues who work at not inconsiderable regional publishing companies, who do not even have a telephone number they can ring at Google, so they just have to accept whatever terms Google offers. We are slightly more fortunate in that we can ring Google, but we do not necessarily get an answer.
Dean Russell
Q
Peter Wright: Absolutely. I once worked as a local paper journalist in Watford. Tristan Garel-Jones was the MP then; he used to pop into our office once a week. He was very assiduous—I would recommend it! I do see this legislation benefiting them. It is more important to them than to anybody else.
The Chair
I will bring in Andy Carter to ask a brief question. I would like us to be able to wrap up soon to avoid detaining our witnesses for up to an hour. If everybody is agreed and there are no further questions other than Andy Carter’s, I will call him to ask his question.
Andy Carter
It is a question to Dan. I am very conscious that you have sat here and not had an opportunity to say anything. Could you give us a broad overview of how the Bill might affect the publishing sector?
Dan Conway: Thank you for the question. I will keep it brief, as I am conscious of everybody’s time. I am primarily here to talk about the role of Amazon in our area of publishing. Amazon has done great things to expand digital markets in books, has great partnerships with UK publishers and has got books into the hands of readers all over the world—and that is a great thing. But we firmly believe that we are now at a tipping point in terms of regulation with Amazon, as they have such entrenched market power in the book market that we need modern proportionate regulation to make sure that that entrenched market power does not lead to anti-competitive outcomes.
By our best estimates, Amazons sell over 50% of the print books in the UK market and about 90% of the e-books and audiobooks. That is monopoly power in selling print books and monopsony power as the sole buyer in retail books. It makes them a gateway company for my members; they are an unavoidable trading partner for any UK publishing company in the UK market, and we strongly support the Bill because we think it will help.
We think Amazon should be assigned strategic market status with the code of conduct that goes alongside it. We particularly support clause 20(2)(a) on trading on “fair and reasonable terms”. It is our view that currently, because of Amazon’s role in the market, publishers are not often able to trade on fair and reasonable terms. We heard from other witnesses about “take it or leave it” terms; effectively, if you are a small publishing business in the UK market, if you enter into a negotiation with Amazon, you are offered “take it or leave it” terms and you cannot negotiate with a retailer of that size.
Andy Carter
Q
Dan Conway: Yes, absolutely. As a trade association, we have to be one stage removed from that for obvious legal reasons, but our members have fed back to us on areas of concern, and we hear that Amazon is removing buy buttons, labelling products as out of stock, delisting products and refusing to stock products without reasonable cause—and all that is in the middle of a commercial negotiation. You have a major retailer that is able to use its size effectively to distort upstream competition through those kinds of tactics. I can absolutely look and see what we can write to you about that.
The Chair
Unless there is anything else, I will bring this session to a close. On behalf of the Committee, I am grateful to you all for the rapid responses you have provided. Thank you very much.
Ordered, That further consideration be now adjourned. —(Mike Wood.)
Westminster Hall
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Cancer Medicines: Appraisals
(11 months ago)
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Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
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Jim Shannon (Strangford) (DUP)
I beg to move,
That this House has considered the matter of appraisals for cancer medicines.
It is a real pleasure to serve under your chairship, Mrs Harris, and I am always pleased to see you in the Chair, as you know. I am always greatly impressed by your commitment to these issues, and I have been pleased to support you in a small way, although always fully. I thank you for being here.
I thank Members for coming along to participate in this important debate. I am pleased to see the shadow Minister, the hon. Member for Denton and Reddish (Andrew Gwynne), in his place, and the SNP spokesperson, the hon. Member for Midlothian (Owen Thompson). I do not think there is a debate when the Labour spokesperson and I are not together, and we are, more often than not, saying the same thing. I am also incredibly pleased to see the Minister in his place, and it is no secret that he listens and responds to the questions we ask. I think he will find today that there is a united front pushing for the same things. Hopefully, we are pushing at an open door and he can respond in a positive fashion.
It is great that Members have the time to be here to support this matter. The UK’s health technology appraisal process must evolve if it is to keep pace with innovations in cancer treatment and improve outcomes. That is important because, across this great United Kingdom of Great Britain and Northern Ireland, one in every two people—half the people we meet out on the street—will be struck by cancer. My father had cancer on three occasions. He was a Christian and he survived all three times due to the prayers of God’s people, the skill of the surgeon and, ultimately, the care and love of the nurses and the family who supported him.
There are many global healthcare challenges, and the UK must emerge as a leading force. That is why this debate, which is specifically about appraisals for cancer medicines, is so important. It is essential that the Government, the NHS and the National Institute for Health and Care Excellence evolve their processes to address emerging access challenges—and there are challenges. We must have a process that moves quicker, focuses attention and delivers in the necessary timescale.
In July 2022, cancer waiting lists stood at over 320,000 across the UK, which is breathtaking. In addition, there are wider challenges with patients getting treatment in Northern Ireland. As you and others will know, Mrs Harris, I always try to give a Northern Ireland perspective. I am ever mindful that this is not the Minister’s responsibility, but what is happening in Northern Ireland encapsulates what is happening in the UK, Scotland and Wales. Waiting times for cancer treatment in Northern Ireland are the worst on record. Just a third of urgent suspected cancer referrals from GPs—only 35.6%—began receiving treatment within the 62-day target in the final quarter of last year. We have a big challenge, there is a lot to do and there is clearly a lot more for Northern Ireland to do. It is incredibly concerning that we have deteriorated further since those figures from 2021-22. Back home we have a crisis; a catastrophe is perhaps waiting to happen. It is unacceptable that almost 64% are waiting too long to start cancer treatment.
We in Northern Ireland have a cancer strategy that echoes the asks of many cancer charities across NI, including Cancer Focus Northern Ireland and Cancer Research Northern Ireland. I want to put on record my thanks to those cancer charities, which do fantastic work and are very good at contacting us—I do not think there is an MP here who does not have regular correspondence with them. The information they formulated and sent to myself and others before the debate was really helpful.
The cancer strategy was agreed in March 2022 but, over a year later, given stringent funding cuts from central Government, we simply have not had the finances to fully implement it. It still has the potential to play a crucial role in the transformation agenda of the health and social care service, and I believe that it will prove to be an exemplar of true healthcare for cancer sufferers, but we look to our Ministers back home and here in Westminster to ensure that we have the funds to make that happen.
Throughout the United Kingdom of Great Britain and Northern Ireland, cancer survival rates have risen thanks to improvements in planning, but levels of diagnosis and treatment lag significantly behind those in other countries for some cancer types, especially our five-year net survival rates.
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
I congratulate the hon. Member on securing the debate. He mentioned the significance of diagnosis. Medical radioisotopes are highly significant for the diagnosis and treatment of dangerous cancer cells, and it is important to secure a domestic supply of them, in terms of both security of supply and cost. I am told there is a shortage of supply in the offing in the United Kingdom, but there is a chance to secure a generating reactor at Trawsfynydd in north Wales, known as Project ARTHUR. I am sure the hon. Member agrees that it would be a positive step for cancer care in the UK if the UK and the Welsh Government were able to make progress together on delivering that project.
Jim Shannon
As so often in Westminster Hall and in the main Chamber, the right hon. Lady makes a positive suggestion, and it is one I know you would also support, Mrs Harris. We think it should be the Government’s intention to make every effort to deliver that project in Wales alongside the Welsh Assembly, because it will help us all in the United Kingdom. I always enjoy these debates because they bring us all together, focused on the issue and not the politics of it. If we can make life better for all of us in the United Kingdom through that project in Wales, let us do it. I do not know whether the Minister has had time to prepare, but hopefully his civil servants will give him some indication on that, and then we can look forward with a positive suggestion out of this debate. I thank the right hon. Lady for her intervention; it was very helpful.
Our poor international standing and lack of supportive frameworks mean that, in some cases, certain innovative cancer medicines are not submitted for UK regulatory approval or to NICE, further impacting access for UK patients. Resolving challenges in the appraisal process for licensed medicines will provide important benefits. First and foremost, there will be benefits to our constituents and patients, including, importantly, access to a wider range of treatment options and the potential for improved outcomes for those needing treatment.
Secondly, there will be benefits to the NHS, which will be able to deliver more efficient care and have permission to access a full range of licensed medicines. Thirdly, there will be benefits to the UK—this great nation—because resolving these challenges will improve its attractiveness as a destination for clinical research by incentivising research and development to focus on new and more challenging patient populations. How the Government respond to what the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) asked for is an indication of how we will move forward and lead the way.
One issue is that NICE guidance is not automatically applicable in Northern Ireland, although the Department of Health there does tend to adopt NICE guidelines and approaches. As such, the patient access challenges outlined will likely have the same impact on Northern Irish cancer patients as they will on cancer patients in England and Wales. To be a successful, leading force in cancer medicines and treatments, we must be united, not divided, in how we tackle these issues. I have always been an avid believer in the idea that no nation in this United Kingdom should be left behind, and I know the Minister has always been committed to that; whatever the subject of a debate, he encapsulates my thoughts on how important it is to work together.
There will be challenges for medicines in the cancer drugs fund. Following the update of NICE’s methods and processes, medicines currently in the cancer drugs fund will be measured against different criteria to those used when those medicines entered it. That could mean that, for some medicines, the likelihood of recommending routine NHS access is significantly reduced, so we need some reassurance on that.
The cancer drugs fund is a source of interim funding for cancer drugs in England. It provides access to promising cancer medicines via managed access arrangements. The Northern Ireland Department of Health confirmed in 2018 that medicines approved by NICE for use through the cancer drugs fund will be equally accessible in Northern Ireland through a separate budget pot, which I urge the Minister to defend against any future budget cuts. I know that is not the Government’s intention, but it would be nice to have that reassurance today so that we can report it to everyone involved back home.
Given that medicines are to be reappraised under the NICE guidelines, they will not be appraised against the same criteria. I have ascertained that NICE is not presently considering any flexibility for medicines in that situation. For certain medicines, that will mean that the likelihood of recommending routine NHS access will be further reduced, and probably one of the major asks in this debate is to ensure that that does not happen.
The Government confirmed that 43% of medicines currently in a period of managed access through the CDF include the end-of-life modifier. Issues remain around who can access what medicines. New patients will not be given access to cancer drugs fund-approved drugs if they are not originally taking the drug at the first NICE regulation. Sometimes there needs to be flexibility in how drugs are allocated. It is not just a black and white tick-box exercise—it never is. We need to focus on the circumstances of the individual, the patient and our constituents—I know from his responses to questions that the Minister understands that, and we seek reassurance that that would be the case. The issues I have outlined mean that new cancer patients have no access to old drugs, so future eligible patients will lose out on options in their treatment plan. We seek reassurance that, when it comes to their treatment plan, eligible patients are given options to ensure that they are not debarred by some paper exercise—if I can use that phrase, with great respect.
NICE must act to address the impact that updates to its methods and processes will have on medicines currently in the CDF, especially in Northern Ireland, where these methods are usually followed to the rule. Ensuring that medicines in the CDF can be assessed against the same criteria under which they were initially recommended for use in the NHS will increase confidence for cancer sufferers that the medicines to which they so desperately need access are available. If the Minister has one positive reply for us today, that is the one we would ask for, because we know that it would bring relief to many people right away.
There will always be issues surrounding cost and the cost-effectiveness of financing a drug. The 2019 voluntary scheme for branded medicines pricing and access is an agreement between industry and Government that aims to meet the need to keep the NHS medicines bill affordable. I know there is a need to do that, but there is also a need to make the medication and drugs available, with the ambition to grow the life sciences sector as well, which we must do and have done before. The partnership between Government, pharmaceutical companies and universities is one that I recognise from Queen’s University Belfast and Ulster University in Northern Ireland. Those two universities have great relationships and partnerships with pharmaceutical companies that are to the fore of finding new cures for disease.
The scheme operates through rebate mechanisms, where companies pay a percentage of their net sales back to the Government. Historically, the rates in the voluntary scheme have averaged well below 10% of revenues, but as of 2023 they are 26.5%—wow! That rapid rise was driven by several factors, including the post-pandemic demands on the NHS and the fact that the UK is now widely out of line with comparator countries. Not only does the current level of repayment risk costing the UK economy far more than it saves, but it has an incredible impact on patients’ access to medicines. Again, we need some reassurance from the Minister on that.
For the UK to continue to be an attractive destination for clinical development, which brings benefits to all areas of the United Kingdom of Great Britain and Northern Ireland, a solution to the cost challenge must be found. In presenting the facts of the case and the evidential base, all of us present are very much solution-based, and our questions to the Minister will be about finding solutions.
Further combination therapies have been instrumental in combining medicines to attack different types of cancer and cancerous cells. There are still multiple unresolved issues around the value assessment, which I will briefly list, and I thank Sanofi for making me aware of this information before the debate—indeed, some organisations have been incredibly helpful in giving us a train of thought and a focus for requests, and hopefully we can be solution-driven.
Combination therapies undergoing appraisal can be found not to demonstrate cost-effectiveness or value for money. Furthermore, pricing barriers have proven problematic for manufacturers when two therapies are involved. The manufacturer of the new medicine has no influence over the price of the new therapy, meaning the total cost may go over the cost-effectiveness threshold. We all regularly meet lobby groups and pharmaceutical companies, which tell us that the NICE process is making it difficult for them to advance their medicines to provide relief and find a cure. I know that Governments have to be responsible and do not have the power to spend money willy-nilly, but it is important that we grasp what the manufacturers and pharmaceutical companies are trying to achieve.
Combination therapies can offer people suffering with cancer a better quality of life, a better response to treatment and—this is really what it is all about—a better chance of survival, which is so important. The UK must learn from countries such as Spain and the US in creating a more cohesive and agile path from pre-trial to treatment. Those are just two countries that have an excellent methodology for trying to advance. Hopefully, the Minister will reassure us that we in the United Kingdom are doing the same as other countries. The US dominates certain research, such as in immunotherapy, followed by China. The UK is in third place, with a global share of approximately 5%. Third place is not bad—it is a bronze medal—but we would like to move a wee bit further beyond that, and I think it is possible. The ideas are here, the technology is here and the will is here. We just need to drive it.
We must learn to strengthen links between UK academia, clinical medicine and industry, at a time when it is being reported that the number of industry-backed clinical trials has decreased by 41% since 2017. I know there has been a focus on covid, with everybody trying to find the cure, but let us get back to where we were before and lead the way again. I do not see how we can say that we are doing more to expand the variety of medicines that we offer patients, when the number of trials has declined by almost half.
I cannot emphasise enough how important it is that we ensure that the United Kingdom remains an environment where companies want to bring medicines forward for NICE appraisal in the first place. Being able to approve access to innovative cancer medicines is critical if we are to improve patient outcomes. The UK currently ranks 16th out of 18 comparable countries for five types of cancer, and it is important that we address the challenges with appraising cancer medicines to ensure that patients continue to access the new, innovative treatments in the pipeline. It is so important to get that pipeline concluded and the product line out the other end.
What is the solution? First, it is about exploring and adapting to the challenges and issues that must be overcome in terms of costing, combination therapies and fairer price negotiations for manufacturers and the NHS. The UK Government—our Government—must, in collaboration with NICE and the NHS, work with industry and patient organisations to develop and trial a sustainable solution.
Cancer has killed too many in recent years. Advances in medication and medicine have increased the likelihood of survival—not when my dad had cancer 40-odd years ago, but today. Cancer affects too many loved ones; there are too many horror stories, which we, as Members of Parliament, hear regularly. We do not always get the good stories; it is usually the bad stories about what has gone wrong. As MPs, our duty is to bring them forward on behalf of our constituents and highlight them, as we have done today.
The NHS can work closely with the cancer drugs fund to improve patient access to the good and decent drugs that will help them, and ensure that nobody is left behind. I sincerely thank all the organisations that have been in touch with me and others ahead of the debate on an issue that is so important and affects so many. I say a special thank you to Sanofi for its efforts and support and for answering my questions and queries.
We in this United Kingdom of Great Britain and Northern Ireland have real potential to ensure the best outcomes for constituents and patients. I look to the Minister for reassurance, which I am sure is coming, that we will continue to do all we can to work with the devolved nations—Scotland, Wales and Northern Ireland—and NICE to improve people’s lives. Our job is to do just that. If we can improve people’s lives and help them to live longer, what a joy it will be to have those answers.
Siobhain McDonagh (Mitcham and Morden) (Lab)
It is a pleasure to serve under your chairmanship, Mrs Harris. I thank the hon. Member for Strangford (Jim Shannon), who is the closest thing this House has to a national treasure, for securing a debate that is so important to me.
This debate is about appraisals for cancer medicines. As with any debate about cancer in the House of Commons, there will be Members who have a personal connection to the issue. I will not spend a lot of time explaining my family’s situation, but for me this debate is different. It is not like the other debates that we take part in as parliamentarians. For some, we are experts in the field; for others, we are explaining the experiences of our constituents; and for others, we are speaking about what we have heard from stakeholders. My contribution is grounded in the year and seven months I spent caring for my sister, experiencing what the NHS treatment is like at first hand, and suffering as it became clear that over the past 40 years there has been no improvement in the treatment of glioblastoma—a brain tumour. The drug used to treat glioblastoma today, temozolomide, is the same drug that has been used for the past 20 years. That is not a national policy challenge; it is a frustration that I have lived.
When a person is diagnosed with a glioblastoma, they get six weeks’ radiotherapy, followed by six months’ chemotherapy with temozolomide if they can manage it. The drug was introduced in 2005, and it is called the gold-standard treatment in our NHS. That is a bastardisation of the English language. It is not a gold standard. It is not even a plastic standard. Although there are other treatments and drugs on the market for other cancers, the 3,200 people who are diagnosed with glioblastoma each year have had almost no improvement at all. The average life expectancy for someone diagnosed with a glioblastoma is nine months—do not believe the figures that suggest it is 18 months. The five-year survival rate is only 12.9%—just 1% better than the five-year survival rate in 2010.
For other cancers, the story is very different. For someone diagnosed with lung cancer in 2010, the five-year survival rate was 10.3%—not dissimilar to the survival rate for glioblastoma. The difference is that by 2020, the five-year survival rate for lung cancer had doubled to 21%. For some undiagnosed with breast cancer in 2010, the survival rate was 83.2%. By 2020, the five-year survival rate was all the way up to 85.9%. The five-year survival rate for bowel cancer has gone from 58% in 2010 to 60% in 2020.
I do not in any way mean to take attention away from those cancers. I am absolutely delighted that survival rates have increased, that there is innovation and that there are trials across the board. However, when I meet constituents who have had a cancer diagnosis for something other than a brain tumour, I regularly hear that they have had access to experimental trials. I appreciate that that is because I have a south London constituency and we are close to the brilliant Royal Marsden. When it comes to brain tumours, it is not that there are only a few trials; there are zero, with not many on the horizon. There are many reasons why survival rates have not changed for brain tumours in 20 years, but one is in the title of this debate: there are nowhere near enough appraisals for new brain tumour drugs and nowhere near enough clinical trials.
I will give an insight into how difficult it is to get a new drug on the market for glioblastoma. When my sister’s brilliant oncologist, Dr Paul Mulholland, set up a new clinical trial, he could not get the pharmaceutical companies to give him the drugs he needed. As a result, he had to rely on me, a Member of Parliament with no medical training, to write to the pharmaceutical chief executives asking them to donate to his trial. We were successful. We met senior members in four drug companies, and Roche was absolutely brilliant in its response. But why did it take a letter from somebody like me to get the drugs for a new clinical trial, instead of the other pharmaceutical companies responding to Europe’s expert on brain tumours? It completely baffles me, but I suppose that is the world we live in.
This experience tells me that the market is not working. It tells me that because only 3,200 people are diagnosed with a glioblastoma every year, it is not profitable for the pharmaceutical companies to invest in glioblastoma treatments. The market is very small, so it is not worth their while. As policymakers, it is our job to see where the market is working and where it is not. As legislators, it is our job to change, cajole and, ultimately, legislate to make sure that it does work. That has simply not been happening with glioblastoma, for which there has been no improvement in 40 years.
The drug companies will not change on their own. Unless we demand that they invest in those drugs, nothing will ever change; it will go on and on. Believe me, I do not want my worst enemy to go through what we have over the last 18 months. After speaking to some of the experts in the field and having conversations with all the main brain tumour charities, we have been able to develop a four-point manifesto that will make a real difference. As it happens, it will not cost very much either. I would be very grateful if the Minister could respond to that point.
On a personal level, I understand that the Minister is standing down at the next election. He has a year to 18 months to leave a real mark on this area of work. I ask him personally to be up to that challenge, to stand up to the status quo and the establishment in the medical profession and pharmaceutical companies, and to consider our glioblastoma manifesto.
First, we need a target of getting 200 glioblastoma patients into clinical trials each year on a drug that has the potential to change the course of the disease. That would be 1,000 patients over the lifetime of a Parliament. With those trials, we can begin to understand what works and what does not.
Secondly, the NHS should trial on brain tumours every drug that gets licensed to deal with other tumours, as long as there are not indications that it would be dangerous. Repurposing those drugs would be a cheap way to make a huge difference. It is sometimes the only way that makes a difference. The reason for melanoma survival rates of 90% at five years is precisely that: the use of a drug licensed for another cancer purpose.
Thirdly, the NHS should ensure that every neuro-oncology multidisciplinary team has a medical oncologist who is a core member and is required to attend meetings to discuss patients, so that brain tumour patients are not left in a corner of the ward because there is no specialist arguing for them. Unless a neuro-oncologist is in the room, we will not benefit from their ideas or expertise.
Fourthly, the NHS should require that every young—or not so young—doctor, training to be a medical oncologist should go through a mandatory course on brain tumours. At the moment, there is no compulsory training. Doctors have to take two courses on bowel cancer as part of their training, but nothing on brain tumours. Believe me, they do not take that option. The reason that there is nobody on those wards and the research infrastructure is not there is because nobody is required to do the course.
Fantastic work is being done in the world of cancer. There are improvements in some areas with some fantastic successes, which we should celebrate. However, we should have our eyes wide open when we are not making any progress. We should be able to take stock and say, “This is not working; we need to try something new.” In 2018, after Tessa Jowell sadly passed away from a glioblastoma, £40 million of Government funding was promised to fund research into brain tumours, but the infrastructure of treating glioblastoma is so poor that there have not been enough bids to allocate that funding. As of January, just £15 million of the promised £40 million had been awarded; the field is in such a dire situation that we cannot even spend the money that has been specifically allocated to brain tumours.
This is about trying something different. I do not care whether it is Labour, the Conservatives, the Lib Dems, the DUP or the SNP—I will get behind anyone with the political will to make a change. Einstein famously said:
“The definition of insanity is doing the same thing over and over again and expecting different results.”
I think we are getting to that point with the treatment of glioblastoma. It is time to break the mould, take a risk and try something different.
Tracey Crouch (Chatham and Aylesford) (Con)
I think this is my first time speaking under your chairmanship, Mrs Harris; I am sure it will be a great pleasure. I congratulate the hon. Member for Strangford (Jim Shannon) on securing this important debate, and on his excellent speech setting out the issues with the new NICE methods and processes for cancer drugs. The hon. Member for Mitcham and Morden (Siobhain McDonagh) described him as a national treasure. As a Minister, I was once in charge of national treasures; I feel I lost the opportunity to enshrine his legacy in a Bill before Parliament, during whose passage I am sure he would have intervened.
The hon. Member for Strangford set out an interesting problem, and, like him, I am grateful for the briefing I have received on the matter. I am humbled to follow the hon. Member for Mitcham and Morden. I have been on the cancer treadmill, and I think that, as patients, people become incredibly compliant; they do as they are told. It is often much harder for those who love someone who has cancer. They fight for better treatment and care on behalf of their loved one because it is all that they feel they can do, as the hon. Lady set out.
We need to do so much more on rarer cancers, particularly brain cancers. I quickly googled global survival rates for glioblastoma; the survival rate in the US is 26%, compared with 10% in the UK as the hon. Member for Mitcham and Morden set out. That shows that factors such as access to drugs can make a significant difference to outcomes. I am sure that the Minister heard very much what she said, and many people who are suffering from brain tumours will be grateful for her contribution.
I have no intention of becoming the poster girl for all things cancer. In some cases, I still find talking about my experience of the disease quite hard, but I wanted to speak in this debate because I also find it infuriating that we lag behind so many countries on many cancer-related areas, including access to medicine. However, I want to give some good news on cancer targets from my area. It is extremely worrying for anyone to read front-page news of missed targets, backlogs, delays and so on at the start of their cancer journey, but in Kent and Medway we are fortunate to have one of the top performing alliances in the country for meeting the 62-day standard, with both Maidstone and Tunbridge Wells NHS Trust and Medway NHS Foundation Trust reaching 85%. In fact, MTW, which is where I was treated, has consistently met its targets for the last three years, having kept all its cancer services open during the pandemic. The improvements are generally down to achieving more rapid diagnoses by triaging referrals and sending as many patients as possible straight to their diagnostic test.
A lot of evidence links early diagnosis with better outcomes. Despite having top-notch treatments available on the NHS, the UK still lags behind Europe and the US. There may be many reasons, but my view and that of many others is that the main push should be for diagnosing patients as early as possible to improve outcomes. However, we really cannot afford to get into a situation where we do not have access to the latest treatments; otherwise, outcomes may worsen. There is a conundrum, which can be summarised as: methods and processes versus cost versus data—and it is really hard to squish that triangle into a circle. I met two pharmaceutical companies to learn about this issue. Although I am not naive to its aims, I was struck by the disadvantage that the changes to NICE’s methods and processes could leave UK cancer patients with.
The hon. Member for Strangford outlined the background to the changes so I will not repeat them in great detail, but in summary, in 2022 NICE changed the way it reviews disease severity as part of its assessment process. It introduced the severity modifier and removed the end-of-life criteria, which gave a higher value weighting to medicines for terminal illnesses. That change is likely to negatively impact cancer medicines in particular. Capacity issues, cost containment measures and other commercial environment factors are steadily combining to create a life sciences sector that is disincentivised to focus on cancer innovations or invest in the UK. That in turn will pose challenges to achieving the Government’s ambitions to accelerate access to oncology medicines and meet the policy targets set out in the “Life Sciences Vision” and the NHS long-term plan.
What worries me is that big, global oncology conferences take place—like the recent American Society of Clinical Oncology conference in Chicago—which are brilliantly reported in our newspapers, with references to breakthrough drugs for x cancer sending shivers of hope down the spines of people like me and many others, when the truth is that very few of those drugs will reach our NHS due to NICE methods.
That is when I see the other side of the argument, at least to some extent. We should really be congratulating whoever does the procurement negotiations with pharma to drive down the cost to the NHS so that investment can be made in other areas of cancer, such as diagnostics, although that can be stretched only so far before companies pull their drugs from the market. It is about finding a sweet spot that works well for both.
Data is another challenge. There is a lack of outcome data available to NICE in the full assessment of some medicines. The problem for pharmaceutical companies is that this data is hard to come by. Outside of a clinical trial, they have little or no access to outcome data from the use of the drug in the real world, and if it is expensive, it is hard to prescribe it without a NICE recommendation in the first place—thus we have come full circle due to a lack of evidence and, of course, the increasing cost.
Siobhain McDonagh
Does the hon. Lady agree that it seems crazy that in a system as universal as the NHS there should not be access to outcome data? To give just one example, South West London Elective Orthopaedic Centre at Epsom Hospital is the largest hip and knee replacement centre outside of America. It is the lowest for blood risks, and has the lowest infection rates and quickest turnaround. It has its own small charity and keeps the data, making £1 million a year from it. That could go some way towards paying for the latest cancer drugs.
Tracey Crouch
I entirely agree. Data sharing will help cancer outcomes full stop, not just in the example she gives. If my GP sent me for a breast screening, for example, the person doing the screening could not currently see whether I have had a cervical screening. Having the conversation about screening for other cancers while having some form of cancer screening is an important aspect of long-term survival rates, so I completely agree with the hon. Lady.
It appears that NICE, through changes to its methods and processes, has probably got stricter on the level of evidence it requires before it will make a recommendation, so that it ensures that there is a survival benefit to the things it recommends, all of which is a potential reason that we should collect and share data better across the NHS. We could allow pharma better access to anonymised NHS data, and some trusts already do so with strict governance in place. Working together in this way would allow us to access the actual impact of a drug when it is used outside of a trial and allow NICE to make a real-world evidence-based recommendation, which would be particularly helpful for rarer cancers such as glioblastoma.
We have to get over the clinical reticence of not using a drug before it has a NICE recommendation, otherwise we will never get the real-world data. Some 80% of cancer drugs recommended by NICE were only recommended if the price to the NHS was reduced, so, given that in the UK clinicians tend not to prescribe without a positive NICE recommendation, the pharmaceutical companies essentially have to drop the price to get the recommendation for the drug to be on the market. In all those points, it is forgotten that at the centre of this is a cancer patient just wanting to get the best possible treatment to live for as long as possible.
We all want positive outcomes for cancer. NICE has committed to keeping its new methods under review. During this time, it is essential that flexibility is maintained when considering disease severity so as to ensure timely and ongoing patient access. Pharmaceutical companies want to be at the forefront of developing life-enhancing, cancer-beating drugs for the market. There has to be a sensible way forward, but at the moment it feels like the changes may have made things worse for current and future cancer patients hoping for breakthrough life-enhancing treatments.
I know the Minister to be a sensible and reasonable person. I hope he will take renewed vigour from what he has heard so far in the debate and will sit down with all the interested parties to see how we can go forward, because without doing so, I fear that on this issue—coupled with others around screening, diagnosis and access on to pathways—we will continue to lag behind other countries in beating cancer.
Owen Thompson (Midlothian) (SNP)
It is a pleasure to see you in the Chair, Mrs Harris. I commend the hon. Member for Strangford (Jim Shannon) on securing this important debate. I will do my best to follow the two previous contributions from the hon. Members for Mitcham and Morden (Siobhain McDonagh) and for Chatham and Aylesford (Tracey Crouch) about their personal experience. I cannot contribute to the debate in that way, but I will do what I can.
All our lives have been touched by cancer in one way or another. We all know someone whose life has been changed in some way by the disease. Therefore the appraisal of cancer medicines is of the utmost importance to us all. These medicines give hope and, indeed, life to so many. Yet even something as vital as the evaluation and distribution of cancer medicines did not escape the upheaval of Brexit. The UK ended its membership of the EU three years ago, and that catastrophe, which Scotland did not want, meant that the Medicines and Healthcare products Regulatory Agency withdrew from the European Medicines Agency. While immediate disruption to patient care was avoided, there have been shortages across the board since Brexit.
In Scotland, the Scottish Medicines Consortium—if I mention it again, it will be easier to say SMC—must review and recommend a new medicine before it can be prescribed on the NHS for routine use. This would take place after a medicine has received a marketing authorisation from the MHRA. The SMC advises and provides recommendations to NHS Scotland. This due diligence must be carried out by medical professionals to ensure everyone’s safety. The Scottish Government remain concerned about the effect of Brexit on the authorisation of medicines, as medicines obviously play a crucial role in the NHS. The authorisation and appraisal of medicines also have a key role in the Scottish Government’s commitment to supporting people to live longer, healthier lives. Diagnosing and treating cancer are a priority for the Scottish Government, which is why they are investing £40 million over five years to support cancer services.
However, the NHS in Scotland has finite resources, and medicines are the second largest item of expenditure for NHS Scotland, so difficult choices have to be made. A number of factors need to be looked at. For example, what benefits does the medicine offer compared with other available treatments? Other factors include the quality of life and amount of extra life that may be gained by patients using the new medicine, how the medicine is administered and whether it will save money later on. Those are all examples of the considerations that have to be included when coming to decisions.
Despite UK Government vows to make the MHRA faster and nimbler, we remain concerned about budget and staff cuts to the organisation. There is also a question about the so-called light-touch approach to authorising generic medicines and relying heavily on approvals from larger regulators in the EU and US. The Financial Times reported that the need for cuts at the MHRA has been driven partly by Brexit and the loss of millions of pounds of annual income from its role in authorising medicines in the EU. There has also been a contraction in UK Government funding after the MHRA was subsumed into the budget of the Department of Health and Social Care, as far as I can see.
The hon. Member for Strangford referred to the payback rate of 26%. That is another thing we must not lose sight of. Two very large pharmaceutical companies have already withdrawn from the voluntary scheme as a result of the increase to the rate, which they claim is now punitive. Any further withdrawals from the scheme will surely only have impacts on patients—the people we all want to be doing everything we can to support.
According to recent research by the Nuffield Trust, although the UK Government and pharmaceutical industry averted immediate disruption to patient care from difficulties in the supply of medicines after leaving the single market, there has been a great level of shortages. A review by Imperial College Business School revealed that fewer novel drugs were authorised by the MHRA in 2021—its first year of independence—than by the European Medicines Agency; the UK saw the approval of 35 drugs, compared with 40 in Europe and 52 in the US. That goes back to the points about the availability of medicines and the options that that then makes available to doctors and their patients. Any reform of the regulatory framework must ensure that patients have a voice; their lived experience must inform regulatory decisions. That is where we can all play our part—by relating the experiences that are brought to us.
A cancer diagnosis can be a heartrending and life-changing event, but it can bring positives, and we can all learn from the experiences of those who have gone through it. We need to do everything we can not to add to that heartache by allowing standards to drop or by creating more red tape that stops people getting the medicines they so urgently need.
Brexit casts a long shadow and it has impacted on this area, so we must ensure that there is no withdrawal from the current EU standards or safety controls on medication. It is in all our interests to ensure that we support the development and appraisal of new medicines. We owe that to all our constituents and none more so than those affected by cancer.
Andrew Gwynne (Denton and Reddish) (Lab)
It is a pleasure, as ever, to serve under your chairmanship, Mrs Harris, and to respond to this debate on behalf of the shadow Health and Social Care team.
I begin by congratulating the hon. Member for Strangford (Jim Shannon), who I call my hon. Friend, on securing this important debate, and I thank him for his tireless work campaigning on such issues.
Also, I pay tribute to my hon. Friend the Member for Mitcham and Morden (Siobhain McDonagh) for the powerful case that she put to the Minister in respect of brain tumours generally and specifically the glioblastoma manifesto. I very much hope that the Minister is able to take up her challenge, because the inequalities in outcomes that she laid out are unacceptable. In the year 2023, we should not be looking at a situation in which there have been zero improvements in life expectancy from cancers such as glioblastoma since 2005-06 when we have seen dramatic improvements in the other areas that she mentioned. We owe it to Baroness McDonagh—Margaret McDonagh—and to others such as Tessa Jowell to ensure that we see improvements in this area, too.
As for the hon. Member for Chatham and Aylesford (Tracey Crouch), she said herself that she has been on the cancer treadmill, and it is lovely to see her back in her place and up to her old usual tricks. We welcome her.
Tracey Crouch
I just want to say that I was never not in my place; I was fortunate enough to go through cancer treatment during covid, when we were all working under a hybrid procedure. Actually, that experience has helped to form some of the contributions that I have made to the Procedure Committee about how we in this place support people who are going through significant illnesses.
Andrew Gwynne
Absolutely—the virtual Parliament hid a multitude of sins. I know that as somebody who struggled with long covid through that period. Many people would not have known just how ill I was, because I just appeared on a screen. However, it is nice to see the hon. Lady in person; I should put it like that. And she was entirely right to say that cancer touches us all, which is why we can all cite personal experiences of it. I lost my mum to ovarian cancer when I was 19; she was just 50. I lost my dad last year to rectal cancer. I am not alone; we all have people, including close family members and friends, who we have lost to cancer.
I also pay tribute to the hon. Member for Midlothian (Owen Thompson), who responded on behalf of the SNP, for his contribution to the debate and to the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts), for her intervention.
I am sure that I speak for everybody from all parties in the House when I say that ensuring that patients have quick access to the most innovative and effective treatments is an absolute priority. This country has a proud history of medical innovation, a reputation that we should try not only to protect but to enhance, as we have already heard today.
We are talking today about the appraisal process for cancer patients, which, as we have also heard, has changed markedly over recent years in several areas. We have seen increased focus on targeted treatments and immunotherapies, as well as reform of the cancer drugs fund in 2016, a move that was taken to improve people’s access to cancer drugs while allowing NICE to collate more information on potential areas of clinical uncertainty.
In a recent report, the Association of the British Pharmaceutical Industry highlighted that 78% of medicines have been able to exit the cancer drugs fund with a positive recommendation, with most of them spending about two and a half years in the CDF process. It also recognised improvements as a result of the relaunched CDF, but raised concerns that the CDF has
“perhaps been overly relied upon”
in order to
“delay making routine recommendations.”
It states that
“a new balance may need to be struck between NICE and manufacturers in considering which treatments should enter the CDF to resolve genuine uncertainty surrounding long-term clinical outcomes and for how long.”
Given that NICE recently set out specific circumstances when committees may be able to accept a higher degree of uncertainty in routine commissioning decisions, can the Minister set out whether his Department has assessed the ABPI’s findings and whether more can be done to improve access to innovative treatments for patients via routine commissioning? That links to a wider point that I wish to raise on clinical research and trials.
Clinical trials provide an opportunity for the NHS, businesses and brilliant researchers to work together for the benefit of everyone. Unfortunately, however, in recent years the UK trials industry has collapsed. The number of commercial trials in the United Kingdom decreased by 41% between 2017 and 2021. Worryingly, the UK has dropped from fourth to 10th in the global rankings, behind Spain, France and Italy. Of most concern is that in 2020-21, the NHS lost £447 million in revenue due to a drop-off in clinical commercial trial activity. Those figures should seriously worry the Minister. They risk putting patients at a disadvantage for all kinds of innovative treatments, including cancer medicines.
In Labour’s recent health mission, we committed to putting Britain right at the front of the queue for new medicines and vaccines. Alongside our pledge to spend 3% of GDP on research and development across the public and private sectors, we want our clinical trials to be more competitive, efficient and accessible. Making those ambitions a reality means tackling unnecessary bureaucracy in how trials are set up and reducing the administrative burden on everyone involved in the clinical trial, including the NHS. Will the Minister set out how his Government plan to reverse the drop-off in clinical research and trials—a drop-off that is costing our NHS financially and clinically?
Finally, I want to touch on the issue of patient access to innovative medicines, including for cancer patients. In 2021, in its “Life Sciences Vision”, the Government committed to identifying and addressing “unwarranted variation” in the uptake of innovative medicines. But in February this year, in the innovation scorecard commissioned on behalf of the Department of Health and Social Care, it was found that a number of areas were still falling short of the NICE recommended levels of new medicine uptake.
Will the Minister provide an update on what work he is doing to improve regional variation in uptake of innovative medicines so that no matter where someone lives, they can access the treatment they need when they need it. Will he also commit to improving the data collected as part of the innovation scorecard to include information on cancer medicines so that we can meaningfully assess uptake and isolate areas for improvement where necessary? That is something that the life sciences sector has called for, so I would welcome more information on that from the Minister.
In conclusion, Labour is wholly committed to ensuring that cancer patients in this country receive access to the very best medicine and care. That means ensuring that appraisals for cancer medicines remain fit for purpose and adapt in line with evolving technologies and scientific advancements. It also means turbocharging clinical trials and tackling the unacceptable gaps in access to cutting-edge treatment. In his response, I hope that the Minister will meet the ambition set out by the Labour party and that we can work together towards making Britain a world leader in cancer care and treatment, because we owe it to all those people on the treadmill right now.
The Minister for Health and Secondary Care (Will Quince)
It is a pleasure to serve under your chairmanship, Mrs Harris. I thank the hon. Member for Strangford (Jim Shannon) for securing this important debate on appraisals for cancer medicines and thank all Members who have contributed to a hugely valuable discussion.
The hon. Member said that he thought the debate would be a presentation of a united front, and that has been demonstrated today. He also said that he hoped he was pushing at an open door. On many of the points he made, he certainly is doing that. He spoke with great passion and empathy for those who suffer from this terrible disease, and I commend him for bringing this issue to my attention and the attention of the Government. Unusually, for a Westminster Hall debate, I have some time to respond to the points, so as ever, I will offer all Members who would like it a meeting to discuss any of the issues that have been raised in greater depth, but I will try to cover them in as much detail as I can in my response.
According to Cancer Research UK, one in two people will develop cancer at some point in their lives. There are around 290,000 new cancer diagnoses a year, equating to around 780 every single day. I am acutely aware as a Health Minister that when we use statistics such as these, we must remember, as the hon. Member for Mitcham and Morden (Siobhain McDonagh) eloquently and articulately pointed out, that these are people; these are human beings who we all know and love—a dear friend, a loved one, a member of our family. It is important when we talk about statistics that we do not lose sight of that.
Let me turn to the hon. Lady’s contribution. She made a powerful speech, and it is not the first that I have heard from her and had the good fortune to respond to. She rightly made a powerful and emotive case on behalf of her sister Margaret and all those who suffer and have suffered with brain tumours. I think she knows my commitment to doing all I can to improve the situation in relation to brain tumours. In truth, I think I have spent more time on this particular issue in my time as a Minister than I have on any other condition under the umbrella of the major conditions strategy. I will continue to do so, not just because of the powerful case that she makes, along with others across this House and campaigners, but because I know there is an injustice in that this area does not get the attention it deserves, and I want to address that. I have raised it with the chief scientific adviser, who heads up the NIHR, and it is important to also raise it with NICE.
I have met the hon. Lady, and I would be happy to do so again. She makes a powerful case that we need the pharmaceutical industry to step up in this space, and I am keen to work with her to see what more we can and should do to make sure that happens. Finally, let me thank her for her kind words about my leaving Parliament at the next election. I assure her that I will do all I can for as long as I am in this role to help her achieve the objectives she seeks.
I join the hon. Member for Strangford in paying tribute to all the cancer charities—some very large and some very small—that work to support patients up and down this country. He is right to draw the House’s attention to that.
The NHS has seen enormously high demand for cancer checks. More than 2.8 million people were seen in the 12 months to April this year, up by 26% compared with the same period pre-pandemic. That returning demand is positive after the falls we saw during the pandemic. We are working closely with NHS England to reduce the amount of time people are waiting to receive a diagnosis, and we are making progress; it is not as fast as I would like, but we are working very hard to make progress. The latest published figures show that the 62-day cancer backlog for the week ending 30 April stood at 22,533. It has fallen by 34% since its peak in the pandemic, but I am acutely aware—this preys on my mind every single day—that it amounts to more than 22,000 people, too many of whom have had to wait 62 days and are struggling with the anxiety of waiting for either a diagnosis or the all-clear.
The hon. Member for Strangford set out the scale of the challenge we face, which I touched on there, but I will move on to what we are doing to address this. The Government are spending more than £8 billion on the elective recovery fund, £700 million on the targeted investment fund and, importantly, as has been referenced in a number of contributions, £2.3 billion of capital funding has been made available to increase our diagnostic capacity—those 160 additional community diagnostic centres. I was able to give the hon. Member for Denton and Reddish (Andrew Gwynne) some good news on that for his constituency recently.
We have 108 community diagnostic centres operational at the moment. I announced a further number only last week, and we have another eight coming on stream. We want to get to 160 centres by 2025, but I want to do it as quickly as we possibly can. There will also be additional surgical hubs. Those CDCs have already since July 2021 delivered over 4 million checks, so we have to get those open and operational as quickly as possible.
Liz Saville Roberts
The Minister is of course aware of the proposal for a medical radioisotopes facility in north Wales, which is crucial for diagnosis in the future. I wonder whether he is also aware that this would complement Bangor University’s Nuclear Futures Institute and its planned new medical school. We are all aware of the shortage of clinicians. I am concerned that the centre for doctoral training in nuclear energy futures at Bangor, which plays a vital role for PhD projects and their funding, has had its application for renewal rejected by the Engineering and Physical Sciences Research Council.
I would be grateful if the Minister clarified whether he is aware of this issue. I appreciate that it is local, but when we are looking at the future, these local solutions will be absolutely critical. If he is not aware of this, could he commit to raising it with the Department for Science, Innovation and Technology and his counterparts in the Welsh Government? Most importantly, could I plead with the Minister for a meeting with him to discuss the wider issue of radioisotopes availability, their cost and the security of supply in the future?
Will Quince
The answer to both is yes, and yes. If the right hon. Lady would write to me with the details, I will certainly raise the issue and meet to discuss radioisotopes specifically.
NHS England is working very closely with the independent sector to ensure that we are using all the available capacity to us to deliver both diagnoses and treatment as quickly as possible. The Government announced the major conditions strategy on 24 January, which is important for cancer as it draws on previous work on cancer. Over 5,000 submissions were provided as part of our call for evidence last year, and we will continue to work closely with stakeholders, the public and patients—whose voice should never be forgotten, as the hon. Member for Strangford rightly points out—and the NHS in the coming weeks to identify the actions we need to take as part of the strategy that will have the most impact.
Specifically on NICE appraisals, the hon. Member raised several concerns about the way in which cancer medicines are appraised. Members will know that NICE is rightly independent of Government. It is an expert body that makes evidence-based recommendations to the NHS on whether new medicines should be routinely funded by the NHS on the basis of on assessment of clinical and cost effectiveness. Those recommendations then develop, mainly for the NHS in England, but as was mentioned, they are usually adopted by the NHS in Wales and in Northern Ireland. Scotland has its own system. This is a difficult matter to raise, but it is important to point out that every pound that we spend on a new medicine is money that is not available for other services, and the NICE appraisal process ensures that NHS funds are spent in a way that provides the greatest health benefit to society. That is a hugely difficult job, which NICE does with great professionalism.
Again, it is important to point out that NICE appraises all new medicines and that its approval rate for cancer medicines has consistently been around 90%–I think that the latest figure is 92%. It is absolutely right that when NICE recommends a medicine for the NHS, it is available for patients and NHS England is required to fund that drug or treatment. I know that the NHS in Northern Ireland and in Wales has adopted a similar model.
NICE’s methods and processes for assessing new medicines are internationally respected, and they have evolved over time to ensure that they reflect best practice and keep pace with advances in medical science. As my hon. Friend the Member for Chatham and Aylesford (Tracey Crouch) pointed out—I will come on to this in some detail— NICE concluded a comprehensive review of its appraisal methods and processes last year, which it carried out with a high level of ambition and transparency. As she pointed out, changes include the introduction of a new severity modifier, which will give NICE more flexibility to recommend medicines for more severe diseases at higher prices. The severity modifier replaces the previous flexibility for end-of-life treatments.
My hon. Friend raised some concerns about that, and I always listen very carefully to what she says on this and many other issues, especially given her personal experience and campaigning. She is right to say that the situation is hugely complex, and her point about data is a really good one, because decisions need to be informed by good-quality data. I would be happy to meet her to discuss how we can ensure that we are collecting data not just on a regional basis, but nationally, so that we can make sure that NICE is making informed decisions. As she rightly points out, we need to ensure that patients and their voices are always at the heart of all the decisions made by not just the Government, but NICE. I would be happy to meet her to discuss that in greater detail.
On the broader point about whether the introduction of a severity modifier in place of an end-of-life modifier will affect cancer drugs specifically, analysis was carried out by NICE in developing the modifier. It indicated that the vast majority of cancer medicines that would have been eligible for the end-of-life modifier would also be eligible for a weighting under the severity modifier. I am happy to meet my hon. Friend and any other Members who would like to meet NICE to discuss this issue further.
Tracey Crouch
I think it is very important that the Minister also meets the pharmaceutical companies, because there is a counterclaim to the statistic from NICE that he has just given. The pharmaceuticals say that, actually, a significant percentage—I cannot remember off the top of my head what it is—of drugs would not pass the test. My plea to him is to sit down with all interested parties and not just listen to NICE’s statistics on this issue.
Will Quince
My hon. Friend is absolutely right, and I regularly meet the pharmaceutical industry, not least because of VPAS, which I will come on to discuss because it has been raised by a number of Members. While I understand the concern, it is absolutely right that assessment of clinical and cost effectiveness reflect up-to-date clinical pathways, evidence and evaluative methods and processes. However, my hon. Friend is absolutely right to say that we should also hear and understand the views and concerns of the pharmaceutical industry so that we have a rounded, balanced view and the full picture, to make sure that there are no unintended consequences because of the action that is being taken.
The hon. Member for Strangford mentioned non-uniform pricing and VPAS, so let me come on to that specifically. The tricky thing is that the negotiations for the next VPAS are currently under way. Given that there are ongoing discussions, it would not be appropriate for me to go into too much detail, because of the commercial sensitivity. It would also be inappropriate to set up a working group to review NHS England’s policy on non-uniform pricing. What I would say is that if changes were made to the wording in the next VPAS on commercial flexibilities, they would be reflected in an updated commercial framework for new medicines.
The hon. Members for Strangford and for Denton and Reddish raised clinical trials. We are doing a huge amount of work in that space because I recognise some of the issues and challenges that the hon. Member for Denton and Reddish set out. That is why we commissioned the O’Shaughnessy review into clinical trials, and why we accepted Lord O’Shaughnessy’s recommendations in full. We should take a step back for one moment and look at the work that we did as a country and an industry on clinical trials, particularly relating to covid. We basically shut down huge numbers of clinical trials to focus on a vaccine. To be fair, this country absolutely led the way in that, and we should be very proud of what we did, but we have not been fast enough in switching clinical trials back on and we have lost some of our competitive edge in relation to other countries, as the hon. Gentleman pointed out. The reality is that it is a race; clinical trials are globally competitive, and other countries, including Spain, have seized the advantage and are fighting hard for market share. We have to make sure we are a competitive place. That is about clinical trials but also our regulatory environment.
The hon. Member for Midlothian (Owen Thompson) made good points about the MHRA. We are absolutely looking at its processes and procedures, and we are putting an extra £10 million into it over the next two years to ensure it is a world-class regulator that is one of the fastest and most effective and efficient. It is already highly respected, but we must ensure that it does things at the right speed. That is very much on my radar, and as I said we are accepting the recommendations.
The hon. Member for Denton and Reddish also raised the cancer drugs fund. Since 2016, NICE has been able to recommend medicines for use through the Government’s £340 million cancer drugs fund, which enables patients to receive promising new treatments for a time-limited, managed access period while further evidence is being collected. That is then considered by NICE when determining whether a medicine should be routinely funded by the NHS. Since that fund was created in 2016, it has helped more than 91,000 patients in England, and more in other places, to access innovative medicines.
Siobhain McDonagh
Those 91,000 did not include people suffering from a glioblastoma. We are not anywhere near NICE. We have not got that far. The drugs are not there. There is nothing. None of this works for people with glioblastoma. I do not want to mislead the Minister into thinking that I care only about my sister, Margaret. I draw hon. Members’ attention to early-day motion 1233, in my name, to commend the life of Laura Nuttall, a young woman diagnosed with a glioblastoma aged 18. She died on 22 May. I want to pass on all our condolences to her mum, Nicola, her sister, Gracie, and her father. Laura was a shining light and an ambassador for the Brain Tumour Charity. Although she was told that had only a year to live, she managed to live for four and a half years and secured a 2:1 in her degree. Laura highlighted that brain tumours are the greatest killer of people under the age of 40, who are being let down.
Will Quince
I totally take the hon. Lady’s point when she says that it is not all about her sister, Margaret— I know that from her contributions. Often in this place, we draw on our personal experiences, which enable us to bring to life powerfully and emotively what others are experiencing. I thank her for sharing Laura’s experience, and I send my condolences to Laura’s friends and family.
The hon. Lady is absolutely right that the cancer drugs fund can bring forward only innovative medicines that have gone through the clinical trials process. I will be very happy to work with her and meet her again to discuss how we get more research in this space. That is the key to so much, in relation to tacking brain tumours.
The hon. Member for Strangford spoke about the challenges presented by combination therapies. The commercial framework also recognises that realising the full potential health benefits from combination drug therapies can be challenging, given the requirement for commercial confidentiality and the need to maintain competition. Having said all that, NHS England has a proven ability to negotiate commercial agreements that secure combination treatments for patients. Just last month, deals were struck to enable NICE to recommend Keytruda and Lenvima for hundreds of women with advanced endometrial cancer. Progress is being made, but again, I would be happy to discuss the issue further.
Again, I thank the hon. Member for Strangford for securing this important debate and for his continued interest in the appraisal of cancer medicines and access to cancer treatments for NHS patients. I also thank other Members who have made such powerful contributions.
If one message comes across, Mrs Harris, I hope that Members are assured that the Government and I remain firm in our commitment to making the most promising and effective new cancer treatments available to NHS patients. The hon. Member for Denton and Reddish said that this is not a political issue, and I agree. It would be impossible to find anyone in the House who does not want to ensure that patients across the United Kingdom get access to the most innovative and cutting-edge medicines for cancer and other diseases, as quickly as possible. We all have a common endeavour there.
It is important to acknowledge the huge role that NICE has played, with its world-leading health technology assessment. It has enabled NHS patients to be at the forefront of access to new cancer treatments, in a way that also represents value for the taxpayer. I recognise the point that has been well made today, that we must always seek to improve and to go further and faster. I look forward to working with all Members present and others across the House to achieve that.
Jim Shannon
I thank all hon. Members for their contributions, which I will quickly go through. I thank the hon. Member for Mitcham and Morden (Siobhain McDonagh) for sharing her personal experience, which greatly affected us. She referred to brain tumours—glioblastoma—and the drugs available on the NHS, the survival rate and her heartfelt request for betterment, and the cajoling of legislators that needs to happen.
Drug companies need to change to help cancer patients. Trials need to be encouraged in the NHS and an oncology person needs to be available in meetings. That is a really good idea, because it gives focus. The hon. Lady also said the NHS needs more awareness and training for brain tumours. I wrote down, “Try something new now.” She also referred to the political will for change. The Minister clearly summed up for us all that this is not about politics; it is about patients. The hon. Lady put forward that point very well.
I thank the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts)—I hope that is close to the right pronunciation—for coming along. She put forward a simple request; the Minister responded, and there will be a meeting. If we come up with solutions, we should push for them, and the right hon. Lady has a solution that will benefit us all.
The hon. Member for Chatham and Aylesford (Tracey Crouch) was a guest speaker at one of my DUP association meetings a few years ago; we had her down at the women’s football team in Comber. She knows I have always had a soft spot for her, and I am pleased to see her here making a heartfelt, personal contribution. She referred to the global survival rate for brain tumours, with the USA at 26% while the UK is at just 10%. Other points related to early diagnosis, pharmaceutical companies, better outcomes, the NICE change to the severity modifier, and the difficulties with drugs.
The hon. Lady summed the debate up so very well, and she centred it on the patient. Central to all this—the drug companies, the NHS, the political aspirations of the parties represented here—is the patient. That is critical, and that is what this debate is about. You know that, Mrs Harris, I know that, and the Minister has clearly accepted it. I thank the hon. Member for Chatham and Aylesford for providing that focus that we all needed.
My friend the hon. Member for Midlothian (Owen Thompson) referred to the contraction in funding and its impact on the pharmaceutical companies, on the availability of medicines to GPs and, ultimately, on patients. It keeps coming back to the patients; they are central. I thank the hon. Gentleman very much for his contribution.
I love having debates with the hon. Member for Denton and Reddish (Andrew Gwynne), because we are always on the same page, as we clearly were today. He grasped the issue and summed it up so well. He talked about priority access to innovative medicines, and referred to brain tumours and cancers too. However, he mentioned, as I did, that clinical trials, with businesses and researchers working together, are down by 41%. We really need to address that. The UK has dropped from fourth to 10th in the global rankings. We need to regain that higher position; the hon. Gentleman underlined that. It is not about moving up the rankings for the sake of it; it is about moving up the rankings to regain the position that we had. We understand the reasons for our drop in the rankings, which include covid; the Minister responded well in that regard. It is not about blame; it is about regaining that higher position. The hon. Member for Denton and Reddish also referred to the unacceptable gap in medicines, which must be addressed to make the UK a world leader once again.
It is a pleasure to attend any debate with the Minister, and I thank him for his answers today. He referred to something that should make us focus: there are 780 new cancer cases each day—wow! I had never heard that figure until today. We hear the bigger figure—the 200,000 or 300,000—but I had never heard that daily statistic. As we have been sitting here, there have been diagnoses across this great United Kingdom.
Again, the Minister summed the situation up: brain tumours do not get the attention that they deserve. He referred to a 26% increase in cancer diagnoses in the last year. I loved his positive answer—160 diagnostic centres approved by 2025, with 4 million extra checks. We heard about a 92% approval rate for new drugs, and about clinical trials. Covid changed things, and we must regain our place in the rankings. There is a need to improve and to go faster—how well that was summed up. I thank everyone for their contributions, and I especially thank the Minister for the positivity of his response.
Question put and agreed to.
Resolved,
That this House has considered the matter of appraisals for cancer medicines.
Cryptocurrency Regulation
(11 months ago)
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Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)
I beg to move,
That this House has considered the regulation of cryptocurrency.
It is a pleasure to serve under your chairmanship for the first time, Mrs Harris, and to see you in your rightful place.
As chair of the crypto and digital assets all-party parliamentary group, I am delighted to be able to talk about the potential of the UK cryptocurrency and digital asset sector, and the need for clear regulation to protect consumers, which should be at the core of everything we do, and to support investment.
Just over a year ago, in April 2022, the UK Government set out their landmark vision to make the United Kingdom the global hub for cryptocurrency investment, committing to creating the right conditions for cryptocurrency and digital asset businesses to set up and scale up in the UK. Shortly afterwards, in August 2022, the APPG launched an inquiry to better understand the opportunities that a regulated industry could bring to the UK, as well as the challenges and potential barriers for Government in making their vision for the UK a reality.
Just last week, we published our report “Realising Government’s vision for the UK to become a global hub for cryptocurrency & fintech innovation”. Our inquiry looked at a number of key areas, including the potential for the UK to be a global hub for investment; the UK’s approach to regulation and the role of UK regulators in consumer protection; the potential offered by central bank digital currencies; and the risks of economic crime. We heard views from operators, regulators, industry experts and the general public—the Advertising Standards Authority, Innovate Finance, the City of London Corporation, the Payment Systems Regulator, the Royal United Services Institute, the Law Commission and many others—on the need for regulation of this ever-growing sector. I put on the record my thanks for their input and help in formulating our recommendations.
The APPG’s report is the first on cryptocurrency and the digital assets industry compiled jointly by MPs and Members of the House of Lords, and I thank colleagues in both Houses for their invaluable contributions. We set out more than 50 recommendations, which we hope will establish a foundation for further discussion. The Minister will be pleased to hear that I will not go through them all today, but I will focus on some of the report’s key findings.
It is clear from our work so far that the growth of cryptocurrency and digital assets presents a number of potential opportunities and that the UK is well placed to realise them, but that will require cross-Government strategic planning.
Jim Shannon (Strangford) (DUP)
I commend the hon. Lady for securing the debate—we have become good friends in the House—and I thank her for all she does on this topic. Reports in 2019 indicated that Colu, a tech firm based in Israel, had developed a potential new cryptocurrency for Belfast City Council. There has been much discussion in this place of how cryptocurrency will be regulated across the UK. Does she agree that for the United Kingdom to become a leading force in crypto, regulation must be UK-wide, led centrally from Westminster, and that UK-wide discussion is the only way to achieve safe regulation?
Dr Cameron
I thank the hon. Member for his contribution. Yes, much of this will be led by the Treasury, and I imagine that regulation will be streamlined right across the United Kingdom. I am pleased to hear about developments in Northern Ireland; there have been many in Scotland, too. I spoke to Scotcoin not that long ago. This area has enthused and motivated people right across the United Kingdom, and it is important that we collaborate in order to realise its potential.
Alun Cairns (Vale of Glamorgan) (Con)
It is a privilege to serve under your chairmanship for the first time, Mrs Harris. I congratulate the hon. Lady on her work with the crypto and digital assets all-party parliamentary group and on its excellent report; it is a privilege to work with her. Some years ago, the UK became the world’s leading fintech centre because the regulatory environment was established with a clear direction from Government, which allowed businesses to invest and regulators to lean positively towards the sector’s development. Does she agree that if the positive record of the Government of that time is replicated with cryptocurrency, the UK will have a similar opportunity to be a leading nation in this sector, as well as in other financial technologies?
Dr Cameron
I thank the right hon. Member for his valuable contribution. I totally agree. I saw some research from PitchBook last month that suggested that since the EU produced its regulatory framework on markets in cryptoassets—MiCA—investment in the EU has increased substantially. With a regulatory pathway over the next 12 to 18 months at the maximum, the UK could harness a leadership position in this sector. That will be essential because of the digital revolution that is happening. The next generation is a digital generation already. This is the way that things are moving in the world, and the UK must be at the forefront. I am pleased that the Minister is harnessing his skills and endeavours to ensure that happens.
We heard that without comprehensive regulation there are considerable risks in the industry, particularly regarding consumer protection, economic crime and financial stability, which I will speak about later. While there are clearly legitimate concerns about the potential risk posed by cryptocurrency and digital assets, it is important to acknowledge a number of positive use cases that show the potential benefits of the new technology.
One such example is the use of cryptocurrency at the frontline of the conflict in Ukraine. Many may not know this, but following the Russian invasion, the Ukrainian Government appealed for cryptocurrency donations and received millions of dollars in cryptocurrency to support military and humanitarian efforts on the frontline. Ukraine’s Deputy Minister of Digital Transformation, Alex Bornyakov, has said that cryptocurrency has been “essential” to Ukraine’s response to the Russian invasion. I am delighted to welcome Minister Bornyakov and his team, who are in the Public Gallery. We are delighted to have them here today.
Our inquiry heard that the growth of the sector suggests that cryptocurrency is here to stay. The latest research by the Financial Conduct Authority shows that cryptocurrency ownership has almost doubled in the last year, with almost one in 10 people surveyed owning cryptocurrency in 2022. That highlights the need for proper, clear regulation to protect consumers and support the industry’s growth in a reasonable way. As countries around the world move quickly to develop regulatory frameworks, we feel that the UK must move within the next 12 to 18 months to harness the industry’s potential in order not to lose out to other jurisdictions.
Throughout our inquiry, we heard that there are potential barriers to the UK’s realising its vision, which we set out in the report. We heard that the process for cryptoasset businesses to enter the UK is very lengthy, with limited engagement at times, and that many businesses ultimately choose to invest outside the UK. While the Government have said that they are open for business and for companies in the sector to set up and scale up, we heard that that has not been the experience of many companies seeking to obtain licences to operate in the UK. They have seen very lengthy delays and, in many cases, had their applications rejected. That is fine, because we do not want a race to the bottom, but it often happens without a clear explanation and with limited communication throughout the process.
To date, only 41 firms have been approved to operate in the UK. Will the Minister say what more the Government can do to ensure that legitimate and responsible firms that want to set up and scale up here are able to do so? What steps are the Government taking to ensure that regulators have the resources they need to deliver on their responsibility to process applications?
Martin Docherty-Hughes (West Dunbartonshire) (SNP)
It is good to see you in the Chair, Mrs Harris, and I congratulate my hon. Friend on securing the debate. On regulation, my hon. Friend mentioned risks, and does she agree that the Government need first to admit that when it comes to crypto there is a lot of risk? We know there is a lot of risk—it is called fraud, so fraud regulation should be used in the first instance before they introduce other regulation. There needs to be a recognition that fraud is fraud, whether it is related to crypto or anything else.
Dr Cameron
I thank my hon. Friend for raising those important issues. There is a section in my report on fraud and scam risks to consumers, so he has pre-empted the latter part of my speech, but I will cover his points in full.
Another area of concern is access to basic financial services. To be a hub of cryptocurrency—of innovation, scale-ups and start-ups—companies need to be able to open a bank account and pay their employees. The inquiry heard that firms were struggling to secure access to UK banking services. A high proportion of banks have refused to provide bank accounts to digital assets firms, even when those firms are regulated and licensed to operate in the UK. In addition, just in recent months, a number of major banks have also announced limits on transactions, making it more difficult rather than less.
Such services are absolutely necessary for companies to operate regulatorily compliant businesses. The inquiry heard that that could be one of the single biggest barriers to growth and innovation for the UK. There are concerns that this could fundamentally undermine the Government’s ambition for the UK to become a global cryptocurrency hub and could be a barrier to growth and innovation in the digital sector.
I recently chaired a roundtable with the industry to hear more about their concerns. What more can the Government do to help find a way forward and to ensure clear pathways for firms to access fundamental banking facilities when they are operating legitimately and robustly within the guidelines? Will the Government consider using their powers to help facilitate meaningful dialogue between the banking and digital assets sectors to find a way forward that works for both?
We also heard strong support for the Government’s current approach of regulating cryptocurrency in line with financial services regulations; when we look at the research and the details, we can see that that offers the best and most robust protections for consumers. In that sense, my report supports the Government’s position on financial services regulation.
There is another issue. I worked in the health service and I am keen that people who make gains in the UK should pay their taxes. A regulatory framework in financial services enables the Exchequer to collect taxes, as opposed to using the gambling regulations, which would not allow for that. It is also important that the UK sets regulations within financial services to position itself in collaboration with other jurisdictions internationally and rather than appear an outlier by using other regulatory frameworks.
Our inquiry heard serious concerns about the risks to consumers from fraud and scams associated with the sector. As with all new and emerging technologies, the sector has the potential to be exploited by criminals. We heard that given the rapid pace of growth and consumer adoption, the risks in this area cannot be ignored, particularly if the UK wants to position itself as the global home of investment. Consumer protection measures must be at the core of everything that the Government do. We must mitigate the risks associated with new developments in the sector.
Research from the FCA in 2021 showed that overall public awareness and ownership of cryptocurrency had increased, but it also showed that
“the level of understanding of cryptocurrencies is declining, suggesting that some users may not fully understand what they are buying”.
Consumer research by the Financial Services Compensation Scheme highlighted the low levels of understanding and the need for much greater financial education. Industry and the Government must partner to help raise awareness. We want a joined-up and co-ordinated approach, including industry, regulators, law enforcement and the Government, to clamp down on scams.
Before I conclude, let me briefly mention that the Government are making great strides with the consultation on a central bank digital currency, and we support the progress being made. I have also heard about improvements throughout industry on the sustainability of bitcoin mining and so on. That is very important because we must realise that we are in a climate crisis, and all innovations and new technological developments should contribute to net zero.
For our report, we heard about the need for a joined-up, co-ordinated approach across all Departments, and we have said that Government might consider the appointment of a crypto tsar, who could help to co-ordinate across Departments and support the Minister to ensure a consistent approach. Will the Minister update the House on the Government’s vision for the UK to become a global hub? I realise that yesterday the Prime Minister made a very important speech that contributes to the debate and I would be delighted to hear what more we can do, as the all-party parliamentary group, to support the Minister in his endeavours. We feel that things have been extremely positive, but there is a need to move at pace within the next 12 to 18 months.
The Economic Secretary to the Treasury (Andrew Griffith)
It is a pleasure for me to serve under your chairmanship, Mrs Harris; congratulations on your first time chairing our proceedings in Westminster Hall. I congratulate the hon. Member for East Kilbride, Strathaven and Lesmahagow (Dr Cameron) on once again securing a debate in Parliament on crypto regulation. It is particularly apposite to do so during London Tech Week. I would also like to extend a welcome to Minister Bornyakov and his team, who are watching this debate from the Public Gallery.
I know that the hon. Member for East Kilbride, Strathaven and Lesmahagow shares with me and this Government a desire for the UK to be a leader in this space; that is our vision. I thank her and the crypto and digital assets all-party parliamentary group, which she chairs, for its excellent recent report, which is timely and adds to the growing canon of work. It is a good read, and I commend it to all parliamentarians and policymakers. One of the valuable functions that that group performs is to raise the level of understanding of this exciting but sometimes challenging new domain.
Let me be clear. The Government’s goal is simple: it is for the UK to be an open, well-regulated and technologically advanced society. The extraordinary technology under- pinning distributed ledger technology, or DLT, could have profound and positive impacts across multiple sectors in the UK, including more efficient trading, cheaper payments across borders, more choice for consumers and, as the hon. Member for East Kilbride, Strathaven and Lesmahagow said, the benefit for financial inclusion. Beyond that, it is part of the wider Web3 decentralised movement that is leading to a radical rethink about what the future of the internet might look like and who—which sort of organisations—determines that. McKinsey research suggests that this could be
“a paradigm shift in the business model…by making disintermediation a core element”,
while a research analytics firm estimates that the global market size of Web3 could reach $81.5 billion by 2030.
Alun Cairns
I congratulate my hon. Friend the Minister on pressing ahead with the digital pound that is under consideration in order to ensure that the UK is at the forefront of digital currencies. But is he confident that all the regulators—within the Bank of England for the digital pound, but also the Financial Conduct Authority and others—have the capacity and expertise necessary to deliver the vision that the all-party group and the Government are seeking to set out? Does he agree that it is worrying that many crypto companies find it challenging to open bank accounts simply to conduct their business?
Andrew Griffith
I pay tribute to my right hon. Friend for the points that he made about how important it is that we lean into this space. He used the excellent and apposite example of fintech—a flourishing industry, for which the UK is genuinely one of the leading centres in the world. I share his concern about the availability of bank accounts. As he understands—I am sure he would not wish it otherwise—that is a commercial decision for organisations, but to the extent that the regulatory framework, or indeed the regulatory culture, is a contributing factor, Parliament will bring cryptocurrency into the regulated domain and decide that it is a lawful activity that could reap many benefits for the United Kingdom. It would, of course, be a concern if those who take part in this lawful and well-regulated activity were unable to procure bank accounts, so I can undertake to keep a close eye on that. I do not plan to make an immediate intervention, but he and other colleagues have raised the issue, as has the APPG. I will undertake to keep a close eye on it, and I am open to hearing examples of where people cannot open bank accounts.
The hon. Member for Strangford (Jim Shannon) has left the room, but I can give him the assurances he seeks. As a proud Unionist, it is a delight to have such a diverse set of representatives from across all parts of the Union. It is wonderful to have contributions from all parts of the Union today, but financial services is a reserved matter, and the Treasury and Parliament will bring forward the right regulations. The regulators have hitherto been clear about some of the risks in this domain, and we seek to strike the appropriate balance between not regulating and introducing appropriate regulations while recognising the potential consumer harms and making sure that we have effective, clear, proportionate and timely regulation. Those seem to be entirely desirable attributes.
Martin Docherty-Hughes
I am afraid I am going to have to challenge the Minister on his point about regulation. We already have regulation, which he and I have talked about, especially in Committee on the Finance (No. 2) Bill. Pretending that we did not have levers for a technology that has, in its tech section, been around for 30 years is, quite frankly, pie in the sky. When will the Government implement the existing regulation around fraud to deal with some of the crypto bros we have all been talking about for years?
Andrew Griffith
Fraud sits separately as part of criminal law. Fraud is fraud, which is a long-standing offence. I am sure the hon. Member has studied in detail the Government’s most recent fraud strategy, which is excellent, and I would be happy to introduce him to the Government’s recently appointed fraud tsar, my hon. Friend the Member for South Cambridgeshire (Anthony Browne), who will redouble the Government’s focus on tackling fraud.
On regulation, the hon. Member for West Dunbartonshire (Martin Docherty-Hughes) will recall that we recently passed secondary legislation covering cryptoasset financial promotions, which has now been passed by both Houses of Parliament. The regulators are working on its implementation, which will happen later this year. Importantly, it will once again bring the domain within the realm of the regulators we seek. I should say that the Government have no plans for a crypto tsar, but I undertake to champion the sector, quite rightly, in my role as the Economic Secretary, because I am responsible for financial regulation in the UK.
Given the potentially vast benefits of cryptocurrency, it is right that the Government are leaning forward and taking proactive action to harness the opportunities. I recognise the balance struck in the all-party parliamentary group’s report. I also agree that the UK must show early leadership within this internationally competitive sector, which is why we are working flat out to give clarity and to implement the framework as quickly as possible. I welcome the offer of support from the hon. Member for East Kilbride, Strathaven and Lesmahagow—it is a dialogue that we should continue—and I welcome the work of the all-party parliamentary group. I have regularly engaged with the cryptoasset sector. Rather than set up a single taskforce, I am regularly having multiple engagements to try to move things forward.
Fellow parliamentarians have suggested that cryptoassets are akin to gambling. I refute that. That is not the Government’s position; the right bodies to regulate them are the financial regulators, with their deep expertise and understanding of the issues such as how to ensure that markets are fair and how to protect consumers. They have much greater resource. That is no reflection on anyone, it is simply an important fact.
Importantly, industry can see that the UK has clear and ambitious plans for cryptoassets. I was thrilled to welcome one of the world’s leading tech investors, Andreessen Horowitz, which has decided to open its very first international office—its first outside silicon valley—in the United Kingdom. I hope that it blazes a trail that many others follow, and that reaches into all parts of this wonderful United Kingdom because it is about much more than simply London and the south-east.
I hope that I have made it sufficiently clear that the Government want to be a leader in this space and on the opportunities for growth that it can bring to the UK economy. In my view and that of the Government’s view, the best way to do that is to continue to develop a comprehensive regulatory regime that will create a safe environment to encourage innovation while managing the risks. I look forward to continuing discussions with parliamentary colleagues on this important agenda.
Question put and agreed to.
East West Rail: Bedford to Cambridge
(11 months ago)
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Richard Fuller (North East Bedfordshire) (Con)
I beg to move,
That this House has considered the Bedford to Cambridge section of East West Rail.
It is a pleasure to serve under your chairmanship, Sir Mark, and to discuss the recent announcements on the Bedford to Cambridge link for East West Rail. I am grateful to Mr Speaker for permitting this debate, and for the attendance of colleagues from other areas affected by the decision in my area. The areas directly affected include the parishes of Brickhill, which I share with the hon. Member for Bedford (Mohammad Yasin); Clapham; Ravensden; Wilden; Wyboston, Chawston and Colesden; Roxton; and Tempsford. Neighbouring parishes will also be affected, including Great Barford, Little Barford and Everton.
Many people think that a railway from Oxford to Cambridge is a nice idea. I used to think that too, but as I have got into the details of the railway, and as the performance of East West Rail has rolled out, my confidence and support have been completely eroded. Parliamentary colleagues present today will have their own questions for the Minister, and I am grateful to him for being here and for his helpful interactions with me. I will share with him after the debate specific questions that constituents have asked me to raise with him, and perhaps he can respond to them in due course, but I want to highlight six key asks today.
First, will the Minister agree to visit my constituency to walk the proposed route? Secondly, will the Minister ask the National Audit Office to conduct an inquiry into the East West Railway Company to provide the independent scrutiny that has been lacking to date? Thirdly, will the Minister release the full business case and cost-benefit analysis after the “theory of change” assessment, including all details of anticipated passenger and freight traffic, a discounted cash flow and a net present value? Fourthly, will the Minister today instruct East West Rail to release more detailed maps online, so that people can see what the impact is on their parish, their street or their home? Fifthly, will the Minister instruct East West Rail to write to all property owners whose homes or land are within the current corridor, explaining what the specific impact will be on their homes or properties? Finally, will the Minister conduct a full evaluation of the current status of primary care supply and demand in my constituency, and of East West Rail’s impact on that?
Last month’s announcement by East West Rail was supposed to clarify, to be deterministic, to eliminate doubts, to sideline the nimbys and to propose a great national project of economic growth. It has failed on all those fronts. Instead of a final route, we now have a completely new twist to the story between Roxton and Tempsford, and there is more doubt about the form of traction, although perhaps that is just deflection by East West Rail. Far from sidelining opposition from nimbys, the announcement has galvanised a much wider political alliance of those who have lost faith in the project and the company and who believe there is a greener, better alternative to support growth where we live.
Wera Hobhouse (Bath) (LD)
On the question of growth, East West Rail should be a real opportunity for growth, but real problems will arise if the surrounding infrastructure is not there, which will put pressure on people. Does the hon. Gentleman agree that, together with East West Rail, the Government really need to work with local communities to create additional infrastructure, such as bus services and GP services, so that people see the benefits of that growth?
Richard Fuller
The hon. Lady is absolutely right, and that is why I circulated a letter, which all parties have signed, calling for exactly that: a greener alternative that focuses on sustainable growth and the work-life patterns that people want, not a 19th-century solution that is supposed to unlock growth on an unproven model.
One could sense the political support ebbing away from East West Rail as the announcement was made. The truth is that it has brought no relief to those most affected. I understand that, in a rearguard action today, Beth West, the chief executive of East West Rail, has said that she will approach Government to enable the purchase of houses that are currently planned to be demolished. That would help people who are already two or three years into uncertainty. As an additional ask, will the Minister instruct East West Rail to send an advice note to people whose homes or properties are within the proposed corridor and, included in that, the expected distance from the rail route itself? That will provide clarity to more people, particularly in the villages affected.
The Minister will know that we had elections recently, and that they have brought political change. I am not sure that the election results around the country were good for the Conservative party, but in Bedford borough, the Conservatives won the directly elected mayoralty for the first time ever. That was a repudiation of the Liberal Democrat Mayor, who had strongly supported East West Rail and such an environmentally destructive route across north Bedfordshire, with its phoney economic benefits for the town. Now with Tom Wootton as the Mayor, we have someone who is clear and determined in his opposition to the proposals presented by East West Rail. Conversely, in central Bedfordshire we also have a new leader—an independent, whose ward encompasses Tempsford, the site of a station that may herald substantial housing development, measured in the tens of thousands. Does the Minister appreciate the current scale of interest in alternatives to the project, given these political changes?
I have been contacted, without solicitation, by many sources and experts decrying the performance of the East West Rail Company. One constituent with expertise wrote to me to say:
“From my experience and observations the insincerity of the process pursued by EWR has been its most glaring weakness. In equal measure, however, any such criticism must also lie at the door of the Department for Transport who appear to be an acquiescing partner in the woefully inadequate activities of EWR. Unfortunately, the Government as a whole cannot escape association with the feeling of disillusionment generated through continuous stonewalling, lack of logical business planning, flouting of the law (freedom of information) and insincerity of approach.”
The route chosen by East West Rail is so full of twists and turns, and ups and downs, that it surely competes with what is probably our country’s bendiest road, the B3081 at Cann Common in Dorset—I am not sure whether the Minister knew that—which
“twists and turns more than many an Alpine climb.”
Those words could be applied to the route chosen by East West Rail. Back in the Victorian age, when Governments and others knew how to build railways, they chose a straighter, less hilly route. I encourage the Minister to watch the video from Alison, a constituent of the hon. Member for Bedford, who clearly outlines East West Rail’s irrationality in choosing a route with such topography.
One of the principals behind the campaign, BFARe, Bedford For a Re Consultation, wrote to tell me:
“The crux of the issue stems from the fact that the NSIP process contains a ratchet mechanism whereby the narrowing down of options precludes a fundamental review/rethink of alternatives when better evidence comes to light about previously discarded options. The starting premise for growth in the Arc was flawed and the initial public consultation into the scheme in 2019 was so badly handled that it shut out a lot of people and communities who stood to be most impacted by the scheme”.
Another constituent wrote to me expressing the view of many in my constituency:
“To get to Cambridge I personally would drive to the park and ride and get on a bus to the centre of the city; not drive to Bedford station, pay to park, buy an expensive train ticket to get a train which would not take me to the centre.”
I will spend some time on the cost-benefit analysis, because I think it is an open secret that nobody thinks that East West Rail is financially viable. Less than a year ago, the former Secretary of State for Transport, my right hon. Friend the Member for Welwyn Hatfield (Grant Shapps), when on the LBC radio show of Mr Iain Dale, had the following interaction. Mr Dale: “What would you cut from your Transport budget?” The former Secretary of State: “I would take East West Rail and I would remove.” Iain Dale: “Why haven’t you done it already?” The former Secretary of State: “Well, I haven’t had the opportunity.” Iain Dale: “You are the Transport Secretary. You could easily have done it already. You could have gone to the Chancellor and said, ‘I know you want to cut spending; here is one way you could do that.’” The former Secretary of State: “I have done that in other ways, but you have just asked what I would do as Prime Minister, and I am telling you I would cut East West Rail on what is called two and three, so there’s the second and third tranches of it, and save £3 billion to £5 billion straight away.” I therefore ask the Minister what he would do if he was Prime Minister?
A constituent wrote to me on the cost-benefit analysis and said:
“As someone who has had the ‘we intend to drive a railway line through your property’ notice recently I'd really like to get two questions answered, as this document failed entirely to do so. Where is an up to date business case? No-one has seen one, no-one affected believes a valid business case now exists…When will EWR engage directly with home owners on the route to purchase land?”
I have mentioned that second point already. East West Rail states in its documents:
“While the Business Case is still in development and won’t be completed until we’ve obtained the required consent for the Project...In the final weeks before publication, the proposals are subject to a cross-Government approval process.”
So it will get consent and then tell us what the business case is.
Appendix 5 to the economic and technical report discusses the “economic appraisal”. The report states that it will:
“compare benefits against costs over the life of a project or for a defined period of time. As is typical for infrastructure projects, the monetised impacts of EWR are projected to a point 60 years from entry into service. Both the benefits and costs are discounted and presented in 2010 prices and values in line with TAG guidance”—
transport analysis guidance. The report continues:
“The 60-year value is known as the Present Value (PV).”
It concludes:
“Standard approach to modelling and forecasting results showed us that, in conventional appraisal terms, the BCRs were ‘poor’ across all options”.
What does “poor” mean? It means benefit-cost ratios of 0.26 to 0.42—and that is based on the high-growth option. The high-growth option means that the best benefit-to-cost ratio is less than half the amount taxpayers will be asked to put into the railway. What does that mean in terms of cost to the taxpayer? It means £1.5 billion to £2.4 billion thrown away on a railway.
East West Rail seeks an escape route from such a common-sense economic appraisal. It states:
“These early estimates of costs were a key driver of the BCRs, which did not account for the transformational and strategic benefits considered later as part of the application of our Theory of Change.”
Over two chapters, East West Rail attempts to draw in every possible justification for its project. It talks about east-west connectivity, but it does not mention the cancellation of the expressway. It talks about housing costs, but it does not notice that the highest costs are where railways exist. Thus its proposals are as likely to increase house prices in areas where they are lower than in Cambridge than they are to lower house prices in Cambridge itself. It ignores the power of the market, with private companies already making decisions about where to locate if Cambridgeshire is too expensive. For example, Marshall Aerospace is very sensibly relocating to Cranfield Airport.
Before I entered Parliament, I was a partner in a strategy consulting firm, advising large businesses and utilities on investment decisions. I was also a partner in a venture capital fund, investing in the high-growth businesses of tomorrow. I am also a graduate of Havard Business School, and I can use all that life experience and those qualifications to assess the theory of change exercise by East West Rail as complete nonsense. What is the Department for Transport metaphorically smoking if it continues to go along with this economic illiteracy? I may have missed the financial conclusion of the theory of change exercise, but perhaps the Minister can advise us whether he will release the full financial case, together with all the assumptions and sources. Today, I issue a challenge to the chief executive of East West Rail to attend a public debate with me to argue the economic case for and against this project—openly, transparently and honestly.
We all know the real reason behind all of this: it is about housing. A constituent wrote to me saying:
“From the economic and technical report, it is clear that Bedford is viewed as simply a cheaper housing estate separate from where all the jobs are expected to be—in and around Cambridge. So what’s in this for Bedford?”
The real reason for East West Rail is the concreting over of north Bedfordshire. We have the issue of the Tempsford interchange section, with reports of up to 40,000 new homes in a village that currently has 400 residents. There is also Stewartby, in the Mid Bedfordshire constituency, where pages 92 and 93 of the economic and technical report suggest the railway will open up 70,000 jobs to households. In my estimation, that amounts to about 35,000 houses.
I am not a nimby on housing—we should all do our fair share—but as the MP for North East Bedfordshire I have to point out that there is considerable pressure on GPs, dentists and school places. Without investment in that soft infrastructure, it is very unwise to support additional housing growth.
Wera Hobhouse
Does the hon. Member agree that it is unfair to call people such as those in Mid Bedfordshire who are raising these absolutely real concerns nimbys? People need those services to go with the growth and the increased railway line.
Richard Fuller
I do, but I would not do what I understand the Liberal Democrats are doing in Mid Bedfordshire, which is to ask people which housing estate they do not like so that they can oppose it—that is not the right way to do it. However, as regards very large-scale developments, the hon. Lady is absolutely right, and we should have that consideration. In 2019 I stood on a manifesto calling for infrastructure first on these large-scale developments. I do not know whether the Minister can give me an update on that—it is not his remit, so I do not expect him to, but it is important, and he stood on the same manifesto as I did.
We should all do our fair share. I looked at the census data on the growth in households between the 2011 and 2021 censuses. The national average increase in households over that period was 6%, and I think we all feel that rapid growth in our constituencies. Perhaps unwisely, I then decided to look at specific constituencies. I looked at the Chancellor’s constituency, and he is doing his bit, with 6% growth. I looked at the Secretary of State for Transport’s constituency, and there was a 9% increase in households over that period, which is a substantial amount above the national average. The Minister, who is responsible for rail, had only 5% growth, but we will forgive him that 1%. In North East Bedfordshire from 2011 to 2021, there was 21% growth, which is already three and a half times the national average of growth in households. That is already putting pressure on GP services, dentists and school places. How on earth can I, as the MP for North East Bedfordshire, allow further pressure through an increase in housing growth until those problems are dealt with?
I want to turn to the environmental impact. I had an interaction today with Councillor Tracey Wye, who represents the ward that includes Potton. She wrote to me to say she would like to see a commitment that this project would be in harmony with the environment—something so future-proof, leading-edge and creative that we would be at the leading edge of sustainability and climate resilience. I could not agree more; she is absolutely right.
We have been a bit misled, I would say—perhaps that is unfair—about the electrification of this line. Originally, in the Railways Act 2005, it was going to be electrified as part of the electric spine. In the high-level output specification of July 2012, the line was listed as a new electric railway line. It was then dropped by East West Rail Company, but the company’s latest document now says that it may come back. Minister, which is it? Are we electrified or are we not? Is it battery powered or not? The announcement was supposed to clarify the form of traction, but it has done nothing of the sort.
I believe that Ministers know that the original plans by Lord Adonis in the 2017 “Partnership for Prosperity” report were bogus, and they have not kept pace with changes in working patterns and our greater focus on environmental issues. A previous Secretary of State cancelled the Oxford-to-Cambridge expressway in 2021, stating that
“analysis shows that the benefits the road would deliver are outweighed by the costs”.
Precisely that charge can be laid today against East West Rail, so why is the current Secretary of State not taking the same action?
A constituent wrote to tell me:
“From a net-zero perspective, how could they possibly introduce a new transport link, with the intention of running diesel trains on it until 2040 at the earliest? Hardly what you’d describe as inspirational or forward thinking.”
Another constituent wrote:
“As someone with long standing involvement in the biotech industry and academic community, I would question the whole rationale for the railway in the first place. Of course we all want to consolidate Cambridge’s position as a technology hub, but if science and industry in Oxford and Cambridge want to collaborate they’d do it remotely. East West Rail is a 19th century response to a problem for which we in the 21st century have solutions that are cheaper, better and less environmentally destructive.”
I call on the Minister to consider those solutions.
Sir Mark Hendrick (in the Chair)
I remind Members that they should bob if they wish to be called in the debate.
Daniel Zeichner (Cambridge) (Lab)
It is a pleasure to serve with you in the Chair, Sir Mark, and I congratulate the hon. Member for North East Bedfordshire (Richard Fuller) on securing the debate. We have had many animated discussions about this subject in the past, and it will probably not surprise him to know that I take a slightly different view, but I commend him for the powerful way in which he has represented his constituents. I suspect others will do the same, because infrastructure projects of this type always cause problems for local constituents, and I have every sympathy with them.
This debate about East West Rail, the Cambridge to Milton Keynes to Oxford link or the arc—call it what you will—has been going on for a long, long time. I have been involved in discussions and debates about it for many years, and frankly I want to move beyond the debates and get the railway done.
I pay tribute to the many people who have campaigned tirelessly on these issues, including those noble councillors who set it all in motion many years ago and the East West Main Line Partnership. I am grateful for the work of the National Infrastructure Commission, which the hon. Gentleman mentioned, and the all-party group for the east of England, which I co-chair with the hon. Member for Waveney (Peter Aldous). I wish to make three main points relating to the history and the purpose of the project, and the economic and environmental value of getting it delivered.
It has been a long-running goal of rail enthusiasts to restore the lost line between Cambridge and Oxford, which has been made harder by the loss of some of the old Varsity line route. I remember conversations some 20 years ago at least, when some foresighted people were talking about it, and over time the issue came to be picked up by local authorities, which could see the broader benefits. By the time I came into this place in 2015, that campaign was picking up pace. In the subsequent eight years, I can barely recall all the conferences, party groups, business tsars and leaders who have come and gone, some of whom were never appointed in the first place —“announcements and then steps back”, as it has been described. I fear that is all part of the rather hopeless way we go about building infrastructure in this country.
I remember that, at one Budget, the then Chancellor invited Members to show up at a surgery-style session with the Minister in one of those gloomy ministerial offices down the corridor. The then Minister, who shall remain nameless, looked absolutely astonished that anyone had actually shown up. We then had a rather civilised conversation—I think that is when the business tsar came and went—and I put to him the questions that I have been putting for a number of years: what is this line for, and will it be electrified? Predictably, answer came there none.
I put exactly the same question—what is the line for?—to one of the senior civil servants who had been working on the project at one of the many annual conferences about the arc. I was absolutely flabbergasted to get the reply that they were planning to consult on exactly that issue, which seems to be rather the wrong way around.
Back in 2017, at another one of those conferences, I challenged the then chair of the East West Rail Company over electrification, and he publicly promised that not a litre of diesel would be bought. As we have heard, that issue remains unresolved—although given that we are still quite a long way off seeing any trains, I suppose that pledge has been honoured so far.
At that time, the Government were planning to build not only a new rail line but, as we also heard, a major new road. Considerable time and effort were spent on that. I must say that I always opposed the road on the same line that has been mentioned: it is a 19th-century solution to a 21st-century problem. It was absolutely the wrong thing to do when we were trying to encourage a modal shift, and I am glad that it was finally abandoned.
I might be testing the Minister slightly, but can he tell us how much was spent on that abortive project, how many civil servants are still working on the arc project—including beyond the Department for Transport, in other Departments—and how long that project team has been going? I seem to have been aware of it for a number of years, and we really need to see some output from all that work.
That brings me to my main point. As I have said, I understand the concerns about the route. First, I am glad that the southern route has been settled on near Cambridge, because overall that seems to be the most sensible. However, the reason for my unswerving support for the project is that I believe that the environmental and economic benefits will be significant. Environmentally, we know that we have to move people off roads. It may be that the world is changing, but I think—and the evidence is rising on this—that people will want to get back to face-to-face contact.
Wera Hobhouse
We are in a climate emergency. If people want to really see the benefits of a new infrastructure, they need to see the benefits to both the environment and their health. The Government are not making electrification the main priority. Is that not really what this line should be about—electrification?
Daniel Zeichner
I served on the Transport Committee with the Minister for a number of years, and I appreciate that these issues are not straightforward or simple, but the hon. Lady is absolutely right. In the end, electrification is obviously the way we should be going.
Let us also look at the time savings for people. In the early-morning rush, it can take almost an hour to get the nine miles from Cambourne into the centre of Cambridge by car. By rail, that would be reduced to 15 minutes. Bedford to Cambridge by car is 75 minutes—as I discovered to my cost a few weeks ago—and 90 by bus; but, I am told, it takes 35 minutes by train. That is transformational.
I fully accept that this is partly about the future success of Cambridge, because we are struggling hugely to find housing for the people we need to maintain Cambridge’s position driving the UK economy. It is not an unimportant point, although I accept that the location of that housing will not always necessarily appeal to everyone. Cambridge housing is hugely expensive; we all know the figures. Development pressures on my city are intense, and we have an acute shortage of people. Ironically, those are not necessarily the world-leading people but all the people we need to run the basic services. Even the best scientists in the world require their lunches, and offices that are cleaned and maintained, and we are struggling to find those people for lower-paid jobs. We therefore need affordable housing.
I accept the point that house prices do not necessarily always conform to the economic models that some people would like to propose, but we need housing that is available via quick, reliable and environmentally sustainable transport links. Those points have long been made by the leaders of Cambridge City Council, Lewis Herbert and Anna Smith.
In addition, the project would begin to open up prospects for more jobs in high-quality, environmentally sustainable communities along the arc. That is an important point. If we are building these new communities, it must not be about just a developer’s charter; they have to be the kind of communities that will attract the people who will be part of our future—a success in both Cambridge and Oxford.
I accept that there will always be debates about the economic theories of how development works and what the drivers are, but I am pretty convinced that this must be the way forward, and not just along the arc. As others, including Eastern Powerhouse, have outlined, it potentially unlocks further opportunities to the east as well.
I will conclude by making some points about the economic significance of and for Cambridge. The region already adds more than £110 billion to the UK economy every year, and the Cambridge sub-region is a major contributor to the Treasury. Frankly, reinvesting some of that to improve the local quality of life is hardly a unreasonable demand. Cambridge and Oxford are world leaders in venture capital investment, with hugely important research and development sites.
I believe that East West Rail can help to unlock the physical constraints that are currently a real challenge, and help us to get the people we need to remain in our world leadership position. There is strong support for the line from the local authorities and the business community; indeed, I was struck by a recent briefing from the business-led organisation Cambridge Ahead, because this was one of its top priorities. I know that when Government support seemed to be wobbling a while ago—I think we heard a characterisation of that earlier—the University of Cambridge was among the organisations that were particularly concerned about the prospect of the line not going ahead. I am glad that the wobbling seems to have settled, that we have a Minister who is firm in his intentions, and that the current version of this Government seem to understand the significance of the project.
I end where I began: there will always be arguments over routes and local impact, but I urge people to step back, look at the bigger picture and get this electrified railway in place.
Anthony Browne (South Cambridgeshire) (Con)
It is a pleasure to speak under your chairmanship in this important debate, Sir Mark, and I congratulate my hon. Friend the Member for North East Bedfordshire (Richard Fuller) on securing it. We have had many discussions about this issue over the years, including with my constituency neighbour, the hon. Member for Cambridge (Daniel Zeichner). My constituency is literally in between the constituencies of Cambridge and North East Bedfordshire —they border mine on either side—and both Members’ excellent speeches raised both the pros and the cons of East West Rail, which affects my constituency.
My job is to represent the views of my constituents, which are very split. There are those who are massively in favour. Cambourne, which the hon. Member for Cambridge mentioned, is the only town in my constituency that will be affected by East West Rail, and the people there are very frustrated at how long it takes to get into Cambridge city. A lot of them work there, and it can them an hour to get there on the train. A station is being built at Cambridge South, which the Rail Minister, my hon. Friend the Member for Bexhill and Battle (Huw Merriman), visited recently. It will take the people of Cambourne 11 minutes to get there, and 14 minutes to get to Cambridge Central, which will be transformative for their lives. The business groups and the university are in favour of the new line, and they regularly write to me about their support for it.
On the other hand, there are villages along the line where it is all downside and no upside, such as Haslingfield, Harston, the Eversdens, Hauxton and so on. They will suffer a railway line going right through them, and probably the worst affected will be Highfields Caldecote, where the rail line will clip the corner of the village. The housing being built there now will presumably have to be knocked down. I had a very impassioned email from Jason Western, who runs the Fortitude Fitness Centre, which is an outdoor assault course. He has built it up over 20 years, and the railway line will go right the way through it, affecting a lot of jobs. I can completely understand the distress that it will cause to people like that.
I want to address whether the East West Rail line is needed at all. My hon. Friend the Member for North East Bedfordshire made so many good points that there is not a huge amount I can add, but I also want to raise some of the main issues. Since being elected as an MP, I have been in discussion with the Government about whether the line is needed, and there have been various wobbles. I was told at one point that it had been cancelled and that we were just awaiting the announcement. I was awaiting the announcement, which did not come, and now it has been re-announced. That was because the calculation at the time was done under the Green Book methodology—the standard transport methodology, which my hon. Friend referred to—which produces benefit-cost ratios of just 0.27. That is astonishingly poor—so poor that we would never build a transport project like that. However, East West Rail has come up with a new methodology—the “theory of change”, which he referred to. It is not from the Green Book but from the Magenta Book, and it talks about the impact of the line on overall growth in the area. The project has certainly mutated from helping people to travel more quickly from Cambourne to Cambridge, to helping to supercharge growth in the area.
I do not know quite where it fits in my hon. Friend’s ranking, but I know that the growth of housing in South Cambs over the last 20 years has been about three times the national average, or maybe even higher. In the district of South Cambs, there are three new towns. I laugh when my colleagues complain about a new town or 500 houses, because I have tens of thousands of new houses in my constituency. There are already plans to build 57,000 new houses over the next 20 years, which is as many as in Cambridge city at the moment. We will be doubling the number over the next 20 years—that is what is planned at the moment.
East West Rail’s business case is clearly predicated on massive housing growth. That growth—this is all hidden in the small print, which is so small that I cannot read it but have to interpret it—is based on 23,500 new houses in Cambourne and 19,000 in Tempsford, just south of St Neots. I do not know whether that is in addition to the housing that has already been planned or whether it is included in the previous figures, which makes a huge difference. Such growth has a huge impact on neighbouring villages, such as the gorgeous little village of Knapwell, with only 45 houses. Knapwell is very remote, and its residents are quite understandably worried about being completely swallowed up. As various Members have mentioned, we also have to worry about all the soft infrastructure when building on that extraordinary scale.
One binding constraint is not mentioned at all in the 2,000 pages of East West Rail documentation. Although we have not read it all, we have done word searches. I entered the word “water” to find that it only appears in the name Waterbeach, which is one of the new towns. This is not some sort of made-up environmental issue, whereby we are worried about things in 20 or 50 years’ time; we do not have enough water in South Cambridge to serve the current housing and agriculture. We have an aquifer, so all the water comes in locally and is not piped in from the rest of the country, but we use more each year than is replenished naturally by rainfall, so the water level drops. The ponds, rivers and streams get completely dried out in the summer, which is terrible for wildlife. We are already building all these houses, and the Environment Agency is very concerned that we just do not have enough water, even for the houses on existing projections. I hate to think what those toilets and showers will be like without water.
East West Rail and the Department for Environment, Food and Rural Affairs really need to be joined up on water supply. There is a plan at some point to build a reservoir in the Fens and pipe the water down, but the existing planning structure means that it will probably not be for 20 years or more. Will that provide enough water for all this housing? Will we need two new reservoirs? How will it fit in? It really needs to be joined up, because we simply cannot build the housing envisaged in this document without the water supply. We need to think about that.
I would love to see the proper business case. We keep being told that it will come at some point, but who is responsible for its delivery? Is it the Department for Transport, the Department for Science, Innovation and Technology, the Department for Levelling Up, Housing and Communities, or DEFRA? Who will oversee it? Who will be responsible for the spatial plan? Will it be the local authority? There has previously been discussion of development corporations, about which I made my views incredibly clear. I am not opposed to development corporations in all situations, but if they are not about press releases, they are about solving a problem that we cannot solve in any other way. In this case, development corporations should only be used as a solution to an existing problem. I cannot see that that would be the case, so I see no case for development corporations.
As my hon. Friend the Member for North East Bedfordshire mentioned, one of the main concerns locally is the exact design. The 2,000 pages contain no detail about what the railway line will look like: no schematics, no visions, and no drawings or visualisations. It is difficult for the villagers impacted by the line to appreciate how it will affect them. For people living right by this thing, that is incredibly important to know, and makes all the difference. I will come to some of the issues for the individual villages in a minute.
My final main point is about the property blight. I mentioned my constituent who has a fitness centre, but there are lots of people whose properties have been quite severely blighted by the plan, including those who had just moved in when they found that the railway would be built next to them and they could not move away again.
My hon. Friend mentioned that East West Rail had been quite proactive. I have been strongly pushing it to address the blight issue way ahead of the statutory requirement, because the law operates far too much in favour of the infrastructure and not householders. It has introduced a scheme to help people buy properties beforehand if they want to move, but they have to prove they have a reason to move and go through a whole load of hurdles. It should at least be geographically defined, so that if people live within a certain distance of the railway, they can automatically sell their house.
The other issue is the need for additional compensation. Our compensation for compulsory purchase in the UK is not generous enough. The value of a house is not just its market value. My constituent has built up his business over 20 years—who knows the value of that piece of land? I do not know whether he has planning permission, but he will have to end up moving his business, and that is a huge disruption. I know of many homeowners who have built up their houses over 20 years and made it a forever home but will suddenly have to sell it. I urge the Department for Transport to look at giving people 10% or 20% above the value of those houses, because it is not fair on them to say, “You’ve got to move. We’re just going to give you the market rate.”
I want to put on record some of the impacts along the route, because these are questions that my constituents and their various campaign groups are asking. There are lots of campaign groups in my constituency, such as Cambridge Approaches, that are doing valuable and important work on this. I mentioned Highfields Caldecote, where the railway line is literally going through the top end of the village. Is it going under the A428 at that point, which is what East West Rail says? I cannot see how it can do that, because the A428 is pretty sunken underground already. At one point, there was going to be a huge embankment 30 feet in the air. Will it be at that level, or will there be a cutting? If it is under the A428, which is right next to it, there would have to be a cutting. This makes a huge difference to people, but there is no information about it.
In the villages of Great and Little Eversden, will there be an embankment at ground level or a cutting? Again, there is no information about that. The line goes through Chapel Hill, which is an iconic local hill where we get fantastic views across South Cambridgeshire, and it is called Chapel Hill because of its historic significance. Will that be fully cut into, which was the original plan, or will it be tunnelled? I hear lots of suggestions that it will be tunnelled, but without any concrete commitment. If it is tunnelled, would it be cut and covered or bored?
There is a possible road closure between Harlton and Haslingfield. Would that be cut and severed? Would the villages be separated? In Harston, will it go over the A10—the main road into the south of Cambridge—or under it? We have no information about that. Would the junction with the King’s Cross line at Harston be a grade separated junction? Would the railway be taken right up into the air and back down again, or could it be done at grade level, which would have far less impact?
What about the road between Harston and Newton? That is not just a road between the villages; they share shops and a school. The people of the village of Newton—which is next to the village I grew up in and has a fantastic pub, the Queen’s Head—would not be able to go directly to Harston. It would be incredibly disruptive to their lives, and the last plans published said that the road would be severed.
The railway line goes between the villages of Hauxton and Little Shelford, and there is currently a level crossing. Department for Transport guidance now is that there should not be any new level crossings, so how will it be done? There is housing right by it. Will it be tunnelled? Will it be bridged? The people there are really worried that the road will be cut in two.
In Great Shelford, as we get into Cambridge, will four-tracking be required? Will the Long Road bridge have to be taken apart? Will Shepreth branch junction at Great Shelford be grade separated? Again, if it is, that will have a dramatic impact on the village, because the railway line will have to be taken right up into the air and back down. If it is grade separated, how would that be done?
There are so many questions about this, and I wanted to put them on the record. I have been trying to get answers out of East West Rail. It needs to do a lot more work on mitigation; I know that it has done quite a bit already, and I commend it on that, but clearly it has not got there yet. Where full mitigation is not possible, I urge the Government to look at how properly to compensate people for the loss of their homes and businesses, not just at the market rate before the railway was proposed but for the damage, loss of amenity and so on.
Finally, the Government need to review the whole issue of housing. Whatever the arguments for East West Rail in terms of making it easier for people to travel from Cambourne to Cambridge, it cannot be used as an excuse to increase the amount of house building, which is already one of the highest rates in the country, and there is absolutely no water. I urge the Government to address all these topics.
Mohammad Yasin (Bedford) (Lab)
It is a pleasure to serve under your chairmanship, Sir Mark. I thank my constituency neighbour, the hon. Member for North East Bedfordshire (Richard Fuller), for securing this debate, which is of great importance to our constituents.
I do not believe that any people along the proposed East West Rail route are impacted as negatively as my constituents. It is for them that I stand in opposition to the route alignment that was confirmed at the end of May. The proposed six-track route will impact at least 66 properties in Bedford, including the demolition of 37 residential properties based on reasonable worst-case railway corridor width and potentially more demolitions as part of the station redevelopment. I am a big supporter of green public transport, so I supported the East West Rail route in principle to bring much needed connectivity and growth opportunities to Bedford, but I have always opposed a route that requires the demolition of homes.
East West Rail has said that it reviewed both a four and a six-track alignment, but preferred the option that, in its view, better serves the wider rail line, although that comes at the expense of homes in Bedford. For years, many of my constituents have been living under the spectre of house demolition. People’s lives have been put on hold. They have been held ransom by a Government who did not care about them and were too incompetent to make a decision. Selling their homes has been an arduous process so far, and I sincerely hope that they are not further distressed by it. We also need to see far more detailed proposals about what is happening to the land around Bedford Hospital for the new Bedford St John’s station.
I hope Ministers will vastly improve their decision-making processes, ensure that East West Rail treats people whose homes are being stolen from them with the respect and compassion they deserve, and ensure they get the necessary support, and fair and timely compensation, for their losses. The base rate for this should be at least in line with that of HS2, plus inflation.
I have always maintained that East West Rail should be electrified or carbon free from day one, and I am disappointed that the Government have not committed to low or zero-emissions rail. It is outrageous that they are even thinking about a new rail project that is not powered by green technology. I hope the Minister will commit today to a green East West Rail, which will be vital if the Government have any chance of meeting their net zero targets.
I am disappointed that East West Rail has still not published a formal business case. The strategic case and the technical report amount to no more than a glossy corporate dream. There is no detail. We all know that the eastern region is one of the most under-invested places, so of course the growth potential is significant, but citing The Economist as recognising that growth potential as a strategic case is not good enough. We need a proper business case. I question why it has not materialised so far and why we are expected to wait another year to see it. It should be done before the fact, not after. We do not want another HS2 on our hands, with chaos and spiralling costs because we forged ahead with unsound plans before due diligence was complete.
I hope the Rail Minister will do more today to prove the business case for East West Rail, and I hope that business case includes the concerns of Bedford businesses about the potential for disruption and loss of trade that building works would cause. These proposals will rip the heart out of strong and vibrant communities in my constituency. These are people’s homes. Families have been living in turmoil for years, and now their worst fears have been realised. To many who responded to the last consultation, including myself, it feels like we have not been heard. There are lots of words in the consultation response to say, “We listen to people’s concerns,” but nothing has changed. I hope that the Minister will give a commitment today that if the majority of the residents respond in opposition to the plans in the statutory consultation, the Government will listen and not approve the proposal.
Mr Tanmanjeet Singh Dhesi (Slough) (Lab)
It is a pleasure to serve under your chairmanship, Sir Mark. I extend my gratitude to the hon. Member for North East Bedfordshire (Richard Fuller) for securing this important debate. It is clear that the debate has allowed Members from both sides to diligently voice their concerns on behalf of their constituents, and I commend their passion in ensuring that the voices of local people are heard. I hope the Minister has been listening intently and will address the questions posed to him clearly and transparently.
Despite being the Member for Slough, I am not stranger to Cambridge or Oxford, having studied at both universities, and I appreciate the importance of joining these two great cities by rail. More recently, I have had the pleasure of visiting Winslow station. I have also spoken to East West Rail in Milton Keynes, and visited some excellent companies in Milton Keynes that are local to this project, including on the Aylesbury spur, which would no doubt enhance the Bedford to Cambridge connection. Indeed, the line runs through some of the most productive and fastest growing towns and cities. The area supports over 2 million jobs and adds over £110 billion to the economy every year.
As shadow Rail Minister, my support for better rail connections should come as no surprise. As my hon. Friend the Member for Cambridge (Daniel Zeichner) eloquently explained, connecting our great towns and cities through rail links has been proven time and again to provide more opportunities, bolster local economies, unite communities and address the pressing climate crisis. I will always be an advocate for investing in our rail network to make it work for passengers, local communities and the rail industry. That is why it is so important to address the concerns laid out today in order to progress with the project in a way that benefits local people, businesses and passengers.
Putting it plainly, we should not have such limited public transport along this route. Currently, travel from Bedford to Cambridge is restricted to an hour and a half bus service. With the new connection, that is cut to a mere 35 minutes. Quicker journey times, emissions slashed by up to 76% and pressure taken off local roads: the benefits of rail are clear. Those within commuting distance will be increased, with a wider pool of talent for businesses and universities, increasing jobs and opportunities. No wonder, as my hon. Friend the Member for Cambridge again explained to us eloquently, that the top 50 employers in Cambridge have written to the Government in support of the scheme. The aim of the project—to deliver people a better and more convenient way to travel locally—must be maintained alongside local input, consultation and co-operation, not without it.
As hon. Members have outlined, the line covers an area that is going through a great deal of change and growth. This period of flux will undoubtedly mean that significant decisions will be made on infrastructure. Increasing the number of services to meet the existing and growing demand in the region is vital. Failure to provide Government funding to ensure that these needs are met is simply unacceptable. Across our country we have seen people struggle to get GP appointments, a place at their local school or on to the property ladder, and that is exacerbated in areas of high growth and development, as has been highlighted by hon. Members today. That is why progress on the project should be completed alongside public consultation, with local authorities and local people ensuring that decisions are made to benefit the communities who live in those areas.
I feel like a broken record when I say that progress on the project has been characteristically slow, as with countless other rail projects on this Government’s watch that we have debated in the main Chamber and in Westminster Hall. Just last year, the project was rated as “red” by the Infrastructure and Projects Authority’s delivery confidence assessment, which noted that the later stages of the project “appear unachievable”.
The National Infrastructure Commission, no less, recently commented:
“The region presents a significant growth opportunity for the UK but this will be missed if long term certainty is not provided.”
It seems that the Government are lagging behind in all areas. We must build a network for the future, but just 2.2 km of electrified track was added to our rail network last year, while other European nations and others around the world have been full steam ahead—no pun intended—on full electrification. Why has the Minister not insisted on full electrification for the new route, as has been highlighted by my hon. Friends the Members for Bedford (Mohammad Yasin) and for Cambridge, and others? What considerations has he made of the use of trains that are not diesel-only?
As with much of our railway, the Government’s lack of leadership and dithering has impacted progress. The impact of sky-high inflation on building costs, and ongoing Government uncertainty, have not been unique factors in the scheme. Although I am grateful for the Department’s latest update, I am sure the Minister can see that concerns remain. Most notably, perhaps, is the proposed demolition of homes in the constituency of my hon. Friend the Member for Bedford, who is a persistently strong champion and voice for his constituents. The Minister should directly address those concerns and meet my hon. Friend to discuss next steps. This is clearly devastating for the affected communities, as in the constituencies of the hon. Members for South Cambridgeshire (Anthony Browne) and for North East Bedfordshire.
An updated formal business case should also be published. It is simply unacceptable that we are progressing without that update. Clear and effective consultation is clearly the best way forward. The intentions of the project have always been to serve the local community better, so we must ensure that the final project achieves that. I assure hon. Members on both sides of the House that I will personally raise these matters directly with the chief executive of EWR in my planned meeting with her.
EWR must have direct engagement with affected residents to provide all the support that will be needed through the process, particularly regarding compensation and the sale of nearby homes. Will the Minister confirm what action has been taken and what co-ordination there will be with local representatives—Members of Parliament or councillors and authorities—following the recent announcement? Delivering rail projects with local communities’ needs at the very heart should be second nature to a Government in power for 13 years, but sadly they are more chaotic than ever.
We in the region will now have inflicted on us another by-election in which constituents will no doubt deliver a resounding message as to why they will not reward failure. Those that lose out most from Government incompetence are ordinary working people, so I hope the Rail Minister will use this opportunity to address the concerns laid out today. With our railways readying to go full steam ahead, we can ill afford to renege on further infrastructure promises. The people of the north have been betrayed. We cannot allow the people of Bedfordshire and Cambridgeshire to be betrayed. We cannot allow passengers to be let down once again.
The Minister of State, Department for Transport (Huw Merriman)
It is a pleasure, Sir Mark, to serve under your chairmanship this afternoon. I thank my hon. Friend the Member for North East Bedfordshire (Richard Fuller) for securing this important debate on East West Rail from Bedford to Cambridge. I have listened carefully to his representations. As everyone in the debate has said, he makes excellent points and sets us a challenge. I am keen to work with him to address those points.
I have noted the six or seven points he raised. I will go through some this afternoon, but I will write to him on all of them. I want to work with him to ensure the project is delivered in a way that maximises benefits for members of his constituency and the country as a whole. I am well aware that, when it comes to building new railways, some are very much in favour because they benefit directly or indirectly from the delivery of that new railway. We will always call for infrastructure to be delivered before housing. This is an opportunity where that can be delivered.
Of course, there are those whose lives are directly impacted and blighted by railways, who suffer as a result of the build. I have every sympathy with them, and I am keen to work with my hon. Friend and other hon. Members to minimise that and to give as much information, clarity and frankness in the process as we can. I say that as someone whose family lives in Buckingham and is well aware of the impact of HS2. “I get it,” is what I want to say this afternoon.
Let me speak a little about the project and then go into detail as I go along. The East West Rail project will improve the UK economy, supporting ambitions for the Oxford to Cambridge region, to add £103 billion extra gross value added by 2050, securing the UK’s future as a world leader in science and technology. East West Rail will improve connectivity and ensure growth is spread across the region as a whole. The route update announcement, which was mentioned, was laid before us on 26 May, and set out the preferred route alignment between Bedford and Cambridge. That would serve new stations at Tempsford and Cambourne, and approach Cambridge from the south, enabling services to call at the new Cambridge South station and to serve the world-leading biomedical campus. As my hon. Friend the Member for South Cambridgeshire (Anthony Browne) mentioned, I was at the site a couple of weeks ago. It is absolutely fantastic; people are incredibly excited about what this railway will deliver through not just better connectivity but allowing more jobs to flow to the campus, enabling it to succeed and to take on the world’s finest. I am very excited to have been able to announce the funding.
The route update announcement is a milestone that reaffirms the Government’s commitment to the project, along with funding of £1.3 billion to deliver the first connection stage of East West Rail between Bicester and Bletchley. It is part of our national commitment to unlock transformative growth within the globally renowned Oxford-Cambridge hub of science, research and technology. It will transform connectivity for residents and businesses in addition to supporting economic growth and local housing plans. Again, I acknowledge the challenge that housing can deliver in that particular part of the country. The support from Cambridge University, biopharmaceutical companies such as AstraZeneca, Oxford University science park and local enterprise partnerships across the route demonstrates the confidence that key stakeholders and businesses have in the benefits of East West Rail.
With every project at this scale, important decisions must be made to optimise and maximise the benefits it can provide. The proposal to build new stations at Tempsford and Cambourne will enable communities to grow, provide opportunities to improve biodiversity and give people increasing access to green spaces, significantly outweighing the benefits that a St Neots station could provide. As I have stated, I recognise that the proposals will have an impact on some homes and businesses. In particular, I understand the concerns of residents immediately to the north of Bedford station.
The hon. Member for Bedford (Mohammad Yasin) mentioned a six-track rather than a four-track proposal. That is being put in place to regulate the disruptive performance on the existing Midland main line, as well as to mitigate congestion and provide options for future growth. It is an example of where we are building for the future, not just through East West Rail, but to deal with a spot of disruption that already exists. By going to the six-track proposal, we will deliver better infrastructure and a better service on both of those lines, though I do recognise that it has more of an impact on residents.
For local residents who are affected, East West Rail Company has launched a need to sell scheme, designed to support residents who have a compelling need to sell their property but are unable to do so other than at a substantially lower value because of the railway. On the point made by the hon. Member for Slough (Mr Dhesi) that I should meet the hon. Member for Bedford, I did that very recently. We discussed the case of one of his constituents and were able to talk about a solution. I continue to make myself available to all hon. Members on behalf of their constituents who are impacted.
East West Rail Company has also proposed to provide a new relocated station building at Bedford Midland, which will offer opportunities for local authorities to partner with East West Rail to deliver a destination station, if supported by third-party funding. Alongside that, the existing Bedford St Johns station will be relocated so that it is closer to Bedford Hospital, providing better connectivity for patients, hospital staff and visitors. Proposals for East West Rail will also mean a significant investment in the Marston Vale line between Bletchley and Bedford to provide a step change in the frequency of services.
As the House and my hon. Friend the Member for North East Bedfordshire will know, East West Rail Company is holding public information events to answer the questions that have been raised by Members on behalf of their constituents. It is also meeting with stakeholders along the line of route. I will take some of the questions that have been posed, particularly by my hon. Friend the Member for South Cambridgeshire about the design stage, and get responses to them.
A statutory consultation is planned for the first half of next year, in which the next stage of technical and operational design proposals will be presented alongside plans to mitigate any associated environmental impacts. East West Rail Company has committed to delivering a 10% biodiversity net gain across the entire project, and traction options such as full electrification along the whole line of route are currently being reviewed.
Phase 1, which goes from Oxford over to Bletchley, is a mix of an existing line and one that once was a railway line. Phase 2, from Bletchley to Bedford, is an existing line. In that sense, electrification is a more difficult challenge, because bridges and other infrastructure are already in place and would have to be significantly changed. Where we have built new bridges and infrastructure, we have done so with electrification for the future in mind, so there is that pathway available to it. Of course, we are looking toward hybrid options in future as far as trains are concerned, which would enable a better, decarbonised line of route. I know all hon. Members have mentioned that point.
The business case was also referenced. As is standard for a project of this size, a final business case will be put forward once planning consent is secured. Before then, a development consent order application will be prepared in accordance with the Planning Act 2008. East West Rail demonstrates the Government’s commitment to supporting growth and improving connectivity for people and business across the Oxford and Cambridge region.
Let me come to some of the points that were raised—my hon. Friends worked hard to raise as many as they could. The first question was, will I walk the line of route? I am not sure whether that is an invitation to walk the entire line of route or selected parts of it, but I am certainly able to say yes to the former—sorry, I should say the latter. I should get that right for Hansard. Yes, I will walk parts of the line of route so that my hon. Friend the Member for North East Bedfordshire can show me the areas that are impacted. Indeed, we did something similar when we looked at the options of coming into Cambridge from the north or going from Cambridge to the south, and I will of course do that in my hon. Friend’s constituency.
My hon. Friend mentioned the new Mayor, Tom Wootton. I met him and he laid out his arguments as to why he believes the line of route should come through the south rather than the north of Bedford. I have said I will write back to him to explain our thinking behind that and I am very happy to continue to liaise with him. We need to ensure that our case is the strongest case and cannot be rebutted, and that it is not only open and transparent but subject to challenges that will make it more robust. I am very keen to do that.
My hon. Friend also asked whether the National Audit Office will conduct an inquiry. We can consider that option. I always enjoyed working with the NAO when I was Chair of the Transport Committee; it has a lot of value to add when it comes to ensuring projects are built to time and cost. External assurance is provided by the Infrastructure and Projects Authority, whose next review is expected before the statutory consultation. It works as an external review body for the project.
My hon. Friend asked whether I will instruct East West Rail to release the maps. We can check what further information and detail can be provided. East West Rail does not yet have a detailed design for every single area, but where it has the details, it will publish them. It has done so in the Poets area of Bedford. I am very keen that we do that at the earliest opportunity to give residents and businesses impacted by the line as much clarity and detail as possible, so I will look at that point for my hon. Friend.
My hon. Friend’s fifth point was about writing to property owners about the current corridor. East West Rail has written to property owners about the route update announcement and will engage with them further in the lead-up to the statutory consultation. Again, I am committed to ensuring that more detail is provided. I will come back to my hon. Friend on all those points and the one or two that I have not addressed because I have not had the time.
The hon. Member for Cambridge (Daniel Zeichner) asked how much money has been spent on the Oxford-to-Cambridge road that was proposed and then stopped, and how many officials are still working on it. I can tell him that £28 million was spent on the development project, and there are no officials working on it right now. I hope he is impressed with that transparency and immediacy.
My hon. Friend the Member for South Cambridgeshire asked who will be responsible for producing the business case. It is East West Rail in partnership with the DFT. We will work closely with the Treasury to make sure that is properly done in the manner that one would expect. There was talk of the theory of change exercise. That methodology is validated by the Government. We have previously discussed the fact that the Green Book is not particularly good at taking into account regeneration and decarbonisation. Changes have now been made; I welcome them because they mean that transport, and certainly rail projects, score much higher. We will of course ensure that that is rigorous, and that the preparation is transparent. I note my hon. Friend’s expertise in this area from his academic background and his business work. I am keen to work with him to ensure the business case works and is in the right form. He can take that assurance.
The hon. Member for Slough visited Winslow. I did so too, and I was actually brought up a few miles away. I am a supporter of this project because when I went to the further education college in Aylesbury, I used to go over that bridge every day, and there was nothing going on underneath it. Now, as the hon. Gentleman is aware, there is a station that will be ready to be opened shortly, and off the back of that we have the housing and the school. The secondary school in Winslow closed down. I was at secondary school in Buckingham, and all the pupils had to be bussed over. That no longer has to happen, and it is the railway that has allowed that to be built. Winslow is a good example of the fact that, if we build the infrastructure, the rest follows.
I am keen to work with the hon. Member for Slough, because it is clear that he supports East West Rail and wants it delivered. I support his support, as it were. He talked about the electrification miles that have been built, but I have to correct the record. In the past 13 years, while we have been in government, 1,200 miles of railway has been electrified. In the previous 13 years, when the Labour party was in power, the figure was a paltry 63 miles. I am sure the hon. Gentleman will not wish to give me any lessons about how to electrify lines, because we are doing that.
Huw Merriman
I know the hon. Gentleman is going to tell me that he will do a lot more in the future, but the trouble is that we only have Labour’s record to judge him on, not his future deeds. Go on, have a go.
Mr Dhesi
I would like to rebut what the Minister just said. I referred to what has been electrified in the past year, which is a mere 2.2 km of rail line. The Minister is right to point to the Conservative-led Governments’ record in the past 13 years, but having been Chair of the Transport Committee, he will also be aware that the previous Labour Government’s main priority was to invest tens of billions of pounds in our rolling stock to get rid of the old, inefficient trains that we inherited from the previous Conservative Government after 18 years of grinding public transport to a halt. Having got the rolling stock back up to full speed, the last decade has been a lost decade for electrification, which is what other European Governments have done. That is why I said that the Minister and the Conservative Government have been failing on electrification.
Huw Merriman
I am impressed with that argument, actually, that rather than electrifying lines—I am a big supporter of that, and we want to and will do more, as we have done 1,200 miles whereas, as I pointed out, in the previous 13 years Labour had done 63—there was a priority focus on rolling stock. That really is pulling the other one. We have been doing both during that whole process. If the hon. Member has been on an Azuma train, he will know full well that they have been delivered under our—
Sir Mark Hendrick (in the Chair)
Order. Can we stick to the subject, please?
Huw Merriman
Of course, Sir Mark. I am happy to do so, but the invention was so long that I thought you might give me the grace of replying to it fully. I think the point has been made.
Overall, we are committed to the project of East West Rail. The hon. Member for Cambridge set out the case that was recognised—
Huw Merriman
I will make a little more progress, then I will perhaps give way one final time.
My hon. Friend the Member for North East Bedfordshire mentioned the housing challenges in the area. I recognise that, because, having family and being brought up between Oxford and Cambridge, I see that every single time I go back. He is right to prod me on the figures. In my own constituency, we have an 85% area of outstanding natural beauty. I would like to see more development, so that we have the housing, infrastructure and resources where I am, and spread that load more equally.
I recognise the points raised by most hon. Members that the housing will potentially impact their constituencies. I appreciate that, but I will come back to the point made by the hon. Member for Cambridge. We must ensure that cities such as Oxford and Cambridge can compete not just in this country, but internationally. It is absolutely vital that the scientists, entrepreneurs and innovators there who are coming up with extraordinary cures, which will help people not just in this country but around the world, have the support to do that. At the moment, they do not have a workforce. The idea of this line is to deliver a workforce to Oxford and Cambridge, to use Milton Keynes and allow towns such as Winslow to grow further and get schools in place. In my view, it is a good example of rail delivering for the regional economy. I truly believe that it will do that but, as I say, I know the impacts and I understand them. I want to work with hon. Members across the piece on behalf of their constituents so that they feel more reassured, understand what is going on, get the detail and reassurance and, where needed, get compensation, and so that we make the project work for them as well. I will take one final intervention, then I will conclude.
Mohammad Yasin
The Minister mentioned a statutory consultation earlier that will take place from January next year. My constituents think that it is a tick-box exercise; they think that the decision has already been made. If the Minister wants to prove my constituents wrong, will he commit today—I made this point in my speech as well—that if the majority of people taking part in the statutory consultation go against these plans, he will ensure that he puts the proposals on hold? Let him prove my constituents wrong, if he can.
Huw Merriman
That is not a commitment I can give. As we know, those who tend to write back on consultations tend to be the most affected and are therefore the most troubled by the issue. That is not the way that we would run a consultation. We have of course set out a preferred line of route and the ambition that this railway can deliver, but I can give the hon. Member the assurance—I say this as a former Chair of a Select Committee—that consultations run in my Department under my name will be run properly. We will look at all the responses that come back and at where we can make improvements because residents have come up with really good ideas that will be a win for everyone. I expect to look at those closely and work with those suggestions. It will not be a tick-box exercise for as long as I am responsible for the project; I can give the hon. Member that assurance.
I will wrap up. As I stated, I encourage my hon. Friend the Member for North East Bedfordshire and his constituents to continue to use the opportunities provided through the East West Rail company’s community events and its forthcoming consultation to provide feedback on the plans. I will conclude by thanking you, Sir Mark, and all those who have spoken with passion and expertise. I give my commitment that the Department for Transport will work closely with all the MPs who are represented and have concerns. I hope to assure those who have the most striking concerns and deliver for those who believe, like me, that East West Rail can be a power for good in the region.
Sir Mark Hendrick (in the Chair)
I call Richard Fuller to wind up, cognisant of the fact that there is likely to be a vote at around 4 o’clock.
Richard Fuller
I will try not to detain you for 10 minutes, Sir Mark, but we will see. I thank the Minister, the shadow Minister—the hon. Member for Slough (Mr Dhesi) —and all hon. Members who have spoken, plus the hon. Member for Bath (Wera Hobhouse), who is no longer in her place but who made useful interventions. We certainly had a diversity of views, but one thing that united all those speaking from the Back Benches was that diesel is a non-starter on this railway. Until the Minister and the Government resolve that issue, they are pushing a plan that will further erode public support.
The hon. Member for Cambridge (Daniel Zeichner) made the crucial point that the goal of this investment is to try to build on the strength of Cambridge. We are lucky to have academic, technical and innovative skills in and around Cambridge, in the science parks and the university. That hub of activity has a national benefit for all of us. I completely agree with him, including about the importance of being able to provide accommodation for people and support for that potential to be fulfilled. East West Rail is not the smartest way to do that. There are greener, better alternatives that use public money better to achieve that. If we could engage on that rather than blindly going down this route of “We had already thought of it 10 years ago so we have to keep thinking about it”, we would get a better answer for Cambridge.
My hon. Friend the Member for South Cambridgeshire (Anthony Browne) made the crucial point that inadequate attention has been paid to the water supply in the East Anglia region. This is not a marginal concern, but a substantial one. Like my hon. Friend, I have spoken to the experts in this area about their plans going out 20 or 30 years. Even with all the effort they can make with a new reservoir and with desalination plants, we will run out of water in the eastern region unless there are other additional plans. We have to bear that in mind before the potential for more housing can be taken any further.
The hon. Member for Bedford (Mohammad Yasin) spoke with great passion about members in his constituency, which I know well, who have been given a notification, and about the need for compensation and support. My hon. Friend the Member for South Cambridgeshire emphasised how in this country we are not very good at managing these issues for people when it comes to quantity, the process of reassessing the value of properties or timeliness. It was kind of the CEO of East West Rail to say today that she will see whether things can be done. If the Minister took her up on that, that might help those people. As the hon. Member for Bedford said, there is new additional uncertainty about the new station at the hospital and what that will mean for his constituents and the town of Bedford.
The shadow Minister made some strong points. I shall not pick up on all of them. I always love it when I hear someone say they really like something. The shadow Minister said 50 businesses had written to the Government to say that they supported East West Rail. It is always easy for people to support something when they do not have to pay for it. Would those 50 businesses write the same letter if we said we were going to tax their profits until we made up the shortfall for the taxpayer of £1.5 billion to £3 billion? I wonder whether their support would be quite so evocative if they had to pay for it. In the good old days, people used to say, “I’m going to stand on my own two feet. I’m going to pay for things myself.” Perhaps the Minister should look at ways in which the shortfall could be reduced for the taxpayer by charging the businesses that say they are going to benefit. I would be interested in his thoughts about that one.
On the updated business case, again, the shadow Minister talked eloquently about the support he had for rail projects. Well, at the moment this rail project has a benefit-cost ratio of, basically, 26p in the pound to 52p in the pound. I wonder whether that is Labour’s assumption of good value for money to the taxpayer. Is that the benchmark? If we can anticipate Labour spending that £28 billion a year, that would mean a £20 billion to £50 billion a year loss to the taxpayer. I really think that Labour needs to sharpen its pencils on what is a beneficial return and not give such an easy pass if the benefit-cost ratio of East West Rail is as low as that.
I am grateful to the Minister for his responses, and for his willingness to walk the entire route. I am happy to say that we need him only for part of it, and we will find a date. He said that the announcement is a milestone; I fear it is a millstone. I do not think that this is the right way to unlock growth, but I understand that my view differs from that of the Government. It was disappointing that there was no more pressure from the Minister on East West Rail to be open on the business case. As many Members have said, there is no clarity about the business case, and people having the opportunity to discuss it openly would help with greater transparency, which is why I issued my challenge to the chief executive: I am happy to debate the matter with her in my constituency.
The Minister also talked kindly about the impact of housing growth, and I am grateful for that. He talked about his own constituency, which has a large number of areas of outstanding natural beauty. I know that the constituency of the hon. Member for Cambridge and Cambridgeshire have a significant number of areas with greenbelt protection, but we in Bedfordshire love our countryside too. It may not be classified as an area of outstanding natural beauty, and it may not be protected by the greenbelt, but we love it and want to protect it. We do not want a railway and more housing driven through it. The East West Rail announcement has sadly taken us backwards. It has left too many unresolved issues, and too much controversy and uncertainty. Much more work needs to be done before it gets any support from me.
Question put and agreed to.
Resolved,
That this House has considered the Bedford to Cambridge section of East West Rail.
Tackling Rogue Builders
(11 months ago)
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Sir Mark Hendrick (in the Chair)
I will call Mark Garnier 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, as is the convention for 30-minute debates, although there will obviously be opportunities for interventions. I am sure that the Minister will accommodate those.
Mark Garnier (Wyre Forest) (Con)
I beg to move,
That this House has considered Government policy on tackling rogue builders.
Thank you very much, Sir Mark. I am conscious that we may have to break off to vote, so I will try to keep my words to the point. I thank my hon. Friend the Member for Mid Worcestershire (Nigel Huddleston), who is my constituency neighbour, for stepping into the breach this afternoon. He and I are very good friends. He is an outstanding Minister for International Trade and is replying on behalf of the Minister for Enterprise, Markets and Small Business, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who is held up in a Bill Committee. I appreciate that this Minister may not be able to answer every single issue that I intend to raise.
It was nearly 18 months ago that I first brought my presentation Bill to the House, seeking to require the Government to look into the possibility of a licensing regime for builders operating at the smaller end of the market—servicing those people, for example, seeking domestic repairs or small business repairs. That area is known as the repair, maintenance and improvement sector, and it is the RM&I sector that I will concentrate on today. The Minister—when I refer to the Minister, I am in fact referring to his colleague, the Minister for Enterprise, Markets and Small Business—will be aware that at the time the Government were not minded even to look at the possibility of the sector being regulated.
Since then, of course, we have had several new Prime Ministers and a reorganisation of Government Departments, but the Government appear to be, dare I say it, increasingly less interested in talking about this consumer minefield, not more. The Minister, who I have an immense amount of respect for, and I have chatted informally about that and we agreed to meet, accompanied by the Federation of Master Builders, which is championing the cause of improved experience for consumers. It has been difficult to get a meeting set up, but I am delighted to say that we now have a meeting in the diary for the beginning of July.
The issue of rogue builders in the RM&I sector is not widespread, but it is appalling when it occurs. It is important to set out that the majority of builders in the sector are good and decent people. Last week, I had the pleasure of being a judge for the Federation of Master Builders awards, which will happen later this year. It is refreshing to see just how innovating building companies are when it comes to training staff, ensuring health and safety, in some cases offering medical insurance and training for emergencies. Indeed, some of the building firms up for awards demonstrated to me that their reputation is second to none and that they work tirelessly to ensure the longevity of their business through word of mouth and positive endorsements from customers and clients.
Jim Shannon (Strangford) (DUP)
I commend the hon. Member for introducing the debate. He is right: most builders are good workmen and do a grand job. That is the case in my constituency, but we also have cases of shoddy workmanship that go unchallenged as people cannot afford costly litigation on small claims, and feel unable to represent themselves. Does he agree that perhaps there should be a role for local authorities—I know that it is different in Northern Ireland than on the UK mainland—to take on the cases of people who have had shoddy workmanship and do not have the wherewithal to chase the case themselves?
Mark Garnier
I am grateful for the intervention. To a certain extent, local authorities can step in where builders fail to meet building standards, but the problem is that that does not work. That is what I am worried about. As I unwind my speech, the hon. Member will be able to understand a little of what I am proposing, which may be a solution to the problems in his constituency.
Of course, highly qualified and professional firms are not the target of any control that we may want to bring in, but a lot of those very good quality firms would benefit from a simple regime that demonstrates beyond any doubt that a builder firm is legitimate and that the workers within it are both honest and qualified. Repeated surveys from organisations within the sector reinforce that consumers are put off by stories of rogue builders. The FMB estimated a few years ago that up to £3 billion a year is wiped off building activity by consumers fearful of falling victims to rogues.
More recently, the HomeOwners Alliance conducted a survey of consumer worries: 79% of those surveyed reported obstacles in the way of their project, including 42% reporting that it was difficult to find a reliable builder, 29% a lack of available builders, and 15% a lack of confidence in the system. The problem that I am trying to address, working with the FMB, is that of rogue builders who prey on clients who are wholly inexperienced in this area. The vast majority of people who employ a builder have no idea how to manage them. Most of us will only infrequently need the work of a builder or tradesman.
Giles Watling (Clacton) (Con)
I have a constituent, Michelle Thomas, who paid £70,000 for some restoration work to her house, and the house was left untenable. Building regulators said it should be destroyed. She has paid a further £70,000 and had a very honourable builder come and put it all right.
I am amazed that the Government are not minded to regulate the issue, because, as my hon. Friend says, it would be to the benefit of legitimate good builders who work hard and do good work. One of the issues is that we get repeat offenders, who offend time and again. In the case of my constituent, the rogue builder had been involved in six liquidations. That must be addressed in legislation.
Sir Mark Hendrick (in the Chair)
Order. Could I ask for interventions to be a bit briefer?
Mark Garnier
My hon. Friend raises the most important point. We have had six phoenix companies wind up; what we do not want is another six—another six victims who have to have their homes pulled down. That is why we are trying to come up with a system of regulation that can prevent that.
Most of us will only infrequently need the work of a builder or tradesman. When we do, most of us get lucky—it is important to say that. We hear stories of people who endorse workers and pass on their names, as their work is of good quality. However, when someone gets caught by a rogue builder, their life descends into a nightmare. I know what that is like. In the interests of full transparency, I declare my interest, having found myself in such a position a few years back. It is because of that experience that I am keen to help other victims find a way out of the problem and draw the issue to a close once and for all.
When a problem starts—from poor and potentially dangerous work, as we have heard, through to the other end of the scale, which is fictitious bills—ultimately the only recourse is expensive legal fees. My experience opened my eyes to just how many people are victims of those types of rogue traders in so many different ways.
Rogue builders do not just prey on their clients. Others who lose out are the subcontractors and suppliers who do not get paid, as well as the plant hirers who do not get paid and find their machinery is often stolen. Other building firms do not see business because rogue builders will undercut their prices only to hike them later. All of us lose out through tax fraud, as rogue builders take cash in hand to dodge VAT and corporation tax. Tax fraud distorts the market, with rogues undercutting legitimate builders, creating a false impression of costs. The wider economy also loses out; the Federation of Master Builders has estimated that billions of pounds of building work is not undertaken because consumers fear being ripped off.
After my presentation Bill had its Second Reading, I was contacted by a number of victims of rogue builders. I also appeared on an ITV programme talking about the issue, leading to more victims making contact with me. The Petitions Committee contacted me to let me know that there is not one but four petitions seeking a resolution to the problem. Between them, they have gathered over 4,000 signatures, and I urge anyone who hears this debate who has been a victim, or is interested in resolving the problem, to sign one of those petitions.
It is the stories of victims that crystalises the problem, as we heard earlier. I was contacted by a police officer married to a nurse—two fine public servants. They bought their dream home and engaged a builder to renovate it. The work turned out to be massively substandard: it failed building standards and was deemed so dangerous that they could not move back into their home without remedial work. They contacted trading standards, but the builder is refusing to engage and is hiding behind his solicitor.
Similarly, someone else who contacted me had wanted to improve her home so that her disabled sister could get access. She was so let down by the system that she was motived to get in touch with the FMB, and has now launched one of the petitions I referred to in order to seek a licensing regime. Again, I urge people to go on to the Parliament petitions page and add their name.
The problem is that there is actually little redress for victims of rogue builders. Trading standards will probably have a good go at trying to sort it out, but if the builder holds fast, it can do little more than give the builder a telling off and flag their name for future people. The reality is that the only recourse for everybody is the courts, but the legal process is hopeless. Those are not my words; they are the words of a number of solicitors and barristers who advised that, irrespective of the merits of the case, the risk of prosecuting was way too high, so people should cut their losses. “Cut your losses”—do we really think that is a way for 21st-century Britain to tackle a known problem that keeps repeating itself?
The reality is that rogue builders hold all the cards: they can do whatever they like, and there is no recourse. Anyone can pick up a brick and call themselves a bricklayer, anyone can pick up a plank of wood and call themselves a carpenter, and anyone can pick up a pipe and call themselves a plumber. Ironically, they cannot pick up a gas hob and call themselves a gas fitter; that job requires compulsory certification, so there is an acceptance that regulation can be necessary. When a problem arises, however, the only redress is in the courts.
A consumer can be completely rolled over by a rogue trader, but in order to get redress, they need to put aside up to £150,000 to prosecute a legal case, securing barristers, surveyors, solicitors, court fees and all the rest of it. They may win—in fact, they probably will win—but they then need to recover their costs and damages from the builder, who closes their business and moves on to the next scam, having taken all the money out of the business so that there is no way to recover anything. The next victim is engaged and the circus goes on, but our successful litigant is left facing appalling, unrecoverable costs. Meanwhile, more suppliers, subcontractors, plant hirers and the wider building trade lose a little bit more.
However, the solution is simple. The problem lies in the imbalance of jeopardy between the victim and the perpetrator. The reason why there is so much rogue building going on is because it is an easy way to rip people off. In some ways, it is a basic level of fraud, although proving fraud is incredibly difficult. With no loss to the perpetrator, they can go on and on while the victim bears all the costs. How do we balance the jeopardy between the victim and the rogue builder? The answer must lie in regulation, with something such as a compulsory licence that the builder will lose if he or she falls foul of the rules—rules, by the way, that can and will save lives.
Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)
I congratulate my hon. Friend on securing the debate. Rogue builders will often go into liquidation to avoid potential litigation or paying out when they have been taken to court and successfully sued, so should we also look at potentially holding the individual responsible in a fiduciary manner, not just the company? That may be a much more effective mechanism for people to be able to chase potential assets that they can then charge against successful litigation.
Mark Garnier
My hon. Friend gets to the nub of the point. At the end of the day, individuals have to find some sort of personal liability if rogue builders perpetrate these endless infringements. The point is that they have nothing to lose at the moment. If they run the risk of losing their livelihood, they will think again before acting in such a way. It may be that they go on to another type of criminal activity, but we would at least get them out of the building market.
The Minister and I have had informal conversations about this issue, and I know that he and the Minister who replied to my Bill’s Second Reading in 2021—my hon. Friend the Member for North East Derbyshire (Lee Rowley)—are instinctively against licensing and overregulation. To a certain extent, I can see their point. Why burden an industry that gives opportunities to people who choose to work with their hands and avoid a life of form filling? Indeed, I can see from the Wikipedia page for the Under-Secretary of State for Business and Trade, my hon. Friend for Thirsk and Malton—for whom this Minister is standing in—that he was a very successful estate agent. There is limited regulation around estate agents beyond the Estate Agents Act 1979 and the Consumer Protection from Unfair Trading Regulations 2008.
Conversely, I was an investment banker and investment manager, and I know what it is like to be regulated up to the eyeballs. Having been on the Treasury Committee during the passage of the Financial Services Act 2012, and on the banking commission for the Financial Services (Banking Reform) Act 2013, I can see why people might accuse me of being an instinctive regulator. However, even residential estate agents have to be members of a redress scheme. The estate agency of the Under-Secretary of State for Business and Trade would have been required to be signed up to either the property ombudsman or the property redress scheme. Without membership, I understand that it would not have been allowed to trade under the Consumers, Estate Agents and Redress Act 2007.
When I, the two victims I referred to earlier or any of the millions of people who want to improve their home undertake this momentous challenge—as I have said, they might do that only once or twice in their lives—they start by approaching an architect. They may speak to surveyors, and they may go to their bank or mortgage broker to secure a loan to pay for the improvements. They will apply for planning permission from the local planning authority. They may even seek legal advice, and then they will engage a builder.
The architect is regulated by the Architects Registration Board, established by the Architects Act 1987. The surveyor is required to be a member of the Royal Institute of Chartered Surveyors, set up by royal charter and independent of the Government. The mortgage broker is required to be regulated by the Financial Conduct Authority, which was set up by this Government, and cannot trade without that membership. The local planning authority is subject to the oversight of the local government and social care ombudsman. When our home improver starts to pay the builder, it is done from a bank regulated by both the FCA and the Prudential Regulation Authority, the latter of which is run by the Bank of England. Both were set up by the Financial Services Act 2012. Legal advice is regulated by the Solicitors Regulation Authority.
Our home improver then pays the money—their hard-earned cash—having had to go through umpteen regulatory hoops, to someone with no meaningful regulation. That is ridiculous. Not only is the builder not subject to any meaningful regulation, but they could do something that results in someone being severely injured or even losing their life. It is all very well saying that the builder may then be subject to criminal proceedings, but that is small consolation to the relatives of a dead father or a mother with life-changing injuries.
The only outcome that would be satisfactory would be a scheme that honest and decent builders—the majority—would be both happy to sign up to and of which they would enjoy the benefit through being part of a system of excellence. Meanwhile, rogue builders who either game the system or care not one iota about their customers will have something to lose. Without membership of whatever scheme we come up with, they would never be able to trade again, either as individuals or as businesses.
My appeal to the Minister was originally going to be for a meeting, but I am delighted that he, or someone from his office, has got in touch with me. I have every confidence that nothing will get in the way in the diary to stop that meeting happening. I very much look forward to meeting the Minister in early July. However, this is the really important point: will his Department—I know that it has been working to a certain extent on this—work with us to find a solution to this problem and stop the scourge of rogue builders once and for all? Every one of us who comes to Parliament baulks at unnecessary regulation, but just how long are we prepared to knowingly allow people to be ripped off without any usable form of redress?
The Minister of State, Department for Business and Trade (Nigel Huddleston)
I congratulate my constituency neighbour, my hon. Friend the Member for Wyre Forest (Mark Garnier), on securing the debate. He is a great champion for his constituents and for many causes that impact right across the country, this being one of them. I am well aware that he has proposed a private Member’s Bill to improve consumer protection from rogue builders. I am also grateful to him for giving other hon. Members the opportunity to discuss this important subject today. I thank the hon. Member for Strangford (Jim Shannon) and my hon. Friends the Members for Clacton (Giles Watling) and for Central Suffolk and North Ipswich (Dr Poulter) for their contributions, because I suspect that every Member has had correspondence and interaction with constituents on this issue. It impacts right across the country.
I assure my hon. Friend the Member for Wyre Forest that the Government are committed to ensuring that there are high standards in the construction industry and that consumers can have confidence that the work they commission will be undertaken competently and will comply with building regulations to ensure safety. We are also committed to ensuring that there are high standards of consumer protection and redress for those who pay for work that falls short of acceptable standards of quality and safety.
The construction industry makes a great contribution to the UK economy. In 2021, it had a turnover of £439 billion, accounting for nearly 9% of the economy, and employed 2.2 million people in about 430,000 firms, with an additional 700,000 self-employed workers. That speaks to some of the challenges that my hon. Friend mentioned in terms of the fragmented nature of the industry. He is also right to point out that the vast majority of those engaged in this sector are hard-working, honourable and decent people, but there are rogues—there is no doubt about it.
The domestic repair, maintenance and improvement sector is a vital part of the industry, employing about 60% of all those who work in it. The small firms and tradespeople who make up this sector deliver essential work to people right across the country. They play an important role now, which will become only more important as we seek to improve the environmental and carbon performance of homes. They are critical to our approach to reducing the 40% of carbon emissions generated by the built environment, and to achieving our net zero targets. However, it is also a part of the industry where genuine concerns about consumer protection exist.
As I have said, while the majority of tradespeople are honest and competent and provide excellent service, there are some incompetent or dishonest firms and individuals who exploit consumers, undertake defective work or overcharge for the services that they deliver. That must be stopped. The Government are committed to working with the industry and local authority trading standards to improve standards of competence and consumer protection, and to take action against rogue builders. While we are not convinced that the introduction of a licensing scheme in such a large and varied sector would be practical or cost-effective, I hope that I will be able to reassure my hon. Friend and other hon. Members that the Government take the issue of consumer protection from rogue builders seriously, and that we are taking meaningful action.
The Government have taken action to strengthen consumer rights. The Consumer Rights Act 2015 sets out the standards that consumers can expect when a trader supplies goods and services, including building work, and remedies if those rights are breached. Under the Act, traders are required to carry out a service with reasonable care and skill, and, where the timeframe is not specified in the contract, within a reasonable timeframe. Where a trader fails to meet the standards required by the CRA for the supply of a service, or if the service does not conform to the contract, there is likely to be breach of contract and the consumer is entitled to ask for a repeat performance of the service or for a price reduction. If a trader and a consumer cannot agree to a remedy, the consumer can pursue a claim against the trader in the courts. The small claims procedure provides the means to pursue a claim for up to £10,000, at a modest cost and without the need for a solicitor. Consumers have up to six years to bring a claim against a trader for breach of contract.
The Government have also signalled their intention to go further in order to protect consumers with provisions in the Digital Markets, Competition and Consumers Bill, which will give enforcement bodies the power to levy tougher fines. However, we know that many individuals and businesses are reluctant to have recourse to the courts to resolve a dispute, with the costs and time that that entails.
Dr Poulter
My hon. Friend will be aware that the cost of even relatively modest building works is likely to exceed £10,000, but that is the small claims court limit, so that form of redress is not open to many of the victims of rogue builders.
Nigel Huddleston
Yes, we are aware of the challenges with the small claims court. Of course, many building works go above £10,000. The Ministry of Justice is also looking at other forms of redress and procedures, and I understand that those are live considerations within Government. I am happy to forward my hon. Friend’s comments to the relevant Ministers, but we do understand the challenges with the small claims court. It works in many circumstances but it is not right for everybody.
We know that consumers would prefer swift, cost-effective and less time-consuming measures to settle their differences with business. That is why, following the recommendations of the independent “Each Home Counts” review in 2016, the Government have worked with the industry to establish the TrustMark scheme. This created the first Government-endorsed quality scheme for homeowners across a range of trades and types of work. TrustMark provides consumers with a single brand to identify schemes run within the industry that require participating firms and tradespeople to demonstrate competence, and which provide for consumer redress.
We are also working with the industry to ensure that high standards of consumer protection are embedded in relation to domestic households.
Mark Garnier
The TrustMark scheme is great and is a very good start, but it is not compulsory, which means that a lot of consumers do not necessarily know about it. If they do not know about it, they do not know whether they should be asking for it in the first place. The key point is that we can run on TrustMark, but if that becomes the standard it needs to be made compulsory.
Nigel Huddleston
I completely understand the arguments that my hon. Friend makes. He is right: it is not compulsory, but it is an important signal, and a good signal to the industry. It is Government-endorsed, which is also important. We certainly encourage people, when they are seeking such works, to look for that TrustMark, because it is an important indicator.
In this area, and on all the things that my hon. Friend has raised today, the important principle is getting the right balance, as he acknowledged in his speech. That means not overburdening industry and small traders, most of whom operate very effectively and professionally, but we have to make sure that we have systems and processes in place so that when things go wrong, there is appropriate redress.
My hon. Friend mentioned that the temptation, certainly for most of us, is not to overburden businesses with regulation. There will always be an ongoing debate. I appreciate that he has had consistent engagement with the Department and multiple Ministers and that he has brought many other representations from industry to the attention of the Department. We appreciate that, because these are live debates.
Sir Mark Hendrick (in the Chair)
Just before the Minister takes an intervention, I remind Members that this is supposed to be a short debate. I understand that we are possibly going to have as many as five votes, when the votes are called. In the short time we have available, I would be grateful if we could minimise interventions.
Giles Watling
I am very grateful to the Minister for giving way. Is it not the case that historically we have relied on the cry of caveat emptor so much that we have not regulated, but that the time has come to regulate now?
Nigel Huddleston
I am sure the appropriate Minister has heard my hon. Friend’s appeals, and I promise to pass on those comments. The key thing is to get the right balance. If things work, we have got the balance right, but if they do not work properly, we need to reassess the balance. I assure him that on an ongoing basis, officials and Ministers pay close attention to what is going on in the sector. Many of the things that my hon. Friend and colleagues have appealed for today have been asked for by many people, but there is also some quite strong opposition, for good reason, so it is a matter of balance.
I will bring my comments to a close shortly, Sir Mark. On decarbonisation, the Government are working with the industry to ensure that high standards of consumer protection are embedded in our domestic household decarbonisation retrofit programmes. Government-funded schemes require installers to hold appropriate certifications. The Government are also seeking to increase the number of qualified and competent tradespeople and to ensure that they have the skills to deliver the quality of work required. We have already provided nearly £7 million to fund 8,000 training opportunities for the energy efficiency and low-carbon heating supply chains. We are considering options to work with the industry to support further training in key skills shortage areas and new routes of entry to increase capacity. My Department is also working closely with the Department for Levelling Up, Housing and Communities to strengthen the consumer protections available through competent person schemes.
In conclusion, I would like to thank my neighbour, my hon. Friend the Member for Wyre Forest, for securing a debate on this important issue. I hope that I have been able to reassure hon. Members that the Government are not only committed to, but taking action to ensure that high standards of consumer protection exist and to tackle the problem of rogue builders and tradespeople.
Question put and agreed to.
New Hospital Programme and Imperial College Healthcare NHS Trust
(11 months ago)
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Andy Slaughter (Hammersmith) (Lab)
I beg to move,
That this House has considered the New Hospital Programme and Imperial College Healthcare NHS Trust.
It is a pleasure to see you in the Chair this afternoon, Sir Mark. I understand that our proceedings may be interrupted for some time, but let us make a start. I am delighted to see my west London colleagues here—my hon. Friends the Members for Westminster North (Ms Buck), for Ealing Central and Acton (Dr Huq) and for Brentford and Isleworth (Ruth Cadbury)—and indeed the hon. Member for Cities of London and Westminster (Nickie Aiken), my hon. Friend the Member for Reading East (Matt Rodda), and, of course, the hon. Member for Strangford (Jim Shannon), without whom no debate would be complete, perhaps to remind us that although this is to some extent a local or regional issue, it has much wider implications.
To be clear, this debate is about one thing specifically: the defunding and removal from the 2030 new hospital programme of three major hospitals—Charing Cross, Hammersmith, and St Mary’s—all of which form part of the Imperial College Healthcare NHS Trust. They are teaching hospitals, major emergency and trauma hospitals, research hospitals, academic hospitals, tertiary hospitals—hospitals with a huge national and international reputation—but they are also local hospitals for my constituents and those of many other Members.
In the Secretary of State’s statement on the new hospital programme on 25 May, seven of the schemes that had previously been in the 40 hospitals scheme were removed from that programme with respect to completion by 2030—we must be careful in our words here. I need to deconstruct what has happened since that time, because there has been some misleading presentation of the facts. In order to clarify this, I sent some rather key questions to the Minister in advance of this debate.
Essentially, looking at the statement that was made, the Secretary of State said, in respect of those seven schemes:
“The work will start on those schemes over the next two years, but they will be part of a rolling programme where not all work will be completed by 2030.”—[Official Report, 25 May 2023; Vol. 733, c. 479.]
That is the key change, as far as we are concerned, in relation to that statement.
The questions that still sadly remain unanswered are these: what works will be done at each of the three hospitals before 2030? How much will the budget be for that, and will it come out of the £20 billion new hospitals by 2030 programme? What is the total budget for the rebuild schemes at each of the three hospitals? Is this secured funding, and when will it be allocated? By what date or dates will the works for each hospital be completed?
I have put together what I think are the answers—I have done my sleuthing—but I really need to hear it from the Minister’s own mouth, this afternoon if possible, or in a follow up if he needs to use that. I might also add a sort of meta-question to that: when will I receive a response to the email that I and my hon. Friend the Member for Westminster North sent to the Secretary of State on 28 May, which raised those same issues?
I understand that there is confusion associated with the new hospital programme—as would be true of any scheme that came in under the aegis of the former Member for Uxbridge and South Ruislip—about whether those were new hospitals or not. Almost a year ago, I asked the then Prime Minister about the new hospitals—the “new” hospital at Hammersmith that opened in 1902, and the “new” hospital at Charing Cross that opened in 1818—but I will not focus on that point today. This is about the funding and the timetabling of the scheme; frankly, the Minister can call them whatever he likes.
There have been a number of schemes moving in and out. At one stage there were going to be 48 new hospitals. I think 128 bids came in for the extra eight places and five were successful. We are told there is £20 billion, which sounds like a lot of money—it is a lot of money—but it is not the £32 billion to £35 billion that the Health Service Journal says would be needed to complete all the schemes that have at one time been put forward for the new hospital programme. Those are legitimate grievances, but I do not have time to deal with them all today. I have time only to deal with the one matter that I have already raised.
I need to give a little bit of background. As I have indicated, the hospitals have a long and illustrious history, going back more than two centuries in the case of Charing Cross. In 2012, an Orwellian programme called Shaping a Healthier Future, which had been the product of two years’ secret work by the consultants McKinsey, said that several A&Es should close, including the one at Hammersmith, and that Charing Cross should be demolished and replaced by primary care and treatment services on the site. It was the biggest closure programme in the history of the NHS.
Sadly, we did lose the A&E at Hammersmith in 2014, but after a herculean battle fought over seven years by community groups, such as Save Our Hospitals, and by Labour local authorities, particularly that in Hammersmith, that battle was won and Charing Cross had a reprieve and would go on being a major hospital. That happened in 2019.
It was rumoured that the money that would have been gained by selling most of the land at Charing Cross might have gone into the St Mary’s scheme, which, by common consent, is the hospital that most needs emergency work. But although the bill for essential repairs on the three hospitals is about £350 million—far and away the biggest repair bill of any hospitals in the country—if we want to make those hospitals fit for the 21st century, the actual cost, which I believe is accepted by Department of Health and Social Care officials, will be about 10 times that, between £3 billion and £4 billion. If that seems an unspecific figure—my hon. Friend the Member for Westminster North will say more about this—it is because it depends to some extent on what receipts can be received from land value and moneys at Charing Cross. It is a significant sum of money, but it is to make those essential and world-class hospitals fit for purpose for decades going forward, not just to patch them up.
It was always going to be difficult, and it was disappointing that the hospitals were in cohort 4 and would just squeak in by 2030—that is when the work would be completed. We would have a newly built hospital at St Mary’s and refurbished hospitals at Charing Cross and Hammersmith over that time. That is why it was so disappointing when they were moved out of that without any further future date being given.
What is at stake here? Because there has been so much information, I do not want to use my own words, but the words of the trust itself. In preparation for this debate today, it said:
“the main funding for our schemes has been pushed back beyond the original commitment of 2030 as other schemes have been added to the programme and prioritised. We had two schemes in the original list of 40 hospitals to be built by 2030: a complete rebuild of St Mary’s Hospital in Paddington; and extensive refurbishment and some new build at both Charing Cross Hospital and Hammersmith Hospital”—
confusingly, the Department of Health classifies the two hospitals of Hammersmith and Charing Cross as one scheme, but it certainly affects the two hospitals. The trust goes on:
“It is clearly very disappointing that we will not now be funded to complete these schemes before 2030.”
It also states that
“some funding to progress to final business case approval and to support enabling work”
should be provided, and
“we are awaiting a response in terms of a decision and a funding allocation.”
It then talks about the business plans that it is going to put forward. In rather more emotive but absolutely accurate language, it says:
“If we waited until 2030 to start building works at St Mary’s it would become impossible to patch up our oldest facilities, many of which house key clinical services. As the provider of London’s busiest major trauma centre and host of the NHS’s largest biomedical research centre, that would be hugely damaging for the health and healthcare of hundreds of thousands of people”.
That is the statement from the chief executive officer at Imperial, Professor Tim Orchard, and those words should resonate with the Minister.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
I am aware that the Division bell will probably start ringing as soon as I stand up, but I am familiar with that quote from Tim Orchard. My hon. Friend is making a really powerful speech. I am familiar with all these hospitals, as are all my constituents. I was born at Queen Charlotte’s, my little sister was born at Hammersmith, and both my parents were under Charing Cross. I went to the Western Eye Hospital last year when I had shingles, and I have an auntie who has retired but was a consultant professor at St Mary’s.
Does my hon. Friend agree that it is really sad that, in the 75th year of the NHS, we are talking about crumbling estates and all these issues? The backlogs at these hospitals existed long before covid. The Government like to throw up that smokescreen and say, “It’s covid’s fault.” I have just written to Tim Orchard because a constituent told me that there is only one temporary scanner at Hammersmith at the moment. Is that not scandalous? Does my hon. Friend agree that, to paraphrase the Sex Pistols, who were formed on the Wormholt estate, which borders both our constituencies, this is the great NHS scandal?
Andy Slaughter
I thank my hon. Friend for that contribution, and I entirely endorse what she said.
I want to deal briefly with the misinformation—I accept that it was wholly unintentional—in the Secretary of State’s statement, or rather in his responses to questions following his statement, because it is important. A ministerial correction was made following a point of order that I made arising out of that. In response to my hon. Friend the Member for Westminster North, the Health Secretary said:
“We recognise the importance of the Imperial bid; that is why we are starting to build the temporary ward capacity at Charing Cross and the first phase of work is under way on the cardiac elective recovery hub, to bring cardiac work on to the Hammersmith site.”—[Official Report, 25 May 2023; Vol. 733, c. 485.]
There are 47 words in that statement, and four errors had to be corrected in the ministerial correction. That may be an all-time record; I do not know. Some are more important than others. There are bids, not one bid. We are not starting to build; we will start to build at some time in the unspecified future. There is no cardiac elective recovery hub; there is a cardiac catheter lab. The idea that we are just moving cardiac services to the Hammersmith Hospital site would be a surprise, given that St Mary’s is a world-leading cardiac hospital at the moment.
I accept that mistakes happen, but there were other errors in that statement. It implied that works are under way, whereas it is common consent now that they have not yet started. The cardiac work is nothing to do with the new hospital programme; it is part of the ordinary work, as is the refurbishment of wards. The temporary ward at Charing Cross will be necessary, but not until the main funding for the floor-by-floor hospital renewal refurbishment is ready to go. Some greater clarity would be helpful on those very contentious matters.
My first question is: what are the enabling works? What does that mean? We have heard several definitions. The trust says:
“We do not yet know when we will be able to start work.”
There has been mention of surveys. Of course there will have to be surveys before the works, which are estimated to cost several billion pounds, start. We are hoping to get a significant sum of money for the business case—perhaps as much as £200 million. This is about rebuilding the three main hospitals.
An energy centre is mentioned. There will need to be a new energy centre, partly because we have major supply issues in west London, and the existing energy supply would not supply modern, state-of-the-art hospitals. All that is true, but what is not true is that this is somehow the beginnings of the major works of the scheme. That is a fig leaf to cover the fact that the major works have been postponed beyond 2030. The fact is that they are not in the 2030 programme or the current spending review. I ask the Minister again: when will the work be done and what funds have been assigned? Yes, there has been preparatory enabling work, but does that come out of the £20 billion? What is the Government’s commitment to the major work of rebuilding those hospitals? There has been some work, with £20 million spent on preparing plans so far, but we are in limbo at the moment. We are suffering repeatedly from misinformation.
I understand that this is a highly contentious political area. The chairman of the Conservative party will, if the Boundary Commission proposals go through, be the MP who covers Charing Cross Hospital. That is no excuse for putting forward matters that are simply misleading to my constituents and many other people. That does us a great disservice. We all want to see these hospitals thrive, in the interests of patients, staff, management, the trust and the hospitals themselves.
Therefore, I will end my comments, because I want to give others an opportunity to contribute. What I need from the Minister today is clarity and honesty about what is happening. We will live with the consequences of that, and we will continue to campaign as we have done for our wonderful hospitals and local NHS. The Government do a disservice if they are not straightforward and clear in the message they send out.
Several hon. Members rose—
Sir Mark Hendrick (in the Chair)
Order. I remind Members to bob if they wish to be called in the debate. I now call Nickie Aiken.
Nickie Aiken (Cities of London and Westminster) (Con)
Thank you, Sir Mark, it is a pleasure to serve under your chairmanship. I thank the hon. Member for Hammersmith (Andy Slaughter) for bringing forward the debate and for the points he has raised. As the Member of Parliament for the Cities of London and Westminster, I would like to focus my remarks specifically on St Mary’s Hospital in my constituency.
In September 2021, Imperial College Healthcare NHS Trust set out the need for a complete redevelopment of St Mary’s: a new 840-bed, research-led major trauma and acute teaching hospital, which would release around five acres of surplus land for wider site regeneration. As I know the Minister appreciates, that development is of huge—
Sir Mark Hendrick (in the Chair)
Order. The sitting is to be suspended for multiple Divisions in the Chamber. We require approximately 15 minutes for each vote. There is an issue in that there may be more than four votes. I would imagine it could possibly be an hour before we come back. Those who have put in to speak should not worry, because there will be injury time.
Nickie Aiken
Being the Member of Parliament for Cities of London and Westminster, I would like to focus my remarks specifically on St Mary’s Hospital, which is based in my constituency. Back in September 2021, Imperial College Healthcare NHS Trust set out the need for a complete redevelopment of St Mary’s Hospital, a new 840-bed research-led major trauma and acute teaching hospital, which would release around five acres of surplus land for wider site regeneration.
I know the Minister appreciates that the development is of huge importance to the wider London area and not just my constituency. After all, St Mary’s is the major acute hospital for north-west London, providing care across a range of specialities in London, in addition to its world-leading maternity centre and 24/7 A&E department. It played a significant role in the 7/7 bombings and other major incidents over the years. It is host to the NHS’s largest biomedical research centre and through its partnership with Imperial College London, the trust continues its long legacy of translating academic discovery into better care and treatment, including making a major contribution to the management of covid-19.
I welcome the Secretary of State for Health and Social Care’s recent confirmation of Government funding for the redevelopment of St Mary’s. Though the timescales have been altered, I appreciate that the full picture is more complex and I know that work continues to complete the majority of the redevelopment as near to the original timescales as possible. I also appreciate the complexities of the programme’s schedule for building works, so I am glad to hear from discussions with Ministers that they are committed to getting the enabling works started as soon as possible. To that end, I look forward to visiting St Mary’s with the Minister responsible, Lord Markham, and the Under-Secretary of State for Levelling Up, Housing and Communities, my hon. Friend the Member for Kensington (Felicity Buchan) to discuss the case for change and the redevelopment more widely.
I pay tribute to Lord Markham and to officials at the Department of Health and Social Care, as well as to the Minister and the Secretary of State, for their communication with the trust and me throughout the process. I am currently concerned about running key clinical services while we wait for building works to commence and specifically about services being patched up to keep patient care running. As it stands, key parts of the estate date back to 1845 and most of the facilities—even the most modern bits—are at least 70 years old. That is because St Mary’s has been developed piecemeal over the decades. I am sure anyone who has visited there will agree that, when walking through the site, it is clear that the hospital is a patchwork of buildings with complex patient pathways.
As a patient of St Mary’s, having recently gone there for one of my regular mammograms, I saw that parts of the hospital are very outdated and very much in need of redevelopment. That is a product of the hospital’s history. However, the space and configuration of the buildings are making it significantly harder to respond to increasing and changing healthcare demands and opportunities. Let us not forget that the hospital was first built in the 19th century, and is now dealing with 21st-century healthcare and medical advancements.
I have heard significant concerns about the fact that the acceleration of the estate decline is impacting patient care and experience and staff working conditions. In short, the St Mary’s buildings are in a poor and declining condition, despite investment in maintenance and repairs. Taken together, the size, age and condition of the buildings make it hard to deliver the high-quality care that people expect and deserve from such a major hospital.
From speaking to Professor Tim Orchard, the chief executive of Imperial College Healthcare NHS Trust, I am confident that we will find a way to mitigate decline and enable work as soon as possible. I am assured that the trust is doing all it can to find innovative solutions to the ongoing problems. I hope the Minister can update us on the outcomes of the Department’s conversations with the trust, focusing on the progress of the enabling works.
I know the trust is accelerating its exploration of alternative funding, design and phasing approaches that will make the most of the huge potential of the land surrounding the hospital once we have a new hospital on a less sprawling footprint. That hugely expensive real estate can then be used for better redevelopment. The development of St Mary’s has the potential to do so much more for our local community and the whole of the UK science, technology, engineering and mathematics sector.
St Mary’s Hospital has been a leading provider of clinical care, education and research for 175 years. We now have an opportunity to take advantage of and invest in new technologies and other opportunities for it so that it better serves its communities and the wider health system.
Ms Karen Buck (Westminster North) (Lab)
I am grateful for the opportunity to contribute to this debate, and I congratulate my hon. Friend the Member for Hammersmith (Andy Slaughter) on securing it. It is a pleasure to follow the hon. Member for Cities of London and Westminster (Nickie Aiken). St Mary’s Hospital, which I will mainly concentrate my remarks on, is located in her constituency but is the main hospital serving my constituents in north Westminster.
There is a feeling that this is déjà vu all over again. In April 2019, my hon. Friend the Member for Hammersmith and I spoke in a very similarly titled debate on the Imperial hospitals programme. I said:
“In January 2018, Imperial College Healthcare NHS Trust gained full planning permission for the first phase of the redevelopment of St. Mary’s”
as part of the overall redevelopment of the trust. I said that the
“failure to gain funding and approval from key stakeholders…is a key risk on the trust’s corporate risk register, because the conditions of St Mary’s Hospital have deteriorated so much…the structural issues in the hospital have become absolutely and imminently challenging.”—[Official Report, 24 April 2019; Vol. 658, c. 354WH.]
That case has intensified in the intervening years, as I will come to in a moment.
That was four years ago. A couple of weeks ago, we had the announcement that the main funding for the Imperial hospitals scheme has been pushed back beyond the start date of 2030. Other hospitals have been prioritised. Many of the 40 hospitals have received their commitment to proceed on the original timescale, but not St Mary’s or the Imperial hospitals. As the chief executive of the trust board said, that is very disappointing news.
The 40-hospital building programme was a key feature of the 2019 general election. Conservative candidates took advantage of the opportunity to pose outside St Mary’s Hospital and put the pictures on social media and in their campaign literature. One enthusiastically announced:
“We are helping rebuild St Mary’s hospital…Great to talk to Matt Hancock”
—the then Secretary of State for Health—
“about what it means for local residents”.
The Conservative Assembly Member for West Central, even more enthusiastically, talked about how she looked forward to talking to the BBC about the plans to completely refurbish Charing Cross and Hammersmith Hospitals and rebuild St Mary’s. Four years on, St Mary’s is still the hospital with the largest maintenance backlog in the country, and it has been left behind in the programme. That goes far beyond being yet another example of a broken promise.
There are two key issues. The first, which my hon. Friends and the hon. Member for Cities of London and Westminster have alluded to, is the centrality of the St Mary’s and Imperial trust life sciences campus as a leading centre for biomedical research. This is an incredibly exciting project that is part of this country’s scientific renewal—it could not be more important for the locality or the country—but to be honest, it is hard to sustain the necessary investment or the recruitment and retention of staff in a project of that kind in a crumbling hospital building.
But even more important is the central question of the condition of the hospital—all three of them, as my hon. Friend the Member for Hammersmith said, but particularly, from my point of view, St Mary’s—and its implications for patient care and public money. Put simply, this is about wasting money on routine maintenance and repairs to patch up a building that has for many years been recognised as being in need of a transformative rebuild; indeed, the plans have been proceeding on that basis.
I spoke four years ago about the litany of floods, fires and ceiling collapses that we have had to deal with in our hospital estate. However, some recent examples include the closure of the gynaecology day services unit due to the failure of the air handling unit, and the flooding of the Paterson surgical centre—both of which led to two weeks-worth of clinical activities being suspended—as well as flooding in the main out-patient building caused by a sewage blockage, a partial ceiling collapse in an in-patient ward, and sewage leaks into the bottom of the Queen Elizabeth building and into the pharmacy. These problems not only inconvenience patients and delay treatment; they demand ever more ad hoc spending, which is running at an estimated £6 million to £7 million every year, and there is a long list of repair work that needs to be done.
We know that the new hospital cannot be rebuilt overnight, but it is essential that the hospital redevelopment stays within the framework of the timescale that we have been working to over the last few years, since the programme of 40 hospitals became such a key element of the Government’s planning. St Mary’s and the Imperial NHS trust need Government support, and they need it fast.
I have two questions that I would like the Minister to answer today. Will any slippage in the hospital building programme, from other hospitals in the scheme, enable any assistance to be carried over to help Imperial and St Mary? Will the Government also commit to adopting an alternative funding approach to help that scheme—which is being led by a highly skilled, highly experienced team of clinicians and advisers—as a matter of urgency? A scheme is ready to move, but it needs Government support, and the people of Westminster need that hospital to be delivered fast.
Jim Shannon (Strangford) (DUP)
It is a real pleasure to speak in this debate, and I congratulate the hon. Member for Hammersmith (Andy Slaughter) on securing it on this issue. He is indeed a hardy, dedicated and assiduous MP. I say that in all honesty, because I think the good people of Hammersmith have an excellent MP, and they should be very proud of the efforts he makes on behalf of his people in the Chamber and Westminster Hall.
This debate is about the new hospital programme, which applies to the UK mainland. I have come along to add my support to the hon. Gentleman, as I do for many right hon. and hon. Members, here and in the main Chamber. That is my purpose for being here. I am also here to discuss the new hospital programme, which was announced at the 2019 Conservative manifesto launch and would have delivered 40 new hospitals in the UK by 2030. I understand the reasons for the delays—the covid pandemic has focused attention elsewhere and taken away much of the funding—but there is a real need, and hon. Members have made that case today on behalf of their constituents.
I also understand the position of the hon. Member for Hammersmith on the refurbishment works at Charing Cross and Hammersmith Hospitals. As MPs, we want the best of care, access and opportunities for our constituents, and delays to any work are often frustrating, so I understand the request very well, and support his position and his ongoing commitment to his constituents.
I am pleased to see the Minister in his place. He responded to the first debate in Westminster Hall this morning on cancer very well. If he answers hon. Members in the same way in this debate as he did in that one, they will be more than satisfied. With the support of the new hospital programme, Imperial College Healthcare NHS Trust is beginning the next phase of redevelopment planning work for its three main hospital sites, all of which are included in the 40 new hospitals that the Government have committed to building by 2030.
I will quickly give a Northern Ireland perspective: what is happening here is also happening back home. It is important that we all remember that the demands for hospital care and better hospitals are not just in London; they are across the whole of this great United Kingdom of Great Britain and Northern Ireland. Northern Ireland has around 3% of all hospitals, with 40 across the Province.
In a constituency neighbouring mine, Belfast East, we have Ulster Hospital, which is the main hospital for us and is currently undergoing a £261 million revamp being done in stages. I believe that we are now going into section C of this refurbishment. So far there have been developments to a 30,000-square-metre in-patient block that is six storeys high, with a day surgery unit, an endoscopy unit, an angiography unit, and a cardiac investigation unit, with 12 in-patient wards. It is very much a modern hospital and very much of the modern programme that we have in Northern Ireland. The Minister is not responsible for that, but I just wanted to put it on record.
In order to clear our waiting lists, it is crucial that we do all we can to update outdated and old facilities. For a modern society and a fully functioning working hospital, things need to be modern and up to date. That is what the hon. Gentleman has asked for, and that is important. Hospital waiting lists in Northern Ireland are supposed to be banished by 2026—that is pie in the sky, in all honesty—according to a roadmap set out by the former health Minister, Robin Swann. More than 330,000 people are on some sort of waiting list in Northern Ireland and the new elective care framework proposes a £700 million investment over five years. It is important that the Government are committed to the requests of the hon. Member for Hammersmith and the hon. Member for Westminster North (Ms Buck), and to other requests that will follow.
Sir Mark Hendrick (in the Chair)
Order. Health is devolved in Northern Ireland, and the focus of this is very much on—
Jim Shannon
That is what I have done in my comments, Sir Mark. I just want to give you the example of Northern Ireland—
Sir Mark Hendrick (in the Chair)
But it is not a speech about the Northern Ireland health service, surely.
Jim Shannon
I have every hope that the Department of Health and Social Care will be able to give us timely updates on hospitals in England. This is a discussion I always have with those in the devolved Assemblies. We must—I conclude with this—do our best for our constituents and ensure that the collective facilities are in place to serve their needs. I hope the work in the constituency of the hon. Member for Hammersmith will commence soon as some reassurance for his constituents. He put his case forward—the Minister, I am sure, will respond—and I support him in what he has requested.
Matt Rodda (Reading East) (Lab)
It is a pleasure to serve under your chairmanship, Sir Mark. I thank the hon. Member for Hammersmith (Andy Slaughter) for his work in securing this debate, and I thank Members from across the House for their contributions. I support the points my hon. Friend made. He set out clearly in his speech a great deal of local need and hope for a solution to be found in his area, as have other Members. I would like to add my support to them and to highlight a similar issue at the Royal Berkshire Hospital in Reading, which serves both Reading and a very large part of the Royal County of Berkshire.
I start by paying tribute to NHS staff in our county and across the country. They are extremely hard working. They have been through the pandemic and many other great difficulties in recent years and they deserve our respect and support. This rebuilding programme is part of that. It is investing in the future of the country and in the health of our population.
The Royal Berkshire Hospital is one of 40 hospitals that were originally identified by the Government for rebuilding but, sadly, when the announcement was made by the Department of Health and Social Care recently, it was not mentioned. The public and hon. Members present can only imagine the stress that puts staff under, as well as the patients who are waiting for a resolution to many serious building problems in our area. I hope that the Minister will address that point.
Sadly, as my hon. Friend mentioned earlier, the hospital now risks potentially missing out, because if the Government’s plans and assumptions are correct, the pot of money available could run out in 2030 and, as of yet, there is no date for work to start at the Royal Berkshire Hospital.
The issues at the hospital are quite clear and are very similar to the ones in London and across the country. The old part of the hospital, the North Block, is 173 years old. The site is a patchwork of buildings from different dates since then, the A&E department is not suitable, and there is a £200 million backlog of repairs—all very similar to the situation my hon. Friend described for west London, which is obviously nearby. There are many other issues, and all of this affects the productivity of the hospital, the experience of patients and, to some extent, the morale of staff. A number of staff, many of whom I know, have contacted me over some months and years to express concerns about this issue, so I hope that today the Minister will be able to clarify the position for the 40 hospitals in London, Reading and many other areas around the country. I hope he will be able to reassure both patients and staff, and give the country the certainty it needs.
Ruth Cadbury (Brentford and Isleworth) (Lab)
It is a pleasure to serve under your chairship, Sir Mark. I draw your attention to my revised entry in the Members’ Registry of Financial Interests: my spouse is chair of audit at the Imperial College Healthcare NHS Trust. I thank my hon. Friend the Member for Hammersmith (Andy Slaughter) for securing this important debate on the hammer blow that has been inflicted on west London—just one part of the funding and investment crisis being inflicted on the NHS by the Government.
Many of my constituents rely on services from the Imperial College Healthcare NHS Trust, and particularly the St Mary’s, Hammersmith and Charing Cross Hospitals. For constituents in the eastern third of my constituency, Charing Cross Hospital is their local general hospital, whereas for those across my constituency, some or all treatments could be at Charing Cross, Hammersmith or St Mary’s.
My hon. Friend powerfully laid out the case against the Government and the complete neglect they have shown over the past 10 years to those across west London who need NHS care and those who work in the NHS. The sad thing is that I am not even surprised, because this is what we have come to expect from a Conservative Government—things such as the promises made by the now former Member for Uxbridge and South Ruislip. He said there would be 40 new hospitals—that is a promise he drove into the ditch.
I expect that the Minister will make a valiant effort to shake the Etch A Sketch and pretend that the last four years did not actually happen, but patients and staff cannot pretend. Every delayed or inadequate repair or rebuild of any NHS buildings impacts on staff and patients. Leaking roofs, failing electrics, flooding sewage systems and structural faults put whole wards out of action. Operations have been cancelled, diagnostic units and pharmacies have suddenly closed, and much more. This all leads to delayed diagnostics, delayed treatment and delayed discharge.
The NHS backlog currently stands at over 7.3 million, and over 48,000 people in my constituency and the borough of Hounslow were waiting for treatment last year, including 50 who had been waiting over a year for an operation. Behind every single one of those cold numbers is a person whose life is put on hold or, worse, put at risk because of the delays to well-overdue investment. Examples of delay include people who are forced to go private, stroke victims waiting months for a physio, and a young man waiting over a year for an assessment for a broken hip. Behind every one of those stories is not just frustration, but a deeper anger—a righteous anger about just how bad the state of things is. How many of the delays that people are experiencing are made worse because of the failure to invest in the core infrastructure of NHS buildings? We should be clear that it is not the fault of NHS staff and boards. The Imperial trust has needed work to happen for years, and has been preparing and getting plans ready in the expectation that the Government’s promised support will arrive.
I will touch on another aspect that is not necessarily specific to the Imperial trust, but it has been raised with me recently and it is an example of the impact of cutting back on NHS capital investment. There has been a failure to invest in technology, equipment and buildings in testing labs. Without that investment, the NHS is becoming increasingly dependent on the private sector. Businesses are using their leverage position to demand unnecessarily high unit costs per diagnostic test from the already overstretched NHS revenue budgets. Of course, as my hon. Friend the Member for Westminster North (Ms Buck) has described, the annual additional maintenance cost is coming out of revenue budgets because of the lack of capital expenditure.
The failure to invest has left NHS staff, patients and their families down. I know from recently visiting West Middlesex University Hospital is Isleworth in my constituency how hard NHS staff are working, and the groundbreaking work they are doing, but staff say they get little to no support from Government. West Middlesex is not in the same position as the three hospitals mentioned in this debate; it had a complete rebuild on the core part of the hospital under the last Labour Government.
NHS staff and patients are fed up, and they feel ignored. Surely the failure to invest in our NHS estate and provide what was promised will be yet another kick in the teeth for them. The broken promises will have a huge impact on not just my constituents but all Londoners. As has been said, St Mary’s Hospital provides key clinical services and is one of London’s major trauma centres—I think there are only four across London.
Ruth Cadbury
In conclusion, my constituents, who already face record waiting lists, will face a longer wait and greater difficulty because of the Government’s decision to pause investment. The Government over-promise and under-deliver. The whole farce shows why, after 13 years in power, it is time for a change.
Karin Smyth (Bristol South) (Lab)
It is a pleasure to serve under your chairmanship, Sir Mark. It is good to see the Minister; the day after we were last opposite one another, he decided he would not continue after the next general election. I hope we have a good exchange today, and I wish him well.
I am pleased to be in the debate. I declare an interest in that I was born in the Chiswick branch of the old Hammersmith Hospital. The groundworks at Ealing were dug by my father and thousands of Irish labourers from across west London, and I used to visit that hospital as a child. My brother was born in Hillingdon. These places matter to local people.
We are here to discuss something called the new hospital programme, but what we quickly learned was that it was not new, they were not hospitals and there certainly were not 40 of them. It is an absolutely sorry saga, and as we have heard it is a hammer blow for people in west London. It is also a saga that is recognised across the country. Members should not just take my word for it; according to the National Audit Office, the NHS estate does not meet the demands of a modern health service. The growth in backlog maintenance risks harm to patients, and the need for capital is being consistently underestimated. Billions of pounds in capital have been diverted to cover inadequate revenue funding, and yet some capital cannot be used for technical reasons, so there are underspends. Assets are sold to fund day-to-day activities.
In July 2020, the Public Accounts Committee recommended a capital strategy and guidance, including expectations on how backlog maintenance costs will be addressed alongside other priorities. In October 2021, the NHS Confederation stated that NHS leaders had concerns about safety standards because they cannot sufficiently maintain their estate, enable positive digital innovations and reduce the elective backlog without further worsening health inequalities. It described a disjointed and opaque allocation system and unresolved issues about how integrated care systems will allocate and prioritise capital spend.
There is more. In September 2022, the King’s Fund reported that levels of capital investment had changed dramatically over the past 15 years—and don’t we know it! The transfer of NHS funds from capital budgets to support day-to-day spending and relieve the pressures in the NHS has come at a huge cost. NHS buildings and equipment have fallen into increasing disrepair and patients have experienced safety incidents.
The Government’s own review, chaired by Patricia Hewitt, recommended that there should be a cross-Government review of the entire NHS capital regime, with a view to implementing recommendations from 2024. Section 5.43 of the report makes suggestions that a review should consider. My first question to the Minister is, will the Government conduct a review in the light of the Hewitt recommendations? The Opposition would like that update.
NHS estates and capital are a subject that has always interested me in my time as a Member of Parliament. My first involvement as an NHS administrator working on NHS estates was in the late 1980s, when I was a junior planner in Enfield working on the final stages of Chase Farm Hospital, liaising with architects and clinicians and producing updates for the planning director. Later, in the noughties, I was part of the Bristol health service plan to reconfigure acute services and develop the primary and community estate as a non-executive. Yet, my real interest in capital, and part of my motivation in becoming an MP, was the disaster of the Tories’ Health and Social Care Act 2012. Nowhere is the destruction caused by that legislation more apparent than in the management of estates and capital planning, which was not even an afterthought. We cannot provide quality healthcare in leaky, dangerous and collapsing buildings.
Local taxpayers deserve to know how their money is being spent, and another key point made by Patricia Hewitt was about accountability. The MPs here today can get no clarity from their local NHS, and that is frankly outrageous. They have come here today from west London, and from across parties, to try to get some answers as to why the promises made to them have been reneged on. They also want some clarity and, as my hon. Friend the Member for Reading East (Matt Rodda) said, some certainty about the capital programme. It is entirely opaque why some schemes go ahead while others languish somewhere in a possible queue—I am not even sure there is a queue. Indeed, my second question is, can we see that queue? Can we understand the criteria for assessing what is in and what is out, and the timings?
There have been questions about enabling works. We need much more detail on what is in the system now, the original bids and the assessment of the capability to deliver. Who is designing? Who is project-managing? Who is freeing up the clinical time and paying for it to lead and advise on what is needed? Who is tackling safety and the sustainability of these future public buildings so they can meet the challenge of climate change? Because of the damage of the last decade, such skills are in short supply across the public and private sectors.
In case the Minister is not across this and does not have the detail from his civil servants, I will end with a little advice. From my 30 years in and around NHS capital schemes, I know they are complex and require a huge range of knowledge and skill throughout a long process that sometimes lasts for decades. We cannot land modular buildings in major towns and cities, with buildings surrounding them that are hundreds of years old. These are complex facilities that need to augment local services; they are not Amazon warehouses. Decanting clinical facilities and patients is not a matter of unplugging a few computers and moving desks into a portakabin.
Crucially, as the people of Hammersmith and Paddington, Hillingdon, and Uxbridge and South Ruislip certainly know, this is a Government of vague but still broken promises. They could not run a bath; they could not deliver a pizza. They are totally incapable of running this hospital programme. I hope the NHS is not waiting for them to deliver a 75th birthday card, because it will never arrive. They need to go.
The Minister for Health and Secondary Care (Will Quince)
It is a pleasure to serve under your chairmanship, Sir Mark. How do I follow that speech by the hon. Member for Bristol South (Karin Smyth)? Well, first, I would like to congratulate the hon. Member for Hammersmith (Andy Slaughter) for bringing forward the debate. I also thank my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) and the hon. Members for Westminster North (Ms Buck), for Strangford (Jim Shannon), for Reading East (Matt Rodda) and for Brentford and Isleworth (Ruth Cadbury). Time is short, but I will try to answer as many points as possible.
The new hospital programme is the biggest hospital building programme in a generation, which will help us deliver on our manifesto commitment to build 40 new hospitals by 2030. The hon. Member for Hammersmith raised a number of specific questions. I am not responsible for the new hospital programme, because that matter sits with Lord Markham. Nevertheless, I will endeavour to answer as many of the hon. Gentleman’s questions as possible. Furthermore, I know that Lord Markham would be pleased to meet him and colleagues, and I will ensure the hon. Gentleman gets a response to his letter.
On 25 May, we announced that the Government remain committed to building 40 new hospitals by 2030, and the new hospital programme is expected to be backed by more than £20 billion in funding for hospital infrastructure. It is the biggest hospital building programme in a generation. Going forward, new schemes will be considered through a rolling programme of capital investment in hospital infrastructure.
Will Quince
Time is very short, and I ask that the hon. Gentleman to let me answer as many of the questions as I can. If there is time, I will give way.
The programme is part of a more sustainable and consistent approach to delivering state-of-the-art new hospitals and will mean further investment to upgrade NHS facilities across the country. Our announcement is hugely significant to all hospitals in the programme and it gives funding certainty for trusts to progress their schemes in line with revised indicative allocations, most of which are a significant uplift on previous allocations.
I now turn to the specific questions. The hon. Member for Hammersmith said that the debate is about the defunding of the trust. I want to be clear that the trust has been informed of a significantly larger indicative allocation for both schemes than was previously given in 2019. Far from being defunded, the funding envelope has increased significantly.
Furthermore, no schemes have been removed from the programme, as the hon. Gentleman suggested. It is one programme, with a small number of schemes that will now complete beyond 2030. If I might correct the hon. Gentleman, he said that the pot is £20 billion; to be clear, it is over £20 billion.
On Charing Cross, I believe that the hon. Gentleman said that the temporary ward or decant facility will not be necessary until the main construction starts on the tower. That is part of the enabling works that have been raised, which can and should be completed well in advance of the main construction, and therefore can be used as extra capacity should there be a gap between the works. It is the first phase of that floor-by-floor work.
I understand that the main construction itself has not been postponed to start after 2030. We have been clear that, as part of the rolling programme, we may move schemes forward and backward—that question was raised by the hon. Member for Westminster North—based on their readiness to progress. The reason the two Imperial schemes were already in cohort 4 and are now in the rolling programme is that their plans are at such an early stage of development. If they are ready to progress sooner—or indeed other schemes, as the hon. Lady suggested, encounter problems along the way—some schemes may move forward and others may move back. Having the enabling works and business case ready is vital, and I know that hon. Members will have those conversations with the trust.
I will answer some of the other questions in a moment, but specifically on funding, I can confirm that Imperial and all other trusts will now have received confirmation of the individual indicative funding envelopes that give them the basis on which they can submit their proposals through the business case stages. Those individual scheme figures will not be released into the public domain, because they are commercially sensitive. I know that the hon. Member for Hammersmith would like to know the figures, but I hope he will understand why we will not release them: it could prejudice the future ability of contractors for tenders.
We announced that the programme is expected to be backed by over £20 billion, which gives trusts the funding certainty to deliver. We remain committed to delivering all the hospitals in the programme as soon as possible. Specifically on Imperial College, we are working closely with the trust on its two new hospital schemes within the programme. As the hon. Gentleman rightly said, that includes the rebuild of Hammersmith Hospital, the refurbishment of Charing Cross and the redevelopment of St Mary’s in Paddington, as well as any opportunities to commence supportive work ahead of the main construction starting.
Briefly taking each hospital in turn, Charing Cross is a large district general hospital with specialised services. It is a primary undergraduate training centre, and work is under way to explore practical options for a mix of new builds and refurbishment that will be phased across the site. We recognise that the 14-floor tower will need to be refurbished rather than rebuilt, as I mentioned. Other preparatory work that will be necessary, which the hon. Gentleman asked about, includes site-wide surveys and a new energy centre. As with all schemes in the programme, the funding is available for early enabling works such as those as soon as the trusts have their plans ready.
Hammersmith Hospital is a specialist hospital, as the hon. Gentleman said, whose specialisms include renal, haematology, cancer and cardiology care and, of course, its specialist heart attack centre and its research function. Plans for that scheme are also at an early stage of development and will require a phased approach due to space constraints.
Finally, St Mary’s is a large general district hospital, as my hon. Friend the Member for Cities of London and Westminster rightly pointed out, providing highly specialised services. The hospital will require a complete rebuild, and there are a range of options for a new site. We have been clear that we are establishing a new, centrally led programme to deliver those hospitals, which includes a new approach that enables standardisation.
The hon. Member for Hammersmith asked about the completion date for each hospital. The timelines are at an early stage. As a result, they are fluid, but I know that Lord Markham, the Minister in the Lords, will keep him updated on progress as work is undertaken with the trust to develop its proposals.
With a minute to go, I thank the hon. Gentleman for rightly raising this important issue and for his interest and engagement in the new hospital programme. I absolutely assure him that we are committed to the delivery of the two schemes at Imperial College Healthcare NHS Trust, and I thank all Members who have taken part in the debate.
Andy Slaughter
I thank everybody who has contributed to the debate, and the Front Benchers for their contributions. I have a huge amount of respect for the Minister and genuinely wish him great success in his future career, wherever that may be, but he will not be surprised to hear that my constituents will not hear “early stage” and “fluidity” as comforting words. They had schemes for the completion of these major rebuilds of their hospitals by 2030 and assured funding. That is what we do not have, and however we dress it up, we are waiting in hospitals that are not fit for purpose. It is an insult not just to my constituents and patients but to the incredibly dedicated staff. Some of the best clinical staff in the world work in those hospitals, in frankly terrible conditions. That is why we need concrete answers. I will take up the offer of meeting the Lords Minister, but today’s Minister will not be surprised to hear that my hon. Friends and I will pursue this day by day and line by line until we have those assurances.
Question put and agreed to.
Resolved,
That this House has considered the New Hospital Programme and Imperial College Healthcare NHS Trust.
Written Statements
Disregards and Pardons Scheme
(11 months ago)
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The Parliamentary Under-Secretary of State for the Home Department (Miss Sarah Dines)
I am pleased to announce that the Government are today bringing into force sections 194 and 195 of the Police, Crime, Sentencing and Courts Act 2022 which will extend the scope of the Government’s disregards and pardons scheme. This is a significant step forward in addressing the wrongs of the past when LGBT people were criminalised for their sexuality in civilian life and while serving in the armed forces.
The original scheme was established in 2012 to enable men to apply to have certain homosexual offences for consensual sex removed from their records. This extension to the scheme will widen the scope to include any repealed or abolished offence that was used to criminalise same-sex sexual activity. The scheme will continue to apply to both civilian and service offences and conditions will remain in place to ensure that only those circumstances befitting of a disregard will be removed from the record.
Individuals will be able to apply to the scheme using an application form which has been published today on gov.uk along with accompanying guidance.
[HCWS848]
Judicial Conduct Investigations Office Annual Report 2021-22
(11 months ago)
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The Lord Chancellor and Secretary of State for Justice (Alex Chalk)
With the concurrence of the Lord Chief Justice, I will today publish the 16th annual report of the Judicial Conduct Investigations Office (JCIO).
The JCIO supports the Lord Chief Justice and the Lord Chancellor in our joint statutory responsibility for judicial discipline.
The judiciary comprises approximately 22,000 individuals serving across a range of jurisdictions. Over the past year, the JCIO received 1,817 complaints against judicial office-holders. Thirty-three investigations resulted in disciplinary action.
I have placed copies of the report in the Libraries of both Houses, the Vote Office and the Printed Paper Office.
Copies are also available online at:
https://www.complaints.judicialconduct.gov.uk/reportsandpublications/
[HCWS847]
Grand Committee
Arrangement of Business
The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)
My Lords, shall we begin with the usual proviso? I will let noble Lords know if there is a Division in the Chamber; we do not anticipate one in the next hour or so.
REACH (Amendment) Regulations 2023
(11 months ago)
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Lord Benyon
That the Grand Committee do consider the REACH (Amendment) Regulations 2023.
Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, this statutory instrument was laid before this House on 20 April 2023 and makes technical amendments to UK REACH. UK REACH is the retained version of EU REACH and is one of the key pieces of legislation that regulates the use of chemicals in Great Britain. This instrument is being made pursuant to powers in the Environment Act 2021. In accordance with the European Union (Withdrawal) Act 2018, UK REACH maintains the core approach and key principles of the EU REACH regulation. Its primary objectives remain focused on safeguarding a high level of protection of human health and the environment.
This SI introduces two changes. I should make it clear from the outset that the changes do not affect the key principles of UK REACH. The first change this SI introduces is that it amends Article 127P(4B) of UK REACH. This provides an additional three years for businesses to submit technical information on the hazards and risks of their substances to the Health and Safety Executive. This extension applies to all grandfathered registrations and chemicals being imported from the EU under the transitional arrangements. Industry will now be required to submit technical information on the hazards and risks of substances that it manufactures or imports by 27 October 2026, 27 October 2028 and 27 October 2030, depending on the tonnage and toxicity. These dates are changes from 27 October 2023, 27 October 2025 and 27 October 2027 respectively.
This SI supports the work that we announced in December to explore an alternative transitional registration model for UK REACH in order to address the significant potential cost, estimated at between £1.3 billion and £3.5 billion, of obtaining or accessing the full hazard information required to meet UK REACH registration requirements. Work on the alternative transitional registration model is ongoing. In response to concerns about the potential costs, we are currently engaging with stakeholders, including NGOs, to develop an alternative transitional registration model for UK REACH that will help reduce the costs associated with obtaining hazard information, including from expensive EU REACH data packages, while still ensuring that industry remains responsible for the safe use of chemicals throughout the supply chain.
The model also aims to place more emphasis on improving our understanding of the uses and exposures of chemicals in the GB context, which will enable better targeting of regulatory actions. Extending the deadlines will provide certainty to industry so that it can avoid making unnecessary investments towards obtaining information for the existing registration model when that information may no longer be necessary under an alternative model.
I now turn to the second change that this SI introduces. It moves the timelines for HSE to complete its compliance checks to ensure that the information submitted by industry is of sufficient quality. These timelines have been moved in order to align them with the extended submission deadlines. We need to move the dates for these regulatory checks because the current deadlines for compliance checking, as set down in Article 41(5) of UK REACH, would otherwise fall before the amended dates for submitting the relevant information. HSE will now have to complete its compliance checks by 27 October 2027, 27 October 2030 and 27 October 2035, corresponding to the three extended submission deadlines.
This is the first time we have prepared an SI using the powers to amend REACH set out in Schedule 21 to the Environment Act 2021. We have followed all the safeguards we attached to those powers: we received consent from the devolved Administrations of Wales and Scotland; we consulted widely with our stakeholders on our plans to extend the submission deadlines; and we published a consistency statement alongside the consultation, as required by the 2021 Act. This provides the Committee with the necessary assurance that extending the submission deadlines is consistent with Article 1 of UK REACH.
Our assessment, as outlined in the consistency statement, demonstrates that the UK REACH regime will still be able to ensure a high level of protection for human health and the environment for three main reasons. The first is the information and knowledge on chemicals registered under EU REACH available to both the Health and Safety Executive and Great Britain registrants. Secondly, importers from the EU will continue to receive EU REACH-compliant safety data sheets from their EU suppliers, which will enable them to identify and apply appropriate risk management measures. Thirdly, the Health and Safety Executive has the ability to seek risk management data from other sources, if necessary, as it did when acting as a competent authority under EU REACH. This could include calls for evidence or using data from EU REACH and other relevant sources that can provide Great Britain-specific hazard and exposure information.
Alongside the public consultation, we also published a full impact assessment on extending the deadlines. The impact assessment was awarded a green “fit for purpose” rating by the Regulatory Policy Committee. The territorial extent of this instrument is the United Kingdom. The devolved Administrations were engaged in the development of this instrument and are content. The Joint Committee on Statutory Instruments did not report any concerns with this statutory instrument.
The Secondary Legislation Scrutiny Committee raised four main concerns in relation to this SI and the ATR more generally, including whether the implementation deadline of 2024 is achievable; concern from stakeholders about weakening protections for human health and the environment; and concerns about the HSE’s regulatory function and the impact of the REUL Bill. As I have already commented, we are confident that UK REACH will still be able to ensure a high level of protection of human health and the environment. I will take the other concerns in turn.
In relation to the timeline for delivery of the ATR, this is a complex project. It is right that we take the appropriate time to develop the policy and test it with stakeholders. We are extending the transitional registration deadlines to ensure that we have a reasonable amount of time to do that. The earliest we can formally consult is the end of 2023, introducing legislation in 2024, and this remains our aim. The timetable is driven by both the technical and the sequential nature of the work. We are just coming to the end of an evidence-gathering project, including detailed interviews with companies including SMEs. Together with the new deadlines, this draft SI will give industry the time it needs to adapt to the new arrangements.
In relation to the HSE’s regulatory capacity, I am pleased to say that it continues to increase its capacity to take on new regulatory obligations. The HSE’s Chemicals Regulation Division increased by 46% between September 2020 and March 2022, and it has continued to build capacity over the last year. By 2025 the number of HSE staff working on UK REACH delivery is expected to grow to at least 50.
Finally, regarding the committee’s concerns about the impact of sunset provisions in the REUL Bill on this SI, I confirm that REACH was not on Defra’s list of retained EU law that it intends to remove from the statute book from 31 December 2023 following the retained EU law Bill becoming law.
I am confident that the provisions in these regulations mean that we will continue to ensure the highest levels of protection for human health and the environment, based on robust evidence and strong scientific analysis. At the same time, we are taking the necessary steps to provide industry with the legal certainty it needs to operate and to preserve the supply chains for the chemicals we depend on. For these reasons, I beg to move.
Baroness McIntosh of Pickering (Con)
My Lords, I am extremely grateful to my noble friend for the opportunity to debate the regulations, which I broadly support, and to share with him some concerns that have been raised—in particular, by industry.
I start with the last bit of what my noble friend said about the REUL Bill: that this is not currently on the Defra list of retained EU law that might be changed. Can he give us, and therefore industry, an absolute commitment that in the next two to three years there will be no attempt by Defra to amend or revoke this? When the REUL Bill, which is now in the other place, went through its initial stages, we learned that Defra has absolute power to review, amend and revoke any piece of primary or secondary legislation—I forget all the nomenclatures—on the statute book. We as a Committee, a Parliament and a House do not have the right to review that, so it would be fair to business to know that it is not within the sight, mind or intention of the department to amend or revoke within the next two to three years.
On 24 May my noble friend was kind enough to reply to a Question I tabled on REACH and maintaining compliance with the EU REACH programme. He repeated today that, as we speak, we do not know what the total cost of the statutory instruments and the measures therein will be. In his Answer my noble friend said that it will be £2 billion over six years, but he and the Committee will understand that it is not very helpful to those preparing—the NGOs and particularly the chemical firms involved—that the Government do not have an idea. He concludes by saying:
“Although values of chemical exports are increasing, this is not generally reflected in volume, suggesting that inflationary pressures are contributing to the figures”.
I do not expect my noble friend to be able to reply this afternoon, but I understand that the cost of paint went up hugely after the UK left the European Union and I wonder whether that is partly because of the instrument before us this afternoon and the fact that those who wish to export still comply with EU REACH and are now having to comply with UK REACH, albeit with the slight delay.
The UK chemical sector, represented by the Chemical Industries Association, was kind enough to brief me for this afternoon, and I will share with my noble friend and the Committee its concerns. It
“would like to stress the importance of urgently providing legal certainty to businesses. The current level of uncertainty around future registration requirements, expected timelines and related costs is currently not encouraging new market opportunities. While the proposal to extend the deadlines is much welcomed by industry, clarity on the viability of the future registration model will also be needed very shortly to allow sufficient time for appropriate legislation to be developed and for authorities and industry to implement it”.
When will the future registration model be available?
As regards the concerns raised by the Secondary Legislation Scrutiny Committee, I share its concern that the potential date of late 2024 is not achievable, because my understanding is that the Government are looking at a completely new design for UK REACH, including all the things that businesses are expected to do. Again, I ask my noble friend to put our minds at rest. If it is a whole new design, how, hand on heart, can he explain that the department will be in a position to complete it?
The CIA is also concerned that:
“In considering a different approach to registration, it will be essential to avoid a situation where compliance costs are simply shifted rather than reduced, for example from buying access to data under the current system to new administrative costs due to the work needed to generate a dossier under the new model”.
Therefore, I am sure my noble friend would accept that there is considerable uncertainty as to whether the registration costs can be minimised and that the industry needs to know a workable alternative registration model. The CIA is
“of the view that an effective UK REACH regime could be achieved even without requiring a full resubmission of dossiers for all substances already registered under EU REACH”.
I could go on—my noble friend the Minister is aware that I have tracked this issue for some considerable time—but I share the ongoing concerns raised by the Secondary Legislation Scrutiny Committee. I thank it for providing its report in time for us to consider it this afternoon. My main concerns are that 2024 is not achievable and that the REUL Bill gives my noble friend and his department complete power in this field to revoke or amend this without any consultation of businesses or real scrutiny in this place.
With those few remarks, I look forward to hearing my noble friend the Minister’s response.
Viscount Stansgate (Lab)
My Lords, I rise briefly to make just a couple of points. I remember when the EU REACH legislation was going through the European Parliament. I was involved in a different capacity. It was, as Members will know, the biggest piece of legislation that the European Parliament had ever dealt with. This is a very complex area.
I appreciate the Minister’s exposition of this statutory instrument but, like other noble Lords, I have a couple of questions. As the Minister mentioned, this is not the first extension. I am not surprised by that because this is a complex area. Nevertheless, I want to raise something that I think other Members will also raise; indeed, it has just been raised by the noble Baroness. Is the 2024 deadline realistic, bearing in mind especially that the Secondary Legislation Scrutiny Committee referred to concerns that the ATR might be weaker in its effect? Does the Minister care to elaborate a little more on that?
Another question that arises is whether the HSE has enough staff to cope with the complexity and volume of data and the examination that is necessary in this process. Does the Minister care to comment a little on the industry’s concerns about cost? There are some legitimate concerns about that. Who did the Government consult in the course of preparing this SI? The Minister did not mention anyone specifically, but did the department consult the Chemical Industries Association or the professional body for chemistry, the Royal Society of Chemistry, which has taken a close interest in something of such importance over a period of many years? Does the Minister care to say anything about the capacity for confusion in Northern Ireland between the parallel systems of EU REACH and UK REACH?
Finally, in respect of the retained EU law Bill, I really do think—I hope Members agree—that this is too big an issue for us to allow a future Government to make a major change without consulting Parliament. I would be grateful if the Minister could address those points in his reply.
Lord Monks (Lab)
My Lords, I too have experience of dealing with REACH at the European level. When I was the general secretary of the European Trade Union Confederation, we worked with the British chemical industry, including the Chemical Industries Association—often against opposition from the powerful German chemical industry lobby, which was hostile to the whole concept of REACH. I was very pleased when we got it through; as my noble friend Lord Stansgate just outlined, it was not without considerable difficulty and this is an extremely complex area.
I will make two points today. First, I want to give a little tribute to the Chemical Industries Association, which I have found over the years to be as good a lobby group as any in the business world in terms of taking a broad view of issues, as well as looking after its members’ interests. That is important.
I am particularly concerned to ensure that in the extension that has been given, which I support, we continue to adhere to EU REACH, because we have nothing at the moment and the game plan is there. No doubt we will have some variations on it in due course, and I accept that, but in the meantime, in the absence of a British UK-EU arrangement, I hope that the Minister can ensure that the British industry follows the EU rules until they are replaced.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise to express significant green concern about this SI and the general direction of travel. We must look at the framework within which we are considering this. We have recently seen published peer-reviewed research showing that the world has exceeded the planetary boundary for novel entities. We have natural systems and, increasingly, human health systems, that cannot cope with the burden of novel entities. I usually talk about those as shorthand for pesticides, plastics and pharmaceuticals, but it is basically what is covered by the REACH directive.
There is now increasing scientific and public concern about the impact of these on environmental health and public health. PFAS forever chemicals are one example of an area that we are coming to understand in our understanding of biology. Most organisms on this planet are structurally holobionts, made up not just of their own entities but of bacteria, fungi and viruses. We are grasping the sheer complexity of life on this planet far more than we did 10 or 15 years ago, and the impact of these chemicals is increasingly understood—for example, the impact of chemical exposure creating antimicrobial resistance, a whole new area of research where there have been considerable advances in the last few years.
In that context, it is interesting to look at some figures. I pay tribute to CHEM Trust, which has provided me with a large amount of information on this issue, with significant expressions of concern. If we take the substances of very high concern, the UK has not added any hazardous chemicals to its list since we left the European Union, while 24 substances have been added to the EU’s list. Defra is considering just four out of 10 substances for the UK list which the EU added in 2021 but is yet to publish assessments on them. In the meantime, another five substances were added to the EU list in 2022 and nine since January this year. This is happening at a very significant pace, and we are falling further and further behind. There seems to be no interest. Can the Minister suggest how we might catch up with the EU in this specific area?
There are obvious public and environmental health issues here, but there are also issues for trade. If our companies are operating on our standards, they will increasingly be excluded from other markets. The Prime Minister has this week been speaking of the desire to be world-leading in innovation. When substances of very high concern are put on that list, there is a push on companies to look for alternatives—to innovate and find new ways of doing things. If we are not creating an environment in which that is likely to happen, then even in the Government’s own terms we are falling behind on the global stage of science and innovation.
Picking up on the points made by the noble Lord, Lord Monks, it is worth noting that the UK was one of the driving forces behind the creation of EU REACH and the restriction of chemicals regulations in 2007. Last night, I was at an Industry and Parliament Trust meeting, talking about trade. I heard there an expert in standards talking about how the UK has in recent decades been a leader in pushing the creation of ISO standards. However, it is our industry, our scientists and our NGOs that led that push towards higher standards. The Government must keep up, and support the drive in our industry, our NGOs and our scientists.
I shall pick up the points made by other noble Lords about the lack of regulatory capacity. The National Audit Office and the Public Accounts Committee have pointed to this lack, which is creating serious problems that are being identified on every side. Others have already spoken about the Secondary Legislation Scrutiny Committee, which also highlights concerns about human health and the environment, and the HSE’s capacity. We are hearing the same messages from all angles.
In particular, the impact assessment says that the absence of data
“could lead to reduced regulatory oversight and regulatory delays”,
but suggests that it would not be significant because other sources of information can be drawn on. However, the publicly available information about registered substances in EU REACH does not include details on safety tests, uses and how the industry reached its conclusion on the hazards and risks of substances.
The time factor needs to be focused on, as does the fact that we know that today, at this moment, we are exposing everyone in Britain and every bit of the UK’s natural systems to harm from chemicals that we continue to release into the environment when we know we should not be doing so. That will keep piling the costs on. The slower we operate, the more costs there will be. Think of the pressure on our NHS and on one of the nature-depleted corners of this battered planet: if we act slowly, the costs will just keep mounting up. For example, I mentioned PFAS forever chemicals: once they are there, we cannot get rid of them. There is no going backwards if we allow their use to continue.
I have some very specific questions. Will the UK look towards mirroring, moving faster than and eventually matching the EU’s pace of action, particularly on the chemicals of most concern? The UK Government talk about whether a control is right for GB. Do the Government see lower standards as being in some way better for us? How can the Minister say that lower standards of chemical regulation and safety are better for us?
An issue on which I have done a great deal of work and have a great deal of concern is microplastics. The Committee will remember microbeads. Indeed, the Government acted a few years ago on microbeads, but many intentionally added microplastics are still not covered by that legislation, which the REACH work programme of 2022-23 indicated as one of its five priorities. However, it has not yet published an evidence review or initiated any restrictions. Can the Minister tell me when we are likely to see that evidence review on intentionally added microplastics? In the light of that question, I note that EU national experts recently voted to adopt restrictions at the REACH Committee. That is now going to the European Parliament and the European Council, so the EU has steps in progress on these microplastics. When will we?
To be really concrete and scientific, and to focus on the importance of this for environmental and, potentially, human health, we—by which I mean scientists collectively: the human race—have identified the new disease of plasticosis. That was identified in one species of seabird, because we have looked for it in only one species of seabird. We are choking this planet with plastics and we have no idea what that is doing to us or to nature.
The Duke of Montrose (Con)
My Lords, I had the honour to serve on the EU Energy and Environment Sub-Committee when it considered Brexit and the trouble with EU REACH, in that it was not in the least transferable so it is totally dependent on grandfathering, unless there is a stream in which we allow people to apply for new chemicals. We obviously started from zero in our collection and we rely on manufacturers to submit the EU REACH approvals. Do we keep track of how extensive our REACH is, compared with the European one? As the previous speaker said, the EU is expanding its schemes. Do we have tighter regulations than the EU imposes at present?
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction. As with a number of SIs in the past, we have been facing this issue since 2019. At that time, the Government were urged from all sides, especially the chemical industry, to stay within EU REACH. The data analysis and licensing systems that would not be made available to the UK were and are extensive. This would not be the case if the country remained within EU REACH.
The need for registration, evaluation, authorisation and restriction of chemicals is obvious. It protects the public, plants and animals from the harm caused by toxic chemicals, all of which have to be licensed and registered. This is a complex process. Without access to EU REACH data, a completely new set of data had to be compiled and licensed from scratch. This involves animal testing. We cannot get away from this fact. It is necessary, but it could have been avoided. It will also involve huge financial costs to the chemical industry.
On 4 March 2019, my noble friend Lord Fox and I met Defra officials along with the then Minister. We stressed the huge costs involved, which we felt ran into billions, and the long timeframe needed to get the necessary licences in place. I regret to say that we were treated with contempt and told that it would be much cheaper and quicker than our predictions.
The deadline before implementation has already been extended from that set on 26 March 2019. In answer to an Oral Question in September 2020, Defra revealed that EU REACH employed some 600 staff and took 10 years to deal with the difficulties in the system at a cost of £100 million. Defra proposed to achieve the same with 40 staff, at a cost of £13 million. By December 2020, in a debate on a regret Motion, a cost of £1 billion was mentioned.
Here we are today once again extending the already extended timeframe. This is a piece of elastic that has come to the end of its life. Defra’s estimation of the current costs for completing the licensing is now between £1.3 billion and the figure that I think the Minister mentioned of £3.5 billion. I have tremendous respect for the Minister and his predecessor, but on this occasion I have to say to Defra: “We told you so”.
In a debate in 2020, the noble Lord, Lord Cameron of Dillington, began his remarks by saying:
“My Lords, I would like to echo the regret that others have expressed that we have allowed ourselves to walk into this unnecessary nightmare”.—[Official Report, 8/12/20; col. 1162.]
I could not agree more. It is clear than an extension of the timeframe is needed. Is the Minister sure that the timings now being requested will be sufficient? In its report of 11 May, the Secondary Legislation Scrutiny Committee, to which he referred, says that it does not believe that the alternative transitional registration—ATR—model deadline of 2024 is achievable. Can the Minister say whether, during this extended timeframe, animals will continue to be subjected to painful and harmful testing methods? Others have spoken about the effect and the danger of hazardous substances.
Given that the extended timeframe favours large businesses with the greatest tonnage, can the Minister assure the Grand Committee that the smaller but nevertheless vital businesses often providing subcontract work will be able to survive? How many, if any, businesses dealing with and producing chemicals have gone under since the country left EU REACH?
The Minister referred to the Retained EU Law (Revocation and Reform) Bill. How will the three-year extension period proposed today interact with the sunset provisions in the REUL Bill? I believe he said that there would be no impact, but I would be glad for confirmation. The Secondary Legislation Scrutiny Committee raised this issue and the proposed extended deadlines.
In November 2022, Defra extended the submission deadlines for the consultation outcomes. Some 82% of the 289 responses had a strong preference for a three-year extension. However, the NGOs preferred no extension at all. This was due to concerns that the ATR model would be weaker and less protective of human health and the environment than current transitional arrangements, which are also still under development. UK REACH is supposed to be bound by the Environment Act’s precautionary principle. However, there is clear risk involved in the ATR model.
The Chemical Industries Association, the CIA, stresses the importance of urgently providing legal certainty to businesses. The current level of uncertainty around registration requirements, expected timelines and related costs is not encouraging new market opportunities. Extending deadlines is not providing the clarity needed on the viability of the registration model or allowing sufficient time for appropriate legislation to be developed and for authorities and industries to implement it. The noble Baroness, Lady McIntosh of Pickering, referred to this. Will the Minister please comment?
The CIA is of the view that an effective UK REACH could be achieved even without requiring a full resubmission dossier of all substances already registered under EU REACH. Sadly, so prejudiced is Defra to anything that might smack of the EU, it will not adapt EU REACH and insists that UK REACH will be better. If we ever get there, it certainly will not be cheaper.
I will give an example from the CHEM Trust. In its second-year programme, UK REACH deprioritised controls on nine hazardous substances targeted by the EU. These included concentration limits for eight polycyclic aromatic hydrocarbons used as infill and, in loose form, in synthetic football pitches and playgrounds. These are linked to increased cancer risk. A typical sports pitch uses 120 tonnes of these crumbs. According to a 2017 study, six tonnes of potentially carcinogenic material would be non-compliant with the current EU standards. Is Defra’s prioritisation of fewer EU controls on harmful substances a short-term measure until it reaches capacity, or will it introduce other measures to close the protective gap that is opening up before our eyes?
I have serious concerns about the deliverability of the UK REACH regulations. However, I feel I have no choice but to support the extension of the timeframe for delivery. I have a terrible feeling that the ATR will not be achieved and that we will be debating this issue again before too long.
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, I thank the Minister for his overview of the SI before us and for his correspondence in advance of today’s debate. I also thank all noble Lords for their contributions, which highlight the importance of the discussion. Given the discussion in the other place, it will not surprise the Minister that His Majesty’s Opposition will support this SI. However, we have some specific concerns relating to the direction of the post- Brexit REACH regulatory framework and the capacity of the HSE as a statutory body to provide effective enforcement.
As we discussed last week in our debate on the packaging waste statutory instrument—I am becoming a pro—the collation of this data is key to the implementation and enforcement of an effective regulatory regime. But that requires the Government to move at speed to ensure that they have the data available to make informed decisions. Paragraph 7.1 of the Explanatory Memorandum states:
“The changes provide sufficient time for the government to develop and introduce a new registration model that will cater for EU registrations transferred to Great Britain under Title 14A of UK REACH”.
The Government have known about the need to develop and introduce this model for seven years. In fact, the Minister will remember that discussions regarding the future of REACH were a regular feature of the debate around Brexit in the other place before and after the referendum. Given that the industry has been doing everything possible to support the department in reaching a new model, can the Minister inform the Committee why the department is so far behind schedule and why this is being addressed only now?
Paragraph 7.2 of the EM states:
“The statutory timelines for HSE to carry out their compliance checks on the information submitted by industry are also being extended to align with the data submission deadlines”.
I sound like a stuck record, but this is a similar situation to the ones we have seen with imports of food and certain goods from the EU, with launch dates repeatedly postponed due to a lack of preparedness. Can the Minister inform the Committee why we repeatedly need to extend the deadlines?
Later paragraphs of the EM—from paragraph 7.7 onwards—explain why His Majesty’s Government have opted to take a different approach and outline the likely timescales on implementing changes to IT systems. Why were industry concerns about the cost of the original proposal not given more weight at the time? How many civil servants have been used and how much financial resource has been spent on the original option? How much of the work that has already been done can Ministers carry over? While industry supports the changes being made, concerns have already been voiced about the workability of the alternative system and its potential implications for safety, which must remain paramount. We are not against divergence from the EU, but we must not allow gaps to form in our regulation of chemicals. Neither businesses, workers nor citizens will benefit if health and well-being are put at risk unnecessarily.
The Minister in the House of Commons, Rebecca Pow, addressed concerns about the HSE’s capacity by saying:
“Its capacity is increasing all the time … by 2025 the number of HSE staff working on UK REACH delivery is expected to grow to 50, and the number is around 60 or 70 if we consider the wider support functions”.
We welcome that ramping up of capacity, but is the Minister satisfied that this staffing level is sufficient given the areas that we are talking about? In that debate, the Minister also said that the department
“will be developing a chemical strategy”
and that we
“will hear more about that in due course”.—[Official Report, Commons, Fifth Delegated Legislation Committee, 16/5/23; cols. 9-10.]
Can the Minister here, the noble Lord, Lord Benyon, be any more specific? How confident is he that this will not simply be added to the list of items that arrive late?
I sincerely believe that each and every one of us wants nothing more than a regulatory framework that keeps our population safe and secure. Given the nature and importance of the REACH regulations, it is therefore vital that we do not just get this right but get it done quickly.
Lord Benyon (Con)
I am grateful for noble Lords’ interest in this issue, their important contributions to this debate and their support for the REACH (Amendment) Regulations 2023. I will deal with as many of the points as I can.
On my noble friend Lady McIntosh’s point, I can absolutely confirm that there is no intention to amend or revoke any of these measures in the next two years. I will come on to the point about cost.
On the 2024 date, which the Secondary Legislation Scrutiny Committee and a number of noble Lords raised, I repeat the point that I made earlier: the Government are confident that we will be able to meet that date. I am sure that noble Lords will be active in holding the Government to account on that.
On the point made by the noble Viscount, Lord Stansgate, the Health and Safety Executive continues to increase its capacity. The National Audit Office report from May 2022 details the increased staffing levels at the HSE, including the staffing level in its Chemicals Regulation Division going up by 46% between September 2020 and March 2022. The HSE has continued to build capacity in the last year. In the longer term, by 2025, the number of HSE staff working on UK REACH delivery is expected to grow to 50, or around 60 to 70 when considering wider support functions.
The noble Baroness, Lady Bakewell, mentioned that the staff in the EU directorate numbered 600. Of course, that covers the whole of the EU, which is a considerably larger area, but nevertheless we seek to align any regulatory changes we can with them, working with the EU, and I will give more assurances on that.
Baroness Bennett of Manor Castle (GP)
Before the Minister sits down, may I briefly raise two points? He said that a difference in exposure patterns would help to explain the differences in regulation between the EU and the UK. I tried to imagine what those differences might be. Some parts of the EU have considerably more heavy industry. We were at a joint event this morning where we were told that both have large areas of factory farming. Thinking about what people actually consume in the EU and the UK, I cannot think of any significant differences between the two that there would be in the pattern of life in terms of consumption. Either now or perhaps in writing, would he consider explaining what those different exposures are?
Finally, I acknowledge that the Minister very much welcomed and is enthusiastic about the microplastics review. What timeframe are we looking at there? I realise that he might not be able to be precise, but will it be this year or next year?
Lord Benyon (Con)
The noble Baroness half answered her first question. An example is that river flow is often lower in England than in the EU. That is a factor, but I will certainly go back to the department and seek further answers on that and on her subsequent question on plastics. I will certainly write to her.
Animal Welfare (Electronic Collars) (England) Regulations 2023
(11 months ago)
Grand CommitteeRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Lord Benyon
That the Grand Committee do consider the Animal Welfare (Electronic Collars) (England) Regulations 2023.
Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee
The Minister of State, Department for Environment, Food and Rural Affairs (Lord Benyon) (Con)
My Lords, these draft regulations were laid before the House on 27 April. The purpose of the instrument is to promote the welfare of cats and dogs by prohibiting the use of electronic collars capable of emitting an electric current when activated by a handheld device. As noble Lords will be aware, animal welfare is a devolved issue. Therefore, these regulations apply to England only.
These collars are sometimes described as electric shock collars or e-collars. The instrument will make it an offence for a person to attach, or cause the attachment of, an e-collar to a cat or a dog. It will also make it an offence for a person responsible for a cat or dog that is wearing an e-collar to be in possession of a remote control device designed or adapted for activating the collar. This proportionate and targeted ban will not prevent the continued use of other electronic collars which are not associated with such harm and abuse. These include those that emit a vibration or a spray, as well as invisible fencing or containment systems.
This instrument fulfils a commitment given by the Government in response to their 2018 consultation on electronic training collars for cats and dogs in England. This commitment was reiterated in Defra’s 2021 action plan for animal welfare. Concerns about the capacity for e-collars to cause harm to cats and dogs have consistently been raised with the Government. In response, Defra commissioned research to understand the effect of these devices on the welfare of domestic dogs. The research showed that many owners do not read the manufacturer’s instructions prior to use. It also showed that e-collars have a negative impact on the welfare of some dogs, even when used in compliance with the manufacturer’s instructions. E-collars may also redirect aggression or generate anxiety-based behaviour, worsening underlying problems.
In developing these regulations, we have listened carefully to a range of views from pet owners and respondents and have consulted key organisations, including animal welfare and dog owning organisations, veterinary organisations, e-collar manufacturers, dog trainers and behaviourists. We engaged with both those who support the use of e-collars and those who do not.
I am aware of concerns raised by some colleagues regarding the implications of these regulations on livestock worrying. I assure noble Lords that very careful consideration was given to this matter. My officials liaised closely with the National Police Chiefs’ Council lead on livestock worrying, and with several English police forces, as well as police from Wales. They noted that the vast majority of livestock worrying cases involve dogs that have escaped from the premises on which they are kept without their owners knowing. These are cases that hand-controlled e-collars could not have prevented. We therefore maintain that owners keeping dogs in secure premises and ensuring that they are kept on leads when walked in close proximity to livestock is the most effective line of defence against dog attacks of this nature.
We have also considered the impacts of the ban under the Equality Act 2010. Most people who reported having a protected characteristic, when responding to the 2018 consultation or writing to the department since, noted that they relied on the vibration function of e-collars, so the impact of the ban on people with a protected characteristic will be minimal.
We consider that this instrument is an appropriate and measured response to the welfare concerns raised and to the outcomes of the Defra-commissioned research and public consultation. The Scottish Animal Welfare Commission has also recently conducted its own review. It concluded that e-collars should be banned for any training purpose. The same conclusion was reached by other nations that have already banned the use of these devices, including Wales, Austria and Germany. However, the instrument will allow His Majesty’s Armed Forces to continue to use e-collars controlled by handheld devices where this is needed for national security reasons. The Government recognise that some pet owners and trainers have been using e-collars for some time. This means that they will need time to retrain their pets to respond to alternative training methods and devices. For this reason, we have built in a transition period until 1 February next year, when the ban will come into force. I beg to move.
Lord Jones (Lab)
My Lords, I thank the Minister for his introduction. I acknowledge his confident sign- posting of where the regulation takes us. It is clearly a very welcome regulation; there are millions of cat and dog owners who are hugely fond of their pets and will, no doubt, greet the mention of electronic collars with quite some repugnance. The Minister can be congratulated on his regulation, which will surely be wholeheartedly greeted with no little relief by many pet owners.
The regulations are securely rooted in the Animal Welfare Act 2006—perhaps a landmark Act of its kind. We should thank the department for them. As a dog lover, and a dog owner at one time, I recollect our late dog: a black lab, named Sweep. He was a failed gun- dog and, for sure, he had neither courage nor aggression. When we were burgled, I rather think he was the welcoming group for that misdemeanour.
I have only a few brief questions. Mainly as a point of principle and for the record, will the Minister expand a little on paragraphs 4.1 and 4.2 of the Explanatory Memorandum? How did he or his department consult the Senedd? It is a trifle delphic. It is not sophistry, of course, but perhaps he might expand on those paragraphs a little.
Further, paragraph 7.13 refers to His Majesty’s Armed Forces. How will this operate? In what circumstances does the Minister envisage paragraph 7.13 operating? One might presume that an MoD dog with an electronic collar would be very obedient and might even, if it is doing its work, in some circumstances cease to worry a trespasser. One does not know, so perhaps the Minister could indicate how that might work.
Paragraph 10.4 of the Explanatory Memorandum is about consultation. Can the Minister give a brief summary—a précis—of those involved? Maybe they are well-known national organisations, and it may come easily to his memory whom he or his department consulted. Again, I congratulate him on the regulations and a helpful Explanatory Memorandum.
The Duke of Montrose (Con)
I thank my noble friend the Minister for laying out these regulations and the work that has gone into drawing them up. I declare my interest as a vice-president of the National Sheep Association. Of course, worrying by dogs is a major concern for the industry. I have had sheep worried by family pets, and it is very sad for all concerned because, at the moment, the only cure for a dog that is worrying sheep is to have it put down. If a dear family pet fails in this way, often people send it away somewhere else, which does not really solve the situation.
Recently, the secretary of the NSA issued a statement that some farmers in Wales are finding that they can train a dog not to worry sheep by using electronic collars. It is not a question of monitoring the collar but of training the dog. This could prevent the putting down of healthy dogs. Has this been considered? The collars are limited to shocks of about 5,000 volts, whereas electric fences and so on can be about 35,000 volts, which animals quickly come to recognise. This is an area where the limits covered by this measure might have to be reconsidered.
The Earl of Leicester (Con)
My Lords, I declare my interest as a landowner and farmer. We have a flock of sheep and, of course, I keep dogs. These days, it seems that every public document states that it is evidence-based, but too often the scientific research and the evidence involved are pre-organised to produce a political result—and so it is with this legislation, prepared by Defra.
Wales, a country with a great deal of sheep farming, banned electronic dog collars a few years ago. A year after the ban, Welsh farmers reported four times more dog attacks on sheep and that they had needed to shoot three times as many dogs. At home, in 2020, our flock lost five sheep to dog attacks and two in 2021. One was saved but was never the same again, and perhaps we should have euthanised the poor thing when we found it. Last year, we lost 23 sheep. I am not saying that this legislation would have saved all those dogs, because clearly there is an issue with responsible dog ownership. Most responsible dog owners keep their dogs on leads. However, we are about to pass this legislation. Defra understood that 500,000 electronic dog collars were in operation in this country. The RSPCA’s 2021 figures for cruelty to animals reported 1,094 killings of animals and 38,087 abandonments. How many e-collar incidents of cruelty were reported? Zero.
I have had 15 dogs. I have had five generations of working spaniels. In answer to the emotive speech by the noble Lord, Lord Jones, about dog owners loving their dogs, of course I love my dogs. The fifth generation of my working spaniels is a batshit crazy spaniel. I am sure that noble Lords with spaniels will agree with this. I try to love him. Well, I do love him. For Christmas, he got an e-collar. The first thing that I did was use the “vibrate” button on him, but in worst-case scenarios I use the “shock” button. I am lucky that the Government are allowing me a transition period to February 2024; I am certain he will be a brilliant dog by then. He wants to do a good job but he is a lively animal.
What will happen after February 2024 to the 500,000 people in this country who own an electronic dog collar? This legislation says that they will be subject to unlimited fines. I know about this, so I will have to destroy my electronic dog collar and put it in the bin, but what will happen to someone found with one who is unaware of this legislation? What sort of fine will they get?
Baroness McIntosh of Pickering (Con)
I support the remarks of my noble friends who spoke about the use of collars in livestock, but I will ask my noble friend the Minister a brief question. Why has the department provided an exemption for the use of e-collars by the Armed Forces? What was the basis for that? It would be helpful and interesting to have sight of the internal animal welfare standards and permissions of the Armed Forces if they are available.
Baroness Bakewell of Hardington Mandeville (LD)
My Lords, I thank the Minister for his introduction to the SI. He will be pleased to know that I am happy with it and have only a couple of points to make.
In contrast to the previous SI, this one seeks to protect animals from harm and amends the Animal Welfare Act 2006. Once implemented, it will ban the use of handheld devices and prohibit the use of electric shock collars. Anyone found guilty of using a handheld device will be subject to unlimited fines. This is quite clearly a good thing.
Defra conducted a public consultation in 2018. Most respondents supported a ban on all types of electronic training collar but some were in favour of retaining the ability to use them provided they did not deliver an electric shock. Animals quickly learn from these devices and they are useful in keeping animals safe near busy roads by keeping them contained in a restricted area. There is also an opportunity for their use in preventing dogs escaping and chasing livestock, as we have heard. Sheep worrying is a very serious matter—
The Earl of Leicester (Con)
Might I suggest that the seven-week public consultation in 2018 received 6,700 responses, of which 64% opposed making it an offence to attach an e-collar to a cat or a dog and 63% opposed making it an offence to be responsible for a cat or a dog who had an e-collar?
Baroness Bakewell of Hardington Mandeville (LD)
I thank the noble Earl for his correction. However, I was going on the information that I had received in the SI.
As I was saying, sheep worrying is a very serious matter and one where every effort should be made to prevent it happening.
I welcome the consultation but wonder why it has taken so long since its completion in 2018—five years ago—to bring forward the SI. In the intervening period, many dogs will have suffered electric shock treatment, which could have been prevented.
It is useful to make a distinction between domestic dogs and working dogs. I would support that.
There is a great difference in the way the two systems work. Collars that make a sound or vibrate are not prohibited under this SI. Paragraph 7.12 of the Explanatory Memorandum is very clear on that. It says:
“As electronic training collars that emit sound, vibration or some other non-shock signals are not prohibited under this instrument, they will remain available for situations where voice, sound or other recall methods cannot be used”.
An electric shock is a form of punishment for a dog or a cat, whereas the other system is a more humane way of encouraging domestic animals to adopt a different behaviour. I have seen some of the comments made in response to the consultation, including from those who believe that dogs will go on killing if electric shock collars are banned—the noble Earl, Lord Leicester, seems to indicate that this will be the case. This is the response, I believe, of the farmer and the shepherd, and some weight should be attached to that response. A collar that provides an electric shock is the tool—certainly in a domestic situation—of the uncaring. A better option is for a collar that emits a sound or a vibration.
The noble Lord, Lord Jones, raised an important point about the Armed Forces, and I am very interested in the Minister’s response.
From my point of view, this SI is long overdue in preventing unnecessary suffering endured by dogs and cats. I fully support the ban and the measures contained in the SI; there are exclusions, but I am happy with them.
Lord Ponsonby of Shulbrede (Lab)
My Lords, I was not intending to intervene in this short debate but, through sitting here, I think I have something to contribute as a sitting magistrate. I deal with dogs and dog owners in magistrates’ courts in London, and a number of times I have put in place what are effectively dog death sentences for those that have misbehaved. Before one gets to that stage, of course, one would have mandatory chipping and neutering of animals, but sometimes they continue to attack people or other dogs.
It is a very interesting debate, but I have just one specific question for the Minister. We have heard about the unlimited fines on the owner if there is no compliance with these regulations, but can I check that there is no change in the powers of the courts when they are dealing with the dogs themselves as a result of this statutory instrument?
Baroness Anderson of Stoke-on-Trent (Lab)
My Lords, it is a pleasure to follow my noble friend Lord Ponsonby. This SI is a necessary piece of legislation and His Majesty’s Opposition will support it. Many of us have and have had wonderful family pets who are and were central to our family life. I come from a family of dog owners, having had an Alsatian and a crazy—maybe not batshit—springer spaniel as cherished childhood pets. I cannot imagine why anyone would wish to use an electronic shock collar for training, rather than treats.
A 2019 study carried out by the University of Lincoln found that electric shock collars compromised a dog’s well-being, even when used by professional e-collar trainers. They were also found to be no more effective than training using positive reinforcement methods. This is far from the only evidence that collars cause harm to animals. We therefore strongly welcome the introduction of this SI.
Given that the consultation took place in 2018 and featured in the 2021 action plan for animal welfare, why has it taken the extra time to bring the measure forward? As acknowledged in the Explanatory Memorandum and by the Minister, the Welsh Government acted on this back in 2010. Can the Minister inform the Committee why we are legislating 13 years later? Do our colleagues in Wales care more about corgis than this Government care about bulldogs?
We welcome the decision to include an exemption—outlined in paragraph 7.12 of the EM—for those with protected characteristics. This will help those who have a legitimate need for collars that emit sound, vibration or other non-shock signals, whether for the owner’s benefit or the animal’s. After all, Labradors, golden retrievers and German shepherd dogs are so valuable for those of our citizens who are dependent on service dogs. It would be an anathema to them that anyone would seek to train their support dogs via shock treatment.
We also note the exemption on the use of electronic collars for the Armed Forces, where this is required for defence purposes. The Minister knows that we share a keen interest on issues pertaining to our Armed Forces. Does he have any estimate of how many dogs this is likely to affect and which breeds, and is he personally satisfied that the Armed Forces’ animal welfare standards are robust in this area?
The Kennel Club is campaigning for the same measures to be introduced in Scotland. Its chief executive, Mark Beazley, was quoted in the Independent as saying:
“More action is urgently needed in Scotland, where regulations are needed to replace the ineffective guidance currently in place, and we will not rest until we see the complete ban on these devices that cause suffering and harm”.
What discussions, if any, has Defra had with Scottish counterparts?
We all have a favourite breed of dog, whether that is a Labrador retriever, a Border collie or a cockapoo. There are more than 13 million pet dogs in the UK. Their owners will expect us to do everything we can to protect their pets from harm, which is why we are supporting this SI. After all, who could countenance the image of a cocker spaniel, a Jack Russell or a labradoodle being subject to electric shock treatment?
Lord Benyon (Con)
I am grateful to noble Lords for their important contributions to the debate. This instrument will deliver on another commitment made in the Government’s action plan for animal welfare. As a nation of animal lovers, we are united in our commitment to do what is best for the welfare of our pets. Protecting them from unnecessary suffering is an important step towards that goal.
Almost unique in any animal welfare debate, I think, has been the absence of a response I get to almost any measure we bring in, which is, “That is all very well, but—”. Usually, people want you to go further. I have been to enough animal welfare events and debates in this and the other place where people always want more. But we hope that we have introduced something that is proportionate, addresses the concerns of animal welfare organisations—I will come on to talk about who we consulted—and reflects the need for this.
Several noble Lords asked about our exemption for the Armed Forces. They are right: this instrument includes an exemption for His Majesty’s Armed Forces where required for defence purposes. This is a specific and limited exemption to ensure that important national security and public safety capabilities are retained. The use of an e-collar in such circumstances would be subject to the internal Ministry of Defence animal welfare standards and permissions. I say to my noble friend Lady McIntosh that it is entirely legitimate that she puts that question to Ministry of Defence Ministers. They have very high standards for animal welfare right across the Armed Forces. There is an exemption here, for reasons of a specialist nature, for certain uses of dogs. I will not go into any more detail, but I assure the Committee that I have been convinced by the evidence I have heard on that matter.
The noble Lord, Lord Jones, asked who Defra engaged with in drawing up the ban. We ran a public consultation on proposals for a ban in 2018. A total of 7,334 responses was received, including approximately 6,000 from members of the public. The remaining responses were from organisations or individuals involved in fields relevant to electronic training collars, dog trainers or vets. Animal welfare groups support the ban, as do veterinary surgeons, the training sector and assistance dog charities. In the way that the data was compiled, an individual’s responded was counted as one and an organisation’s was also counted as one, but those organisations may have reflected the views of many hundreds, possibly even thousands, of members. It may be not quite right to talk about it in terms of percentages. Of course, animal welfare is a devolved matter and we engage closely with the devolved Administrations on a range of issues, including this policy.
A number of people have raised the issue of the increase in sheep worrying in Wales subsequent to the ban. I investigated this closely in the lead-up to our debate on this statutory instrument. It is clear that, across police forces, there has been increased activity and an increased determination to work with both the public and farmers to report sheep worrying events; that may be the reason why we have heard of more cases. Sheep worrying is a disgusting thing to witness. I have had livestock killed and injured by dog worrying. This Government have taken immense pains to try to limit these sorts of activities. We will continue to work with others to make sure that we limit the number of livestock worrying incidents and dog attacks.
Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2023
(11 months ago)
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Lord Bellamy
That the Grand Committee do consider the Rehabilitation of Offenders Act 1974 (Exceptions) (Amendment) (England and Wales) Order 2023.
Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee
The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bellamy) (Con)
My Lords, I beg to move that the Committee has considered the statutory instrument to amend the Rehabilitation of Offenders Act 1974 (Exceptions) Order 1975 to add four occupations: chartered management accountants, fire and rescue authority employees, justice system intermediaries, as defined, and notaries public of England and Wales.
As your Lordships know, the Rehabilitation of Offenders Act 1974 governs the disclosure of cautions and convictions for most employment purposes. Under the Act, most convictions become spent following a specified period, which supports the rehabilitation of offenders, helping them to put their past behind them.
The exceptions order lists the categories of jobs where those protections are lifted so that individuals, if asked, are required to disclose spent convictions. There are certain jobs where more complete or relevant disclosure of an individual’s criminal record may be appropriate, particularly when we are dealing with financial matters, professional persons, vulnerable persons or young persons, among others. There is clearly a balance to be struck here between the rehabilitation of the offender and the protection of the public.
The order proposes to add four occupations to the exceptions order. First, it adds members of the Chartered Institute of Management Accountants—CIMA. This is related to the functions that they carry out, which are fundamentally based on trust and present a particular opportunity to cause harm to the public through abusing that trust. The order already includes most accountants but, for historical reasons, it does not yet include CIMA, whose members carry out very similar functions to those already carried out by chartered accountants. The addition has been requested by the institute itself and it already exists in Scotland, so in the Government’s view, it is entirely in line with the policy and intent behind the order in question.
The second category being added is employees of the fire and rescue service, where, in the Government’s view, there exists a clear case for change. The Independent Culture Review of London Fire Brigade contains some troubling findings, and recent reviews into fire and police culture have also revealed certain failings. That has been confirmed by a report by His Majesty’s Inspectorate of Constabulary and Fire & Rescue Services. It is important that we vet people we employ in our public services. Firefighters in particular come into contact with the public in certain circumstances, so it is right that they should be included.
The addition is particularly sought by the National Fire Chiefs Council, representatives of which, I gather, are present today. It asked that this change be made. In the Government’s view, this supports the ongoing reform of the fire and rescue service from a cultural and safety point of view, bearing in mind that firefighters in particular often attend schools or vulnerable persons’ homes and incidents or accidents as first responders, exercising statutory powers and helping to safeguard others. Therefore, it is only right that the fire and rescue service should be included. We hope that this will protect and enhance the reputation of our fire and rescue service employees, who are deeply trusted: we admire their courage and dedication to duty. In the Government’s view, this will enhance the trust that they must enjoy to carry out their roles effectively.
The third category being added is justice system intermediaries, whose role is essentially to enable communications with vulnerable witnesses and parties in police inquiries and court and tribunal proceedings, particularly those who assist the Ministry of Justice in the witness intermediary scheme or are appointed as intermediary advisers. Their participation is generally to help witnesses who are, for example, under 18 or suffering from some mental or physical disorder or impairment. These intermediaries are clearly in a position to have unsupervised access to vulnerable adults. In the context of their duties, they may have unsupervised access to children under the age of 18, and the role can involve discussions with vulnerable people concerning highly personal or sensitive matters, such as domestic or sexual abuse. The inclusion of such persons in this list will add to the safeguarding of the vulnerable people concerned and place the intermediary in a position of increased responsibility for the welfare of the vulnerable people. Again, that will increase trust in the system.
The fourth category being added is notaries. This is a quite different category. A notary—or notary public, to give the technical term—is a specialised lawyer who has undertaken further legal education and examination, and is typically responsible for certifying and authorising certain documents, particularly those relating to property deeds and other financial transactions, and to foreign court proceedings, foreign qualifications and the like. For those who enjoy the byways of history, notaries are still regulated by the Faculty Office of the Archbishop of Canterbury. Although most notaries are solicitors, they do not have to be. They attest the authenticity of documents, certify documents, take affidavits and swear oaths.
Lord Ponsonby of Shulbrede (Lab)
My Lords, the Opposition support this draft order. Supporting ex-offenders into employment is something that we must all endeavour to be better at, especially given the central role employment can play in preventing future offending. It is vital that our criminal records system does not unnecessarily trap people in the past when they are committed to reform and have stayed out of the offending cycle and rebuilt their career. However, the overriding concern when legislating in this area must always be the protection of the public.
The exemptions included in the 1975 order strike that proportionate balance because those areas of work, such as working with vulnerable individuals or potentially sensitive information, require a high degree of trust. We are satisfied that the proposed extensions to the 1975 order can be introduced while maintaining that vital proportionate balance. Given the culture that we have seen across some of our fire and rescue authorities, and the police, we must ensure that people are properly safeguarded. I am glad that representatives of the fire authorities are here today.
Justice system intermediaries have very high levels of responsibility for the vulnerable individuals they assist, including children, and they sometimes have unsupervised access to them. Notaries also frequently deal with vulnerable people and highly sensitive information, and it is right that individuals who undertake such work are subject to additional DBS scrutiny.
The relevant organisations are producing guidance to ensure that a proportionate approach is taken with regard to the disclosure of criminal records in these additional areas, to ensure that equality and individual privacy are upheld alongside public protection. What plans, if any, do the Government have to review this guidance to ensure that it is indeed proportionate, as the Minister emphasised, and drafted in line with the anticipated need of those professions, as recommended by the Secondary Legislation Scrutiny Committee?
Can the Minister share whether the draft order represents the extent of his department’s current intentions to change the criminal records system? Will he also inform us whether he has had any recent meetings with the organisation #FairChecks, or whether the Government have any plans further to reform in relation to its campaign about offences committed in childhood?
When preparing for this short debate, I reflected on my experience with the DBS system. As somebody who has worked all their life in private industry, I have never been checked in the DBS system. I have recruited many people and been recruited, I have been a company director and various other things, and I have never been checked. However, I have been checked by the DBS system as a magistrate and as a coach for my son’s sports clubs to make sure that I am a fit and proper person to carry out that coaching role. However, I have never had to jump that particular hurdle in my working life.
As the Minister said, this is a very live issue when one deals with youths, as I do as a magistrate. It is not unusual for me to have a youth in front of me who says that he aspires to being a football coach. Of course, if you are a football coach you will be coaching youths, which requires the highest level of DBS check. It is not necessarily a bar, but it is the highest level. When I sentence youths, I want to encourage them to go on to fulfil their ambition, if it is to be a football coach. While on the one hand we support these enhanced safeguards, I hope they will not be a bar on people fulfilling their ambitions. The fear is that these enhanced checks will act as a disincentive for people to go ahead and apply for certain types of roles, such as the example I gave.
I hope the Minister can expand a little further on what the Ministry of Justice is seeking to do with a wider review of the whole DBS system, and how it could be thorough on the one hand but on the other proportionate to the aspirations of people who seek to get a job as a firefighter, as in his example, or, as in my example, a youth who wants to be a football coach. The system is very cumbersome. The effect of that is that it discourages people checking and putting their names forward. I hope the Minister can expand a little further on the work the Ministry of Justice is doing to look at the whole criminal records review process.
Lord Bellamy (Con)
My Lords, I thank the noble Lord for his contribution and for the support he offers to this statutory instrument. I will respond to his two main questions. First, on the guidance, officials from the Ministry of Justice, with the help of officials from the Disclosure and Barring Service, are working closely with representatives from these professions to develop and update their guidance to ensure that it is proportionate and fair. As far as I know, that is an ongoing process and a matter for ongoing review to make sure this scheme works proportionately.
As far as other plans are concerned, as I understand it—having regard to the Police, Crime, Sentencing and Courts Act 2022 and a recent judgment of the Supreme Court—the intention is to remove the disclosure of certain youth cautions, warnings and reprimands from the system altogether so that there is less clutter, if I can use that shorthand, in the system. There is also something called the multiple conviction rule, which I think necessitated disclosure when there was more than a single conviction. This will, I hope, reduce the likelihood of protection of the public unduly interfering with the important objective of rehabilitation; that is the intention, at least.
We have to find a balance. We are doing our best, particularly in the youth area. I am conscious of the point made by the noble Lord, Lord Ponsonby, about those who aspire to be a football manager and so forth. We really do not want, if we can possibly avoid it, to put obstacles in their way from when they got into trouble at 15, 16 or 17 when they are now 27 and settled down. We do not want the earlier criminal record to be a blight on their lives. We have to strike the right balance.
Work on this is ongoing. My good friend in the other place, the right honourable Edward Argar, is meeting criminal justice charities on 13 June—tomorrow, I think. It may even be today; I have slightly lost track of what day it is at the moment. They will discuss further reform of the criminal records system to see whether we can simplify it and tip it a little more in favour of youth, in particular, to ensure that the rehabilitation objective is properly followed.
That is the most I am able to say this afternoon. I am sure that there are further instalments to come in this important story. Unless noble Lords have any other questions, I commend this instrument to the Committee.
Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023
(11 months ago)
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The Earl of Minto
That the Grand Committee do consider the Register of Overseas Entities (Penalties and Northern Ireland Dispositions) Regulations 2023.
The Minister of State, Department for Business and Trade (The Earl of Minto) (Con)
My Lords, I beg to move that these regulations, which were laid before the House on 26 April 2023, be considered. They form part of a series of secondary legislation needed to effectively implement the register of overseas entities. The register of overseas entities, which I will refer to as the register, was created under Part 1 of the Economic Crime (Transparency and Enforcement) Act 2022, which I will refer to as the Act.
The register will help crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. Overseas entities owning or buying property or land in the UK must give information about their beneficial owners or managing officers to Companies House. Law enforcement agencies now have a wealth of new information to help them track down criminals using UK property or land as a vehicle for money laundering.
On 1 August 2022, the register went live, with the deadline for registering set at 31 January this year. There has been a high level of compliance, with more than 28,100 overseas entities already registered to date. Entities that disposed of land before the end of the transitional period were required to provide statements with information about their beneficial owners and details of the land disposals, such as the title numbers. More than 750 have provided details to Companies House, having disposed of all their interests before the end of the transition period. This means that just under 29,000 entities have complied with the requirements. While that leaves up to a few thousand entities still to register, some of these are believed to have been dissolved or struck off and others have not kept their addresses up to date with the land registries. This means that they may not have received letters from Companies House.
I know noble Lords will want reassurance that compliance and enforcement action is being taken. This takes time but is well under way. Companies House continues to work to increase compliance even further and is preparing cases for enforcement action. Any overseas entity that has failed to register is already restricted from selling, leasing or raising charges over land that they own. Overseas entities are also unable to register any new purchase of UK land without first registering. These are novel and severe sanctions.
It is worth reminding noble Lords that, when the draft Registration of Overseas Entities Bill was scrutinised by Parliament in 2019, the Joint Committee on Human Rights warned of the severity of these restrictions, in particular the “chilling effect” that this would have. The Government took these concerns seriously but felt that the sanction was proportionate given the register’s policy objectives. This shows the seriousness of the sanction and the need for the Government to balance our approach to enforcement so as not to deter legitimate investment into the UK.
Once the Economic Crime and Corporate Transparency Bill receives Royal Assent, a further enforcement tool will be added to our arsenal. A person who receives a financial penalty from the registrar or is convicted of an offence may be disqualified from acting as a UK director. Once that Bill receives Royal Assent, I will also bring forward further regulations under new and amended powers to further strengthen the register’s requirements.
I now turn to the details of this instrument. These regulations deal with two main areas: financial penalties arising from offences in relation to the register; and the treatment of land disposed of in Northern Ireland by overseas entities and the rights of those acting in good faith. The Bill sets out that the registrar may impose a financial penalty as an alternative to criminal prosecution. This instrument sets out the procedure for imposing and enforcing these financial penalties. A financial penalty could be imposed on a variety of persons depending on the offence in question. For example, it could be imposed on the entity and its officers where an overseas entity has failed to register, a verifier who has knowingly submitted a false filing or a person who has failed to respond to an information notice sent by an overseas entity.
If the registrar suspects that a person has committed an offence, she may issue them with a written warning, giving them 28 days to make representations about their conduct. If the registrar is satisfied beyond reasonable doubt that the person has committed an offence, she may issue a penalty notice in writing to that person, giving them 28 days to pay the penalty. If a person fails to pay, interest will accrue at the statutory interest rate of 8% per annum.
The instrument sets out that financial penalties imposed by the registrar may be fixed, set at a daily rate or a combination of both. Where the criminal fine set out in the Act is a fixed penalty, the registrar may impose multiple penalties in relation to the same conduct if the contravention continues. Subsequent penalties could be of increasingly higher amounts to encourage compliance. The instrument does not prescribe the specific financial penalties that may be imposed on each offence. Instead, it states that a financial penalty must not exceed the maximum fine that a court in the jurisdiction in which the offence was committed could impose under criminal proceedings. This flexibility allows non-compliant persons to be targeted proportionately and effectively and allows for penalties to be adjusted according to the seriousness and specifics of the case.
I will now briefly set out the approach that the registrar will take. Given that financial penalties are an alternative to criminal prosecution, the registrar will bear in mind the process that a court would follow. They will be proportionate, as the goal of the financial penalty regime is to encourage ongoing compliance with the requirements of the register. When deciding whether to prosecute and what sentence to give, courts follow sentencing guidelines to ensure that it is in the public interest to prosecute and that the sentence is proportionate to the seriousness of the offence. The registrar will also consider the public interest and be proportionate when imposing financial penalties.
The Act provides different maximum fine amounts and prison sentences commensurate with the nature of the offence. Contrary to recent reports, the Act does not set out that courts may impose daily fines for the failure to register offence. This means that the registrar cannot impose daily penalties either. Instead, the instrument allows the registrar to impose more than one penalty if non-compliance is ongoing.
For the failure to register offence, the Act sets out that, in England, Wales and Scotland, courts can impose an unlimited fine. In theory, this means that the registrar may impose an unlimited financial penalty if an overseas entity fails to register. As an indication of the seriousness of this offence, the registrar will review portfolios owned by overseas entities that fail to register.
The registrar will use a range of sources to estimate the value of the portfolio in question, including the UK house price index and data on business rates bands. The registrar will then apply different starting points for the financial penalties, depending on whether the estimated value of each property or piece of land falls into one of three bands. If its value is estimated to be in the lower band, the starting point for the penalty will be £10,000. If it is estimated to be in the middle band, that rises to £20,000. If it is estimated to be in the higher band, it rises again to £50,000.
If an overseas entity owns more than one property or piece of land, the penalty values will be added up to calculate its starting point. Given that interest will accrue at the statutory interest rate of 8% per annum, if an overseas entity fails to pay, the penalty will rise quickly. The registrar may also consider other aggravating factors, such as whether the person has committed the offence previously.
Where any financial penalty remains unpaid, it can be enforced as if it were a judgment debt, including by registering a charge against the property or land owned by an overseas entity. The registrar will keep the model under review before imposing financial penalties for failure to file the annual update on time. If the registrar finds that the level of penalties needs to be reviewed because they are not providing a sufficient deterrent, this instrument gives her the flexibility to do so.
The instrument gives the registrar the power to vary or revoke financial penalties on a case-by-case basis, for example if new information comes to light that aggravates or mitigates any offence. The instrument also sets out the grounds for appeal and the court’s powers in relation to that appeal.
This measure adds to the tools at the registrar’s disposal to promote compliance and maintain the register’s credibility as a vehicle for improving transparency and reducing the misuse of UK property by overseas entities. Companies House has been preparing to operationalise these regulations and will be ready to issue notices as soon as they come into force.
The second part of this instrument sets out the grounds for registering dispositions in Northern Ireland that would otherwise be prohibited. It amends Schedule 8A to the Land Registration Act (Northern Ireland) 1970 to provide a mechanism to allow the Secretary of State to consent to the registration of a land transaction that would otherwise be prohibited.
If a third party transacts with an overseas entity at a time when that entity is non-compliant with the register’s requirements, the third party will be prohibited from registering the transaction. For example, if they have purchased land from a non-compliant overseas entity, they will be unable to register themselves as the new proprietor. The intention of this sanction is to disincentivise anyone from transacting with non-compliant overseas entities. However, in certain circumstances, it is possible that a third party may transact in good faith without knowing that the overseas entity was non-compliant, resulting in their acquisition of a land title that cannot be registered with the Land Registry. The Act is not intended to penalise innocent third parties, so this mechanism is necessary for the effective functioning of land transactions. A similar mechanism is already available in England and Wales, and in Scotland.
The Bill’s expedited passage through Parliament last year left no time to include this mechanism in the draft Bill for Northern Ireland. Instead, a power was taken to make regulations, ensuring that consistency in the application of the requirements could be maintained across the UK. The instrument also inserts a regulation-making power into Schedule 8A to enable regulations to be made to specify how applications should be made, and makes other consequential amendments to Schedule 8A.
I close by emphasising once again that the measures in these regulations are crucial for the effective operation of a register that will crack down on dirty Russian money in the UK and corrupt foreign elites abusing the openness of our economy. I hope noble Lords will support these measures and their objectives. I commend these draft regulations to the Committee.
Lord Wallace of Saltaire (LD)
My Lords, I thank the Minister for that extremely clear and helpful explanation of the statutory instrument. As he will be well aware, we are now in the middle of considering the second economic crime Bill in two years. This deals with a number of issues that overlap with those two pieces of legislation, in particular the position of Companies House and how far it will have the additional staff needed to handle its new responsibilities and ensure that this SI and the other elements of those two pieces of legislation will be effectively enforced. I would welcome any reassurance he might give on that.
It is encouraging how much compliance there has been so far. It will be interesting and useful to know how stubborn the remaining non-compliant areas are. What is the scale of the unregistered land and properties that we still face in England, Scotland and Northern Ireland? We are all aware of stories of large houses in Hampstead that have been unoccupied for many years and whose ownership is unclear. Is this SI likely to end that situation so that business rates can be properly levied, and so that ownership will be clear and, if necessary, come under scrutiny and be changed?
I am interested in the remark about an alleged chilling effect from forcing everyone to comply. I have a certain interest in this, since my wife and I are thinking about downsizing and are looking at aspects of the London property market. On looking at a major new development on the South Bank some months ago, we were told that just over 40% of the apartments had already been sold to foreign buyers. I wonder whether the Government have looked at the impact of full compliance with the new overseas ownership regulations and whether they think that will have a marked effect on the London housing market—and possibly on London house prices, which the Wallace family would welcome.
The extent to which over the last 20 years a number of new housing developments in London have been built specifically to be sold to foreign owners rather than to serve the needs of people who need housing here has been one of the scandals of our housing market, and we very much welcome this position now changing.
Baroness Blake of Leeds (Lab)
I add my thanks to the Minister for his opening remarks and the detail that he went into in explaining the nature of the SI before us. I preface my comments by picking up on one remark that he made, that the whole purpose of this is not to deter investment. We are always looking at finding the bad actors in this situation, rather than bringing in penalties that will have a detrimental effect on businesses’ ability to attract investment.
We regard this as an important statutory instrument, and I am sure the Minister will agree with me that it is very overdue. We know that there were conversations around this and action was taken by David Cameron back in 2016. We have to acknowledge that it is a tragedy that it took the war in Ukraine to precipitate the action that we have seen thus far. I hope we do not get into a Groundhog Day situation, as I know that we will probably engage in further conversations around this when we head into Report on the Bill next week. However, that is the nature of the fast-moving situation that we are in. Many of the issues that have been touched on today have been discussed at length in Committee on the Economic Crime and Corporate Transparency Bill, so I do not want to repeat too much of that, knowing that we will come back to it.
As I say, we support provisions within this SI and believe that they are common sense, but we have to acknowledge that the delays have been at a cost.
I believe the fine is currently set at £2,500 per day. Is it the case that no one has yet been issued with a penalty? It would be good to clarify where we are in the process. We certainly want to see action stepped up against those failing to comply with the new legislation, and we know that there are those who are yet to face financial penalties. The spirit running through all the debates about the next stages of this is of wanting the system to be as robust as possible. In particular, as the Minister mentioned, this presents us with an opportunity to bring in further measures and strengthening, but the question that will run throughout this, which he probably cannot answer at the moment, is whether it will be fit for purpose and will cover all the issues that come up.
How soon after the passing of the SI will the registrar be able to issue financial penalties? I presume there will be a process of issuing warning notices. Has there been any provision for warning notices to be sent out in advance of the SI being passed? It would be helpful to know whether that is the case and therefore whether it will be possible for the registrar to move to those financial penalties as soon as the SI has been passed.
More generally, on timings, the dates of appeal on the warning notices suggest that a period of 28 days needs to be passed. Can we have some clarification? The draft regulations state that the period contained in any warning notices
“must be at least 28 days beginning on the day after the date of the warning notice”
being issued. If a company or entity disagreed with what was in the warning notice, would it have to make representation to the registrar within 28 days or after a minimum of 28 days? There is a need for some clarification. Also, if warning notices have been issued, have any written representations been received?
I also emphasise the issue that we have raised significantly. I am grateful to the noble Lord, Lord Johnson, for arranging for us to meet the registrar and some of her officers; it was a very instructive meeting. But, as has been outlined, I want to put on record our continuing concern about whether the level of resources will be fit for purpose, given the scale of change being brought in, the number of companies that we have heard about and the fact that there will be stubborn cases that are difficult to bring to a conclusion. We have had some reassurance that this will not be fixed in stone and that if the registrar feels that more resources are required, they will be able to come back to that. The issue is the sheer capacity and the fact that the status of those working in Companies House is being changed from recording information to taking action when there is suspicion of wrongdoing.
The other area that has generated a great deal of concern is the 25% threshold for beneficial ownership and the possibility of anonymity that it gives, enabling overseas entities access to UK properties and markets. I know there will be more discussion around this, but it is important to flag these matters whenever we have the opportunity. I hope the Minister will acknowledge that this area still presents a problem in getting underneath all the issues that need to be addressed. I thank him for his very clear explanation of the powers in the SI to consent to Northern Ireland dispositions.
I conclude by saying that, yes, we support the changes being introduced, but it is an area of huge concern. Economic crime is still increasing, as we know, and coming back to deal with unforeseen loopholes that might ensue will be an important part of the legislation before us. I very much look forward to the Minister’s response and to continuing the work on this important area.
The Earl of Minto (Con)
I thank both noble Lords for their valuable contributions to this debate—not just now but in the past.
The Government are absolutely committed to ensuring that the register is robust and effective at tackling the use of UK property to launder money. These regulations provide mechanisms that ensure the register operates effectively. A clear and effective procedure for the imposition and enforcement of penalties will serve as a deterrent against non-compliance and bad actors, as well as punishing guilty parties, including by potentially imposing charges over their land.
The provisions relating to the dispositions in Northern Ireland extend the same treatment to the entirety of the UK. They allow the registration of land, where it would otherwise be prohibited, for the benefit of those who act in good faith, and ensures that their interests are not affected by the actions of non-compliant overseas entities.
The points that noble Lords have discussed today highlight the necessity of the measures contained in these regulations. I will try to address some of these now. The noble Lord, Lord Wallace, raised a number of extremely important issues, and I will take them in the order I wrote them down.
On the question of proper funding for Companies House, there are two elements of funding, which total a maximum of about £83 million in any one period; that should certainly be enough. I think one can see from the work it has already achieved that it has made great strides. I am not saying the work is finished, but it has made great strides towards achieving the whole purpose of the register and, through that, giving the registrar the leeway to concentrate on the people who have not yet fully complied.
On the continuous rate of compliance, I think we last met here on about 2 May. Since then, Companies House has had 600 more applications for compliance. That rate of about 100 a week is continuing, so the process is working.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
My Lords, I apologise for interrupting the noble Earl, but there is a Division in the Chamber. The Committee will adjourn for 10 minutes.
The Earl of Minto (Con)
If I am right, I completed talking about the compliance rate, which I hope answers the noble Lord’s query.
On the question of the marked effect on the market, I suppose one will have to wait and see what the market response is. As the noble Baroness said, we must not affect the investment market because inward investment into this country is extremely important. We are trying to catch the people who are trying to launder dirty money but there are many more people who are trying to invest legitimately. Whether the market is actually affected by this instrument, I am not so sure. It is an enormous market and we are not talking about a vast number of properties. It is a very difficult question to answer. It is a balance between having severe penalties for those who are flouting the law and allowing proper, genuine inward investment.
On the question about how enforcement action will take place, the answer is that the fine can be enforced as any judgment debt. This would include a charge on the property, which could indeed lead to repossession and, ultimately, the sale of the property.
I think I have answered the question on Northern Ireland. It is not a significant number of properties in Northern Ireland, as I understand it. The purpose of the SI is just to ensure that there is commonality—it is a levelling-up issue—throughout the whole of the United Kingdom.
Some of the issues that the noble Baroness, Lady Blake, raised have been covered by some of those answers. Her initial point about deterring investment was very well made: that is certainly something we do not want to do. We have already discussed the detail of this, but she mentioned the fine being set at £2,500 a day. The actual amount can be limitless. The courts can issue and aggregate that fine, depending on the scale of the penalty. The instrument is as robust as possible, and I believe it is fit for purpose.
The statutory instrument sets out that the register must allow a minimum of 28 days for the person to make representation following receipt of the warning notice. That period of notice will be issued at the same time as the warning notice.
On the question of how much action has already been taken, the answer is that no one has had a penalty yet. This SI allows Companies House to impose financial penalties. It has written to property and service addresses, but warning notices cannot be issued until the SI is in force. However, Companies House stands ready to issue warning notices as soon as the SI is actionable.
The Government fully understand the 25% beneficial ownership point. It is one that really needs careful watching; the Government and Companies House are fully aware of the potential ongoing issue that is likely to provide. I hope that answers some of the specific questions raised by noble Lords.
The register sets a new global standard for transparency and levels the playing field with property owned by UK companies, which must already disclose their beneficial owners to Companies House. This register is a crucial part of the Government’s fight against illicit finance. The Economic Crime and Corporate Transparency Bill, which is currently before Parliament, will feature substantial changes to UK company and partnership law and will complement the Act. The Bill will introduce amendments to the Act which will further strengthen the requirements for overseas entities wishing to own land in the UK. For example, new measures in the Bill will require more information about overseas entities, including the title numbers of the properties held. It also introduces minimum age limits for managing officers to ensure that the details of a person aged over 16 are always provided—a point the noble Lord made when we last discussed this.
The Bill will also make further provisions for registrable beneficial owners in cases involving trusts. It includes an anti-avoidance mechanism to ensure that those in scope of the register when the Act was first published as a Bill in Parliament cannot circumvent its requirements. The laying of these regulations will complement the measures in the Act to ensure the register is as effective as possible. I commend these draft regulations to the Committee.
Road Vehicles (Authorised Weight) (Amendment) Regulations 2023
(11 months ago)
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Baroness Vere of Norbiton
That the Grand Committee do consider the Road Vehicles (Authorised Weight) (Amendment) Regulations 2023.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)
My Lords, these draft regulations were published on 23 January and laid before Parliament on 26 April. They will be made under powers conferred by Sections 41(1), (2)(d), (3) and (5) of the Road Traffic Act 1988.
The highest greenhouse gas-emitting sector of the economy is transport, with road freight making a significant contribution to those emissions. In 2021, heavy goods vehicles produced 20% of greenhouse gas emissions from domestic transport. Shifting towards cleaner types of vehicles and fuels is therefore vital if emissions from this sector are to be brought down in line with the 2050 net-zero goal.
These regulations implement increases in weight limits for certain alternatively fuelled or zero-emission vehicles. The weight limit increase is up to a maximum of one tonne for an alternatively fuelled vehicle and a flat two tonnes for a zero-emission vehicle. In all cases, the maximum weights for individual axles will remain unchanged.
The vehicle types that are having their weights changed by this regulation include articulated lorries and road train combinations with five or six axles, normally limited to 40 tonnes, and four-axle combinations, normally limited to 36 or 38 tonnes. No additional weight allowance will apply to the heaviest articulated lorry and road train combinations of 44 tonnes or four-axle motor vehicles of 32 tonnes. As the noble Baronesses know, those are the standard limits and types of vehicle.
These regulations will also apply to certain smaller zero-emission lorries with two or three axles and zero-emission three-axle articulated buses. Alternatively fuelled versions of these types can already operate at up to one tonne above the normal limits.
A vehicle’s power train consists of the components which generate power and then transmit it to the road to move the vehicle. Alternatively fuelled or zero-emission heavy goods vehicles may have a heavier power train compared to traditionally fuelled, heavy goods vehicles with internal combustion engines. For example, they may be fuelled by a gas stored in a pressurised fuel tank or they might use batteries. These components can be significantly heavier than a conventional petrol or diesel fuel tank and combustion engine used in an equivalent vehicle.
The typically heavier power trains of these vehicles means that, under the current vehicle weight limit rules, they may have to carry a reduced amount of cargo compared to an equivalent fossil-fuelled vehicle in order not to breach the weight limit. The higher weight of the empty vehicle essentially acts as a payload penalty. This decreases the commercial viability of these new types of cleaner vehicles, as more vehicles may be required to move the same amounts of cargo or they may just be restricted to moving lighter loads.
These regulations increase the maximum permitted weight for the relevant zero-emission vehicles by a flat two tonnes. That is most appropriate for a zero-emission vehicle, because the weight of the power train is usually significantly more than two tonnes. The weight limit increase for alternatively fuelled vehicles is up to one tonne, because it depends on the actual extra weight of the power train. That will be assessed and put into what I think is called the ministry certificate—the little chitty that goes inside the lorry and basically tells enforcers how much weight that lorry can take. It is key that these two things are different and are considered differently, because they take into account the variations and different features of the power trains of these cleaner vehicles.
However, the weight limit does not apply beyond the existing maximum for a six-axle vehicle of 44 tonnes. These vehicles are therefore within the current normal limits for infrastructure, such as roads and bridges. We see no reason why they cannot freely circulate on the road network. Furthermore, the per-axle weight is also not being changed because, if it is, one would see increased road wear and deterioration. It is also worth pointing out that operators in the European Union also have that flexibility and are using their vehicles when it comes to cabotage movements in the UK already, and there have been no significant issues.
There was a public consultation on this draft instrument, which ran from July to September 2021. There were 92 responses, with 59% in favour and 6% opposed, the remainder being “don’t know”. We obviously looked at the rationale and concluded that we were content to go ahead with that.
The only other thing to point out about the statutory instrument is that the regulations will include a requirement for the Secretary of State for Transport to conduct a review of them on a five-yearly basis, because there will be a rapid development in technology and they may not be appropriate in five years, for whatever reason. It is important to include that—but, otherwise, I see this as fairly straightforward, and I beg to move.
Baroness Randerson (LD)
My Lords, I thank the Minister for her explanation. I understand the need for these changes for practical reasons, to develop and enable the rollout of the new generation of HGVs. I also realise that, as the Minister referred to just now, this measure is part of our international obligation derived from the TCA, if we want our goods vehicles to be able to operate abroad. But the Minister would be very surprised if I did not have some questions and comments.
She mentioned articulated buses, but what about non-articulated buses? I remember, about seven or eight years ago, having a ride on a prototype electric bus in the Westminster area, where it was made clear to us that there was a special dispensation for this bus. It was a two-level bus, not a single-storey bus. They made it clear that, because the battery was so heavy, there was a special dispensation to allow this bus to operate in the London area because of weight limits. Technology moves on and batteries may not be as heavy now, but it would be interesting to know where we are, because an awful lot of electric buses are being ordered at this moment.
That leads me on to an obvious question—to ask the Minister what we are talking about in terms of the number of goods vehicles, at which this is largely aimed, on our roads at the moment. Several paragraphs in the Explanatory Memorandum talk about this being the early stages of development, but we hope that this development is going to roll out very quickly, and it would be a good thing to have some kind of measure of what is happening at the moment. There will be—and this is severely underplayed in the Explanatory Memorandum —a cumulative impact on road structures, which are bad enough already in Britain. People are always complaining about the potholes and road surfaces, and there will be an impact on them.
Were the views of National Highways sought? Obviously, this will have an impact on its finances. Despite its name, National Highways is not in charge of motorways in Scotland and Wales, so were the views of the devolved Administrations sought? Looking at paragraph 10.4 of the Explanatory Memorandum, I think they probably were not asked. Of course, local authorities are in charge of local roads, and I am also interested in their responses about the impact of vehicles such as this on their road surfaces. The roads in the local area around a heavy goods vehicle depot are going to get quite a pasting over time.
I note that the consultation was two years ago. Why has there been a delay this long? Bits of the Explanatory Memorandum sound a bit out of date. It talks about the technology being in an “early stage”, but things have moved on a lot since then. However, in paragraph 12.3, the EM mentions
“potential changes in accident severity”.
This is a very serious issue, because heavier vehicles are more likely to kill when involved in an accident. The EM suggests, obliquely, the potential need for additional training and familiarisation, which could have a financial impact for businesses. Has any thought been given to formalising the need for additional training for the drivers of these bigger vehicles?
Before I move to my final point, I will mention the issue of road surfaces. I am stretching this a little, but I am sure the Minister saw coverage of the collapse of a multi-storey car park in America. That story led to a debate in the press about the impact of heavier vehicles—in that case, it was obviously cars and small vans. There will be a case for looking at and reinforcing our infrastructure. The Minister is clearly aware of it because she referred to the impact on bridges. Has the department looked at the impact on multi-storey car parks? Is there a programme to ensure that, before this technology is rolled out to a large percentage of people, the safety of car parks is reassessed?
My final point is that the impact on road surfaces and the possible training implications of this measure mean that there should have been an impact assessment and consultation with the devolved Administrations.
Baroness Taylor of Stevenage (Lab)
I, too, thank the Minister for setting out the basis of these important regulations, which are fairly straightforward on the face of it. As she said, transport is our economy’s biggest greenhouse gas-emitting sector and a huge amount of those emissions come from HGVs. The issues around commercial viability and making sure that there is no commercial disadvantage to those vehicles because they have an inherent weight disadvantage built in are also really important.
We have no objection to these regulations in principle. We also understand that the extensive consultation with the industry took place in 2021, with 59% of respondents in favour. However, to add to the comments of the noble Baroness, Lady Randerson, this consultation was carried out over two years ago. In view of the urgency of tackling the climate emergency, can the Minister shed any light on why the regulations are only now being introduced? Was National Highways consulted on the regulations and on the long-term impact on the national roads infrastructure, which may be considerable?
Baroness Vere of Norbiton (Con)
I am grateful to both noble Baronesses for their contributions to the debate this evening. I will answer as many of their questions as I possibly can although I am already aware that there is one or two I cannot. Therefore, as ever, a letter will be forthcoming.
I do not have any information on the first issue that the noble Baroness, Lady Randerson, raised about the double decker bus that she went on. They are not covered by these regulations. It is quite interesting that, in my many years as buses Minister, it was not something that came up in my discussions. I am assuming that the issue has been fixed and that the batteries are sufficiently light such that they fall under the standard regulations. If that is not the case, I will write to the noble Baroness.
One of the other things worth mentioning—this is where the noble Baroness, Lady Taylor, finished—is the question of where we are and where we are going to be. It is still very early doors on this. There are not significant numbers of these vehicles circulating. We are trying to make a small change to encourage more people to take them up. I am sure that the noble Baroness has seen things such as the zero-emission road freight demonstrators, into which we are investing £200 million. Those sorts of things are the trials to encourage these sorts of vehicles to take to the road. It is very early in their development but we think that we are getting slightly ahead of the game by ensuring that this is in place. There are some logistics companies operating their own trials with these kinds of vehicles because they can charge them within their depots. I suspect that, in five years’ time, when we do the post-implementation review, we will be able to establish with greater certainty what the demand and pick-up rate look like.
It is also the case that this does not apply to vehicles that normally operate at 44 tonnes because, as the noble Baroness will know, that is the standard in the industry. It does have slight limitations but that limitation is not really fundamental in that we are not going to go over 44 tonnes. This means that the issues raised about increased road wear, the impact on bridges and training generally fall away, to my mind: the roads and bridges that we have already deal with 44 tonnes and these are all going to be less than 44 tonnes. The increase in road wear correlates to a one-fourth power of the weight on the axles: whatever the weight of the axle, you get a times four increase, or a power of four increase, in terms of the road wear. Again, though, we are not changing the weight there.
The point is that we are not going over the current limitations and, as I said at the outset, the numbers of these are still very small in the context of the tens of thousands of trucks that are out there. I do not see that there is a significant case for the wear and tear of roads; nor do I see that there would be significant issues for bridges at all because there will be plenty of other trucks going over that are heavier.
In terms of training, any trucker who is driving one of these new trucks will have been trained up to 44 tonnes anyway. They will probably need new training to operate the vehicle but we do not anticipate that there will be a significant change for driving. They will be used to driving heavier trucks and will probably have been doing it for a long time.
In terms of the infrastructure rollout, it is the case that goods vehicles are slightly behind the private car sector. As one can imagine, they are much more difficult to decarbonise. However, we are pushing forward and working with the industry in various forums that we have set up, such as the Freight Energy Forum, to think about what sort of infrastructure the industry needs and where it is going to need it. We will publish a zero-emission HGV infrastructure strategy in due course; that is being worked on at this moment in time. That will set out how we will charge the vehicles when we get them on the road.
I do not agree that there was a delay in bringing forward this SI. While the consultation was at the end of summer in 2021, there would have been analysis of the consultation and ministerial decision-making, then you get into the world of pain that is getting lawyers drafting and figuring out which law they will be drafting against. Statutory instruments take a surprisingly long time from the moment of intention—saying, “Yes, let’s do this—to actually bringing it before the House. We have to make sure that they are right. I am always slightly surprised but, actually, this is a “business as usual” instrument. I do not think that there is a pressing need for it because it is not as if we have thousands of these vehicles desperate to go on the road. However, doing this is worth while. I am grateful for the support of both noble Baronesses for this instrument.
The Deputy Chairman of Committees (Baroness McIntosh of Hudnall) (Lab)
My Lords, that concludes the business of the Grand Committee this afternoon. The Committee stands adjourned. If I may say so, it is immaculate timing because I think that we will be needed in the Chamber very shortly.
House of Lords
Archbishops’ Commission on Families and Households: Love Matters Report
(11 months ago)
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The Lord Bishop of Durham
To ask His Majesty’s Government what assessment they have made of the report of the Archbishops’ Commission on Families and Households, ‘Love Matters’, published on 26 April; and what steps they plan to take in response to its findings.
The Parliamentary Under-Secretary of State, Department for Education (Baroness Barran) (Con)
My Lords, I thank all members of the Archbishops’ Commission on Families and Households for their report, which underlines the importance of love in family life. This has particular importance for those children with a disrupted family life, hence the focus in our recent strategy for children in the social care system, Stable Homes, Built on Love. We will consider the report’s recommendations alongside the Government’s response to the Office of the Children’s Commissioner Family Review.
The Lord Bishop of Durham
I thank the noble Baroness for her Answer. There are five key messages in the archbishops’ commission report. The second is that relationships need to be supported all the way through life. Obviously, relationships education in school is one thing, but the thrust is how we support adults in relationships. Adults have to take responsibility for themselves, but there are ways in which support can be offered. How might the Government encourage relationship support, particularly at life transition points?
Baroness Barran (Con)
The right reverend Prelate makes an important point, and the question about when and how the state gets involved in adult relationships is obviously a very sensitive one. Underpinning our approach we have the family test, which means that all departments need to think about the impact of their policies on families, including at the key transition points which the right reverend Prelate referred to. Where the state must be involved in adult relationships, we strive to do so sensitively and effectively. Where families want to engage with the state, those services should feel accessible and non-judgmental.
Baroness Taylor of Stevenage (Lab)
My Lords, I echo the thanks given to the archbishops for their report, which is a thoughtful and compassionate approach to putting families at the heart of policy-making. One of the key recommendations of the report is to give every child the best possible start in life. Successive cuts to local government funding and other funding have decimated the provision of the Sure Start programme, started under the last Labour Government to provide comprehensive and vital support to children and their families. In the wake of Covid, such support is more important than ever. Will the Minister outline how future funding settlements will take account of the archbishops’ recommendations?
Baroness Barran (Con)
My Lords, some of the work that we are doing has already anticipated the recommendations, including the one to which the noble Baroness referred. She will be aware of our significant investment of around £300 million to enable 75 local authorities to create family hubs designed to give children the best start in life and of our childcare reforms which include £4.1 billion of investment by 2027-28 to fund 30 hours of free childcare for children over the age of nine months.
Lord Farmer (Con)
My Lords, as co-founder of the Family Hubs Network, I am pleased that the archbishops’ report, Love Matters, mentions family hubs more than 30 times and recommends that they also help separating families. The Ministry of Justice’s mediation reforms for England and Wales anticipate family hubs helping separated or separating parents to access services. However, there are not yet family hubs in Wales. While recognising that social care is a devolved matter, how might the Government encourage Wales to integrate family support in this way?
Baroness Barran (Con)
Like my noble friend, the Government are committed to championing family hubs. I will ensure that my officials engage with colleagues in the devolved Administration to share evidence and best practice about them.
Baroness Armstrong of Hill Top (Lab)
My Lords, it is very clear that despite the very important report from the archbishops’ commission, and indeed other reports, the Government have still not grasped the seriousness of this issue. In the north-east, we now have more children in families living in poverty than ever before, or at least in recorded time, and more than elsewhere in the country. It is also the region where the heaviest cuts to local government spending are and where the difference between children who are achieving and those who are not has grown and remains starkly difficult. Do the Government begin to grasp the nature of the problem in areas and regions such as the north- east and what are they going to do to work with those of us from the north-east, including the right reverend Prelate, on how we tackle these urgent issues?
Baroness Barran (Con)
I am pleased to say that I was in the north-east on Friday visiting schools in Hartlepool and was very impressed. The noble Baroness rolls her eyes, but I can only tell her what I saw on the ground, which was teachers working tirelessly with children, children with aspiration striving, and opportunities in their local area which the Government are supporting. Time does not permit me to go through all the initiatives that the Government are taking, but in everything from children’s social care to levelling-up areas to the education investment areas we are very focused on exactly the areas the noble Baroness cites.
Baroness Burt of Solihull (LD)
My Lords, on a slightly less serious note, the Beatles sang “All You Need Is Love”, but does the Minister agree that while love matters, we need more than that to achieve the worthy recommendations in the report? Does she agree that, specifically, we need more compassion, more political will and more hard cash? Can she tell the House which, if any, of the recommendations the Government are minded to implement and how much additional hard cash they have set aside to achieve that?
Baroness Barran (Con)
In terms of which recommendations we plan to implement, I refer the noble Baroness to my original Answer, which is that we will be responding as part of our response to the Family Review by the Office of the Children’s Commissioner and will reflect at that point on the recommendations in this excellent report. I absolutely agree with the noble Baroness about compassion, and I agree with her about hard cash. That is why we are making such a significant investment in the children’s social care system, in our support for early years and in children with special educational needs so every child in this country has the best start in life.
Baroness Deech (CB)
My Lords, one of the transition points in a family is divorce and, predictably, no-fault divorce has pushed the rate up. At a seminar yesterday we heard evidence not only on how acrimony over money on divorce depletes children’s assets but on how the bitterness in that process has a lasting effect on their lives. When will the Government set out a timetable for reforming financial provision on divorce and will they ensure that child maintenance is paid? It is shamefully neglected at the moment.
Baroness Barran (Con)
On the noble Baroness’s last point, I know that my colleagues in DWP are making important progress in terms of the payment of child maintenance and I think they would share the noble Baroness’s sentiments when it is not paid. In terms of financial provision on divorce, in April this year the Government asked the Law Commission to carry out a review of the law in this area. It will look at whether the current law on financial provision provides a cohesive framework in which parties can expect fair and sufficiently certain outcomes.
Lord Brownlow of Shurlock Row (Con)
My Lords, I declare my interest as a patron of Dingley’s Promise and thank my noble friend the Minister for her comments on investment and funding. I particularly congratulate the Government on their investment through the safety valve fund and acknowledge that £6.9 million has just been given to Wokingham Borough Council, which is the next-but-one authority to where I live.
Baroness Barran (Con)
I am in such shock to have such appreciation for the Government’s actions, but I thank my noble friend for his comments.
Lord Sikka (Lab)
My Lords, inequalities identified in the archbishops’ commission’s report ultimately blight life. Last year, a study estimated that the Government’s austerity policies caused 335,000 excess deaths between 2012 and 2019 alone. Will the Minister answer just two questions? First, what forgiveness have the Government sought from the families of individuals killed by their policies? Secondly, will the Minister ensure that all Bills from now on are accompanied by an assessment showing their capacity to cause premature death?
Baroness Barran (Con)
I am happy to look at the research to which the noble Lord refers, but my own experience of looking at linking mortality to policy is that it is an extremely complicated business and I take exception to the suggestion that any Government—and this Government—would ever intentionally do anything that they believed would harm their people.
Elections: Voter ID
(11 months ago)
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Baroness Jones of Moulsecoomb
To ask His Majesty’s Government what assessment they have made of the impact of voter ID rules on people’s ability to vote, and what plans they have to review these rules before the next general election.
The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)
My Lords, we are encouraged by the first rollout of voter identification and are confident that the vast majority of voters will have cast their vote successfully based on sector feedback and our own observations on the day. As set out in legislation, we will be conducting an evaluation of the implementation of voter identification at the May polls and intend to publish the report no later than November this year.
Baroness Jones of Moulsecoomb (GP)
I am quite surprised at that Answer, because initial reports suggest that thousands, if not tens of thousands, of people were not able to cast their votes. Of course, the really disturbing thing is that a former member of the Government—still a Member of the other place, recently knighted, Sir Jacob Rees-Mogg—said at the National Conservatism Conference in Westminster last Monday:
“Parties that try and gerrymander end up finding their clever scheme comes back to bite them, as dare I say we found by insisting on voter ID for elections”.
So a member of the Minister’s own party has called it “gerrymandering”.
Baroness Scott of Bybrook (Con)
The successful introduction of voter identification at May’s elections was to ensure the future integrity of our voting system. Comments from elsewhere do not reflect the reality of the reason for or the administration of that change. The Parliamentary Under-Secretary of State for Local Government and Building Safety, Lee Rowley MP, made the Government’s position absolutely clear in a letter responding to a point of order raised in the House of Commons on 16 May. This letter has been deposited in the House of Commons Library.
Viscount Hailsham (Con)
My Lords, several years ago I was concerned in a case involving allegedly forged postal votes. In the course of that time it became clear to me that many heads of family in some communities were providing postal votes that were, in my eyes, highly questionable. I very much hope that the Government are still keeping the matter under review.
Baroness Scott of Bybrook (Con)
I assure my noble friend that voter identification is just one of a series of measures within the Elections Act that are aimed at tackling voter fraud and ensuring the future security of our electoral system. Further changes will be delivered later this year to introduce sensible safeguards against the abuse of absent voting, clamping down on the practice of postal vote harvesting and tightening the rules around postal and proxy votes.
Baroness Hayman of Ullock (Lab)
My Lords, according to the Electoral Commission, 1.2% of people who attended a polling station at this year’s local elections were turned away because they lacked photo ID. We are not talking about ID but photographic ID; that is the concern. If the next general election reflects the turnout of 2019, this could mean that 380,000 voters are sent home and prevented from exercising their right. On this basis, can the Minister really say that these photographic voter ID requirements, as they stand, are fit to be applied at the next general election?
Baroness Scott of Bybrook (Con)
As I have said, we are undertaking a review. It is essential that, before we make claims such as we are hearing from the other side, we understand how the policy has operated in practice, what has gone wrong and where there are any areas for improvement in the future. Of course, where there are lessons to be learned, we will do so and we will change at the point of that evaluation. We are already gathering evidence as a Government. Also, the Electoral Commission is conducting extensive evaluation; we expect its initial findings later this month and a full report in September. I suggest that the whole House waits until we get that full evaluation before we start throwing stones.
Baroness Williams of Trafford (Con)
My Lords, it is the turn of the Liberal Democrats.
Lord Wallace of Saltaire (LD)
My Lords, we already have a problem with fewer young people turning out to vote than others. The clear implication of what Jacob Rees-Mogg said was that this was intended to discourage more young people from voting, but it ended up discouraging some older people from voting as well. Would not one of the easiest things be to expand the number of possible means of identification that young people could present when voting, and make it clear that that is being relaxed?
Baroness Scott of Bybrook (Con)
We will look at the evidence of that. We have said we that we will look at other forms of identification when we have the evidence to do so; that is what the Government will do.
Baroness O’Neill of Bengarve (CB)
Do the Government have any intention of specifying what sort of ID is acceptable? I decided to test this out in the recent local elections. I took my House of Lords pass; it has a photograph, as we all know, but it was not acceptable. Luckily, in my pocket I also had a passport, so I was able to vote. This should not be left unclear.
Baroness Scott of Bybrook (Con)
The returning officers have a clear list of acceptable forms of photo identification that they use. They have been fully trained on those. As I have said, we will look at other methods of photo ID and get the evidence to say when something is particularly useful. ID is changing all the time, but we have to ensure that it is secure ID that is being used in a polling station.
Lord Udny-Lister (Con)
My Lords, there is plenty of anecdotal evidence in London and, indeed, councillors have reported cases of voter fraud to the police in previous elections and been ignored. Can we have an assurance that there is going to be proper evaluation, particularly in some of the London boroughs where this evidence exists?
Baroness Scott of Bybrook (Con)
We have made it very clear in the legislation that will be doing a review, not only after this general election but after the next two to ensure that the voter identification system we are putting in place is right, is correct and is not disenfranchising any voters from electing.
Lord Mackenzie of Framwellgate (Non-Afl)
My Lords, does the noble Baroness agree that this Question would not be relevant if the introduction of biometric ID cards by the last Labour Government had not been opposed by the party opposite? Does she also agree that such a measure would also have addressed the scourge of criminal identity theft that blights our country as fraud offences go through the roof?
Baroness Scott of Bybrook (Con)
A national identification card is a totally different subject; it is much wider and further than this. That debate is perhaps for another day.
Viscount Stansgate (Lab)
My Lords, the integrity of our electoral system is important. In the light of what the Minister has told the House about the Government’s review, will she now undertake in advance to raise with her noble friend the Leader of the House that we should have an opportunity to debate that review in government time in the autumn?
Baroness Scott of Bybrook (Con)
I do believe that it was agreed in the legislation that when the review came out it would be discussed by both Houses. If that is not correct, I will correct it in a letter in the Library—but I am pretty sure that that is what was agreed.
Lord McCrea of Magherafelt and Cookstown (DUP)
My Lords, whenever photographic ID was introduced for elections in Northern Ireland, it was supported by all parties and all Members in both Houses of Parliament. Why should it be different for any other region of the United Kingdom?
Baroness Scott of Bybrook (Con)
We took the good practice from Northern Ireland that has been in place for 20 years and we thought that it was correct and right for the integrity of our democratic system to bring it across the whole of the United Kingdom.
Lord Hayward (Con)
My Lords, I welcome the comment that my noble friend made in relation to the Electoral Commission report, which is due in the next few days, but is she aware of the Democracy Volunteers report, already published, which would appear to indicate deficiencies in terms of communications and publicity, particularly with the ethnic communities, and also, as indicated previously, that certain returning officers did not have adequate information as to what photo ID was acceptable at polling stations?
Baroness Scott of Bybrook (Con)
I am certainly well aware of that report and we will take into account any comments made and any evidence in it. We will also be doing quite a lot of talking to people who went into those polling stations and taking their views as we move through the review. What I have to say is that some local authorities were exceptional at reaching out to their communities in many different ways in order to ensure that people had full access to their polling stations We need to use that best practice across the whole of the local government sector.
Renewable Transport Fuel Obligation
(11 months ago)
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Baroness Walmsley
To ask His Majesty’s Government when they intend next to review the renewable transport fuel obligation.
The Parliamentary Under-Secretary of State, Department for Transport (Baroness Vere of Norbiton) (Con)
My Lords, the department continually keeps the renewable transport fuel obligation under review to ensure that it delivers cost-effective emission reductions and is best placed to meet our carbon targets.
Baroness Walmsley (LD)
I thank the Minister for her information, but at the last estimate over 107,000 hectares of land in the UK grew crops for biofuels—land that could have fed 3.5 million people. First, given the pressure on land, the need for greater UK food security and the global shortage of cereal crops caused by the war in Ukraine, will the Government end biofuel production from food crops in the UK? Secondly, on imported biofuels, will the Government ensure that only biofuels produced from waste, agricultural or otherwise, are imported for use in the UK?
Baroness Vere of Norbiton (Con)
The Government have incredibly high standards of sustainability for the fuels that we allow under the renewable transport fuel obligation. As I am sure the noble Baroness is aware, many of the crops grown for biofuels are not fit for human consumption. However, they are grown because they are useful not only for biofuels but for animal feedstock. There is a very careful balance to be struck. The Government are well aware of the land use issue and the need to be able to develop enough human-supporting crops. As I say, we keep all of this under review.
Lord Ravensdale (CB)
My Lords, I declare my interests in the register. I have two questions. First, what progress is being made with regulations to enable support for nuclear-derived fuels and recycled carbon fuels within the RTFO following the recent amendment to the Energy Bill? Secondly, quota-based systems such as the RTFO are being implemented in other countries for the purposes of decarbonising ammonia and fertiliser production. What plans do the Government have for similar schemes to clean up ammonia?
Baroness Vere of Norbiton (Con)
As the noble Lord will be aware, the Energy Bill is currently working its way through the other place. I am very pleased that we were able to get the amendment for recycled carbon and nuclear-derived fuels, as it goes into primary legislation. We are working concurrently on the secondary legislation to bring that into effect as it is needed and into the various schemes. On ammonia and various other renewable fuels, we are looking very carefully across the entire suite of low-carbon fuels. The Department for Transport will be publishing a low-carbon fuel strategy later this year.
Baroness Ritchie of Downpatrick (Lab)
My Lords, the logistics sector is calling for a stronger partnership with government over the use of low-carbon fuels. What arrangements will the Government put in place with the logistics industry for this to happen, including the much-promised publication and delivery of a low-carbon fuel strategy? It was promised last year and then at the end of this year. When will that be published?
Baroness Vere of Norbiton (Con)
As I mentioned in the previous answer, it will be published later this year. The low-carbon fuel strategy is incredibly important. We have been working very closely with the freight and logistics sectors to understand their needs in terms of decarbonisation. For example, we have invested £200 million in the zero-emission road freight demonstration programme. An enormous amount of work is going on in this area. The low-carbon fuel strategy is but one of those things.
Baroness Boycott (CB)
My Lords, I refer back to the original Question asked by the noble Baroness, Lady Walmsley. We import 90% of the fuel we use for transport. It is coming from land that could be used to grow food. Last year we imported crops from Ukraine that were then used in biofuels in this country. It is a question of due diligence. Can the Minister reassure the House that we are genuinely using stuff that would otherwise be wasted?
Baroness Vere of Norbiton (Con)
I agree that there is an issue of due diligence here. The Government are always willing to hear from anyone who has any insight as to crops or biological items that may be coming from places that are not within the sustainability criteria. It is not fair to say that renewable fuels come from biogenic materials. It is the case that biofuels from waste represent 76% of the renewable fuels supplied; for example, 93% of all biodiesel comes from used cooking oil, which has very few other uses. While I accept that we need to look at crops and whether they are for human consumption or not—obviously, the latter is the one we focus on—we need to recognise that alternative sources of bioethanol are fairly thin on the ground at the moment.
Lord Tunnicliffe (Lab)
My Lords, the Renewable Transport Fuel Obligations Order 2007, as amended, says in Article 1A:
“The Secretary of State must from time to time … carry out a review of the regulatory provision contained in this Order; and … publish a report setting out the conclusions of the review … The first report must be published before 15th April 2023”.
Now, I think that date has passed. Has such a report been published? I spent time with my friend Google this morning, and after two hours, could not find it, but with the messy way our legislation is formed, I may have missed it. If it has not been published, why not? It is crucial that commitments such as this are honoured.
Baroness Vere of Norbiton (Con)
I agree with the noble Lord, and I accept that it should have been published by 15 April. It is in its very final stages of preparation and will be published as soon as possible. There is an important component of this post-implementation review: there will be an opportunity for feedback on the scheme as it currently exists. Therefore, I hope that the noble Baroness, Lady Walmsley, and anyone else with an interest will look at the post-implementation review, consider various reports which have recently come into the public domain, and think carefully about how we can improve the scheme. We are always looking for improvements, we keep the scheme under review, and I am willing to keep an open mind.
Lord Lucas (Con)
My Lords, does my noble friend agree that, looking at the long term and particularly our 30 by 30 commitment on land use, we should not be devoting agricultural crops to vehicle fuels—certainly not ordinary vehicle fuels—and that anything we can get from waste should be directed at aviation and other sectors where it is extremely difficult to create substitutes, rather than ordinary domestic road vehicles?
Baroness Vere of Norbiton (Con)
The noble Lord is right. It is the case that the road vehicle sector is at a transition moment, as we go to battery electric and hydrogen fuel cells, but we can use it in this transition period. We are focused on using things such as recycled carbon fuels for sustainable aviation fuels, because we see that as a key way to decarbonise sectors that are much harder to abate, such as aviation. We will be looking at similar technology for maritime, if that exists.
Baroness Randerson (LD)
My Lords, long-haul flying looks to be the most challenging sector to decarbonise. It is likely that sustainable aviation fuels will have a major role in doing that. Will the Minister commit to introducing a price stability mechanism, to encourage the development of a UK-based sustainable aviation fuel industry, so that we have the jobs and investment coming to this country, rather than going to our competitors overseas, as it looks like at the moment?
Baroness Vere of Norbiton (Con)
The Government have already recognised the strong case for sustainable aviation fuel for all types of flying, whether short- or long-haul. We will implement a sustainable aviation fuel mandate requiring operators to use 10% SAF by 2030, which acts as a pull on the market. Therefore, we are considering what else needs to be done to make SAF plant projects in the UK investible. This will not be a government-sponsored contract for difference as the SAF mandate does an awful lot of the heavy lifting, but we are working very closely with industry to look at an industry-led solution to improve the revenue certainty when it comes to SAF.
Lord Watts (Lab)
My Lords, is it not the case that this small island is crying out for a land strategy policy, and that the House of Lords Land Use in England Committee recommended that we have the strategy and resources for it, and that all departments take part? Does the Minister share my disappointment that this is not happening?
Baroness Vere of Norbiton (Con)
I understand that it is happening, but I am slightly more excited by the biomass strategy, which will look at all the elements of biomass—what their potential uses are for our domestic environmental goals but also how they interact with our land-based goals. Therefore, we will also have the opportunity to look at our sustainability criteria, and how they can be strengthened in the context of looking at land strategy.
Nova Kakhovka Dam
(11 months ago)
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Lord Harries of Pentregarth
To ask His Majesty’s Government what is their assessment of the destruction of the Nova Kakhovka dam and the international response.
The Minister of State, Foreign, Commonwealth and Development Office (Lord Ahmad of Wimbledon) (Con)
My Lords, at least 80 communities and 40,000 people are affected by flood water. Damage to homes, infra- structure and agriculture will affect thousands more. Our partners are working hand in hand with the emergency services to evacuate people and provide vital relief. We have also provided an additional £16 million to the United Nations and the Red Cross to help civilians, including those affected by flooding and others elsewhere in Ukraine in humanitarian need. To bolster efforts, we are also sending boats, water filters, pumps and waders to Ukraine.
Lord Harries of Pentregarth (CB)
I thank the Minister for his reply; it is particularly good to hear of the support the British Government are giving to those affected by the floods. My Question concerns a different aspect of the matter: adherence to the Geneva conventions. Article 56 of the 1977 Protocol 1, additional to the 1949 Geneva conventions, says that dams and nuclear sites must not be the object of attack if civilians are going to suffer. Over 170 nations have signed up to this, including Ukraine; Russia originally signed up and then withdrew ratification. Will His Majesty’s Government reaffirm the importance of adhering to that in a world where there are now so many dams and nuclear power stations?
Lord Ahmad of Wimbledon (Con)
My Lords, I agree with the noble and right reverend Lord. The essence of all the Geneva conventions was to ensure that these important elements are protected during conflicts, so I very much support his sentiments. However, I remind the House that, as my right honourable friend the Prime Minister has said, our intelligence communities are still looking at the incident, and it remains too soon to make a definitive judgment as to the cause.
Lord Berkeley (Lab)
My Lords, vast areas of Ukraine are now under water. Is the Minister aware that there is a big shortage of boats there, as he might expect? Will he work with me to try to repurpose some of the boats coming across the channel with so-called illegal immigrants, so that they can be reused in Ukraine, instead of being wrecked to stop them being reused in this country?
Lord Ahmad of Wimbledon (Con)
My Lords, the basis of what the noble Lord says is important: we need to ascertain what the needs of Ukraine are and to meet them. If boats are required, as I said in my first Answer, we will seek to provide them.
Lord Stirrup (CB)
My Lords, the consequences of the breach of the Nova Kakhovka dam have been described as “generational” in their impact. Does the Minister agree that this underlines the importance of next week’s Ukraine Recovery Conference and the need for it to address ecological issues as well as infrastructure and economic development matters?
Lord Ahmad of Wimbledon (Con)
My Lords, I totally agree with the noble and gallant Lord. In preparation for this Question, I saw the mapping made of the flooding, which is on both sides of the Dnipro river; half is on the Russian side. Even organisations such as the ICRC cannot access the area, and people are suffering. I agree with the noble and gallant Lord that there are issues concerning agriculture and the natural habitats, which will be impacted, but as the waters recede we will be able to make a better assessment. However, we will not be able to make that assessment unless Russia allows access to its side of the river.
Lord Purvis of Tweed (LD)
Further to the noble and gallant Lord’s question, it is very welcome that London is hosting the second Ukraine Recovery Conference jointly with Ukraine, but if that is to be successful for the state’s future, proper scrutiny, oversight and accountability of any private sector reconstruction work for Ukraine will be necessary. The Ukrainian Parliament, the Verkhovna Rada, is not included in the agenda for the recovery forum. Does the Minister agree with me that Parliaments and their scrutiny are very important for effective, sustainable recovery after any conflict? Will he ensure that there is always an eye on proper parliamentary involvement in these fora?
Lord Ahmad of Wimbledon (Con)
My Lords, my understanding is that parliamentarians are also attending that conference. As the noble Lord will be aware, it is primarily aimed at the private sector and focused on reconstruction, but I note what he said.
Lord Selkirk of Douglas (Con)
Does the Minister accept that a lot of the water will be undrinkable?
Lord Ahmad of Wimbledon (Con)
I accept what my noble friend says. The challenge has been that, as the dam broke, pollutants and other substances such as oil and petrol contaminated the whole river. As I said to the noble and gallant Lord, Lord Stirrup, there are implications for both agricultural land and the ecological habitats along the river. The assessment is still yet to be made fully.
Lord Browne of Ladyton (Lab)
My Lords, I draw attention to my entry in the register of interests. Like many other parliamentarians, I am an ambassador for the Halo Trust. The breach in the Kakhovka dam is flooding extensive minefields and dislodging many thousands of landmines. In fact, Halo has cleared 5,000 landmines from that area in the last month alone. Looking ahead, as the noble Lord is constantly being invited to do, to 21 June and the Ukraine recovery conference, there can simply be no talk of reconstruction in Ukraine without first focusing on making the land safe from explosions. What steps are the Government taking to ensure that landmines and unexploded ordnance, of which there is an incredible amount in that country, are firmly at the forefront of delegates’ minds as they gather in London later this month?
Lord Ahmad of Wimbledon (Con)
My Lords, I agree with the noble Lord. What is very evident, as he said, is that large sections around the dam and the river have been cleared of landmines. The United Kingdom Government have worked with the Halo Trust, and its CEO, James Cowan, will be addressing the Ukrainian conference on the specific issue of demining in advance of reconstruction in Ukraine.
Lord Collins of Highbury (Lab)
My Lords, I return to the question of agriculture. I know it is early days to undertake a full impact assessment, but can the noble Lord reassure us that our expertise will be used fully to support Ukrainian agriculture in the long and medium term? Will he ensure that the issue of the impact on agriculture is properly addressed at the Ukraine recovery conference?
Lord Ahmad of Wimbledon (Con)
My Lords, I can give the noble Lord that assurance. In a previous Question, we talked about the importance of Ukraine’s supplying the world’s economies with grain. We have yet to see how this will impact, for example, the Black Sea grain initiative. The Dnipro river goes straight into the Black Sea, so of course there are implications. As the noble Lord, Lord Browne, pointed out, many mines have been washed through and that assessment has still to be made, but specific parts of the conference are allocated to agriculture. Half a billion people used to get their grain from Ukraine, so there is a major task ahead of us.
Lord Hamilton of Epsom (Con)
My Lords, further to my noble friend Lord Selkirk’s remarks about drinking water, is it right that this reservoir provided drinking water for Crimea, and what are the implications long term for that?
Lord Ahmad of Wimbledon (Con)
My Lords, I assure my noble friend that we are seeking to make early assessments of the full implications. What is clear is that this provided water to many parts of Ukraine, including those areas currently occupied by Russia. Frankly, a full assessment cannot be made until we get full and unfettered access. I regret to say—I would be glad to be proven wrong—that I do not think we will be able to make that assessment until Russia does the decent thing and withdraws from Ukraine.
The Earl of Devon (CB)
My Lords, one of the perhaps unintended consequences of this tragedy is the recreation of considerable areas of wetland that previously had been drained. Will thought be given to the preservation of some of that wetland and the biodiversity that it might offer to the people of Ukraine?
Lord Ahmad of Wimbledon (Con)
Again, the noble Lord is correct. When we look at the devastation, many of the natural habitats and wetlands have been impacted. A full assessment has yet to be made but what is clear from early reports is that much has been damaged and impacted. Of course, areas are being damaged further downstream because of the pollutants being carried forward by the river, and there is the impact of the mines. The noble Lord is correct and I assure him that that will be very much part of the work of the international community. That is why it is necessary to involve the private sector at this time, next week, to make sure we can have a collective effort in rebuilding Ukraine.
Lord Anderson of Swansea (Lab)
My Lords, the Government should be congratulated on their initiative in convening the reconstruction conference next week. Has an attempt been made to estimate the cost of reconstructing the dam when conditions allow? It can only add to the costs of the damage Russia has caused, and of course add considerably to food prices and affect food availability in the developing world.
Lord Ahmad of Wimbledon (Con)
My Lords, on the noble Lord’s final point, of course, the developing world, particularly parts of north Africa, is severely impacted by the lack of grain supplies from Ukraine. On his earlier point, I have asked that specific question, and assessments are being made. According to an early assessment, the dam is irreparable and would require rebuilding. Then, of course, there is a timeline associated with that, which runs into not weeks or months but years. The other issue to bear in mind is that one side of the dam is in Russian-controlled Ukraine territory. A concerted effort will be required to ensure that, first and foremost, we see peace and see Russia withdraw, so that all arrangements can be put in place to rebuild the dam, which serves so many people across Ukraine and the wider region.
Business of the House
(11 months ago)
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Baroness of Williams of Trafford
That Standing Order 38(1) (Arrangement of the Order Paper) be dispensed with on Wednesday 14 June 2023 to enable Committee stage of the Illegal Migration Bill to begin before oral questions that day.
Baroness Williams of Trafford (Con)
My Lords, on behalf of my noble friend the Lord Privy Seal, I beg leave to move the Motion standing in his name on the Order Paper.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, when we had a similar Motion to this some weeks ago, calling us in on a Wednesday morning at short notice, I raised some objections, particularly on behalf of people who do not live round the corner in London and who are expected to change all their plans to get here without proper advance notice. On that occasion, I got virtually a promise from the Government Front Bench that we would not have it again. But here we are, having it again, because the Government’s legislative programme is in total disarray. We sat until 4 am last week and 2 am this morning; they cannot organise their legislative programme. It is really ridiculous that Members should be treated in this way.
I wonder if Boris’s friends who are going to be joining us have been told what to expect. How is Ben Houchen going to manage to get down from Teesside suddenly on a Wednesday morning? What about Charlotte Owen? It is going to interfere with her social life, that is one thing for sure. Indeed, Nadine Dorries does not realise what she is gaining by not being nominated to this place.
This is ridiculous. This place is being treated disgracefully and Members are being treated disgracefully. We are human beings. We need to sleep at night, we need to be treated properly, and we need to be consulted on the programme. This is not happening, because this Government are in total disarray.
Baroness Williams of Trafford (Con)
My Lords, I am sure the noble Lord was sleeping soundly in his bed when the Committee stages were being heard last night and on Wednesday of last week. Sitting early was the suggestion of one of the usual channels and was agreed to by all the usual channels.
I also want to say, if I may, that I find it utterly condescending that the noble Lord would speak about a young lady and her social life in such a way.
Strategic Highways Company (Name Change and Consequential Amendments) Regulations 2023
(11 months ago)
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Baroness Vere of Norbiton
That the draft Regulations laid before the House on 24 April be approved.
Relevant document: 38th Report from the Secondary Legislation Scrutiny Committee. Considered in Grand Committee on 5 June.
Employment Relations (Flexible Working) Bill
Tuesday 13th June 2023
(11 months ago)
Lords ChamberRead Full debate Employment Relations (Flexible Working) Act 2023 View all Employment Relations (Flexible Working) Act 2023 Debates Read Hansard Text Watch Debate Amendment Paper: Public Bill Committee Amendments as at 7 December 2022 - (7 Dec 2022)
Baroness Taylor of Bolton
That the order of commitment be discharged.
Baroness Taylor of Bolton (Lab)
My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Unless, therefore, any noble Lord objects, I beg to move that the order of commitment be discharged.
Equipment Theft (Prevention) Bill
Tuesday 13th June 2023
(11 months ago)
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Lord Blencathra (Con)
My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move manuscript amendments or to speak in Committee. In these circumstances, and if no noble Lord objects, I beg to move that the order of commitment be discharged.
Financial Services and Markets Bill
Tuesday 13th June 2023
(11 months ago)
Lords ChamberRead 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: HL Bill 124-III Third marshalled list for Report - (9 Jun 2023)
15:26 - Division on Amendment 91 - Ayes: 212 / Noes: 203 - Amendment 91 agreed.
18:13 - Division on Amendment 104 - Ayes: 192 / Noes: 210 - Amendment 104 disagreed.
18:56 - Division on Amendment 106 - Ayes: 184 / Noes: 188 - Amendment 106 disagreed.
Baroness Boycott
“Forest risk commodities
(1) FSMA 2000 is amended in accordance with subsection (2).(2) After section 410 insert—“Forest risk commodities410ZA Forest risk commodities(1) A person must not carry on a regulated activity in the United Kingdom that may directly or indirectly support a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity unless relevant local laws were complied with in relation to that commodity.(2) A person that intends to carry on a regulated activity that may directly or indirectly support a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity must establish and implement a due diligence system in relation to that regulated activity to ensure compliance with relevant local laws.(3) The due diligence system referred to in subsection (2) must be in place within 24 months of the day on which the Financial Services and Markets Act 2023 is passed.(4) Within the period of one year beginning with the day on which the Financial Services and Markets Act 2023 is passed, the Secretary of State must by regulations made by statutory instrument make provision about the details of the due diligence system referred to in subsection (2).(5) A statutory instrument containing regulations under subsection (4) may not be made unless a draft of the instrument has been laid before and approved by a resolution of each House of Parliament.(6) In this section, “due diligence system” means a system for—(a) identifying and obtaining information about the commercial activities of any beneficiary of the regulated activity and of their group regarding the use of a forest risk commodity,(b) assessing the risk that relevant local laws were not complied with, or that free, prior and informed consent was not obtained from local communities, or from indigenous people in accordance with their rights under international law, in relation to that commodity, and(c) mitigating that risk.(7) A person that carries on a regulated activity in the United Kingdom that directly or indirectly supports a commercial activity in relation to a forest risk commodity or a product derived from a forest risk commodity is subject to—(a) the reporting requirements under paragraph 4 of Schedule 17 to the Environment Act 2021 (“the Environment Act”) in relation to the due diligence system required under subsection (2), and(b) Part 2 of Schedule 17 to the Environment Act as though they are a person to whom Part 1 of that Schedule applies.(8) Terms used in this section that are defined in Schedule 17 to the Environment Act have the meanings given in that Schedule.”(3) In paragraph 17(1) of Schedule 17 to the Environment Act 2021 (use of forest risk commodities in commercial activity), for “and any Part 2 regulations (“relevant provisions”)” substitute “, any Part 2 regulations (“relevant provisions”) and section 410ZA of the Financial Services and Markets Act 2000”.”
Baroness Boycott (CB)
We debated this amendment last Tuesday but it has taken until today to get to the vote. Needless to say, its importance has not diminished. The Amazon is the lungs of the world, and this is a straightforward amendment that aims to clamp down on illegal deforestation. While I thank the noble Baroness for her response last week and much appreciate all the points that she made, we need to move faster in this direction, and so I would like to test the opinion of the House.
Lord Vaux of Harrowden
“(8A) At least annually after the Payment Systems Regulator has imposed the requirement set out in subsection (5), it must publish a report on the impact of the requirement, including its assessment of the impact on the protection of consumers and the behaviour of payment service providers in relation to consumer protection.(8B) Reports published under subsection (8A) must provide at least the following information for each payment service provider subject to the requirement—(a) the number and value of authorised push payment (APP) scams notified to them;(b) the percentage by number and value of APP scams that have been reimbursed;(c) the percentage by number and value of APP scams initially rejected and subsequently appealed and the results of such appeals;(d) the percentage by number and value of APP scams that have been finally rejected;(e) the shortest, longest and average time from notification to decision about reimbursement.”Member’s explanatory statement
This amendment aims to ensure that the impact of the APP reimbursement requirement is assessed and reported on regularly and to ensure that consumers can see whether the rules are being applied consistently and which institutions are better and worse at reimbursing victims fairly and promptly.
Lord Vaux of Harrowden (CB)
My Lords, I introduced a number of amendments on the subject of authorised push payments fraud in Committee. At the time I said I was broadly happy with the Minister’s responses but would look to return to the reporting question again, which is what Amendment 94 does. I should say at the outset that I support what the Bill is trying to do in respect of APP fraud to make it easier, and in particular fairer, for victims of APP fraud to get their money back. Before I go any further, I remind the House of my interest as a shareholder of Fidelity National Information Services, Inc., which owns Worldpay.
My new Amendment 94 has two elements to it. First, it would introduce requirements on the PSR to report annually on the impact that the reimbursement requirement had had on consumer protection and on the behaviour of payment service providers. Secondly, it would effectively create a league table to enable consumers to see how each bank is actually performing both in preventing fraud and in reimbursing victims.
On the first point, the annual impact report is necessary because the mandatory reimbursement requirement could have unintended consequences that might damage consumer protection. I shall give a couple of possible examples of that. First, there is the possibility of moral hazard. If the mandatory requirement means that consumers start to take less care about protecting themselves because they will be repaid anyway, that could have the undesirable consequence of actually making it easier for the fraudsters to commit fraud and so actually increase levels of fraud. While, as we discussed in Committee, we must not put the blame on the victims, there is a balance to find in this area to avoid making it easier for the fraudsters while improving consumer protection and outcomes. We will know whether we have found the right balance only when we start to see the results.
A second example might be that the banks change their behaviour in an undesirable way. Rather than improving their fraud detection and prevention processes, they might simply decide that the easiest thing to do would be to stop providing services to people whom they see as being at the highest risks of fraud in order to reduce their potential reimbursement liability. I think many Members of this House have seen similar behaviour in respect of PEPs—politically exposed persons—where, rather than undertaking sensible risk-based steps, banks have on occasion just decided that it is too difficult or expensive to deal with PEPs and have refused to open accounts or have even closed accounts. We will come to that later today, but it is a good example of a well- intentioned risk measure having undesirable consequences. In the case of APP fraud, if the banks see it as too great a financial risk to provide banking services to those deemed to be at a higher risk of fraud, then we might see a whole swathe of more vulnerable people unable to obtain banking services.
These are just two examples, but I hope that they demonstrate the importance of the PSR keeping the impact of the requirement for mandatory reimbursement under regular review and amending it if it turns out to have unintended negative consequences. Reporting on this regularly and publicly will ensure that the impact assessment is robust.
Turning now to the second element of the amendment, the requirement to report annually on the performance of the banks, a major criticism of the current voluntary reimbursement code is that it is completely non-transparent. While numbers are published, they are anonymous. Consumers cannot see which banks are behaving best, and which are behaving worst, unless, as TSB does, they tell us voluntarily. The TSB example is encouraging—it is using its 100% reimbursement policy as a selling point. Introducing competitive good behaviour is highly desirable, and this amendment would help achieve that.
The amendment would effectively create an annual league table that would enable consumers to see which banks have the lowest levels of fraud—which will give an indication of how good they are at detecting and preventing fraud—which banks are better and quicker at reimbursing victims when fraud occurs, and, by including the appeal information, which banks make it more difficult for victims. That would allow consumers to take this information into consideration when deciding whether to stay with their existing bank or when considering opening a new account—something that would otherwise not be possible. That would, I hope, provide a real competitive incentive for banks to change their behaviour both in detecting and preventing fraud and in treating victims promptly and fairly.
This would not introduce a significant additional burden; the PSR will have all this information anyway, so reporting it is not a significant job. However, the benefits to consumers of making this information public are potentially significant.
When we discussed this in Committee on 13 March, the Minister stated in relation to the impact assessment that the PSR
“has committed … to a post-implementation review”
and that the Government would also
“monitor the impacts of the PSR’s action and consider the case for further action where necessary”.
That does not go far enough. Fraudsters keep changing their business models in reaction to actions by industry and the authorities, so it is essential that this is kept under continual review rather than only a one-off, post-implementation review. It is also important that the impact assessments are published. Can the noble Baroness provide any greater comfort in those respects?
On the league table, the noble Baroness said on 13 March that the PSR
“is currently consulting on a measure to require payment service providers to report and publish fraud and reimbursement data”.—[Official Report, 13/3/23; col. GC 166.]
It is now nearly three months later, so can the noble Baroness provide an update on whether this consultation has progressed and whether the data will in fact be published? It would be better if such data was published by a single source such as the PSR rather than piecemeal by payment service providers. I beg to move.
Baroness Bowles of Berkhamsted (LD)
My Lords, I support this amendment and I can be relatively brief. It is important not only to collect the statistics but also at times to dig underneath to see how they might be being gamed. From personal experience, I know of instances where banks are treating microbusinesses more strictly than they are treating consumers, saying that a business should know and therefore rejecting them out of hand at the first time of asking, if I can put it that way. I have heard, in a similar case, stories of someone making contact by telephone repeatedly, their inquiry getting lost and the person having to go through the whole story with a case handler multiple times, the strategy obviously being, “Let’s try and make them give up”. That was with a very large bank; I will not name it because I do not have absolutely all the detail. Therefore it is quite important that different criteria are not being used between sole traders and individuals when it has already been determined via the ombudsman that both have a route.
Lord Naseby (Con)
My Lords, this amendment has to be seen in the context of the statement by the Payment Systems Regulator on 7 June, which was only a few days ago. It seems to me that that is the key starting point. I say to my noble friend on the Front Bench that that statement is enormously welcome. It states clearly that:
“For the first time, our new reimbursement requirement will introduce consistent minimum standards to reimburse victims of APP fraud”.
I do not want to detain the House by going through some of the detail of that because that is not what we are doing here today, but it seems to me that that is a significant step forward.
Secondly the PSR says quite clearly:
“We are increasing protections within Faster Payments”,
and that is also a key issue. There is a timeline in the statement which states that there will be consultation on:
“The allowable claim excess that Payment Service Providers can charge”.
That is to be done in August and the whole lot will be finished by October. I wish it were to be done a little quicker, but it seems an excellent start.
The only part of the amendment which I think is extremely valuable is the one-year report. Frankly, with the volume of illegal activity that there is at the moment, if it were me—and I was the marketing director at a couple of the companies I used to work for—I would not wait a year; I would like to see what happens within the first six months of the new regime being in place. Later on, you can decide if there is some consistent reason that you move to a six-month situation.
Finally, I would like to know exactly what the starting point was before the new regulations came in. At the moment, I do not know that we have any official statistics. We may do and, if so, it would be very helpful to the House to know, not necessarily at this moment but in the near future, the starting point for the number of these terrible situations that people are being faced with today.
Lord Livermore (Lab)
My Lords, the Payment Systems Regulator is now putting in place requirements to ensure more consumers will receive a refund if they fall victim to authorised push payment scams. This is very welcome. Many banks have already taken steps to make customers aware of the risk of scams, but the sophisticated nature of many such scams means there is a need for even stronger efforts to prevent fraud occurring in the first place. Not all of the detail is yet settled, with consultation on key aspects of the new scheme to follow later in the year, but we hope the Minister can give an indication of the levels of protection likely to be offered.
We welcome the tabling of Amendment 94 by the noble Lord, Lord Vaux, which we understand to be a probing text. As the new system beds in, it will be vital for banks and other financial institutions to collect data and share that with the regulator, in order to inform future changes to guidance and regulation. The amendment also proposes public reporting of data to enable consumers to see which institutions have a good or bad track record. This is an interesting idea and we look forward to hearing the Minister’s response on this specific point.
While APP scams fall within the financial services realm, anti-fraud initiatives cut across departments and legislation. That is why one of our priorities for the Online Safety Bill is to ensure robust media literacy provisions, so internet users are able to better identify which articles, websites or emails are legitimate. With a significant amount of financial fraud taking place online but with the limited scope of that Bill, we hope the Minister and her department will engage with the Online Safety Bill as it approaches Report stage. Scams cause a significant amount of emotional distress, as well as coming with financial costs, so we hope that the Government and the regulators will do everything possible to keep ahead of the curve.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, the Government and the Payment Systems Regulator recognise the importance of regular, robust data collection. This is crucial for monitoring the effectiveness of the reimbursement requirement and ensuring that firms are held accountable. I am grateful to the noble Lord, Lord Vaux of Harrowden, for his considered engagement on this issue. I reassure noble Lords that the PSR has committed to half-yearly publication of data on authorised push payment scam rates and on the proportion of victims who are not fully reimbursed.
I can tell my noble friend Lord Naseby that a voluntary system is already in place and the PSR has already begun collecting data from the 14 largest banking and payment groups. The first round of transparency data is due for publication in October this year. The data that the PSR will publish includes the proportion of scam victims who are left out of pocket, fraud rates where the bank has sent customers’ money to a scammer, and fraud rates where the bank has hosted a scammer’s account. That means that, from October this year, the PSR will publish data for total fraud rates, both for sending money and receiving fraudulent funds, and reimbursement rates, on a twice-yearly basis for the 14 largest banking groups. This so-called league table will provide customers with the information they need to consider the relative performance of different banking groups on these metrics, and to factor that into their banking decisions.
Further to this data, once the reimbursement requirement is in place the PSR will use a range of metrics to monitor its effectiveness on an ongoing basis. These include the length of reimbursement investigations, the speed of reimbursements, the value of repatriated funds, the treatment of and reimbursement levels among vulnerable customers, and the number and value of APP scams. Data on appeals will be captured and reported by the Financial Ombudsman Service separately.
More broadly, the PSR will publish a full post-implementation review of the reimbursement requirement introduced by this Bill within two years of implementation. The review will assess the overall impact of the PSR’s measures for improving consumer outcomes. That does not mean it will not also consider the effectiveness of this measure on an ongoing basis. Indeed, more widely, the PSR will consider risks across different payment systems and, where necessary, address them with future action. This includes a commitment to work with the Bank of England to introduce similar reimbursement protections for CHAPS payments, and with the FCA in relation to on-us payments.
The PSR has been working closely with industry to develop effective data collection and reporting processes for its work on fraud. While the Government recognise the intention behind the noble Lord’s amendment, they do not consider it necessary or appropriate to prescribe specific metrics to be collected in primary legislation. I hope that, given the reassurance I have been able to provide today, he would agree with that point.
The noble Lord, Lord Livermore, spoke about the wider impacts of fraud and the duties that go beyond financial services companies or payment system providers in addressing those risks of fraud. That is being looked at through both the Government’s counter-fraud strategy and other Bills. He mentioned the Online Safety Bill. I disagree with his assessment of the measures in there. The measures that we have to tackle fraud in that Bill are a significant step-change in what we expect of companies in this space, and I think they will make a real difference. We are committed to working across all sectors to look at what more we could do in this space once we have implemented those measures and see how effective they are. I hope noble Lords are reassured by our commitments more broadly on this issue, and specifically by the fact that the PSR will be publishing data in this space once we have implemented the measures in the Bill.
Lord Vaux of Harrowden (CB)
My Lords, I thank all those who have taken part in this debate, particularly the Minister for her constructive engagement on this and the reassurance she has just given. In fact, in one area, she has actually gone further than my amendment suggested, as the noble Lord, Lord Naseby, pointed out: the annual report is now to be six-monthly, which is hugely welcome. It is only for the top 14 payment service providers, which will cover the bulk of the market, but that is something that the Government and the PSR might want to keep under review, particularly as different players come in and out of the market. I thank her very much for her reassurances.
I will make one comment more generally, echoing some of the comments made by the noble Lord, Lord Livermore. It is not only the banks that are players within the fraud chain, it is all those other parties that enable or facilitate fraud, from the tech companies to social media companies, the web-hosting companies, the telecom companies, et cetera. This measure puts all of the liability on to the banks. While it is a simple solution for victims—and that is to be commended—we need to find some way of incentivising all those other players in the fraud chain to behave properly and to stamp down on their services being used by fraudsters. I am hoping that we will see progress on that in the Online Safety Bill, and also in the failure to prevent fraud clauses in the economic crime Bill that is coming forward. With that, I beg leave to withdraw my amendment.
Baroness Penn
“Arrangements for the investigation of complaints
(1) The Financial Services Act 2012 is amended in accordance with subsections (2) and (3).(2) In section 84 (arrangements for the investigation of complaints)—(a) omit the “and” at the end of subsection (1)(a);(b) omit subsection (1)(b);(c) after subsection (1) insert—“(1A) The Treasury must appoint an independent person (“the investigator”) to be responsible for the conduct of investigations in accordance with the complaints scheme.”;(d) omit subsection (4);(e) in subsection (5), in the opening words, for “regulators” substitute “Treasury”.(3) In section 87 (investigation of complaints)—(a) in subsection (9A), after paragraph (b) insert—“(ba) for the regulator’s response under paragraph (b) to include a summary of—(i) the cases in which the regulator decided not to follow any relevant recommendations, and(ii) the reasons for not following those recommendations;”;(b) in subsection (9B), after paragraph (e) insert—“(f) such other matters as the Treasury may from time to time direct.”;(c) after subsection (9B) insert—“(9C) In subsection (9A)(ba) the reference to “relevant recommendations”, in relation to the regulator’s response in respect of an annual report, is a reference to—(a) any recommendations to the regulator contained in that annual report, and(b) any recommendations to the regulator contained in final reports relating to individual complaints given during the period to which that annual report relates.”Member’s explanatory statement
This new Clause would amend the Financial Services Act 2012 to make the Treasury, rather than the regulators, responsible for the appointment of the Complaints Commissioner and would impose additional reporting requirements.
Baroness Penn
“Politically exposed persons: money laundering and terrorist financing
(1) The Treasury must exercise the power conferred by section 49 of the Sanctions and Anti-Money Laundering Act 2018 (power of appropriate Minister to make regulations about money laundering etc) for the purpose mentioned in subsection (2).(2) The purpose is to make provision amending Part 3 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692)(“the 2017 Regulations”) (customer due diligence) so as to secure the result required by subsection (3).(3) The result required by this subsection is that, where a customer is a domestic PEP, or a family member or a known close associate of a domestic PEP—(a) the starting point for the relevant person’s assessment under regulation 35(3) of the 2017 Regulations is that the customer presents a lower level of risk than a non-domestic PEP, and(b) if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer is less than the extent to be applied in the case of a non- domestic PEP.(4) In this section—(a) “customer” includes a potential customer;(b) “domestic PEP” means a politically exposed person entrusted with prominent public functions by the United Kingdom;(c) “enhanced risk factors”, in relation to a customer who is a domestic PEP or a family member or a known close associate of that domestic PEP, mean risk factors other than the customer’s position as a domestic PEP or as a family member or known close associate of that domestic PEP;(d) “non-domestic PEP” means a politically exposed person who is not a domestic PEP;(e) the following terms have the same meaning as in regulation 35(12) of the 2017 Regulations—“politically exposed person” or “PEP”;“family member”;“known close associate”.(5) Section 55 of the Sanctions and Anti-Money Laundering Act 2018 (Parliamentary procedure for regulations) does not apply to regulations made in compliance with the duty imposed by subsection (1).(6) Regulations made in compliance with the duty imposed by subsection (1)—(a) are subject to the negative procedure, and(b) must be laid before Parliament in accordance with paragraph (a) before the end of 12 months starting with the day on which this section comes into force.(7) The Treasury must, before the end of 6 months starting with the day on which this section comes into force, lay before Parliament a statement setting out what progress has been made towards making the regulations in compliance with the duty imposed by subsection (1).(8) The duty in subsection (7) does not apply where the regulations have been laid before Parliament in accordance with subsection (6)(a) before the end of 6 months starting with the day on which this section comes into force.”Member’s explanatory statement
This new Clause would impose a duty on the Treasury to amend the money laundering regulations with the effect of ensuring that a politically exposed person who is entrusted with a prominent public function by the UK (or their family members or known close associates) should be treated as representing a lower risk than a person so entrusted by a country other than the UK, and have lesser enhanced due diligence measures applied to them.
Baroness Penn (Con)
My Lords, there has been significant discussion throughout the passage of this Bill, and more broadly in parliamentary debates, around the treatment of politically exposed persons—PEPs—under the money laundering regulations. Noble Lords have made many valuable contributions on this issue, sharing their personal experiences and those of their family members. I appreciate the concern expressed across this House that noble Lords and their family members can face disproportionate treatment as a result of their PEP status, including burdensome requests for information and even being prevented from accessing financial services. The Government are clear that action is needed to address this. In looking at this issue, we have sought to balance the need to maintain our adherence to the international standards in this area, as set by the Financial Action Task Force, with the need to ensure proportionate treatment of PEPs.
Therefore, the Government are tabling amendments to this Bill to achieve this in two areas. The Government are clear that domestic PEPs are lower-risk than foreign PEPs, and this must be reflected in both policy and practice. Noble Lords will be aware that while the money laundering regulations require all PEPs to undergo enhanced due diligence, the Government require the FCA to publish guidance on how banks and other financial institutions should meet this requirement. The FCA’s current guidance, published in 2017 following a provision introduced in the Bank of England and Financial Services Act 2016 with cross-party support, makes it clear that financial institutions should treat domestic PEPs as lower-risk than non-domestic PEPs in the absence of other high-risk factors.
Lord Forsyth of Drumlean (Con)
My Lords, when I went home after the last time we discussed accountability of the regulators to Parliament, my wife said to me, “I was watching you speaking on TV and, very unusually, you were praising the Minister to the skies”. Here I am having to do it again. My noble friend Lady Penn, the Minister, has listened very carefully to all the points that have been made and has come forward in these amendments with a package that makes my Amendment 101 look rather feeble, for which I am extremely grateful.
I do not propose to spend much time talking about Amendment 101 but want to make just a couple of points. First, I declare my interest as a chairman of Secure Trust Bank. Secondly, it is not just the banks causing difficulty here; it is also credit card providers such as American Express, which seems to have been particularly heavy handed.
I have had an American Express card since 1979 and yet, only recently, I got an email which I assumed was a spoof that said I had to provide copies of my passport and bank statements, details of my investments and income, and my payslips—such as they are—to American Express within a certain number of days. I assumed this was some fraudster. Then I got another email telling me that my card had been suspended because I had failed to produce this material. When I rang American Express and said: “What is going on here?”, they said: “Unless you produce it, your card will remain suspended”. Of course, there were a number of payments on my card, which caused me some embarrassment.
That is a completely disproportionate use of the regulations. I am not even sure that some of the financial institutions are even looking at this work themselves. They may be contracting it out to other people who are simply involved in box ticking.
I will give another example from some years ago. My daughter had an account at the same bank as me, Coutts, and the manager said to her: “Is there any chance that you could move to another bank because you are such a pain to look after because your dad is a politically exposed person?”. In my view, that is an absolute disgrace. Our children find it difficult to get mortgages. People find it difficult on probate. What my noble friend is proposing today goes further than my amendment and I hope it will result in change.
There is a problem, however, in that the regulator is judge and jury in their own court on this matter, although I appreciate the measures which my noble friend has put in place to hold them to account. Of course, if we set up a committee of this House or a Joint Committee, I think this will be very high on the agenda if they have not actually dealt with it.
I have one slight niggle with Amendment 97 in my noble friend’s name, which is that she gives the FCA 12 months to publish. That seems an inordinate length of time. In the previous amendment we discussed today, my noble friend reduced the time to six months from 12 months. Perhaps she might reflect on whether it really needs 12 months to carry this out. At first, I thought it might be a move in the hope that perhaps there might be a general election and it might get lost in that and there might be a change of government and it might not happen. But one thing is clear: everyone on all sides of this House feels very strongly about this issue and I commend my noble friend for having taken this action, which I know has not been easy, and for the care with which she has listened to colleagues in coming forward with these proposed changes.
Lord Moylan (Con)
My Lords, I shall speak to my Amendment 105 in this group. I express enormous gratitude to my noble friend the Minister for all the effort she has put in to resolving this problem in the last couple of years and now in this Bill. I have had a number of meetings with her, for which I am grateful. I have learnt much from her in the course of those meetings and in Committee. I think this is also an appropriate occasion for me to apologise for the fact that in Committee I insisted on one particular point of detail that I was right and, of course, it turned out on closer inspection afterwards that she was 100% right and I had got it wrong, so I apologise for that.
She has made sterling efforts, and what she is proposing today is welcome. None the less, those efforts—at least until we came to this debate today—have not been successful in scrapping a system which is cruel, capricious and unjust. In part, that is because of resistance in parts of the Civil Service. While I accept her proposal today, it worries me—I am wary—that 12 months is being sought in which to come forward with proposals which will resolve it definitively.
I would prefer, in principle, my Amendment 105. I am grateful for the support given to it by the noble Baroness, Lady Hayter of Kentish Town, the noble Lord, Lord Sharkey, and my noble friend Lord Forsyth of Drumlean—which I think pretty well represents most sides of the House.
The legal background, which my noble friend explained to some extent, is that this all originates with the Financial Action Task Force—an international group in which British officials play an important part. It is not binding. It is not law, but it is like a standard of good behaviour, if you like. I can understand why my noble friend and the Government at large wish to continue to adhere to those standards. I have no problem with that.
However, it is clear that the FATF—I am afraid that is the expression I am going to use for the Financial Action Task Force—recommendations make a distinction between domestic and foreign PEPs. It is difficult for the European Union to make such a distinction internally— I think the noble Baroness, Lady Bowles, who was involved with the European Union at the time, will confirm this—so when the FATF recommendations were incorporated into a European Union directive, that distinction between domestic and foreign PEPs was lost. So, as it was then transposed into UK law through the money laundering regulations, that distinction no longer appeared. However, it is clearly there in the FATF recommendations.
Since we are no longer obliged to adhere to the European Union directive, it is entirely possible for us, and entirely consistent with any sense of international obligation we have, to restore that original distinction. That is what my amendment would do in law straightaway. The FATF recommendation is that domestic PEPs should not be subject to the money laundering regulations unless they are in what is described as a “higher risk business relationship”. I have stuck very closely to that wording in my amendment.
It is also my view that when the Government come back in a year’s time, or maybe sooner—I hope it will be sooner; it does not have to be a year—they will end up more or less with my amendment. If they want to stick to the FATF recommendations and yet alleviate some of the burden on domestic PEPs, this is more or less where they will have to be. That is what I would prefer, but I am clearly not going to see it today.
I will add a few other points. As I say, I think my amendment is the standard against which within a year we will be judging what the Government come back with. There are a few other points not captured in the amendment that I think the Government have to address in the course of the review. First, at the moment, banks claim that the tipping-off provisions in the money laundering regulations mean that they cannot tell us when they are investigating us as PEPs. So, one gets these bizarre requests, as described by my noble friend Lord Forsyth, but if you try to have an intelligent conversation with them about what is going on, you are completely blanked and no explanation whatever is forthcoming. They claim that this is mandated upon them. I think that is possibly a misinterpretation, but in either event, it has to go. We have to be able to talk sensibly to people who are trying to make such inquiries if we are indeed within scope of them at the end of this process.
Secondly, it must be made clear to the banks that the closing or freezing of accounts should be very much a last-resort action, and only if there is already evidence of a suspicious transaction. It cannot be resorted to in the way that some banks have been doing. It is simply unconscionable that perfectly ordinary people who are family members—not necessarily Members of this House—are having their accounts closed down or frozen while investigations take place, when there is no evidential basis for doing so. It is simply, “Your turn has come round on the agenda to be inquired into”. Can my noble friend say whether we can look forward to any alleviation in practice during the next 12 months while we are waiting for this to happen, or is the full rigour of this unjust system to be persisted with while we are waiting?
Baroness Hayter of Kentish Town (Lab)
My Lords, it is exactly three months ago today that we debated this issue in Committee, when the Minister heard many examples of what had been going on. She has done rather more than any of her predecessors in acknowledging that there is a problem with how the AML rules are applied to PEPs and that change needs to happen—but she has gone even further and done something about it. I will not say that it is simply because she is a woman and that is what we do, but it is interesting that she has done it. As we heard, she has tabled Amendments 96, 97, 118 and 119, which she has outlined.
I have added my name, as the noble Lord, Lord Moylan, said, to Amendment 105, which goes a bit further and is more specific than the Government’s amendment. Ideally, they might have accepted it and made a carve-out for our family members; as we have heard, we may be guilty because we are here, but they have done nothing wrong and it is awful that they are caught by it. So I welcome the Minister saying in her introduction that the review will specifically look at whether it is possible to tweak that somewhat.
As I said in Committee, this has been going on for rather a long time. The noble Lord, Lord Flight, was the first noble Lord to raise it that I could find, in 2013, and I have been on about it since 2015, as the House knows. We have had Written Questions, Oral Questions, meetings, press coverage and all of that. In addition to the inconvenience for us, this has also meant that all these banks and others are wasting their time looking at our business instead of, as we have heard, at some other people. It is not just Amex and others; it is car purchase firms and everybody else inconveniencing us and wasting their time.
The Minister has acknowledged that it is time for legislation. The key part of her proposal is distinguishing between domestic and foreign PEPs and a requirement both on HMT and the FCA to do something. What the Government have done may not be perfect, but it is a real step forward. I think the Minister is well aware that we will keep a rather beady eye on what is happening, and we will be back here if nothing changes.
In the meantime, we should thank the Minister for what she has done. We have made a big step forward and I am delighted that the noble Lord, Lord Moylan, will not be pressing his amendment. It is right that we accept where we have got to with the Minister, and we will watch that being implemented.
Lord Sharkey (LD)
My Lords, I have added my name to Amendment 105 in the name of the noble Lord, Lord Moylan, and I congratulate him on his determination and persistence. I do not quite understand his dislike of Turkish barbers, but we can deal with that some other time.
His amendment’s simplicity and its direct modification of the regulation is an appealing approach, as is the absence of the word “review”. I was very pleased to see the government amendments in this group, chiefly because, of course, they are government amendments. I am very grateful for the Minister’s clear and long-standing commitment to resolving, or at least ameliorating, the problem. I have only a couple of observations about the government amendments.
The explanatory statement to Amendment 96 says that UK PEPs
“should be treated as representing a lower risk than a person so entrusted by a country other than the UK, and have lesser enhanced due diligence measures applied to them”.
The amendment itself, in proposed new subsection (3)(b), states that
“if no enhanced risk factors are present, the extent of enhanced customer due diligence measures to be applied in relation to that customer is less than the extent to be applied in the case of a non-domestic PEP”.
Neither of those offers a definition or sets an upper limit to what this lesser form of due diligence should be. Is that decision to be left entirely to the financial services companies? If it is, can we reasonably expect uniformity of definition and behaviour?
Why would we expect the banks to significantly change their current behaviour? Would it not be more likely that they will simply water down some minor aspect of the diligence they currently feel is due and carry on otherwise much as they do now? In a way, that is what is happening anyway. The banks mostly ignore the FCA’s current guidance, as set out in paragraph 2.35 of FG17/6. The FCA, in response to that, applies no sanctions. Nowhere in the government amendments is there mention of sanctions for non-compliance with the new arrangements.
Given the rather cavalier disregard some banks have displayed towards the current guidance, do we not need some sanction for future non-compliance, or a way of making the FCA properly enforce its own guide- lines? What use are guidelines if they are not enforced? I would be very grateful if the Minister could say how a workable definition of “lesser due diligence” is to be arrived at and how the new regime may be enforced.
Viscount Trenchard (Con)
My Lords, I declare my interest as a director of two investment companies, as stated in the register. I was interested to hear the remarks of my noble friend Lord Forsyth of Drumlean about American Express. He said that he had had a gold credit card with that company since 1979. Well, I had a gold card issued by American Express in 1978. I was very proud of having that card. I did not use it often, but it is one of those cards that clears automatically every month so there is no danger of running up unpaid debts and paying 20% or 30% interest.
In November 2021, I missed an email from them asking me for KYC information, including my passport details, proof of address and a utility bill, and I omitted to reply. I then got another email a month later—with no telephone call or letter through the post—saying that my account will be closed down. I telephoned them and, after waiting for three-quarters of an hour or so, I spoke to someone who agreed that they did not really need KYC information on me, but if I supplied it and uploaded it to their website, my account would not be cancelled, and all would be fine. I duly did that, but the account was still cancelled in about February 2022. I was not happy about this, because, as I said, I rather liked my gold card issued in 1978, so I took issue with them.
Over the past 15 months, I have spoken with them about six times; I have been on the chat function about six times. I now have two names of individuals and an email address I have been corresponding with, but my account is still cancelled—although they still send me a monthly statement through the post giving me a credit balance. I will print out the Hansard report of this debate and attach it to my next email to American Express, because I am not giving up on this.
Lord Clarke of Nottingham (Con)
I will not make a speech giving my experience of American Express, but it is remarkably like that of my noble friends Lord Trenchard and Lord Forsyth. I decided that I could not be bothered with such outrageous burdens being placed on me. Having had my card from some time in the 1970s, I have allowed them to cancel it. Having heard of my noble friend’s experience, I am rather glad that I just let it go and reverted to using my Barclays visa card on all occasions.
Lord Naseby (Con)
I will take my noble friends’ points further. My experience was identical to that of my noble friend Lord Forsyth. Frankly, I have cancelled the whole thing; Barclaycard does a far better job.
Viscount Trenchard (Con)
Both my noble friends have a much more sensible approach to this matter.
I echo the other remarks of my noble friend Lord Forsyth, whose Amendment 101 I was minded to support. I too am most grateful to my noble friend the Minister for listening to the opinions of your Lordships expressed in Grand Committee. I added my name to Amendment 227 in Grand Committee, tabled by my noble friend Lady Noakes. Her amendment was debated on 13 March alongside Amendment 215, tabled by my noble friend Lord Moylan and other noble Lords. I would have added my support to my noble friend Lord Moylan’s Amendment 105, but it was too popular and there was no room.
My noble friend the Minister will recognise the disproportionate difficulties which UK PEPs must endure as a result of the money laundering regulations 2017. On balance, I would have preferred to be excluded by virtue of being a UK citizen, but my noble friend has decided that exclusions will apply to domestic PEPs, which does not sound so nice, but will achieve the same outcome.
Unfortunately, it will take years for British citizens resident abroad who are connected to UK PEPs to be released from similar regulations in many different jurisdictions. For example, my son has found it impossible to be appointed as a bank account signatory in Taiwan and South Korea. However, my noble friend the Minister’s amendment should make the life of UK PEPs easier. I am interested to see whether, in a year’s time, the amendment proposed by my noble friend Lord Moylan will be the triumphant, most successful and best one of these. In any event, I am most grateful to her for taking up this point, as she said she would.
Lord Eatwell (Lab)
My Lords, we seem to be predominantly discussing personal experiences at the moment, so I declare an interest as the former chairman of the Jersey Financial Services Commission.
The definition of a politically exposed person in Amendment 96 refers to persons
“entrusted with prominent public functions by the United Kingdom”.
Presumably, that would not apply to the Crown dependencies, since they are not part of the United Kingdom. I think that this is a mistake; it should be corrected by the Government, given the important role many UK citizens play in the Crown dependencies and in the financial services industry in the Crown dependencies. Would the Minister agree to take this away and see whether the omission of the Crown dependencies is just an error that has been made in drafting this amendment.
Baroness Kramer (LD)
My Lords I rise because this amendment allows me to do two things that I do not do very often. One is to thank the Minister because the amendments that she has brought forward are constructive, as others have described. The second is to say to the noble Lord, Lord Moylan: finally, a benefit from Brexit. One down, which pleases me, I have to say.
I want to ask the Minister if, in the course of the review, she will look at the industry that has mushroomed from the vetting of PEPs. I dealt with the American Express problem that others have described. I filled in my forms and still have my card—I am afraid that the BA miles win me over. I decided that I would open a savings account at Chase Bank as they were offering some good rates but discovered that I was caught up in this PEP process and the bank asked for a raft of information that, frankly, I should have never been asked for. The breaking point was a phone call asking me for payslips for my husband. On his death, I had inherited from him and therefore the bank wanted historical payslips. My husband died 17 years ago and I do not know how many people still have their payslips from 17 years ago, never mind those of a dead spouse.
To me, that was typical of the overstepping and exaggeration—gold-plating is almost an understatement —that has been going on in this process. It caused me to go on to the web and discover that there is a raft of consultants, advisers and legal entities that have become engaged in this process and taken straightforward guidelines from the FCA and blown them up into something extraordinary and complex. I am furious with the FCA because it does not enforce the guidelines; I hope the Minister will convey that and that the Government will become furious with the FCA for not enforcing its own guidelines. I hope that she will also encourage it to use the review to look at the vast industry that has burgeoned and makes its profits from making life an absolute misery for anybody it can catch in the system.
The Earl of Erroll (CB)
My Lords, I should like to add to this because I have had enough trouble with the PEPs issue for a long time. First, I thank the noble Lord, Lord Moylan, for explaining an important point about why I can get no information from Northern Trust on administering an investment trust in which my wife owned shares in Ireland. We had to get probity in Ireland, but the trust will still not release the money and will not say why. I am getting an absolute blind spot. Even Barclays, which wants money over here to pay off something does not seem to be getting any joy. I suspect that it is because the trust is not allowed to tell us that we are under investigation. That is wrong. If there is a problem, we could unlock it if the trust could just say, “We are trying to investigate this because we think we have to”.
I personally find it offensive that I am deemed to be a risk and a crook. I thought that in this country we were innocent until proven guilty. Actually, this is the other way around. Just because I happen to be a Member of the House of Lords, it is assumed that I am corrupt. This has caused a lot of problems for me and my family, but I am not going any further into detail. We have heard good stories from others, but I do not understand why we are PEPs. I have no access to government contracts and there is no reason to bribe me, sadly. I do not understand the logic behind that, and something should be done. The classification of PEPs should be looked at and revised because a lot of other people who are not PEPs are in places handling government contracts. As far as I know, they are not under permanent scrutiny, so I think you have got the wrong people and it is a nightmare.
Lord Naseby (Con)
My Lords, the noble Lord, Lord Eatwell, mentioned the Crown dependencies. I want to ask my noble friend on the Front Bench about the position of the British Overseas Territories.
Baroness Chapman of Darlington (Lab)
My Lords, I accept that we are politically exposed people—of course we are—and we can be bribed, so it is right that there are rules around this. This topic has attracted a lot of interest throughout the passage of the Bill, along with a number of questions and debates. I completely understand why that is.
While the enhanced checks faced by politically exposed persons are often onerous, as we have heard—all power to the elbow of the noble Viscount, Lord Trenchard; well done to him for finding the names of two actual human beings to speak to at American Express, and I hope he gets his situation resolved—it is vital that this country maintains strong anti-money laundering regulations and acts in a manner consistent with international standards. Unfortunately, to an extent that involves us, but I think the Government’s amendments in this group do what is needed in making the distinction, as do many other jurisdictions, between domestic PEPs and those from other countries, which is consistent with the Financial Action Task Force guidelines.
We welcome the support for the amendments from the noble Lord, Lord Forsyth, and my noble friend Lady Hayter of Kentish Town, both of whom have raised this issue consistently for some time. Most of all, though, it is right that we thank the Minister for bringing the amendments forward. She has worked hard to try to resolve colleagues’ concerns on this issue, and we hope that those will be dealt with by the upcoming changes to the regulations and the accompanying guidance.
Baroness Penn (Con)
My Lords, I reiterate what the noble Baroness, Lady Chapman, has just said: our approach in this area has always been guided by ensuring that the rules in place in the UK maintain the international standards that are set in this area. That has been the guiding principle in looking at resolving this issue. Nevertheless, we felt that it was right that action be taken. Examples such as that from the noble Baroness, Lady Kramer, demonstrate clearly that the approach taken by institutions is not always proportionate, and we need to address that.
I have heard from noble Lords, including my noble friends Lord Forsyth and Lord Moylan, questions about the timescale for the two pieces of work that are committed to in the amendments. I understand that feeling, but we have engaged closely with the FCA on the review that it is committed to undertaking through the government amendment, and it is clear that if there is to be a thorough assessment of the treatment of domestic PEPs at a systemic level—we have already raised individual issues or individual institutions in response to previous debates—then it must be given adequate time to be conducted.
The 12-month timeframe will allow the review to benefit from fuller engagement with industry and with affected PEPs, and it will ensure that the FCA is able to develop a full understanding of the scale and extent of this issue. I think it gives the FCA time to address issues such as those raised by the noble Baroness, Lady Kramer. Included in that timeframe is the fact that, if it deems it necessary to update its guidance, it will produce the draft within that timeframe.
The Government have 12 months to amend the money laundering regulations. As I said, the distinction between domestic and foreign PEPs does not currently exist in law, and we want to make sure that we get the drafting right to ensure that it achieves the intended outcomes without unintended consequences. That will require us to consult with industry to ensure that the language in the amendment has the desired outcome of altering firms’ behaviour in how they treat low-risk domestic PEPs. These points relate to the questions posed by the noble Lord, Lord Sharkey, because this definition will come in part through the amendment of the regulations but in part from looking at the FCA’s guidance, and what needs to be set out more fully there when it has done its review.
Acknowledging the interest from parliamentarians—perhaps we should all have declared our interest as we stood up to speak, in respect of PEPs—we have committed to updates on progress both from the FCA and the Government in delivering on these amendments.
My noble friend Lord Moylan and the noble Earl, Lord Erroll, raised the interaction with tipping-off requirements and communication to customers. We have asked the FCA to consider this as part of its review. The noble Baroness, Lady Hayter, and others, mentioned the impact on family members. Again, we have asked the FCA to consider this in its review.
My noble friend Lord Moylan also asked if we need to wait for 12 months for action. The FCA remains committed to taking action where it identifies non-compliance with its current guidance on PEPs and will do so throughout the course of the review. I encourage noble Lords to use the contacts provided in my letter on this issue in November, if they encounter difficulties while the Government amendments are being implemented. I am sure that those in the FCA responsible for this area will look at this debate carefully.
The noble Lord, Lord Eatwell, raised a question on Crown dependencies, and my noble friend Lord Naseby asked about overseas territories. I will write to noble Lords on that. If it is right or appropriate that this should extend that far, there is nothing in the amendments to prevent the Government doing that, but I would want to double-check the right interaction and the right locus for addressing those concerns. With that, I beg to move.
Amendment 96 agreed.
Amendment 97
Baroness Penn
“Politically exposed persons: review of guidance
(1) The FCA must review its guidance on politically exposed persons (“PEPs”) given under section 139A of FSMA 2000 and in compliance with the requirements under regulation 48 of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692)(“the 2017 Regulations”).(2) The review required under subsection (1) must include—(a) an assessment of the extent to which the guidance is followed by those persons to whom it is given under regulation 48 of the 2017 Regulations, and(b) in the light of that assessment, consideration as to whether the guidance remains appropriate or whether it should be revised.(3) The FCA must—(a) before the end of 3 months beginning with the day on which this section comes into force, publish an update on the FCA’s plan for the review required under subsection (1), and(b) before the end of 12 months beginning with the day on which this section comes into force—(i) publish the conclusions of the review, and(ii) where the FCA concludes that the guidance should be revised, publish draft revised guidance for consultation.(4) Publication as required by subsection (3) must be in the way appearing to the FCA to be best calculated to bring the publication to the attention of persons likely to be affected by it.(5) The FCA is not required under this section to publish any information whose publication would be against the public interest.(6) In this section—(a) “domestic PEP” means a politically exposed person entrusted with prominent public functions by the United Kingdom;(b) the following terms have the same meaning as in regulation 35(12) of the 2017 Regulations—“politically exposed person” or “PEP”;“family member”;“known close associate”.”Member’s explanatory statement
This new Clause would impose a duty on the FCA to review the guidance that the FCA produced in 2017 on the banks’ treatment of politically exposed persons, and publish draft guidance alongside the review, if the FCA concludes that the guidance should be revised.
Earl Attlee
“Withdrawal of banking services
(1) When a provider of banking services in the United Kingdom decides to cease to provide banking services to an existing customer, or decides not to offer banking services to a specific prospective customer, because of one or more of the reasons specified in subsection (2), the bank is required to inform the FCA about that decision within the period of 4 weeks after the decision is taken. (2) The specified reasons are—(a) there is a reasonable suspicion that the customer is, or has, engaged in money laundering;(b) there is a record or specific instance of the customer not complying with requirements under money laundering regulations in a significant and easily-avoidable manner;(c) the provider cannot accept the regulatory risk of providing banking services to the customer despite the reasons set out in paragraphs (a) and (b) not applying;(d) ethical reasons;(e) the customer is in the defence industry.(3) The FCA must maintain a record of decisions notified to it under subsection (1).”
Earl Attlee (Con)
My Lords, I will also speak to my Amendments 99 and 100. In Committee, I moved an amendment similar to Amendment 99. I will not weary the House with the arguments I made in Committee in detail. Suffice it to say that, in the new year, I became aware of a small business that was exporting armoured fighting vehicles to Ukraine under export licences granted by His Majesty’s Government’s Export Control Joint Unit. I will call the businessman in question “Peter” for reasons of security.
Peter’s major high street bank has withdrawn provision of banking facilities and will give Peter no reason—exactly the problem discussed in the previous group. In these circumstances, I understand that the banks will generally stonewall a Member of another place. However, the bank in question was very helpful to me, and explained that the problem was the money laundering regulations and the attendant unacceptable regulatory risk. I tried as hard as possible to resolve this problem discreetly and behind the scenes. The bank indicated that it could continue to provide financial services if it received a suitable letter from a Treasury Minister. Sadly, Ministers would not provide one. I am grateful to the Minister for meeting with me many weeks ago, but she was unable to change her position, which is why I moved a suitable amendment in Committee.
All export licences for lethal military equipment are very carefully considered. In Committee, the Minister correctly made the point that the export licensing machinery tests whether or not the equipment should be exported, while the money laundering regulations are a different test to check for, and counter, illicit finance. The reason I drew the export licence point to the attention of the Committee was that it proves that it is within the defence and security policy of His Majesty’s Government for these vehicles to be exported to Ukraine. If it was thought undesirable, or even just unhelpful, a licence would not be granted. I therefore contend that the money laundering regulations are thwarting the intent of His Majesty’s Government.
Viscount Trenchard (Con)
My Lords, I declare an additional interest as stated in the register as a provider of geostrategic advice to Safe Security (SSL) Ltd. I will not repeat the arguments so well put by my noble friend Lord Attlee, who has given much voluntary military service over the years. I have added my name to my noble friend’s Amendment 98, but I also support both Amendments 99 and 100.
The Export Control Organisation at the former Department for International Trade grants export licences for controlled goods for military purposes. Its online export licensing system is called SPIRE. The organisation’s website states:
“We advise that you register your company on SPIRE, benefits include: More Control … Time Saving”.
I understand that it takes much time to obtain a SPIRE licence, but I am not convinced that it saves any time in carrying out this control business. It is of course right that companies wishing to receive licences to conduct this kind of business should be properly vetted and undergo the most stringent checks. However, once they have done that and been granted SPIRE accounts, why do they then find that the money laundering regulations prevent banks opening accounts in order to execute this kind of business under any circumstances?
In Committee, my noble friend the Minister acknowledged that
“the government process for the granting of export control licences focuses on the end use of goods rather than the source of funds paying for them”.
She told the Committee that the Treasury has
“engaged with the Export Control Joint Unit, the Financial Conduct Authority and other partners on this issue”.
She said that she was
“not aware of a systemic issue”,—[Official Report, 21/3/23; col. GC 297.]
but would “act to address it” if the Government identified one. I rather think there is a systemic issue here, because banks run a mile when anyone, particularly an SME, tries to open a bank account to do this kind of business. Banks are not aware of the SPIRE system and give absolutely no recognition to any licence granted under it to a prospective customer. The result of this, at least in some cases, is that the business is being carried out in other jurisdictions, such as Finland, that do not apply these regulations in such a stringent manner. This obviously deprives the Exchequer of corporation tax revenues and results in the official statistics understating the extent of British support for Ukraine.
This does not apply only to military equipment but includes the provision of vehicles to be used as field ambulances. I want to ask the same question of my noble friend the Minister as that asked by my noble friend Lord Attlee: do the Government think that absolute observation of the money laundering regulations is more important than permitting those who are licensed to do this business to do so?
Baroness Kramer (LD)
My Lords, we should thank the noble Earl, Lord Attlee, for raising a set of significant issues. I have no specialist knowledge in this area, but I am very well aware that SMEs generally are disadvantaged under our current framework arrangements. As the Minister will know, individuals and micro businesses—usually a small sole trader or somebody of that ilk—fall within the FCA’s regulatory perimeter, but the SMEs that have just been described fall outside of it.
Therefore, where there are gaps or where their treatment is completely inappropriate, they have nowhere to turn. In those circumstances, they face significant disadvantage compared to their competitors across the globe. So I hope the Minister will understand that this is a reflection—I think “tip of an iceberg” was the correct term—of something that is quite systemic in many different ways, and an area where the Treasury, and the regulators, need to focus attention.
Baroness Penn (Con)
My Lords, as I set out previously in Grand Committee, I commend my noble friend Lord Attlee for his strong role in supporting Ukraine and bringing the value of his expertise in support of efforts to provide Ukraine with vital supplies. I understand that my noble friend wishes to ensure that the money laundering regulations do not hamper the private export of armoured vehicles or military vehicles to Ukraine. However, this cannot come at the expense of weakening the regulations in a way that would allow them to be circumvented by those wishing to launder money or finance terrorism.
The Government are committed to providing economic, humanitarian and military support to Ukraine. That is why the UK is proud to have pledged £6.5 billion in support of Ukraine, including £1 billion of World Bank guarantees to go towards closing Ukraine’s 2023 financing gap and £2.3 billion in military support for 2023. In 2022, 195 standard individual export licences and three open individual export licences were granted for the export of military items to Ukraine.
I recognise that my noble friend has concerns about a wider issue relating to provision of banking services to those involved in the defence industry and the refusal or withdrawal of services for other reasons connected with money laundering or ethical concerns. As I said in Committee, I am not aware that banks are taking a blanket approach to such customers. I am grateful to my noble friend for setting out some further specific cases today and I am glad that he had the opportunity to meet my noble friend the Defence Minister. The Treasury would be happy to look further into these cases with my noble friend and the Ministry of Defence. Equally, if the defence industry has wider concerns, I would encourage it to bring them to the attention of the Government and the regulators.
My noble friend made a comment on the Government’s ESG policy and its impact on defence companies. Our ESG policy is focused on delivering the net-zero commitment and there is nothing in that policy framework that prohibits or otherwise disadvantages defence companies and the war in Ukraine—
Earl Attlee (Con)
I am sorry to interrupt the Minister, but it was not the Government’s ESG policy that had caused me a problem but the banks’ ESG policies.
Baroness Penn (Con)
I understand the point that my noble friend makes, but I think that is rather a matter for the banks. Nevertheless, as I have said to my noble friend, if there are wider or more systemic issues in this area, I would encourage him to draw this to the attention of the Government and the regulators. The Government are clear that investment in the defence sector remains important.
My noble friend suggested again that I or another Treasury Minister write to the bank which withdrew services from his associate telling it to relax steps to be taken to comply with MLRs. However, it would be extraordinary and inappropriate to override the MLRs in this way. Further, banks would still be under obligations in relation to the Proceeds of Crime Act which relate to dealing with such money.
I thank my noble friend for raising this issue. I am glad that he has met the Ministry of Defence on it. If there are wider issues that he would like to highlight to the Government, the Treasury is committed to working with the MoD to look at them. None the less, I hope my noble friend does not press his amendments at this time.
Earl Attlee (Con)
My Lords, I am grateful for the response of my noble friend the Minister. I detect a little bit of movement, but I am not surprised at her response. Of course, I am very happy to withdraw my amendment.
Earl Attlee
“Performance bonds for small or medium-sized enterprises
(1) Within six months of the passing of this Act, the Secretary of State must lay before each House of Parliament a report on the availability of performance bonds to small and medium-sized enterprises from the financial markets to cover stage payments in capital projects.(2) The report must, among other things, cover collateral requirements.”
Earl Attlee (Con)
My Lords, during my research into the money laundering problems identified in the previous group, I identified another problem for SMEs: the availability of performance bonds from the financial markets to cover stage payments in capital projects. I do not need to explain to your Lordships what stage payments are or how bonds work, and it is certainly something that I do not have any expertise in. The difficulties are that the banks require so much collateral that the system is intractable. It is not a problem for large firms with correspondingly large balance sheets; this problem affects only SMEs and tends to keep them small. I talked to a manufacturer of hovercraft, and if all their current enquiries came to fruition, they would simply not be able to secure the necessary bonds to finance the work. I beg to move.
Baroness Kramer (LD)
My Lords, this is an issue that I have raised in the House before, having run into the same set of issues—I suspect with some of the same companies down in the West Country involved particularly in large-scale exports which require performance bonds to be able to meet their contractual obligations. In these instances, performance bonds were denied by the banks unless the collateral included the homes and personal possessions of the directors and senior managers of the company. This was despite the fact that the firms had long-standing records of being able to deliver on the projects they engaged in and indeed the customers at the far end had reputations, again, of being excellent payers.
It is a real weakness in the system that we have no one who deals with market gaps, particularly when it applies to SMEs. I attribute part of this to the regulatory perimeter, but regardless of where the fault lies, there needs to be a remedy if we are to build a future economy which will be based very largely on SMEs and, hopefully, very significantly on exports.
Lord Harlech (Con)
My Lords, the Government recognise the importance of ensuring that SMEs are able to access appropriate financial products, including performance bonds, and of ensuring the availability of useful information on such products. As noble Lords are aware, performance bonds are a type of financing product that provides a financial guarantee to one party in a contract in the event of the failure of the other party to fulfil its obligations.
More broadly, SMEs already benefit from a diverse financial market, made up of high-street banks, smaller banks and a range of non-banks, to ensure they can continue to access suitable finance. The Government support SMEs’ access to finance through a variety of debt and equity finance programmes through the British Business Bank. These programmes were supporting more than £12 billion of finance to more than 94,000 smaller businesses as of June 2022.
The British Business Bank also produces several reports on access to finance on an annual basis, including the Small Business Finance Markets report, providing expert and independent assessment of the availability and options within the wider funding landscape for SMEs. Fundamentally, the commercial terms that banks and insurers offer, including the collateral they require for performance bonds, are a matter for the firms, subject to meeting the relevant regulatory requirements.
The Government remain committed to maintaining the highest international standards of regulation, and the Financial Services Act 2021 granted the PRA the powers to implement the latest international standards, known as Basel III.1. These include revised capital requirements for performance bonds for banks. The PRA recently consulted on its proposals and specifically requested comments and data from firms and wider stakeholders on its proposals for capital requirements for products such as performance bonds, and it will be considering feedback provided by respondents in formulating its final proposals. For insurers providing performance bonds, the Government are reforming one of the capital requirements, the risk margin, removing a barrier to lower product pricing.
As noble Lords are aware, under the provisions in the Bill, our independent regulators will take on new responsibilities. This means that the PRA will take on responsibility for setting the relevant regulatory requirements that are currently set through retained EU law, acting within the framework set by the Government and Parliament.
As we have discussed a number of times in relation to the Bill, when making rules designed to ensure the safety and soundness of financial services firms it is also important to consider how those firms can support the wider UK economy. That is why the Government have introduced the new secondary growth and competitiveness objectives, which will require the regulators to act to facilitate the competitiveness of the UK economy and its growth in the medium to long term. The PRA’s current consultation has been undertaken before the provisions in the Bill will come into effect. However, the Financial Services Act 2021 requires the PRA to “have regard” to the Government’s economic policy, including investment in SMEs and infrastructure, as well as the effect of its requirements on the UK’s international standing and the provision of finance to businesses and consumers in the United Kingdom on a sustainable basis.
Measures in the Bill also allow for parliamentary scrutiny of the regulators’ performance, including how they have advanced their new secondary competitiveness and growth objective. In addition, the Bill requires the regulators to produce statements of policy on how they will review their rules. Recent government amendments will require these statements to include information on how stakeholders can make representations to review rules, and on the arrangements for ensuring that these representations are considered.
In conclusion, the Government are committed to ensuring that SMEs have access to suitable financial products which are subject to suitable prudential safeguards to appropriately manage any risks. This is particularly important to ensure that UK SMEs are accessing finance to support their goals and contribute to the UK’s growth agenda. I therefore ask my noble friend to withdraw his amendment.
Earl Attlee (Con)
My Lords, I am particularly grateful to the noble Baroness, Lady Kramer, for her intervention, which showed how much more she knows about finance than I do. She did a great job. I am not convinced that industry will be cracking open the champagne after listening to my noble friend’s response to my amendment; nevertheless, I am grateful for it. In the meantime, I beg leave to withdraw my amendment.
Lord Forsyth of Drumlean
“Bank of England digital currency: legislation
The Bank of England may not issue digital currency unless authority to do so is granted by an Act of Parliament which is passed after this Act.”
Lord Forsyth of Drumlean (Con)
My Lords, I will speak to Amendment 103 in my name. It is supported by my noble friend Lord Bridges of Headley, who is currently chairing the Economic Affairs Committee, where the Governor of the Bank of England is before the committee. I hope he is giving him a good roasting on the issue of central bank digital currencies, which is the subject of this amendment.
I shall not bore the House by explaining what central bank digital currencies are and why they represent a threat as well as an opportunity, because all that was well set out in the Economic Affairs Committee’s report Central Bank Digital Currencies: A Solution in Search of a Problem? which was published in January 2022. The report was debated in the House in February this year. In the report’s recommendations was a simple suggestion that the Government give a clear indication that, should they decide to go forward with introducing a digital currency, it would be subject to primary legislation. To the astonishment of the committee, the Government have consistently refused to do so. They are arguing that they have not yet decided whether they think a central bank digital currency would be appropriate.
More recently, the Chancellor wrote a letter addressed to the chairman of the Treasury Select Committee and my noble friend Lord Bridges, addressing him as “Dear James” rather than “Dear George”. Ah—my noble friend is now in his place, so I do not need to elaborate too much. My noble friend Lord Bridges has been a vigorous champion of the need to have parliamentary accountability concerning this matter.
A main theme in Committee and throughout consideration of the Bill has been accountability. I have on several occasions now paid tribute to the Minister for responding to that. There are real issues about having a central bank digital currency. The first point is it is not a currency; it is simply a means of having digital banknotes. However, the fact that people are able to have an account in which their money is in digital form through a clearing bank with the central bank has huge implications for financial stability, depending on how much can be held in a digital account. The ability to move money from a conventional bank account to a digital wallet instantly would mean people would be able to react to financial events almost instantaneously. The fact that people could move their money to a central bank digital wallet would mean there would be less money—I should declare my interest as chairman of Secure Trust Bank—available to be lent, which would have huge implications for credit and, if taken to the extreme, would amount to the nationalisation of credit in our country, although no one is suggesting that.
There are also huge implications for privacy. If a digital currency is to operate effectively and not be prey to crooks and organised crime, it is essential that it is organised in a way that will monitor people’s transactions, and that, plus the ability to limit transactions, has big implications for civil liberties. For the first time in my life, I have had left-wing libertarian organisations writing to me saying how much they appreciate what I have been saying on this subject.
I will not take up the time of the House—and by the way, this Report stage is the very model of how Report on a Bill should be conducted. I will simply say to my noble friend that the notion that the Treasury and the Bank of England could get together and introduce a central bank digital currency without having proper parliamentary scrutiny and debate about these issues is utterly ridiculous in my view and I do not understand why the Government have been resisting doing so.
Lord Bridges of Headley (Con)
My Lords, I will speak very briefly and I apologise for being late.
The Governor of the Bank of England was just in front of the Economic Affairs Committee and our final question was on CBDCs. He gave an answer that I thought was lukewarm at best in his support for them, which was very interesting in and of itself. Before going any further, I remind the House of my interest as an adviser to Banco Santander.
The last time I debated a CBDC, I think there were five of us in the Chamber. Just as I was summing up my speech, suddenly the Chamber filled up, and I thought: “My God! Everyone is suddenly interested in my thoughts on CBDCs”. Only then did I realise that there was just about to be a debate on Brexit for the 231st time, and my views on CBDCs were completely and utterly irrelevant.
As my noble friend has just so eloquently summarised, this is an issue that we really need to focus on a lot more in Parliament as a whole. You may be a fan of CBDCs—here I am looking at my friend the noble Baroness, Lady Kramer, who I think is more persuaded by the merits of them and may see them as the best thing since sliced bread, or perhaps in this case one should say decimalisation—or, like me and my noble friend Lord Forsyth, you may be of a more conservative disposition and need to be convinced of the need for change. Whichever view you have, as my noble friend has just said, it is imperative that Parliament has the chance to debate, scrutinise and vote on primary legislation before a CBDC is introduced.
My noble friend has summarised many of the most important points, including privacy, financial stability and the impact of bank disintermediation. There is also the entire issue of how a CBDC might affect the operational independence of the bank, as my noble friend pointed out. One estimate is that a CBDC could—I stress “could”—increase its balance sheet by £400 billion, and it would obviously give the bank entirely new tools in monetary policy.
Then there is the entire issue of cost. I have to say that the words “IT infrastructure project” are possibly the most expensive three words that you can put together. I am very concerned about how much this will cost. No one seems to be able to say how much it will cost or who will pay.
Then there are issues of cybersecurity. The Bank states that new infrastructure needed to support a digital pound would make
“an attractive target for hackers and fraudsters who wish to steal funds”
and
“may become a target for hostile attacks with the aim of disrupting the system and, potentially, the wider economy”.
According to GCHQ, while a digital currency presents “a great opportunity”, it goes on to say:
“If wrongly implemented, it gives a hostile state the ability to surveil transactions”.
Those are just some of the enormous issues that a CBDC raises, and why we must have primary legislation to be able to scrutinise and vote on all this. I am very grateful to my noble friend the Minister, her colleague the City Minister, Mr Griffith, and the Chancellor for focusing on this.
I should actually say that the Chancellor may be forgiven: I am christened James George, so he might have just been signing this late at night, even though I have known him for 20 years. I will put that to one side. I got a very nice letter from the Chancellor, as did Harriett Baldwin. The problem is that, although it is signed by Jeremy Hunt, I feel that it is almost signed by Lewis Carroll because it gives you the feeling that it comes from Alice in Wonderland at a certain point.
If I may, I will detain your Lordships by reading two paragraphs:
“The Government and the Bank of England are at an early stage of policy development and have not made a decision on whether or not to introduce the digital pound”—
that we all know. It goes on:
“As a result, we do not yet know whether a digital pound will require primary legislation”.
When you read that back a few times, it begs a question, and I would be grateful if my noble friend the Minister, when she sums up, could answer it. Could a digital pound be introduced without primary legislation? This seems to suggest that potentially you could have one and it would not require primary legislation.
Be that as it may, the letter then goes on to say:
“However, in recognition of the potential significance of a digital pound, and the views of Parliamentarians, the Government commits to introducing primary legislation before launching a digital pound”.
So even though one might not need primary legislation, the Government are committing that there would be primary legislation.
Obviously, that is a great step forward. My problem is that it is still is not watertight. Much as I would like to say that my noble friend, Mr Griffith and the Chancellor are going to be there for years to come, I somehow do not know whether that is going to be the case. That is why I very much echo what my noble friend has said, and would like the Minister to go as far as possible in saying why it is not the case that they are not willing to put this into primary legislation. Moreover, I would be very interested to know the view of the Labour Party and the Liberal Democrats on this, and whether they too would say that they will commit not to introduce a CBDC without primary legislation.
I end by echoing my noble friend. The introduction of a digital pound—a “Britcoin”, as you might call it —would be an enormous undertaking. We cannot and we must not leave it to be passed by statutory instrument one wet Wednesday afternoon in the Moses Room. That would be an absolute disaster. It needs to be debated on the Floors of both Houses and voted on.
Baroness Altmann (Con)
My Lords, I too apologise to the House for being late.
I have added my name to my noble friend’s amendment. I urge my noble friend the Minister and the House to think very carefully about what possible advantages there could be relative to the disadvantages of having a central bank digital currency. We have seen so many people lose so much money, and so many money launderers, thieves and so on make so much money from digital currencies. This may be one of the biggest scams of the century.
It is very difficult to see why we need digital currencies at all. The risks for money laundering and economic crime, the lack of transparency and security for anyone putting money in, and the opportunity that this would offer to rogue states and actors to try to undermine our entire financial system require significant warning. The possibility that this could be introduced without primary legislation seems to me to be unconscionable and a dereliction of our duty to make sure that we are looking after the currency of this country.
Baroness Kramer (LD)
My Lords, I had the privilege of serving on the Economic Affairs Committee, with the noble Lord, Lord Forsyth, as chair, when it produced the report. Your Lordships will gather that my views on whether we adopt a digital currency are distinctive somewhat from others who have spoken today. It is not that I am some enthusiast for it; I recognise all the issues and disadvantages that have been named today, particularly financial stability and privacy. However, 18 countries will be adopting a central bank digital currency this year—including China, initially for its domestic market. It has been piloting it in 12 cities, but eventually it will become an offering that it takes to the many other countries where it expects to exercise influence, in both Asia and Africa.
I am afraid that we are facing potentially a King Canute situation: we may not particularly want such a currency but might simply have to accept that to remain in the forefront and in play within financial services and as a major exporter and participant in global trade, we may have no choice but to go down this route. But I absolutely share with every other speaker the view that this should be determined by Parliament in primary legislation. The issues are sufficiently fundamental and far-reaching. They carry risk, and they require judgment and perspective—and it is in debates in the other place and here that that can happen.
It seems to me that something so fundamental as currency surely is the responsibility of a democratic Parliament. It cannot be transferred, in effect, to either the Treasury to run through an SI, or to the regulators to not even bother with an SI but largely to put it in place through various regulatory changes. So, here we have absolute common ground; this should be on the face of the Bill. I am concerned that this may be the last piece of legislation coming forward where we have the opportunity to put it in the Bill. There might be a further opportunity in a year’s time, but it depends on the speed of change that we experience.
Guarantees from the Government would be good. I am glad that a letter has been written to Harriett Baldwin and the noble Lord, Lord Bridges, but we need something that recognises the significance and importance of doing this through primary legislation.
Lord Livermore (Lab)
My Lords, we welcome the amendment in the name of the noble Lord, Lord Forsyth, which has enabled this short and informative debate on the process for establishing a central bank digital currency. As technology develops and people’s habits change, it is vital that we keep pace. Therefore, the principle of a digital pound has much to commend it, although the arguments, implications and details clearly need to be properly worked through. The introduction of a digital pound would represent a significant step, and it is therefore right for the noble Lords, Lord Forsyth and Lord Bridges, to ask about the underlying processes, though it is a novel experience for the two noble Lords to be asking for commitments from this side of the House.
We very much welcome the clarification offered by the Chancellor in his letter to the noble Lord, Lord Bridges, and the Economic Affairs Committee that there would be primary legislation before a digital pound could be launched. We agree that this is an important safeguard.
Baroness Penn (Con)
My Lords, I thank my noble friends Lord Forsyth and Lord Bridges for their leadership in the House on this important topic. I do not intend to relitigate the debates around the question of a central bank digital currency; I was one of the five or so noble Lords who debated the Economic Affairs Committee report in February, and I enjoyed it very much.
As we set out then and in Grand Committee, the Government have not yet made a decision on whether the digital pound should be introduced, and that remains the case. But we also take the view that a digital pound may be needed in the future, so further preparatory work is justified. Therefore, the Treasury and the Bank of England issued a joint consultation on a potential digital pound on 7 February. As that consultation paper makes clear, the legal basis for a digital pound will be determined alongside the consideration of its design.
Lord Forsyth of Drumlean (Con)
My noble friend has made valid arguments for not putting the amendment, as drafted, in the Bill. However, she and her very clever officials could get around this by tabling an amendment at Third Reading to that effect.
Baroness Penn (Con)
I am afraid that I am not in a position to commit to my noble friend’s suggestion. I hope that the reassurance he has heard from all Front-Benchers on this issue will persuade him not to press his amendment at this time.
Lord Forsyth of Drumlean (Con)
My Lords, once again, my noble friend has gone beyond what we might expect in responding to the debate, so it is a pleasure to beg leave to withdraw my amendment.
“Defined contribution and defined benefit pension funds investment review
(1) The Treasury must publish a review of how to incentivise defined contribution (DC) and defined benefit (DB) pension funds to invest in high-growth firms and a diverse range of long-term assets in the United Kingdom, which must include green infrastructure.(2) The review must consider how best to do this while protecting the safeness and soundness of pension funds.(3) In carrying out the review, the Treasury must consult—(a) the Department for Work and Pensions,(b) the Department for Business and Trade,(c) the Pensions Regulator,(d) the FCA,(e) the PRA,(f) the Pension Protection Fund,(g) pension trustees, and(h) relevant financial services stakeholders.(4) The review must consider the merits of—(a) amending the definition of “specified scheme” within the meaning of the Occupational Pension Schemes (Scheme Administration) Regulations 1996 (S.I. 1996/1715) so as to increase the threshold of such DC schemes in respect of which trustees and managers are required to produce a value for members assessment under regulation 25 of those Regulations;(b) adjusting the terms of reference for DB Local Government Pension Schemes (LGPS) funds to consider regional development as an investment factor;(c) establishing frameworks to enable DB pension funds to invest in firms and infrastructure alongside the British Business Bank.(5) The Treasury must prepare a report on the outcome of the review, and lay it before Parliament within one year of the passing of this Act.”Member’s explanatory statement
This amendment would compel the Treasury to publish a review within a year of Royal Assent on how to incentivise pension fund schemes to invest in high-growth firms and green infrastructure. The review would have to consider requiring DC schemes to assess the merits of: consolidation, establishing frameworks for British Business Bank investments (so that DB pension schemes will be able to invest alongside them), and adjusting the terms of reference for Local Government Pension Schemes (so they consider regional development as an investment factor).
Baroness Chapman of Darlington (Lab)
My Lords, we are pleased to bring back Amendment 104. I am grateful to the noble Baronesses, Lady Bowles of Berkhamsted and Lady Altmann, for signing the amendment.
Since Committee, and following the suggestion from the noble Lady Bowles, we have incorporated an additional consultee in the form of the Pension Protection Fund. If we are looking at different and better ways to utilise pension funds, it is only right that that body be formally involved in the process. It is important to note that the amendment would not directly lead to changes in how defined contribution and defined benefit pension funds are invested; it merely seeks consideration via a formal review of a number of potential ways forward.
I draw colleagues’ attention to subsection (2) of the proposed new clause in the amendment, which puts
“the safeness and soundness of pension funds”
front and centre. While no investment fund is risk-free, this is about identifying how funds could be used to support high-growth firms and long-term assets, including green infrastructure.
In 2019, the British Business Bank and Oliver Wyman published research which found that the UK’s defined contribution firms are not investing in fast-growing and innovating companies. It is a problem because the UK is home to incredible tech start-ups and life science companies. They are Great British success stories, but their growth potential is sometimes limited by a lack of access to finance. The research found that retirement savings could be increased by a significant amount with just a modest investment in these firms. For example, a 22 year-old whose defined contribution scheme made 5% of investments in the UK’s fastest-growing companies could see an increase in their retirement pot of 7% to 12%.
Having amended the Bill to include a nature target, we must also consider how pension funds can do their bit to help the environment. This review would look at investments to the types of green infrastructure which will fuel our future economic growth and help deliver the transition to a net-zero economy. The Government recently included nature-based solutions as part of the definition of infrastructure in the UK Infrastructure Bank Act. If investment in nature is a suitable purpose for a Government-backed investment bank, we should harness the power of pension funds as well. This review would be timely, with the recent collapse of Silicon Valley Bank and its UK subsidiary and the demise of Credit Suisse sparking panic in the financial markets and hitting the value of pension funds.
The world is changing. More people shop online and work from home, meaning that investment in things like shopping centres and office blocks no longer produces the returns it did in the past. If done properly, small changes to how pensions are invested could have a significant impact on UK economic growth and, more importantly, a significant impact for the scheme members themselves. I beg to move.
Lord Naseby (Con)
I declare an interest as trustee of the Parliamentary Contributory Pension Fund. As a trustee, but also on my own behalf, I have no concern about pension funds being incentivised. We are there, as trustees, to look after our pensions in the future. Incentives are one thing, but, as a trustee, I am not sure I want to be dictated to and told I have to consider high-growth funds in particular.
When I look at proposals from our fund managers, I look at the return expected over a period of time. Obviously, we are long-term investors, and it may be that a firm has the potential to be one that produces excellent returns. I do not think, on the whole, that pension funds are there to help smaller and newly created firms grow. On the other hand, I can say quite honestly that proposals are in front of us in relation to infrastructure which have considerable merit. I suspect that positive decisions will follow in due course. I ask my noble friend and the Opposition to bear that in mind.
I will also comment on the proposed new subsection (3) on consultation. In addition to the parties listed, I would like to see the trade associations of, for instance, investment trusts, the associations of fund managers and a number of other organisations in the financial world which group together. If we are going to help our country in terms of growth, consultation should be with those at the coalface and those varying funds, et cetera.
I have reservations. I understand the driving force behind the amendment, but it does need some refinement before it is considered as a possible way forward.
Baroness Hayman (CB)
My Lords, I support this amendment, which fits very well alongside the discussions we had on the fiduciary duty of pension fund trustees. I will not push those amendments to a vote, but the work being done, as the Minister described, on having a clear and close look at the fiduciary duty for pension fund trustees would complement this amendment. I do not think it is threatening in any way to pension fund trustees; it is very carefully framed and asks the Treasury to publish a review on incentivisation. It is perfectly possible, in the words of the noble Lord, Lord Naseby, to fine-tune it after the review—that is the purpose of the consultation.
This amendment is worth while. The noble Baroness, Lady Chapman, referred to the UK Infrastructure Bank and its recognition of nature-based projects and types of infrastructure as assets that could be invested in. I was involved in that amendment, on which the Minister, in her usual helpful style, listened and took action. I hope that she will similarly recognise the virtues of this proposed new clause and I support the amendment.
Baroness Bowles of Berkhamsted (LD)
My Lords, I added my name to this amendment and suggested the inclusion of the Pension Protection Fund, partly because there is already quite a big conversation around how we will incentivise investment and be prepared to take a bit more risk, because the UK seems to have become very risk-averse. There has been regulatory encouragement, if you like, for pension funds to be somewhat risk-averse; I am not sure it is actually risk- averse to end up in a situation where you invest everything in sovereign bonds and have a systemic risk but, setting that conversation aside, gilts have always been regarded as a very steady investment. It has perhaps been forgotten how to invest for reward.
The fiduciary duty is important and we need to look at it, because there are implications if you suggest in any way to trustees what they ought to do. Of course, that does not mean that you have to take zero risk as a trustee—you must understand the risk and reward dynamic—but, if we move through legislative steps, we would have to add to the list of consultees a whole load of lawyers to help sort out how we deal with the common-law fiduciary duty. Overall, this is a good amendment, making the Government part of this conversation and drawing in more consultation so that more people can input with common purpose, instead of there being lots of consultations all over the place.
Of course, there is work being done by parliamentary committees and I hope notice will be taken of those, and maybe care taken, looking at proposed new subsection (4)(b) and
“adjusting the terms of reference for DB Local Government Pension Schemes (LGPS) funds to consider regional development as an investment factor”.
To some extent they can do that already, especially in the amounts that are retained where the local authorities are investing directly rather than through the pooled funds—and I have to declare an interest here in potentially listing a fund.
Lord Eatwell (Lab)
My Lords, this is not just a good amendment, it is a very important and timely one. Noble Lords will recall that after the death of Robert Maxwell and the exposure of the way in which he had looted the Mirror Group pension funds, the Government introduced a new pensions structure to protect defined benefits pensions, as well as new accounting standards which needed to be obeyed by pension funds. The effect of this protective barrier placed around defined benefits funds has been that they have adopted extremely conservative investment strategies and the return on investments has correspondingly been extremely low compared with what could be achieved by quite modest amendments of investment strategy.
These issues are now a matter of widespread discussion where the unfortunate unintended consequences of the post-Maxwell legislation have been revealed. It is necessary quite rapidly to take account of the discussions, to assess the performance of pension funds since the last significant pensions legislation, and to come up with sensible proposals for reform. That is why this amendment is crucial, for both the pensions funds industry and the wider economy. I encourage the Minister to support this amendment because by doing so the Government would make a major contribution to the future prosperity of a whole raft of pensioners in this country and to the success of pension funds as investment vehicles within the UK economy.
Lord Blackwell (Con)
My Lords, I am concerned that, while seemingly innocuous, this amendment might turn out to be the thin end of the wedge of government intervention in pension investment. Clearly, the obligation on pension trustees should be to do their best to get the right returns for their investors. Once we start incentivising trustees to take decisions based on incentives offered to them, that raises the question of who then bears the consequences and the responsibility if those investments turn out in the long term not to be the right thing for their pensioners to be invested in.
I do not dispute the point that pension fund investments have not been optimal in the past, but to my mind that is to do with regulatory restrictions that have been placed on pension funds and the requirements to meet those restrictions. I think there is a case to look at the regulations around pension funds that restrict their investment choices and to enable them to invest in a wider set of assets, but I do not think the right way to do that is to start proposing incentives that would turn into the Government mandating the way that pension funds should be invested.
Lord Davies of Brixton (Lab)
My Lords, I support the amendment. I still think of myself as a relatively new Member of the House, so it is useful to remind the House of my lifetime spent working in the pensions industry, broadly in support of scheme members. I have been a scheme trustee, I have chaired the Greater London Council investment panel and I have advised trustees of pension schemes as the scheme actuary. I am just stating my expertise here.
I support the amendment because I think a review is required. I take on board the remarks about the thin end of the wedge, but unless we have the review those concerns cannot be addressed. As the noble Baroness, Lady Bowles, said, there is now a big conversation about using pension scheme money to promote the British economy. There is actually a long history of that sort of proposal going back over many years, but it seems to have reached a crescendo over the last year or so.
It is essential that we have a review. What is also essential, of course, is that the review is undertaken by those who know what they are talking about, but that has not necessarily been true about all the comments made so far. For example, I draw the attention of the House to the recent useful report produced by the Pensions and Lifetime Savings Association—not a body that I consistently agree with—on supporting pension investment in UK growth and thinking up quicker and simpler ways to promote pension fund investment in our economy.
I was going to raise two issues. One has already been explained clearly by my noble friend Lord Eatwell: the funding standards that have been established work against the principles that I am sure we all support. Another problem that we have is the Conservative Government’s introduction of freedom and choice. It is difficult to oppose freedom and choice but, when you come to pensions, which are long-term arrangements depending on long-term investment, giving people freedom of choice weakens the very basis upon which they are being organised. It is all very well saying to pension funds, “You’ve got to invest in infrastructure”, but if the members of that scheme have the right to pull their money out at any time, it is very difficult to take the long-term view. That is a fundamental incoherence behind the so-called policy of freedom and choice. Those issues need to be addressed in the review.
I also hope that the list of consultees for the review is not a complete list; to the extent that it is possible to consult the scheme members, they should be consulted as well. I also hope that the issues can go somewhat broader than those listed in the amendment.
In general terms, a review is needed, and I hope it will lead to the objective being clearly set out of promoting the UK economy.
Baroness Altmann (Con)
My Lords, I fully support and have added my name to this amendment. It is a pleasure to follow the noble Lord, Lord Davies. We both go back a long way in the pensions industry. My entire career has been in pensions—examining occupational pension schemes as an academic, then managing occupational pension investments in the City, then advising schemes and Governments. I have also been a trustee on investment committees for pension schemes.
I have to say that the current position that members of pension schemes find themselves in—both members of defined benefit schemes and members of too-often-forgotten defined contribution schemes—has not been positive in terms of the experience of the 2022 markets. As we have heard, trustees and managers of pension schemes have been encouraged to believe that the right way in which to invest a pension fund is in supposedly low-risk—which actually also means relatively low-return —investments, rather than in the traditional and older-fashioned way of managing schemes that persisted until the noughties, which was to try and maximise returns.
We have now moved to a position whereby we were supposed to be minimising risk, but I argue that that entire movement away from supporting the British economy and away from supporting UK equities and UK growth assets has been underpinned and misled somewhat by quantitative easing. The Bank of England’s policy, which effectively offered a natural large buyer that underwrote and underpinned the government bond market, perhaps led people to believe that that was the best or safest way in which to invest pension funds. That was partly because the long-term value of the liabilities, as well as their present value, is discounted and measured as of today by using the gilt yield or bond yield measure. In corporate reporting it is double-A corporates; in actuarial valuations it is typically gilt yields.
In 2022, conventional gilts lost 20% and index-linked gilts 30% of their value. The FTSE 100 rose a little. Yes, smaller companies did not do so well, but the idea that pension schemes were investing in a low-risk manner was actually confounded last year, and I would argue that, as we move into a post-QE world and as we have recognised and I have been warning since 2011, or even earlier than that, the policy of quantitative easing is a significant danger for pension scheme investments and members.
We must recognise that we do not fully understand what investment risk means any more. The capital asset pricing model is based fundamentally on the idea that gilt yields are the lowest-risk assets and all assets are more risky—even if they offer more returns, potentially they are more risky—and may need to be considered with a little more circumspection.
That leads on to the idea that, if we do not quite know whether gilts and fixed income are indeed low risk in the way that we thought they were and they have been in the past—because central banks are going to need to offload at some point and are certainly no longer underpinning the markets—diversifying investments and supporting the domestic economy in the way that this review would be investigating must come into the public debate.
Baroness Kramer (LD)
My Lords, I speak from these Benches on behalf of my party, as a group of realists. The current Government, and any future Government, look at the pools of money in pension funds, whether defined contribution or defined benefit, and see them as a tempting source of investment in the area of scale up and infrastructure, where we are desperate to find additional investment. I point out that pension funds are not disadvantaged in investing in investment-grade assets in any way. It is in investing in sub-investment grade assets where they carry a burden under the current arrangements.
These investments in scale up and infrastructure are, by definition, high risk and illiquid, and we have to face up to that. Some 40% of scale-ups fail and infrastructure projects run notoriously late, and well over budget. I challenge people to come up with a very long list of infrastructure projects that have come in on time and on budget. It is hard to identify virtually any project that meets that test. It means that pension obligations must be fully protected if we are to open up these funds to be able to invest in a far more illiquid and high-risk way.
That is why I am comfortable with this amendment, because proposed new subsection (2) insists:
“The review must consider how best to do this while protecting the safeness and soundness of pension funds”.
I was also pleased that the noble Baroness, Lady Chapman, introduced the additional consultee identified by my noble friend Baroness Bowles—the Pension Protection Fund—in this process, because that is clearly a mechanism which could provide the kind of protection for pensioners who may be exposed if we change the risk profile of pension fund investment.
I insist that the first responsibility of a pension fund is to pay out its obligations on time and in full. I suspect that everyone who is invested in a pension believes that that is, and must continue to be, true. Often when we discuss these issues the Canadian pensions funds are cited because they do indeed invest in illiquid and high-risk assets, but anyone reading the credit rating agencies discussing those pension funds will find that the pension funds are pretty much backstopped by the Canadian Government.
What I hope will come out of this review process are new opportunities to fund our economic growth but also protections commensurate—it may not be the same strategy but through some mechanism—with those that the Canadians have put in place, to make sure that our pensioners will still be paid on time and in full. If that no longer remains true, we end up in a very serious pickle but, having read through this set of amendments, I think they get us to the right place to be able to achieve that.
Baroness Penn (Con)
My Lords, the Government welcome the further discussions that this debate has given us the opportunity to have on the issue of unlocking pensions capital for long-term, productive investment where it is in the best interests of pension scheme members. Indeed, as I set out in Committee, the Government have a wide range of work under way to deliver the objectives set out by this review. While I was a little disappointed not to hear those initiatives referenced in this debate—apart from, perhaps, by my noble friend Lady Altmann—I will give it another go and set out for the House the work that is already under way in this area.
As previously set out, high-growth sectors developing cutting-edge technologies need access to finance to start, scale and stay in the UK. The Government are clear that unlocking pension fund investment into the UK’s most innovative firms will help develop the next generation of globally competitive companies in the UK.
The Chancellor set out a number of initial measures in the Budget to signal a clear ambition in this area. These included: increasing support for the UK’s most innovative companies by extending the British Patient Capital programme by a further 10 years until 2033-34 and increasing its focus on R&D-intensive industries, providing at least £3 billion in investment in the UK’s key high-growth sectors, including life sciences, green industries and deep tech; spurring the creation of new vehicles for investment into science and tech companies, tailored to the needs of UK defined contribution pension schemes, by inviting industry to provide feedback on the design of a new long-term investment for technology and science initiative—noble Lords may have seen that the Government launched the LIFTS call for evidence on 26 May; and leading by example by pursuing accelerated transfer of the £364 billion Local Government Pension Scheme assets into pools to support increased investment in innovative companies and other productive assets. The Government will come forward shortly with a consultation on this issue that will challenge the Local Government Pension Scheme in England and Wales to move further and faster on consolidating assets.
At Budget, the Chancellor committed the Government to undertaking further work with industry and regulators to bring forward an ambitious package of measures in the autumn. I reassure the noble Baroness opposite that this package aims to incentivise pension funds to invest in high-growth firms, and the Government will, of course, seek to ensure that the safety and soundness of pension funds are protected in taking this work forward, as in proposed new subsection (2). Savers’ interests will be central to any future government measures, as they have been to past ones. The Government want to see higher returns for pension holders in the context of strong regulatory safeguards.
In addition, the Government are already working with a wide range of interested stakeholders, including the DWP, the DBT, the Pensions Regulator, the FCA, the PRA and the Pension Protection Fund, as well as pension trustees and relevant financial services stake- holders. Proposed new subsection (3) in the amendment seeks to set out this list in legislation. I reassure the House that this is not necessary as the Treasury is actively engaging with them already, as appropriate. The Government would also be happy to engage with other interested stakeholders, as raised by my noble friend Lord Naseby and the noble Lord, Lord Davies of Brixton.
I note the specific areas of review outlined in subsection (4) of the proposed new clause, and I reassure noble Lords that the Government are considering all these issues as part of their work. In particular, proposed new subsection (4)(a) references the existing value-for-money framework. As I set out in Grand Committee, one area of focus for the Government’s work in this area is consolidation. To accelerate this, the Government have been working with the Financial Conduct Authority and the Pensions Regulator on a proposed new value-for-money framework setting required metrics and standards in key areas such as investment performance, costs and charges, and the quality of service that schemes must meet.
As part of this new framework, if these metrics and standards were not met, the Department for Work and Pensions has proposed giving the Pensions Regulator powers to take direct action to wind up consistently underperforming schemes. A consultation took place earlier this year, and the Government plan to set out next steps before the summer.
Turning to proposed new subsection (4)(b), I have already set out the forthcoming consultation to support increased investment in innovative companies and other productive assets by the Local Government Pension Scheme. Noble Lords may also be aware that the levelling up White Paper in 2022 included a commitment to invest 5% in levelling up. This consultation will go into more detail on how that will be implemented.
I turn to proposed new subsection (4)(c). The Government are committed to delivering high-quality infrastructure to boost growth across the country. We heard references in the debate to the UK Infrastructure Bank, which we will work with. The Treasury has provided it with £22 billion of capital. Since its establishment in 2021, it has done 15 deals, invested £1.4 billion and unlocked more than £6 billion in private capital. Furthermore, we have published our green finance strategy and Powering Up Britain, setting out the mechanisms by which the Government are mobilising private investment in the UK green economy and green infrastructure.
The Government wholeheartedly share the ambition of the amendment to see more pension schemes investing effectively in the UK’s high-growth companies for the benefit of the economy and pension savers. We agree with noble Lords on the importance of this issue. Where we disagree with noble Lords is on how crucial this amendment is to delivering it. Indeed, the Government are currently developing policies to meet these objectives, so legislating a review would pre-empt the outcome and might delay the speed at which the Government can make the changes necessary to incentivise investment in high-growth companies. Therefore, given all the work under way, I hope the noble Baroness feels able to withdraw her amendment.
Baroness Chapman of Darlington (Lab)
My Lords, I am grateful to everyone who has taken part in this debate. The Minister’s response was not awful. It was encouraging to hear some of the things that she had to say, and we recognise the work the Government are leading on this issue. However, the benefit of taking the approach outlined in the amendment, notwithstanding some of the comments that have been made about it, is that it would give focus and prominence to this issue and would bring together some of the threads that the Minister referred to. It is an important piece of work that, given everything the Minister said, ought to be not too onerous and is something that the Government ought to be a little more enthusiastic about starting—because it needs to start. This is something we would like to see proceed quickly. I think there has been sufficient support for the amendment from all sides of the House, and I wish to test the opinion of the House.
Baroness Kramer
“Protection of banking reform: ring-fencing and SMCR
(1) Parts 1 (ring-fencing) and 4 (conduct of persons working in financial services sector) of the Financial Services (Banking Reform) Act 2013 and amendments made by them to FSMA 2000 may not be modified or revoked except by an Act of Parliament.(2) No change or revocation may be made by secondary legislation, including by the PRA and FCA, to—(a) the requirements for ring-fenced bodies, and(b) the senior managers and certification regime, or other rules for the conduct of persons working in the financial services sector,that departs from the principles set out in the final report of the Parliamentary Commission on Banking Standards.(3) For the avoidance of doubt, subsection (2) includes secondary legislation that would allow ring-fenced bodies permanently to carry out excluded activities.(4) This section may not be amended except by an Act of Parliament.”Member’s explanatory statement
This amendment would prevent the Government from making substantive changes to the policy on ring-fencing and SMCR by statutory instrument, and would prevent policy from being amended in a way that departs from the report from the Parliamentary Commission on Banking Standards.
Baroness Kramer (LD)
My Lords, in Committee the Minister reassured the House that the principles of ring-fencing and the senior managers regime which protect our banking system could be changed only by primary legislation. Then came the Silicon Valley Bank UK crisis and we discovered that breaking down the ring-fence in particular can be done by simply using statutory instruments and without the full engagement of Parliament. My Amendment 106, which is written from the two tabled in Committee, is intended to reassert the fundamental principle that change has to be driven by primary legislation and it removes the loophole which we experienced with Silicon Valley Bank.
I shall explain very briefly the Silicon Valley Bank issue. As part of their agreement with HSBC to acquire SVB UK, the Government permitted HSBC to transfer funds from its ring-fenced retail bank into SVB UK, which is outside the ring-fence. The transferred funds can now be used for activities which the HSBC retail bank would be prohibited from, including high-risk and speculative transactions.
If this was a temporary state of affairs, I could understand this awkward response to an emergency, but on Thursday the Minister will bring a statutory instrument to this House to make that breach of the ring-fence for HSBC permanent and notably with no limits on the amount of funds that can be transferred from ring-fenced to unring-fenced. Unless I misunderstand the SI, there are no conditions on the use of those funds, even though last month the Minister seemed to imply that we could expect conditions or limits. In effect, the ring-fence is now fully breached for HSBC. Its rival banks, not surprisingly, expect further government action soon to give them exemptions in order to level the playing field. We have in effect destroyed the ring- fence.
Ring-fencing and the SMCR, I would argue, are vital protections against another 2007 banking crisis. They limit the incentives and mechanisms for banks to mingle the culture and capital behind retail banking with the very different and high-risk world of investment banking, with the SMCR establishing individual responsibility for bad or abusive management. The Government have posited in discussion that these protections can be safely weakened because banks now have resolution plans to protect the taxpayer from a bank failure. But that presumption, frankly, has been blown out of the water. Both the Swiss and the US regulators in the last few months facing bank failures—one Credit Suisse and the other the three regional banks in the US—decided that, in the circumstances, resolution would be far more damaging to their economies than seeking taxpayer support to extract those banks from their predicaments and failure.
We have had an illustration that makes it clear that the resolution plans that we have in place for banks may work in certain limited circumstances but very often, particularly when there is high risk in the economy, may indeed not work and are more damaging to use than to discard. In that situation, it is absolutely crucial that we return to the protections provided by ring-fencing and the SMCR.
That is my view. If the Government disagree with me and believe this is time for weakening the ring-fence or diluting the SMCR, I argue they have to come to Parliament and do it under primary legislation, not through the backdoor that we experienced over the last couple of months through the mechanism of the purchase agreement for Silicon Valley Bank UK.
I am not asking this House to make the decision on whether we keep ring-fencing or the SMCR. What I am saying is that it is this House and the other place that need to actively understand and make the determination if that change is to happen. It is fundamental to the financial stability of our country and therefore that is the way this issue would be addressed. My Amendment 106 combines into one the two amendments from Committee and adds a clause to require primary legislation for any permanent exclusions from ring-fencing rules, closing the loophole used by the Government and reasserting the original intent of the law. I beg to move.
The Archbishop of Canterbury
My Lords, I have joined the noble Baroness in supporting her Amendment 106, as I did her two amendments on this topic in Committee. This amendment seeks to prevent change which goes against the two years of work of the Parliamentary Commission on Banking Standards, which looked in detail at both issues and produced its final report, Changing Banking for Good, 10 years ago. I declare an interest: I sat on the commission along with the noble Baroness.
As I said in Committee on 21 March, the underlying motivation of this amendment is to ask us not to forget the hard lessons learned after the 2008-09 financial crash, for which the whole country, especially the poorest, paid, then and to this day. Recent events show that the memory in the markets is strong, even if it is not in the Government. Alarm spreads easily.
Both the ring-fence and the SMCR were designed to better align the incentives and risk calculations of the financial sector to avoid the privatisation of profits and the socialisation of losses, and to force the financial sector to be conscious of the cost its action has, not only on itself but on the wider economy. The SMCR enables us to make sure that those individuals who are making decisions which have significant consequences are held accountable. It goes some way to bringing individual incentives in line with high collective standards.
The electrification of the ring-fence, which the Parliamentary Commission on Banking Standards recommended, was designed to deter banks from the inevitable temptation to test it. The commission’s first report said:
“any ring-fence risks being tested and eroded over time”
and the new framework at that time
“will need to be sufficiently robust and durable to withstand the pressures of a future banking cycle”.
SVB showed that the concept of a non-systemic bank is a very dubious one, as even banks with good resolution plans, and of very moderate size in the global context and systemically, create a sense of contagious alarm. Banking, as we know—and some noble Lords know very well indeed—is not based on logic but on confidence. There is logic there somewhere, but the confidence is that the bank is secure, despite the fact that its equity is a very small part of its total balance sheet. The contagion caused by the failure of SVB is not yet over among US regional banks, which continue to fail or need rescuing. That moment may come, but let us wait and see.
The Swiss taxpayer is on the hook for Credit Suisse and the US taxpayer for several regional banks that were meant to be non-systemic. Not to learn from the past or the present is, frankly, reckless. Reform may come—there are good arguments for it—but it should not come outside a proper parliamentary process of primary legislation. People and sectors can have short memories. I urge the Government to accept this amendment, which would go some way to making sure that we remember the hard and bitter lessons learned and do not repeat the same mistakes.
Baroness Bennett of Manor Castle (GP)
I will speak very briefly to offer Green support for the amendment in the name of the noble Baroness, Lady Kramer, and the most reverend Primate. The amendment, in a way, is a smaller and lighter version of my attempt to strike out the competition clause, on setting a competitiveness objective, which has sadly remained in the Bill.
In November last year, City Minister Andrew Griffith told the Financial Times:
“The overall thrust of things is to allow more risk … you shouldn’t be risk”
averse;
“we just need to manage that in an appropriate way”.
He went on to say that the aim of reducing ring-fencing was
“to release some of that trapped capital over time”.
I acknowledge that the Minister said that before the collapse of SVB and Credit Suisse, and the other crunches in the American banking system.
In an April piece in the Financial Times, Martin Wolf said:
“A shock like this should make mindless deregulation less appealing to politicians”.
As has been clearly outlined already, the amendment does not actually make anything happen; it just ensures parliamentary oversight. When we get to the dinner break business, my noble friend will seek to ensure that parliamentary oversight is included there. Surely, this is what democracy is supposed to be about.
Lord Davies of Brixton (Lab)
My Lords, I support the amendment. We will return to these issues on Thursday, when we discuss the regulations in Grand Committee. However, it is worth mentioning to the House the clash today between this Bill and a meeting of the Economic Affairs Committee, of which the noble Baroness, Lady Kramer, and I are members. By chance, the committee was interviewing the Governor of the Bank of England. The issue of this arrangement arose, and the governor was quizzed on these very issues. It will be useful on Thursday to explore further why and how this action was taken. The governor provided a justification, but, in the light of his remarks, it will be worth while exploring these issues in more detail when we get the regulations.
Viscount Trenchard (Con)
My Lords, the noble Baroness, Lady Kramer, and the most reverend Primate have retabled as a single amendment—Amendment 106 —the two amendments that were debated in Grand Committee: Amendment 241C on ring-fencing, and Amendment 241D on the senior managers and certification regime.
As my noble friend Lady Noakes said during that debate, these amendments are trying to set in stone for all time the conclusions of the report of the Parliamentary Commission on Banking Standards. Times change, and I cannot support this amendment because it introduces an inappropriate degree of rigidity.
As my noble friend also pointed out, the lesson of the HSBC and Silicon Valley Bank episode was that the ring-fencing rules were not, after all, considered inviolable. It was necessary to provide HSBC with special statutory exemptions from the ring-fencing rules to enable it to acquire Silicon Valley Bank. That exemption has brought permanent changes to the ring-fencing regime for HSBC which affect it alone. Can my noble friend say whether that means it has a permanent competitive advantage over rival ring-fenced banks in the UK?
In any case, I rather doubt whether the introduction of ring-fencing has reduced the risks to which bank customers’ deposits are exposed. I disagree that it is therefore important to make it very difficult to weaken the ring-fencing regulations in any way. As I said in Committee, I worked for Kleinwort Benson for 23 years, for a further 12 years for Robert Fleming and then for Mizuho. All three banks operated both commercial and investment banking businesses. Internal Chinese walls between departments made it quite impossible for customers’ commercial banking deposits to be diverted to risky investment banking activities. As I said in Grand Committee, there is no positive correlation between the two cash flows of retail and investment banking. It follows that universal banks are in fact gaining diversification benefits. There is little global evidence that splitting up the banks has made them less likely to get into trouble.
Following the Lehman shock, is it not interesting that the US Government did not go for the reintroduction of a kind of Glass-Steagall Act? I am not convinced that ring-fencing is a good thing, and in general I am opposed to market distortions of this kind, which actually make the consumer less safe rather than safer. Ring-fencing also makes it harder for smaller banks to grow, because they must compete for a small pool of permitted assets against the capital of the larger banks. Will the Government conduct a review of the effectiveness of ring-fencing?
As for the senior managers and certification regime, I am sceptical as to whether it has been effective, because there is no hard evidence that it has been used as the stick that was originally intended. Most well-run banks operate in a collegiate manner, and I think it rather odd to attempt to attribute personal responsibility to managers and directors of banks for the decisions and actions of those banks, beyond the responsibilities that the directors carry in any event.
The SMCR has especially inconvenienced foreign banks operating in London. As an example, I refer to the Japanese megabanks. It used to be their practice to assign a very senior executive to London to take responsibility for all the bank’s activities in the UK and in most cases the whole EMIR region. Often, this might be the executive’s last major management position before retirement, and would typically be for two to three years leading up to his retirement date. Such executives have typically worked for 40 years or more for that bank and have managed regulated financial businesses in Japan for many years. However, the FCA has consistently been extraordinarily slow in approving those executives under the SMCR.
Therefore, the Japanese banks have given up on this strategy and feel compelled to appoint as head of their UK and EMIR operations not the person most appropriate for the job, but the most senior person who has already been working in London for three years or so, merely in order to meet the criteria of the SMCR regime. This has caused considerable inconvenience, because it is unreasonable to send a trusted senior executive overseas for five or six years in the last years of his active career, rather than a more reasonable stretch of two to three years. I know that the SMCR is much resented by Japanese and other foreign banks and I ask my noble friend if she will agree to conduct a review of how it is being implemented by the FCA.
Lord Eatwell (Lab)
My Lords, I must say that, listening to the noble Viscount, Lord Trenchard, just now, I think he has given strong arguments in favour of this amendment—strong because what the amendment asks for is accountability to Parliament on the performance of the ring-fence and the SMCR. If that accountability existed, the noble Viscount would have the opportunity to present his views in a framework, which might then have greater effect than, I am afraid, his speech had without such a mechanism.
Lord Livermore (Lab)
My Lords, we fully support the steps taken by the Treasury, the Bank and the regulators in relation to Silicon Valley Bank UK. The system worked at pace to ensure SVB UK could continue its operations. However, while we endorse the outcomes, legitimate questions have been asked about the ring-fencing exemption granted to HSBC and the potential long-term implications.
The arguments have been excellently outlined by the noble Baroness, Lady Kramer, the most reverend Primate the Archbishop of Canterbury and my noble friend Lord Eatwell, and I will not repeat them now. The financial system has experienced much volatility in recent months, so preventing major changes to ring- fencing being made by secondary legislation is a sensible step and one that we believe the Commons ought to consider before this Bill goes on to the statute book.
Baroness Penn (Con)
My Lords, it has been over 10 years since the Independent Commission on Banking recommended important structural changes, including the introduction of ring-fencing for the largest UK banks, and the Parliamentary Commission on Banking Standards recommended the introduction of the senior managers and certification regime, or SMCR, to embed a culture of greater accountability and personal responsibility in banking. I pay tribute to the important work of these commissions and their lasting legacy in improving the safety and soundness of the UK’s financial system. Amendment 106 from the noble Baroness, Lady Kramer, covers the ring-fencing and SMCR reforms.
In response to my noble friend Lord Trenchard, the legislation that introduced the ring-fencing regime required the Treasury to appoint an independent panel to review the regime after it had been in operation for two years. That independent review was chaired by Sir Keith Skeoch and concluded in March 2022. The review noted that the financial regulatory landscape has changed significantly since the last financial crisis. UK banks are much better capitalised and a bank resolution regime has been introduced to ensure that bank failures can in future be managed in an orderly way, minimising risks to depositors and public funds.
In the light of these considerations, the independent review concluded that changes could be made in the short term to improve the functionality of the ring-fencing regime while maintaining financial stability safeguards. In December, as part of the Edinburgh reforms, the Chancellor announced a series of changes to the ring-fencing regime that broadly follow the recommendations made by the independent review. The Treasury will consult later this year on those near-term reforms. The panel also recommended that, over the longer term, the Government should review the practicalities of aligning the ring-fencing and resolution regimes. In response, the Government published a call for evidence in March. This closed at the beginning of May and the Government are in the process of considering responses.
The noble Baroness, Lady Kramer, and other noble Lords referenced the resolution of Silicon Valley Bank UK, which was sold to HSBC on Monday 13 March. The Government and the Bank of England acted swiftly to facilitate the sale of SVB UK to HSBC after determining that action was necessary to protect depositors and taxpayers and to ensure that the UK’s world-leading tech sector could continue to thrive. To facilitate the sale, the Government made modifications to the ring-fencing regime that apply to HSBC only in relation to its acquisition of SVB UK.
It is critical that the Government have the necessary powers to act decisively to protect financial stability, depositors and taxpayers. The power under the Banking Act 2009 enables the Treasury to amend the law in resolution scenarios. Parliament gave the Treasury this power recognising the exceptional circumstances that can arise. However, I say to the noble Baroness that the changes made to the ring-fencing requirements are specifically in relation to the acquisition of SVB UK and should not be viewed as an indication of the future direction of government policy on ring-fencing. The Chancellor has been clear that, in taking any reforms forward, the Government will learn lessons from the crisis and will not undermine financial stability.
The core features of ring-fencing are set out in primary legislation, which generally may be amended only by primary legislation, so the Government are already constrained in one of the ways that this amendment seeks to ensure. In passing that legislation, Parliament delegated certain detailed elements of the regime to the Government to deliver through secondary legislation, given its technical nature and to allow it to evolve over time, where appropriate. Parliament also included clear statutory tests and objectives within the framework, which the Treasury and the PRA must satisfy when making changes to the regime. These statutory tests continue to reflect the underlying objectives and purposes of the regime. The Government are of the view that they remain appropriate and that no further constraints are necessary.
Turning to the SMCR, I can confirm to the House once more that the framework of the SMCR is set out in primary legislation, so it is already the case that significant amendments can be made only via primary legislation.
Let me also reassure the House that the Government continue to recognise the contribution of the SMCR in helping to drive improvements in culture and standards. The principles of accountability, clarity and senior responsibility that are emphasised by the PCBS report were reflected in the SMCR. We should take confidence from the findings of separate reports by UK Finance and the PRA, which both show that these principles are now more widely embedded in financial services than before the introduction of the regime.
The Economic Secretary made it clear to the Treasury Select Committee on 10 January that the purpose of the review was to seek views on the most effective ways in which the regime can deliver its core objectives. It is important to review significant regulation from time to time to ensure that rules remain relevant, effective in meeting their aims and proportionate to those aims. The Government are grateful to those who have submitted responses to the SMCR call for evidence. This information will help the Government, alongside the regulators, build a proper evidence base for identifying what, if any, reforms to the regime should be taken forward.
I hope that I have sufficiently reassured noble Lords that the Government remain committed to high standards of regulation, and to the important reforms introduced following the global financial crisis. Therefore, I ask the noble Lady, Baroness Kramer, to withdraw her amendment.
Baroness Kramer (LD)
I thank the Minister, but she has essentially repeated the speech she gave in Committee. At the time, I took her assurances at face value that primary legislation would be necessary to make a fundamental change to the structure of the ring-fence. I was therefore frankly shocked when, within a matter of days, the Government took a different point of view in the acquisition of Silicon Valley Bank UK by HSBC. There is no reason why HSBC should have used its ring-fenced arm to make the purchase of SVB; it chose to do so because it got, as a consequence, this opportunity to take that ring-fenced money and put in into non-ring-fenced activities, with no constraints whatever in terms of amount or activity.
The Government are bringing forward another statutory instrument to make that change permanent for HSBC. It is unconscionable that our largest bank should have a competitive advantage like that and other banks not be given it. I am extremely concerned about the way in which statutory instruments are being used to undermine the principle that changing the principles should be only by primary legislation. Therefore, I wish to test the opinion of the House.
Lord Sharkey
“Interest rates for mortgage prisoners
(1) The Financial Services and Markets Act 2000 is amended as follows.(2) After section 137FD insert—“137FE FCA general rules: interest rate for mortgage prisoners(1) The FCA must make general rules requiring authorised persons involved in regulated mortgage lending and regulated mortgage administration to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and to ensure that mortgage prisoners can access new fixed interest rate deals at an interest rate equal to or lower than an interest rate specified by the FCA.(2) In subsection (1)—“mortgage prisoner” means a consumer who cannot switch to a new mortgage deal (with a new lender or with their existing lender) and includes—(a) all 195,000 mortgages identified in CP576 Mortgage Prisoners Review, and(b) those who have a regulated mortgage contract with one of the following types of firms—(i) inactive lenders: firms authorised for mortgage lending that are no longer lending;(ii) unregulated entities: firms not authorised for mortgage lending and which contract with a regulated firm to undertake the regulated activity of mortgage administration; or(iii) closed mortgage books within larger financial groups: a closed mortgage book that is within a larger financial group but in a different entity to an active lender;“new fixed interest rate deals” means the ability for the consumer to fix the rate of interest payable on a regulated mortgage contract for periods of 2 years and 5 years with their existing lender;“Standard Variable Rate” means the reversion rate which is a variable rate of interest charged under the regulated mortgage contract after the end of any initial introductory deal.(3) The general rules made under subsection (1) must set the level of the cap on the Standard Variable Rate at a level no more than 2 percentage points above the Bank of England base rate.(4) The general rules made under subsection (1) should make new fixed interest rate deals available to mortgage prisoners who meet criteria determined by the FCA.(5) When specifying the criteria which mortgage prisoners need to meet to access the new fixed interest rate deals required by subsection (1) the FCA should take into account the criteria used by active lenders to enable their existing customers to access product transfers and ensure that similar criteria apply in the rules required by subsection (1).(6) When specifying the interest rates for new fixed interest rate deals required by subsection (1) the FCA should specify rates for a range of Loan-To-Value (LTV) ratios taking into account the average 2-year and 5-year fixed rates available to existing customers of active lenders through product transfers.(7) The FCA must ensure any rules that it is required to make as a result of subsection (1) are made not later than six months after this Act is passed.””Member’s explanatory statement
This new Clause would require the FCA to introduce a cap on the Standard Variable Rates charged to mortgage prisoners and ensure their access to fixed rate interest deals.
Lord Sharkey (LD)
My Lords, I declare an interest as co-chair of the APPG on mortgage prisoners and I thank the noble Viscount, Lord Trenchard, for adding his name to this amendment.
The amendment is similar to the one we debated in Committee: the only difference is that it gives the FCA the power to determine which mortgage prisoners may qualify for new fixed interest rate deals. The Committee amendment was more prescriptive. Its chief purpose was to allow discussion of the new Martin Lewis-funded LSE report on resolving the plight of mortgage prisoners. I said then that we would bring back the amendment on Report if no discernible progress had been made. No discernible progress has been made. The LSE report contains detailed and costed proposals and was published on 8 March this year. HMT officials were present at the launch and copies of the report were made available. When we debated the amendment in Committee on 13 March, the Minister committed to arranging an urgent meeting to discuss the report.
That urgent meeting with HMT, interested Peers, Seema Malhotra MP, researchers and representatives of the mortgage prisoners finally took place on 26 April, six weeks after the Minister had promised to arrange it. I am pretty sure that that long delay was not the fault of the Minister but simply a clear indication of the very low priority that HMT gives to the matter. In fact, the Minister had written to me to say that he was extremely disappointed that HMT had made no contact, and that his team had called for the meeting to be organised on multiple occasions and had stressed the urgency of the situation.
The Minister was absolutely right to stress the urgency. We stressed it again in our letter of 17 May to the noble Baroness, Lady Penn, asking HMT to make a full response to the LSE proposals before Report. We have had no response to the letter or to the LSE report.
Interest rates are rising significantly and the already intolerable burden on mortgage prisoners is growing steeply, increasing their misery, despair and uncertainty. HMT seems not to understand that or even to care much about it. We know that HMT officials have recently had contact with the academic authors of the LSE report. We also know that those officials told the academics that they hoped to have a response to the report before the Summer Recess. That would be five months since HMT first had sight of the report—an intolerable and unjustifiable delay and a clear indication of the low priority the Treasury is giving the matter.
The treatment of mortgage prisoners is certainly uncaring and at times almost contemptuous. Whatever the outcome of today’s debate on this amendment, I urge the Minister to galvanise the Treasury team and replace what seems to be a leisurely approach with real urgency. After all, in February 2020 the then Economic Secretary to the Treasury said in a letter to Martin Lewis:
“My officials … will take any new proposals under full consideration if they meet our strict requirements that they a) deliver value for money for government (not just individuals), b) are a fair use of taxpayer spending, and c) address any risks of moral hazard”.
The LSE report explains how its proposals satisfy those requirements. I ask the Minister to deliver urgently on John Glen’s promise.
Mortgage prisoners are not to blame for the very high SVRs that are ruining or have ruined their lives; the Government are to blame. HMT sold mortgages to vulture funds without protection for the mortgagees. It later claimed to have been misled by those funds but in fact, research funded by Martin Lewis found that the Treasury was aware of the potential problems as early as 2009, when it recognised that the sale of closed books to investors had the potential to harm borrowers. Martin Lewis’s report went on to say:
“It has subsequently become clear that many prisoners did suffer harm; our first report detailed negative effects including paying high interest rates and difficulty in remortgaging, leading in some cases to anxiety, depression, physical and mental ill health and the prospect of losing the family home”.
Interventions by the Government to date have helped at most 2,200 of the 195,000 mortgage prisoners, and in fact only 200 borrowers have been directly helped to switch as a result of the modified affordability tests run by the FCA. As things now stand, the Government and the FCA are not proposing any further action to help mortgage prisoners. All this misery and harm could have been prevented, but even now the Government still refuse to acknowledge their responsibility or to provide any help.
The amendment would provide immediate and practical support to mortgage prisoners. It would introduce a cap on the standard variable rates paid by mortgage prisoners. Capping at 2% over the base rate would return the margins to what they were prior to the financial crisis. That should stop firms exploiting their captive customers but would have no impact on the wider market.
To ensure that mortgage prisoners can gain some certainty over their mortgage payments, the amendment would also require mortgage prisoners who meet FCA criteria to be offered fixed rates. These fixed rates would vary according to the loan-to-value of the mortgage prisoner, so would be reflective of risk.
The amendment does not single out mortgage prisoners for help that is not available to other borrowers in the active market. It just ensures that mortgage prisoners are able to access fixed-rate deals on the same terms as others in the active market. It stops mortgage prisoners being exploited by vulture funds and inactive lenders and it ensures that they are treated fairly. The amendment requires the FCA to set the criteria for accessing new fixed-rate deals and interest rates based on those in the active market so that mortgage prisoners are treated the same as those in the active market and can access new deals with their existing lender.
Viscount Trenchard (Con)
My Lords, I am pleased again to support the noble Lord, Lord Sharkey, in his noble quest to protect mortgage prisoners, as I did when he tabled a similar amendment in Grand Committee.
I appreciated the commitment of my noble friend Lord Harlech in his winding up that the Government would consider the proposals of Martin Lewis, the LSE and the APPG on Mortgage Prisoners that have been put forward. As he said, mortgage prisoners are the forgotten victims of the financial crash. The banks were bailed out at the expense of these borrowers. Furthermore, the margins between the Bank of England base rate and typical standard variable rates have expanded by more than double.
The problem is that the unlicensed lenders that bought the mortgage books of this group of borrowers do not offer the fixed-rate products that are available to borrowers in the active market. I stress that my motive in supporting the noble Lord’s amendment is to support this group of genuine mortgage prisoners, who are unable to switch to a new fixed-rate mortgage despite having been up to date and not missed any payments.
The Government have acknowledged the detriment caused to mortgage prisoners. This Bill offers an opportunity to provide them with some relief from the difficulties that they are trying to cope with. I hope to hear from my noble friend some concrete plan to assist them as the Government have done for many disadvantaged groups—as a result of the Covid pandemic, for example. I look forward to the Minister’s reply.
Baroness Bennett of Manor Castle (GP)
My Lords, I rise briefly, having spoken on this issue both in Committee and back in the last financial services Bill, just to put a human face on this. In doing that, I remind the Minister of the representatives of the mortgage prisoners whom we heard from at the meeting in the Treasury a couple of months ago.
The face I have chosen to put on is that of 63 year- old Jacqueline Burns, who spoke to the I newspaper in April about what her life is like now that she is a mortgage prisoner. She said:
“I am cutting back on food because I can’t afford to eat … I am so stressed out right now, I am at the end of my tether”.
The story, as Ms Burns told the I, was that she bought her home in Cambridgeshire for £69,000 in 2006 from SPML, which was an arm of Lehman Brothers. Ms Burns remembers that the broker “was really nice” and “pushed me … towards SPML”. We can all probably imagine why that was. The situation in which Ms Burns now finds herself is that she is on the standard variable rate and owes £109,000; remember that she paid £69,000 for the house. Because of the rise in interest rates, her mortgage payments have gone up from £333 a month to nearly £700 a month. She simply cannot pay.
She is in this situation because of a failure of government regulation, and because of arrangements made by the Government that made a significant profit. There is a huge moral responsibility. If we think about the costs that must be being imposed on the NHS by people who eventually become homeless and need council homes et cetera, it is clear that the Government should look not just at their moral responsibility; they also need to ensure that people get a fair deal and do not end up—even if the Government are not thinking of anything else—costing the taxpayer a great deal.
Baroness Chapman of Darlington (Lab)
My Lords, we are grateful to the noble Lord, Lord Sharkey, for bringing back this amendment and for his persistence on this issue over many years. We are also grateful for the work of the APPG, particularly to Rachel Neale, who herself is a mortgage prisoner and has become a champion for those people who have been affected by this problem. I also want to mention my colleague in the Commons, Seema Malhotra, who is doing a lot of work on this issue.
We are hugely sympathetic towards mortgage prisoners, who have endured difficulties over so many years now, and wish that the Government had acted earlier to ease the burden on them. We were pleased to back this amendment during the passage of the Financial Services Bill in early 2021, when it passed by 273 votes to 235. However, we are mindful that at that point the House of Commons rejected that amendment, and did so at a time when a much larger proportion of the population was experiencing issues with mortgage affordability. In recent weeks, however, we have seen hundreds of mortgage products pulled and rates hiked on those that remain available. A number of major banks have even temporarily withdrawn offers for new customers, putting the brakes on the aspirations of many first-time buyers.
Of course, mortgage prisoners are in a different position, in that they have been facing problems for many years and are just not able to simply switch products in the way that others can. As the Minister will no doubt outline, while this amendment did not make it into the Financial Services Act 2021, it did prompt some new and welcome actions from the Treasury, regulators and banks. New advice was available and a number of lenders relaxed their criteria in certain cases. We know that the elected House has already rejected this proposal and, realistically, it is unlikely to reconsider in the current context, but more does need to be done. Can the Minister let us know whether the Government intend to respond to the recommendations that were made by the LSE in its report? If they are, when will that response be forthcoming? The Government urgently need to get a grip on the issues facing the mortgage market generally and, once that situation has calmed, we hope they will be able to do what they can to ease the difficulties faced by mortgage prisoners.
Baroness Penn (Con)
My Lords, I thank all noble Lords who have spoken in this debate, and in particular the noble Lord, Lord Sharkey, for tabling this amendment. I start by emphasising that the Government take this issue extremely seriously. We have a great deal of sympathy for affected mortgage borrowers and understand the stress they may be facing as a result of being unable to switch their mortgage. That is precisely why we, and the FCA, alongside the industry, have shown that we are willing to act, and have carried out so much work and analysis in this area, partly in response to prior interest from this House, as alluded to by the noble Baroness, Lady Chapman. This has included regulatory changes to enable customers who otherwise may have been unable to switch to access new products.
The Government remain committed to this issue and welcome the further input of stakeholders. For this reason, during Committee, the Government confirmed that they were carefully considering the proposals put forward in the latest report from the London School of Economics. Since then, as noted in the debate, I have met with the noble Lord and further members of the APPG and representatives of the Mortgage Prisoners Action Group to discuss the findings of the report and the issue of mortgage prisoners more widely.
The Economic Secretary to the Treasury has also written to the noble Lord, including to provide further clarity on the proceeds from the sale of UKAR assets. The LSE report recommends free comprehensive financial advice for all. That is why the Government have continued to maintain record levels of debt advice funding for the Money and Pensions Service, bringing its budget for free-to-client debt advice in England to £92.7 million this financial year.
The other proposals put forward by the London School of Economics are significant in scale and ambition. While the Treasury has been engaging with key stakeholders, including the LSE academics behind the report, for some time, including since Committee, we have concerns that these proposals may not be effective in addressing some of the major challenges that prevent mortgage prisoners being able to switch to an active lender. For example, the proposals would not assist those with an interest-only mortgage ultimately to pay off their balance at the end of their mortgage term.
We continue to examine the proposals against the criteria put forward originally by then Economic Secretary to the Treasury, John Glen, to establish whether there are further areas we can consider. I remind the House that those criteria are that any proposals must deliver value for money, be a fair use of taxpayer money and address any risk of moral hazard. This does not change the Government’s long-standing commitment to continue to examine this issue and what options there may be. However, it is important that we do not create false hope and that any further proposals deliver real benefit and are effective in enabling those affected to move to a new deal with an active lender, should they wish to.
I will not repeat the arguments against an SVR cap, as we discussed them at length previously in this House. An SVR cap would create an arbitrary division between different sets of consumers, and it would also have significant implications for the wider mortgage market that cannot be ignored. It is therefore not an appropriate solution, and I must be clear that there is no prospect of the Government changing this view in the near term. In the light of this, I ask the noble Lord to withdraw his amendment.
Lord Sharkey (LD)
I thank all noble Lords who have spoken in this customarily brief debate on mortgage prisoners. I especially thank the noble Viscount, Lord Trenchard, for his contribution today and in Committee.
I am uncertain about what the Government’s response consists of. It seems to me that perhaps it consists of three things. The first is exculpatory—it was not our fault. It was the Government’s fault; it cannot be anybody else’s fault that these mortgage prisoners are in the position they find themselves in.
The second thing I am uncertain about is what the Government are actually going to do. I hear expressions of good will and care for mortgage prisoners but I do not hear anything at all that amounts to a plan, or the sight of a plan, or an objective, or something concrete that would help these people. I did not even hear whether we will get a response to the LSE report any time before the Summer Recess, or indeed whether there is a date by which response can be made—perhaps the Minister can enlighten us. I remind her again that by the Summer Recess it will be five months since the LSE report was presented, and the Treasury surely has had time to analyse it in some detail and to make a considered response.
It is quite clear that the real distress experienced by these mortgage prisoners is not understood or felt deeply within the Government or the Treasury. When we had a meeting with the Minister, we had a couple of the leaders of the Mortgage Prisoners group alongside us who told us some terrible stories about what has happened to their families over the past 10 years; 10 years of paying too much money—more than they should have done and more than they needed to in many ways—to these vulture funds.
Lord Harlech (Con)
My Lords, I beg to move that further consideration on Report be now adjourned until 8.31 pm.
Lord Kennedy of Southwark (Lab Co-op)
My Lords, I do not think that the debate on our regret amendment is time-limited.
Lord Harlech (Con)
My mistake. I did not mean to imply that it was time-limited. I meant to say that Report stage on the Bill would resume not before 8.31 pm.
Public Order Act 1986 (Serious Disruption to the Life of the Community) Regulations 2023
(11 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
21:23 - Division on Lord Coaker’s amendment - Ayes: 177 / Noes: 141 - Amendment agreed.
21:35 - Division on Baroness Jones of Moulsecoomb’s amendment - Ayes: 64 / Noes: 154 - Amendment disagreed.
Lord Sharpe of Epsom
That the draft Regulations laid before the House on 27 April be approved.
Relevant document: 38th Report the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument).
The Parliamentary Under-Secretary of State, Home Office (Lord Sharpe of Epsom) (Con)
My Lords, I thank all noble Lords for attending this debate. These regulations amend Sections 12 and 14 of the Public Order Act 1986, which grant the police the power to place necessary conditions on public processions and assemblies to prevent specific harms from occurring. One of these harms is serious disruption to the life of the community. These regulations do not create new powers but define this harm.
Once in force, these regulations will ensure that public order legislation is clear, consistent and current. They will carry over a definition of “serious disruption” which has already been approved by Parliament and provide greater clarity on the circumstances in which the police can exercise their powers to manage public processions and assemblies. Most importantly, they have given the House of Commons the opportunity to consider these measures.
Without these changes there is potential for confusion over what is the lawful extent of protest activity. The police and public will have to grapple with one threshold for criminal offences in the new Public Order Act and another for the use of discretionary police powers in the 1986 Act. With these changes, it will be easier for all to understand when disruption from a protest is no longer legitimate.
The provisions in these regulations are broadly similar to those brought to the Public Order Act 2023 as a government amendment during its passage through Parliament. The only difference is that these regulations do not allow the police to place blanket conditions on multiple protests. I will detail exactly what the regulations do shortly.
The government amendment was narrowly defeated by 14 votes in this House, and was not considered by the elected Chamber. This vote occurred before the vote for adopting the current definition of “serious disruption” in the 2023 Act, which was approved by both Chambers. As both Houses have agreed on a definition, we are sensibly extending it across the statute book and bringing further clarity to public order law. That is something which has been sought by senior police officers and by many in this Chamber today.
The Commissioner of the Metropolitan Police has said:
“The lack of clarity in the legislation and the increasing complexity of the case law”—
the increasing complexity that the case law is making between the right to protest and the rights of others to go about their daily lives free from serious disruption—
“is making this more difficult and more contested”.
The delegated power being used existed prior to the introduction of the Public Order Act 2023. The power was available for the Government to use during the passage of the Public Order Act 2023. These delegated powers were scrutinised by the Delegated Powers and Regulatory Reform Committee, which recommended that a definition of “serious disruption to the life of the community” be included on the face of the Police, Crime, Sentencing and Courts Act 2022, coupled with a power to amend the definition by affirmative procedure regulations. This recommendation was accepted and implemented in full.
It is entirely right that the Executive use powers conferred by both Houses of Parliament to allow the elected Chamber to consider the proposed change in law. The other place has now had the opportunity to consider these measures and has approved them following debate on the Floor of the House yesterday.
The Motion of the noble Baroness, Lady Jones, is highly unusual, and seeks to strike down legislation passed by the elected House and undermine sensible changes which bring clarity and consistency to the law. During the passage of the Public Order Act, the Government listened and responded to the strength of feeling in Parliament on many issues. Changes were made on many of those issues, including serious disruption prevention orders, protections for journalists reporting on protests, and others.
The need for clear powers to improve the management of highly disruptive protests has been well rehearsed, but I will reiterate them quickly. The current Just Stop Oil slow-walk campaign has resulted in the use of over 13,770 police officer shifts, diverting police attention away from local communities. Financially, this has cost the taxpayer £4.5 million in just six weeks, and this is in addition to the £14.5 million it cost last year. These near-daily protests—as of yesterday, I think it was 156 separate protests in six weeks—have pushed the public to their limit. We have seen people taking matters into their own hands. Therefore, as a Government, we must do what we can to empower the police to respond swiftly and effectively.
Given the scale and impact of the disruption caused by slow walks and sit-ins on roads, it is in the public interest to clarify these police powers as a matter of urgency. The Government have always been clear that the delegated powers were needed to be able to respond quickly to evolving protest tactics. The intensive use of slow walks across London has proven that. Once in force, the regulations will provide the police with the legal clarity they need to protect the public from this tactic.
As I have already mentioned, these regulations do not grant new powers to the police, but clarify the extent of existing ones. Therefore, it was deemed disproportionate to carry out a full public consultation. Targeted engagement with the National Police Chiefs’ Council, the Metropolitan Police Service and other police forces was the appropriate approach. All have welcomed clarity in the law. The Metropolitan Police Service specifically welcomed clarity on how the police should consider serious disruption in relation to imposing conditions.
The regulations achieve this by making the following clarifications. First, these regulations will clarify that the police may consider the cumulative impact of concurrent and repeated protests in the same area when assessing whether “serious disruption to the life of the community” may occur. Although a single protest may not in itself cause serious disruption, it is undeniable that a community subjected to repeated or concurrent protests will suffer due to the compounding effect of multiple protests.
Secondly, they allow the police to consider the absolute disruption caused by a protest. That is to say, police should be able to consider the disruption a protest may cause, regardless of what disruption may be common in an area for other unrelated reasons. Without these regulations, “serious disruption to the life of the community” is often considered with reference to what is regarded as normal for a given area, rather than the nature of the disruption caused at that moment in time.
Thirdly, the regulations define the term “community” to mean,
“any group of persons … affected by the procession”,
or assembly, and not just those who live or work in the vicinity of that procession or assembly. This change clarifies that a broader definition of community is to be used when interpreting the meaning of “serious disruption to the life of the community”. This definition better reflects the modern way of life in major cities.
Finally, as I have previously mentioned, the instrument aligns the definition of “serious disruption” with that in the Public Order Act 2023, simplifying protest law. During the passage of the Public Order Act, the appropriate definition of “serious disruption” was debated at length. I would again like to thank all noble Lords for what was an exceptional debate with high-calibre contributions from all sides.
I remain of the view that the definition rooted in protest case law proposed by the noble and learned Lord, Lord Hope, strikes the right balance between legitimate and illegitimate protest. This definition has been scrutinised and approved by both Houses of Parliament. It should now be carried across to the Public Order Act 1986 to ensure consistency across the statute book.
As well as aligning public order legislation, the regulations also bring further clarity by building on the non-exhaustive list of examples of serious disruption to the life of the community to include
“the prevention of, or a hindrance that is more than minor to, the carrying out of day-to-day activities”,
such as making a journey. This provides legal clarity that it is entirely appropriate for the police to place necessary conditions on protests that are obstructing the public from going about their daily business.
Finally, I remind the House that the Government are legally required to publish a report on the operation of amendments made to Sections 12 and 14 of the Public Order Act 1986 by the Police, Crime, Sentencing and Courts Act 2022. The report must be published and laid before Parliament by 28 June 2024. I can confirm that this paper will also report on the operation of the changes made by this statutory instrument.
In summary, the regulations are necessary changes to the law to ensure that public order legislation is clear, consistent and current. They will improve the protection of the public—who this Government support —against the minority of protesters who repeatedly trample on their rights. Current and former police officers, as well as Peers and Members of the other place on both sides of the debate, have called for public order legislation to be both easy for officers to interpret and specific. This statutory instrument achieves these objectives. I beg to move.
Amendment to the Motion
Lord Coaker
Leave out all the words after “that” and insert “while approving the draft Regulations laid before the House on 27 April, this House regrets that the Regulations propose as secondary legislation, which is subject to reduced scrutiny, measures that were recently rejected in primary legislation, and that His Majesty’s Government has not addressed the concerns raised in the House when the measures were in primary legislation, or undertaken a full public consultation on these controversial measures; and therefore calls on His Majesty’s Government to withdraw the Regulations”.
Lord Coaker (Lab)
My Lords, I will make a brief statement before I start my remarks on the regulations. As a Nottinghamshire resident and a former Nottinghamshire Member of Parliament with an obvious close attachment to the city, I am shocked, appalled and saddened at the awful events in Nottingham earlier today—as we all will be. I am sure the whole House will want to join with me in thanking the emergency services and in sending our condolences to the families and friends of the victims and the whole community.
Lord Coaker (Lab)
My Lords, in moving the regret amendment in my name on the Order Paper, I should say that there were contentious and furious debates over the Public Order Act in the Chamber and beyond, although you would not have recognised that from the Minister’s comments.
Let me spell out from the beginning that I do not defend the actions of Just Stop Oil for one minute and neither does my party; I think that it has gone beyond the bounds of reasonableness. However, the police have the powers to deal with these protests, if they had the confidence to use them. Indeed, I agree with the chief constable of Greater Manchester, who said in the media a couple of weeks ago,
“we have the powers to act and we should do so … quickly”.
Our message to the police should be to use the powers they have and that they have our support.
The regulations before us make very real changes to the public order legislation we have. They reduce the threshold for the policing of protests to prevent serious disruption to the life of the community from “significant” and “prolonged” to “more than minor”. They also refer to the cumulative impact of repeated protests.
I remind the Minister and noble Lords that, in the passage of the then Public Order Bill, I asked whether the Government intended to use secondary legislation to overcome the fact that they had lost their vote on measures that were introduced without the Minister knowing a thing about it—namely, the amendment introduced into the Lords, which the Minister no doubt found out about like the rest of us, when we heard it on the radio in the morning. I specifically asked him about this on 14 March, and he said:
“They do not permit this or any future Government to make changes to the meaning of ‘serious disruption’ in this Bill”.—[Official Report, 14/3/23; col. 1209.]
My contention is that that statement implied that the Government would not, in any circumstance, bring forward secondary legislation to change primary legislation. These changes to the law presented to Parliament are via secondary legislation, which I remind noble Lords is unamendable, so there is no ability for meaningful debate.
All protests could be duly affected across the country, with no opportunity for anyone in this Chamber or indeed the other place to say that these changes go too far; no ability to debate whether these changes would impact on protests, or to say that although we do not like Just Stop Oil, we might support protests which deal with extensive housing developments, with inappropriate third runways at Heathrow Airport by lying down in front of bulldozers, or against new nuclear power stations and so on. All these protests are potentially affected by the changes to the legislation that the Government have brought forward. There is no opportunity for us to table amendments to change that, and the Government Minister just dismisses that as somehow irrelevant.
Viscount Hailsham (Con)
I have not seen the additional Explanatory Memorandum. Would the noble Lord tell us what additional material is in it? If it is substantial, surely it should be provided to all Members of this House before the debate proceeds.
Lord Coaker (Lab)
I will read a couple of sentences from it. Paragraph 6.8 provides a reason why the measures are being brought back in this instrument; the justification of promoting “consistency” across the statute book is similar to that provided to the SLSC in advance of the report, and is discussed at paragraphs 16 and 18 of the report. I could not quote what paragraphs 16 and 18 actually are. There is a new paragraph 10.1; it provides a reason why:
“A full consultation was not necessary”.
I have no idea what paragraph 10.1 says, so I apologise to the noble Viscount. And so it goes on. The Government seek to justify themselves—
Lord Harris of Haringey (Lab)
I am sorry to interrupt my noble friend in full flow, but I am shocked by what he is saying. Can he just confirm that this change to the Explanatory Memorandum was therefore tabled after the House of Commons had its debate?
Lord Coaker (Lab)
My noble friend predicts what I was going to say next, in a calm, reasonable, rational way. I was going to ask whether the Minister could confirm whether the other place considered these changes to the Explanatory Memorandum before it had the opportunity to consider the regulations. As a football fan, I say that if this was a football crowd, it would be chanting to the Government, “They don’t know what they’re doing”. It would be quite right.
At heart, what do we believe? I will tell noble Lords what I think, and what I think the SLSC and many noble Lords said. What has taken place is an absolute, fundamental constitutional outrage. This House defeated these, or similar, proposals, brought forward in a panic, as I said, by the noble Lord, Lord Sharpe, without knowing really that he was going to have to do it, earlier this year. Primary legislation was defeated. So what do the Government do? They do not bring forward new primary legislation. They try to sneak through secondary legislation in an underhand way without proper public consultation.
As the Secondary Legislation Scrutiny Committee said:
“We are not aware of any examples of this approach being taken in the past”.
Is this what it has come to? Our Government have, in a shocking betrayal of our unwritten constitution, undermined the conventions on which our way of doing things is based, and on which our Parliament is based. How many times have I stood here and spoken of the need to protect conventions, to recognise the right way of doing things? These conventions protect our democracy, our rights and our freedoms. They are not just something for the Government of the day to dismiss because they are inconvenient. That undermines the workings of our parliamentary democracy. As such, it is shocking.
Of course, the elected Government should have their way, but this was not passed by the other House before being defeated. The Minister says, in a piece of political theatre, “Oh, don’t worry, we passed it yesterday in the House of Commons”. Embarrassed and in a panic in the face of today’s criticism, this was so the Government could say: “Don’t worry about that. We’ll be able to tell Coaker and everybody else who has mentioned it that we passed it yesterday through secondary legislation. That completely torpedoes their argument that the House of Commons hasn’t discussed it”. Such was the rush that they could not even ensure that an amended Explanatory Memorandum was put before the other place before it decided on the legislation.
Like many noble Lords, I have been in this Parliament for a number of years, and I have never seen anything like this. Nothing changes. The fundamental principle is that this Government are using secondary legislation to overcome primary legislation; hence my regret amendment deploring it and calling on the Government to think again. We will abstain, as I say, on the fatal amendment. We will not block this legislation.
Let me be clear to those who keep asking me whether His Majesty’s Opposition’s position is to block the SI: we will not do that. I understand why some people would wish that to be otherwise but, as His Majesty’s Opposition, we will respect convention. We will respect tradition and the right way of doing politics in our country. I do not believe that it necessarily shows any respect for the way that democracy works by voting down the opinion of the elected Government of the day.
The way to change that is, in my view, to get rid of this Government at the next election and put another Government in their place. That is the way forward. We have opposed these measures and will continue to argue that they are unnecessary. But we should not, in my view, be debating this among ourselves. The true adversary in all of this is a bankrupt Government turning in on themselves. We will respect the right way of doing things even if the Government do not. If we are to be the next Government, we will expect those who may oppose us then to act in the proper way, respecting the will of the elected House. That is what I am saying to this Government: that they are not respecting the traditions of our country.
This is a sign of His Majesty’s Opposition doing all they can to prepare for government and to look like a Government in waiting. This shoddy piece of constitution-disrespecting legislation, put forward with no consultation, shows just how far this Government have fallen. It is a moral and constitutional outrage, of which the Government should be ashamed. I beg to move.
Lord Hope of Craighead (CB)
My Lords, I feel some sense of responsibility for the situation in which your Lordships find yourselves this evening because I devised the formula quoted in the regulations before us.
I drafted that particular formula with very specific reference to the locking-on and tunnelling offences described in the Public Order Act, which we were considering as a Bill at that time. I confess that I was not looking forward at that time to any other use of that formula. I understand why the Government have found it attractive and the point they are making that it is better to have a uniform test across the board. However, as the noble Lord, Lord Coaker, has said, this is a debate about the right way of doing things.
I have been making strenuous efforts on the REUL Bill to make it clear that parliamentary accountability requires debate in the Chamber on things that we can discuss and amend if necessary, and not be driven by statutory instruments. While I stand by the formula which I devised—I believe it is the right formula, pitched at exactly the right point for the police to decide when they should intervene—I deeply regret that the Government have felt it necessary to approach a situation in this way. I endorse exactly what the noble Lord, Lord Coaker, has been saying and therefore wish to make it clear that while I stand by my formula, I greatly regret the procedure that is being adopted.
Baroness Jones of Moulsecoomb (GP)
I actually told the noble and learned Lord, Lord Hope of Craighead, that he should not have helped the Government. I am prepared to forgive him, from a sense of generosity, because I know he was trying to help, but it did not actually help at all. The opening speech by the Minister was quite interesting because it lasted nearly nine minutes and focused almost entirely on what the police and the protesters were going to do. It avoided the talk of the constitutional novelty that the Government have introduced.
For me, this is a make-or-break moment for democracy. It is a crossroads that we really have to face up to because, in spite of what the noble Lord, Lord Coaker, said about respecting conventions, the fact is that the Government have not respected our conventions. There are two issues at stake here. The first is suppression of freedom, with a measure that your Lordships’ House rejected as unreasonable only very recently. In some ways more seriously, and secondly, this government move sets a precedent that the Government can use secondary legislation to overrule Parliament’s will as expressed in votes on primary legislation. This means that any future Minister, at any time, could decide to change any law in any way. This to me is deeply disturbing and we will hear from other people, I hope, who find it disturbing as well.
The shadow Attorney-General has said that we have to stick to the conventions and allow this statutory instrument to pass, but that argument seems to be based on a fundamental misunderstanding of the conventions. By convention, your Lordships’ House does not block primary legislation, but this is not primary legislation. Your Lordships’ House can, does and has blocked statutory instruments. I recognise that there is no convention that the Government cannot use a statutory instrument to overturn parliamentary votes on primary legislation, but that convention does not exist because no Government have ever tried to do this before.
What we face here is a novel issue—a turning point for our parliamentary democracy—and the decision in your Lordships’ House on the following question will establish a new constitutional understanding. The key question is: should the Government be allowed to overturn parliamentary votes on primary legislation by using secondary legislation? That is the question we have to think about here today. We have talked before in your Lordships’ House about our discontent about overreach by secondary legislation. I ask your Lordships: is this not the day to act on this? If we refuse to act today, when are we going to act?
The Labour Party has tabled an amendment to regret, and regret is what I believe we will all experience in the future if we fail to support this fatal amendment today. The whole country will have cause to regret the further erosion of the right to protest, which is part of our basic British way of life, and the enfeebling of this House, which many in this House might regret as well. We will regret it when Ministers start regularly to use their power under secondary legislation to overturn existing laws that Parliament has debated and voted for. We will regret it when we read headlines about the police arresting a group of parents and their children who are protesting about pollution outside their school.
What about the community up in Stone in Staffordshire who, just last week, protested about having HS2’s HGVs rushing past their houses 42 times a day? They protested quite hard; I think they would have fallen foul of this piece of law. Or what about arresting people holding a vigil for a victim of police violence, which has of course happened? We will definitely regret it when we hear about a big march against a government policy, as when a million of us protested about the Iraq war, and the police will then have to say, “Sorry, that protest is banned because it may cause more than minor disruption”. That is a very low bar.
Lord Hunt of Wirral (Con)
My Lords, I speak in my capacity as chair of the Secondary Legislation Scrutiny Committee. The noble Lord, Lord Coaker, already referred to the report that we have published on the regulations that we are debating. In our report, we raised a number of issues. First and foremost, we wanted to alert the House to the fact that this instrument did, as the noble and learned Lord, Lord Hope, has referred to, bring back a measure that was rejected by the House during the passage of the Public Order Bill—a point that we felt was particularly important because, regrettably, it had not been mentioned in the Explanatory Memorandum laid at the same time as the instrument itself.
It cannot be denied that primary legislation receives more thorough scrutiny than secondary legislation. Where a measure is rejected during the passage of a Bill, only for it to reappear in secondary legislation, we had no doubt that the House would want to be made aware of it. We concluded in our report that the House would probably wish to consider the possible constitutional issues that arise, and to decide whether it wished to retain its earlier view on the measures.
We are an advisory committee only. We cannot tell this House what to do. Our role is to highlight matters about which we believe the House may want to challenge Ministers and ask for explanations. This debate demonstrates how true it is that the House is concerned to debate these regulations thoroughly.
It is a testament to the sterling work of the team that supports the Secondary Legislation Scrutiny Committee that the committee has been able to contribute to this important debate, and that my officials spotted this and questioned the government department about it as thoroughly as they then did, with further developments today, to which I will refer in just one moment.
These regulations are not only significant in their own right but illustrate issues of greater concern to those who sit on our committee. In May, we published our interim report on the work of the committee, in which we made observations on the instruments laid during the previous 12 months. I pay tribute to my predecessor, my noble friend Lord Hodgson of Astley Abbotts, who identified with me a range of matters to which our committee agreed. One was the inadequacy of consultation. We set out examples in that report where inadequate consultation had had the effect of undermining the operation of an instrument.
In our report on the regulations which we are now debating, we were also critical of the level of consultation, arguing that a considerably greater degree of consultation would have been more appropriate given the specific history, the range of interested parties and the strength of views. Above all, these regulations demonstrate the committee’s major and recurring concern that all too often the quality of the explanatory material accompanying secondary legislation is found wanting.
As I mentioned, our report on these regulations criticises the Explanatory Memorandum because it failed to mention that the measures had been defeated in the House on an earlier occasion, and, as a corollary of that omission, failed to explain the reasons why the Home Office takes the view that it should make a second attempt in this matter. This was important information that should have been included, and provides more than ample evidence of the finding in our interim report that poor-quality explanation was the most unwelcome feature of the secondary legislation that has been laid in the last 12 months.
Just today, in the early hours, the Home Office laid a revised Explanatory Memorandum for these regulations, responding to some of the points in the committee’s report. The House can form its own view on whether the revisions address our criticisms; it is not for us to publish any further commentary. However, departments should not have to revise explanatory material at our prompting. The original version should always provide sufficient information to scrutinise the instrument fully.
In that interim report, we urged all government departments to strengthen their quality assurance systems so that explanatory material, particularly that in support of secondary legislation, is clear, accessible and comprehensive. We will do our best to remain vigilant in identifying when departments fail to do this and are committed to drawing your Lordships’ attention, as on this occasion, to instruments where the quality of explanatory material has fallen significantly short of the standard that I believe this House has a right to expect.
Lord Rooker (Lab)
My Lords, I do not propose to address the public order issues. It is a fairly simple issue, really. It is not the role, and can never be the role, of the unelected House to seek to have the last word. The last word on every issue belongs in the elected House. Sometimes, it is true, it has to wait a year, if the Parliament Act is used, but at the end of the day it has to be in a position of owning what it has passed, so that the electorate can take a view of what it has done. That is where the Government are formed, not here. It is a simple issue, really.
Our conventions have been tested and have been found wanting. I agree very much with the speech that we have just heard—I am a member of the Delegated Powers Committee—but that is not the issue. We have had case after case of the Government taking away powers from Parliament to give executive authority to Ministers. The House has debated this two or three times, but we have not done much about it so far. The simple issue is this: the elected House must own the decision.
I will upset a few people at the end of the evening; I am happy to vote for my noble friend’s amendment but if the fatal amendment is put then I intend to vote with the Government. I will not be in a position after the next election of allowing the then Opposition to claim, when issues arise, “You never voted against it”. I will have at least one name in the Lobby. This is not the first time this has happened; the noble Lord, Lord Strathclyde, voted in opposition against fatal amendments. We know that it has been reviewed, but maybe it is time to look again at our conventions. I think the last time they were reviewed properly was in 2006, by a Joint Committee chaired by my noble friend Lord Cunningham of Felling.
I will not get confused—I agreed with about two sentences of the speech from the noble Baroness, Lady Jones, on constitutional issues. She has spent all week on social media misleading the public about the powers in Parliament. The powers belong to the elected House. It must be in a position to have the last word on every issue.
Baroness Jones of Moulsecoomb (GP)
Can the noble Lord tell me how I misled anyone? I think it has been the Labour Party that has misled people.
Lord Rooker (Lab)
Anyone can look at what has been happening this week. It has been misleading. The fact is that we are in a democracy and we are an unelected House. Our job is very simple: we just ask the other place to look at things again and again. At the end of the day, it has to own the decision. How can it go to the public in a general election if there are decisions that it cannot own? That is our present system and no one has come up with a plan to change it at this time.
Lord Pannick (CB)
My Lords, I support both amendments before the House—that tabled by the noble Lord, Lord Coaker, and that tabled by the noble Baroness, Lady Jones. I do so because, as the noble Lord said, this is a constitutional outrage.
I take that position even though I have great sympathy with the Government’s position on the substance of these regulations. They are absolutely right to say that those who demonstrate are not entitled to inflict more than a minor hindrance or delay on those going about their daily business. Whatever the merits for which the demonstration is held, protesters need to recognise that their rights to freedom of expression and assembly are not the only rights in play. The noble Baroness, Lady Jones, says that this is an authoritarian law. It is not. Members of the community have the right to get to work, take their children to school and attend hospital appointments without being caught in a traffic jam caused by protesters sitting in or walking slowly along a road with the very purpose of disrupting the lives of other people. That is simply outrageous.
However, the issue tonight is whether we approve regulations that defy the will of Parliament, as expressed by this House when we voted down on 7 February Amendment 48 of what is now the Public Order Act, in the light of which Amendment 49 was not moved. I voted with the Government on Amendment 48, and I was in the minority. As we have heard, they are now bringing forward regulations to achieve exactly the same objective. Respectfully, it is all very well for the noble Lord, Lord Rooker, to talk about the other place being the dominant House, which it is, and say that we must give way to it, but we should not do so when there is a constitutional outrage, and not when, as we all know, scrutiny of regulations is cursory at best.
The Government know very well that they can bring forward regulations which we cannot amend and that the normal practice of this House is not to vote them down on a fatal Motion. How is that democratic? How can it be democratic that one of the Houses of Parliament is unable to express its view in relation to the substance of this matter?
Lord Reid of Cardowan (Lab)
With respect, no one is trying to stop this Chamber expressing its view on this or anything else. What it is trying to stop is the assumption that it is this Chamber that makes the final decision. It is not. It is essential for the maintenance of the constitutional arrangements we have that we always respect the elected House, which, as my noble friend said, has to own those policies because it is directly responsible to the electorate. So it is not about discussing, it is not about revising, it is about who takes the final decision.
Lord Pannick (CB)
I totally understand that, and it is customary in this House to ask the other place to think again. I am not suggesting that we should have the final word; I am suggesting that tonight we should vote down these regulations and invite—require, ask—the other place to think again and to consider whether it really thinks it appropriate to proceed by way of what we all agree is a constitutional outrage, as the noble Lord, Lord Coaker, said. There are occasions when we have to stand up for constitutional principle, and this is one of them. If the other place sends it back again, no doubt we will give way because it is the elected House, but we are entitled to express our view in an effective manner. It is all very well regretting, but it has no effect whatever.
I agree with the comments of my colleague Tom Hickman KC and his co-author Gabriel Tan in the blog that they put on the website of UK Constitutional Law Association. They wrote, and they are right, that the Government are seeking to obtain through the back door of Parliament what they have been denied at the front door. It is, they say, a
“remarkable act of constitutional chutzpah”,
and they are absolutely right.
It does not stop there because, as the noble Lord, Lord Hunt, rightly said, the original Explanatory Memorandum to these regulations—I have not seen today’s amended, improved version—nowhere mentions that these amendments were defeated when they were proposed to the Public Order Bill. It is worse than that, as the noble Lord, Lord Hunt, knows, but it is astonishing that the Explanatory Memorandum at paragraph 3.1, under the heading “Matters of special interest to Parliament: Matters of special interest to the Joint Committee on Statutory Instruments”, has this entry: “None”. Is that not extraordinary? Does it not demonstrate the contempt which the Government have in this context for the proper processes of legislation in these matters?
Lord Brownlow of Shurlock Row (Con)
I have been here for only four years, and I am still learning. The noble Lord said earlier that if this statutory instrument is voted down, the other House could be asked to think again and it could bring it back. My understanding is that a statutory instrument cannot be brought back.
Lord Pannick (CB)
The Government can table a new statutory instrument any time they like. They are perfectly entitled. They can table a statutory instrument and invite us to consider it—or, far better than that would be to produce primary legislation which we can debate properly and can amend if we think it appropriate to do so and which will then go back to other place for it to consider.
If it does not agree with us, we will, I am sure—as the noble Lord, Lord Reid, rightly said—follow our customary practice and give way, because it is the elected House. What is so objectionable about this is that all of those procedures are removed. All we can do, as he said, is express regret: we are very sorry about this. Well, I express regret that the Labour Front Bench is not prepared to see through the implications of its own view that this is a constitutional outrage. It is something that we should stand up against and vote against.
Viscount Hailsham (Con)
My Lords, with little exception, I agree with what the noble Lord, Lord Pannick, has said. I start by having considerable sympathy with the motives that have caused the Government to come forward with this statutory instrument. However, for the reasons that were advanced by the noble Lord, Lord Coaker, I feel that the process is very defective. However, again, for constitutional reasons, which I shall mention very briefly, I cannot support the fatal amendment.
That, in summary, is my position; if I may, I shall elaborate a little further. So far as the motives of the Government that lie behind the statutory instrument are concerned, I share very many of these views, as indeed does the noble Lord, Lord Pannick. In a free society, individuals have a right to demonstrate. However, their fellow citizens have a right to go about their daily business without unreasonable obstruction. I fear that, increasingly, we are seeing on the part of demonstrators a disregard for the obligations they have to their fellow citizens.
So I can well understand the motives that activate the Government in bringing forward the changes in the statutory instrument. However, for the reasons advanced by the noble Lord, Lord Coaker, I have very real reservations about the process that is being adopted. The process and its defects were identified by my noble friend Lord Hunt of Wirral. He is entirely right, and his report is extremely direct on the subject. The statutory instrument is in fact designed to reverse the defeat in this House earlier this year.
If that is a desirable thing to do, it should be done by primary legislation. That is the point made by the noble Lord, Lord Pannick. Amendments made to a Bill by this House on Report can always be considered further in the House of Commons and, where appropriate, they can be the subject of ping-pong; that is the proper way forward.
A statutory instrument is an unamendable legislative device and, in my view, one that should not be used to make significant changes to the law, in particular to the criminal law. So one needs to go to the purpose of this statutory instrument. The Home Secretary set it out in yesterday’s debate in the House of Commons. At column 55, she set out the four purposes of the instrument, and said later, of the police, that
“we are trying to clarify the thresholds and boundaries of where the legal limit lies, so that they can take more robust action and respond more effectively”.—[Official Report, Commons, 12/6/23; col. 74.]
Now, that raises at least two pertinent questions. Either this statutory instrument, in effect, does no more than tidy up existing legislation and ensure that existing case law applies equally across the statutory waterfront, or it is intended to make significant changes to existing law. In the first case, it must be doubtful whether the statutory instrument is required; in the second case, if, as I suspect, the statutory instrument does make substantial changes to existing law, it should be done by primary legislation—and that is what this House intended to do in January.
So, finally, we get back to process, which is fundamental to tonight’s debate. I share all the reservations expressed in the amendment of the noble Lord, Lord Coaker. They constitute good reasons why the procedure adopted by the Government is flawed. I would like to think that if the amendment is passed—and in all probability, I will vote for it—the Government will withdraw the statutory instrument and resort to primary legislation.
I am afraid that I cannot support the fatal amendment moved by the noble Baroness. Here, I find myself in agreement with the views expressed by the noble Lords, Lord Reid and Lord Rooker. The House of Commons passed this statutory instrument last night by a very substantial majority. The fatal amendment has a much more dramatic consequence than those occasions when the House amends a Government Bill. In such cases, the Bill can be further considered by the Commons. However, if this House carries the fatal amendment, the statutory instrument is killed. That goes beyond that which an unelected House should in general do.
Lord Paddick (LD)
The noble Viscount seems to be saying that the difference here is that if this House votes down a measure in primary legislation, it goes back to the Commons to be reconsidered. That is not what happened in this case: the amendment was introduced in the House of Lords, not the other place, we voted it down and it disappeared. It did not go back to the other House. Exactly the same thing will happen tonight if noble Lords vote for the fatal amendment.
Viscount Hailsham (Con)
I entirely understand this point, but we need to draw a distinction between amendments that this House makes in Committee and on Report, when it is possible for the House of Commons to consider again and come back to this House, and—
Viscount Hailsham (Con)
May I just finish this point?
In this particular case, if we pass a fatal amendment, as advocated by the noble Baroness, we will be killing a statutory instrument which was supported by the House of Commons last night. I am very unwilling to support that proposition as a precedent, and I agree with the views expressed by the noble Lords, Lord Rooker and Lord Reid.
I say this as one who was in the House of Commons for 30 years. I am under no illusion as to the nature of the House of Commons. My father used to speak and write about the “elective dictatorship”. He was entirely right, but at the end of the day we have to decide where authority lies, and however imperfect its authority may be down the road, it does have the authority of an election, and we do not have that. I give way to the noble Lord if he wishes to intervene further.
Lord Paddick (LD)
I am very grateful, but the noble Viscount makes another error in his assertions. This was not an amendment to the Bill introduced by the Opposition in this House. It was a Government amendment introduced in this House, which was defeated by this House, which means that the amendment could not then be considered by the House of Commons. Therefore, there is no practical difference between the voting down of that Government amendment, killing it completely, and voting for a fatal amendment to the statutory instrument, which would kill it completely.
Viscount Hailsham (Con)
The noble Lord is cavilling at this point. We are, in a sense, talking about principle. Where does authority, in the end, lie? It lies down there because they are elected. It does not lie here because we are not elected. It is for that reason that I shall vote for the amendment moved by the noble Lord, and I do not feel able—although I agree with a great deal that the noble Baroness said—to vote for the fatal amendment.
Lord Jackson of Peterborough (Con)
My Lords, I fear I may be ploughing a lonely furrow tonight in supporting the draft regulations, speaking to the regret amendment in the name of the noble Lord, Lord Coaker, and against the fatal amendment in the name of the noble Baroness, Lady Green.
Lord Jackson of Peterborough (Con)
I beg her pardon —the noble Baroness, Lady Jones of Moulsecoomb. I have in fact read her round robin email and the accompanying legal opinion, and we have discussed these regulations, and of course I have read the report of the Secondary Legislation Scrutiny Committee.
I will not dwell on the process or the constitutional issues as such; the latter were well encapsulated by the noble Lords, Lord Reid and Lord Rooker, respectively. However, I do not agree with the catastrophist rhetoric of the noble Baroness, Lady Jones, on this being somehow a constitutional crisis.
The statutory instrument is quite simple and straightforward, seeking to strike a balance between freedom of speech, freedom of protest and assembly and the rights of the public to go about their daily business unhindered and unmolested. It is also about legal clarity for both the front-line police and the courts. The upsurge of large-scale disruption is not something any Government can ignore, especially as the effectiveness of the police and the public perception of them will be impacted by operational and legal uncertainty. As of last Thursday, as the Minister said, £4.5 million has been spent on diverting local policing priorities—equivalent to over 13,000 shifts—away from theft, burglary, violence against women and girls, knife crime, et cetera, and there have been 86 arrests and the bureaucracy that that involves, mostly for breaching Section 12 of the Public Order Act 1986.
Any Government—every Government—have a responsibility and a duty to protect its citizenry. Let us also remember that the police are currently in a very difficult and unenviable position. Slow walking has an impact not just in a confined geographical area but in a wider community and economic sense, and it has an effect on working people, businesses and public services, emergency services, hospital appointments, funerals, et cetera. At present the police have to balance the rights of protesters to exercise their rights under the Human Rights Act and the European Convention on Human Rights, and the impact of taking time to consider these competing interests. That leaves the police open to charges of partiality, bias, weakness and incompetence. Such a situation obviously gives rise to anger from those most affected by protestors’ selfish exhibitionism, which is often enacted to garner social media coverage, as well as to vigilantism, which of course causes further public order incidents. It is unrealistic not to imagine that such a situation arises not from a single event but from cumulative and repeated events and actions, perhaps over several days, which are more than minor.
I posit that giving the police different, not enhanced, powers to close down demonstrations more expeditiously is in the wider public interest. The regulations do not create more powers but make existing powers clearer and policing more consistent. It is important to remember, as the Minister said earlier, that they also align the threshold of serious disruption with that in the Public Order Act 2023, a definition arising from recent case law, and as such, the Government are right to use the delegated powers in Sections 12 and 14 of the Public Order Act 1986.
Like policing, governance is best undertaken not just by democratic accountability and authority but by consent. Quite evidently, the wider public are demanding that Ministers tackle the problem of deliberate and wilful disruption—actions that do nothing materially to change policy but which also do not persuade sceptical citizens and are in fact punitive and pointless in equal measure.
I do not believe that this statutory instrument is a radical departure that sets a dangerous constitutional precedent. It is certainly not, for instance, a draconian assault on freedom of speech and civil liberties. Comparisons with the Suffragettes, which I think have been used by some members of the Green Party, are of course specious: we have had universal suffrage elections since 1928.
It might be appropriate to turn now to some of the criticisms and observations in the committee’s report—
Lord Jackson of Peterborough (Con)
On consultation, I think it is unreasonable to expect the Government to undertake a comprehensive consultation process when the imperative is to correct quickly a legal loophole. I do have sympathy with the late tabling of the amendments on Report; I think that is a very fair point to make.
I shall finish with the words of the noble and learned Lord, Lord Hoffman. The noble Lord, Lord Coaker, talked about the importance of conventions. With that in mind, the noble and learned Lord, Lord Hoffman, said in 2006 that
“civil disobedience on conscientious grounds has a long and honourable history in this country … But there are conventions which are generally accepted by the law-breakers on one side and the law-enforcers on the other. The protesters behave with a sense of proportion and do not cause excessive damage or inconvenience. And they vouch the sincerity of their beliefs by accepting the penalties imposed by the law. The police and prosecutors, on the other hand, behave with restraint”.
That is what this regulation is about.
Lord Lisvane (CB)
My Lords, I make no comment on the merits of the policy that this proposal would introduce; it is the manner in which the Government have proceeded that has caused me, as it has my noble friend Lord Pannick, great concern. The Home Office has behaved in a way for which I can find no kinder word to use than “disreputable”.
For a start, the Explanatory Memorandum—whichever edition we are in now—did not mention the fact that the proposal had been rejected by your Lordships. When the committee quite rightly inquired why that was not mentioned, the reply could have won an Oscar for weasel wording:
“The details that have been included … are those which we … considered relevant to the document”.
When you are caught bang to rights, the proper response is an apology, not an obfuscation. Yet more astonishing —my noble friend Lord Pannick has already referred to this—is that in the section of the Explanatory Notes outlining anything that might be of interest to Parliament or the JCSI, the single word “None” appears.
Then there is the question of consultation. The Home Office ignored the Government’s own consultation principles and consulted on a selective and skewed basis. It brought to mind the Sellar and Yeatman description of the passage in Magna Carta which they alleged said:
“No baron should be tried, except by a special jury of other barons who would understand”.
In this case the Home Office set out to consult a selection of people it knew would support it, not those who might have a different view. A kind description would be that that was “not straightforward”.
Tom Hickman KC, the professor of public law at UCL, who has already been mentioned, pointed out:
“Where a public authority chooses to conduct a consultation process, that consultation must be conducted properly and fairly”.
He pointed to a ruling by the Court of Appeal that a consultation conducted before certain Covid-19 regulations had been unlawful because it had been conducted on an entirely one-sided basis. I do not see how the consultation carried out by the Home Office in this case could be described as proper and fair.
This instrument and the Explanatory Memorandum —again, whichever edition you care to quote—must have been signed off by a Minister. I think we might be told which Minister it was, and which Minister took the view that this was an appropriate way to treat Parliament. I hope the Minister here will be able to tell us. I do not want to see, and I am sure your Lordships do not want to hear, any pabulum about collective responsibility.
As I suggested earlier, I do not take a view about the merits of what this instrument would achieve. My concern is for the way in which Parliament is being treated and for the apparently resentful and sullen way in which the committee’s questions have been answered.
I am sorry—and I do understand what the noble Lord, Lord Coaker, was saying earlier on—that His Majesty’s Opposition do not wish to go further than regretting what is in front of us. Governments shrug off regrets; they make no difference. As the noble and learned Lord, Lord Judge, said in the Queen’s Speech debate last year, if we make no difference, why do we not just go on talking? Incidentally, I should tell your Lordships that, in my recent email conversations with the noble and learned Lord, we have focused on England’s chances in The Ashes, and I know that we all send him our warmest good wishes in his convalescence.
This brings me to the fatal amendment in the name of the noble Baroness, Lady Jones of Moulsecoomb. At this point, it is very important to recall that it is a very easy thing for a Government to withdraw an SI, redraft it, relay it and start the process again. It is also—and, of course, the business managers will balk at this—not that difficult to achieve a change by primary legislation in a relatively short time. As some noble Lords have said, that is actually the right way to proceed. It is not just what you want to achieve: it is the propriety of the means that you use to get there. If noble Lords do not want this sort of thing to happen again, we should vote it down, so if the noble Baroness presses her amendment to a Division, I shall support her.
Lord Pannick (CB)
May I ask the noble Lord whether, with all his decades of experience of parliamentary procedure, he has ever seen a set of regulations that so defies constitutional propriety?
Lord Lisvane (CB)
I think the noble Lord will know the answer, and it is no.
Baroness Stowell of Beeston (Con)
My Lords, I start by joining the noble Lord, Lord Coaker, in the comments that he made about my beloved home city. I also pay tribute to the Nottinghamshire Police and all the emergency services for their responses to the dreadful events in the city today. Clearly, I send my condolences to the friends and families of those who were dreadfully murdered.
I should also start by saying that I very much understand some of the frustration that has been expressed in the debate so far today, whether it has come from the noble Lord, Lord Coaker, my noble friend Lord Hunt on behalf of the committee, or in various other speeches that we have heard. It is important that the Government produce good-quality Explanatory Memorandums. They have not covered themselves in glory in this particular situation. I care about procedure— I do, very much—but I also care very much about the way in which this House conducts itself and the relationship that we have between this House and the Executive. I feel that, over the last few years, it has deteriorated. It has become increasingly hostile, and that has been clearly evident in the way in which some of the debates that we have held on a range of legislation have occurred. Sometimes, we have made our points in ways that have not showed any sense of disrespect to the Government—because that is not for the House to worry about—but have too often, I feel, shown disrespect to members of the public who take a particular position on things that some of us may not agree with.
Baroness Fox of Buckley (Non-Afl)
My Lords, the noble Baroness, Lady Stowell of Beeston, raises some important broader questions to consider but I think she has overcomplicated what is a more straightforward problem. These instruments were brought into this House by the Government on Report, which was extraordinary enough in itself; the Government lost, and they have come back again. We are told that they have to come back because something really dramatic has happened: there is a whole new set of circumstances and the police do not have the powers to police this really difficult situation. Then, we find out that the new tactics are basically a load of people walking slowly in the middle of the road. People think, “Why don’t the police just arrest them, then?” They have a huge amount of power under public order legislation.
I was speaking at a meeting the other night and somebody said, “Why are the police not using the Highway Code to stop people walking slowly down the middle of the street?” It makes no sense that the only way the police can deal with this is if a statutory instrument is brought in that, constitutionally, completely warps the way the law should be made.
There is a serious danger that the law, and secondary legislation in particular, is being used because there is somehow a failure of the police to police and a failure of the Government to ensure that the police police. The frustration in all this is that while the police say that they do not have the powers to stop people marching slowly in the middle of the road, blocking everyone off, they suddenly spring into action rather quickly as soon as a member of the public gets frustrated and starts pulling down the barriers, dragging that person off, arresting them and so on. You can see that this is a mess. The Government have made the situation worse, and using the law in this way is discrediting in every possible way.
I saw somebody waving a placard at me on the way in that said, “Kill the Bill”, and I agree. I want this Bill to go away. I would love it to disappear. I hate everything about a lot of the things that were brought in through that policing Bill. Any civil libertarian does not want to lose liberties in the way we did; I agree with all of that. The noble Baroness, Lady Jones of Moulsecoomb, has said—and I take her at her word—that she has not brought in her fatal amendment lightly. She has lost sleep over it. That is fair enough; she is doing what she thinks is right in good conscience.
In the end, if the Government are behaving constitutionally irresponsibly and tearing up conventions, I am not prepared to imitate them. As far as I am concerned, the only way that we can behave, in good conscience, is to condemn the Government for what they have done, call on them to get the police to do their job and stop using the law inappropriately, and ultimately express our regret. We should not imitate them by unconstitutionally asserting in an unelected Chamber that we overthrow the elected House.
I so often disagree with the elected Members up the Corridor that it is boring. Who cares what I think? I am here not through the electorate or the public. We are all here because somebody put us here—goodness knows, that is a controversial enough matter—and we have no more legitimacy other than that somebody somewhere thought we were a crony at some point. They made a mistake there with me, let me tell you.
I am afraid that we should not put a fatal amendment through. However, this should be condemned absolutely through the regret amendment. I support the Labour amendment.
Lord Hogan-Howe (CB)
My Lords, I will be very brief, your Lordships will be grateful to know. I support the regret amendment in the name of the noble Lord, Lord Coaker, which I think is the right thing. I think the arguments made by the noble Lords, Lord Reid and Lord Rooker, are profound. The vote last night was clear. The Commons had the chance to get rid of it and did not.
The comments of the noble Baroness, Lady Fox, made me think that it is important to remind us of just one thing. All the criticism of the police has been that, in the past, they have done too little when protestors have been doing too much. They have not done that just because they were being incompetent—although some may argue they were—but because the Supreme Court made a decision a few years ago which left them with some dilemmas. It said that obstruction of the highway was not merely a simple offence anymore. Obstruction of the highway requires no intent or recklessness. It is an absolute offence; you either block the road or you do not. But the Supreme Court said that far more than that has to be considered when making a decision about arresting someone. Is there an alternative route? Is there something else you could do to avoid this obstruction? That is fine if there is a planned protest. It is not fine if, at 5pm today, some poor inspector is confronted with a problem and has to resolve it. That is why this Act has been really important.
Part of this conclusion is about the definition. I agree entirely that this is the wrong way to include this definition. I do not think anyone, even the Government, argued that it is the right way. That is why I support the regret amendment. Providing an increased lack of clarity for the police is likely to lead to more problems rather than less. The problems were not just around the lack of clarity from the Supreme Court decisions but due to some of the protests that were taking place and the disruption they were causing—for example, around Heathrow and many significant things we need to keep our people safe and secure. The law was being abused in a way that was hurting too many people.
For all those reasons, I support the regret amendment put forward by Labour. I cannot support the noble Baroness, Lady Jones, although in my humble view it was the most powerful speech she has made while I have been here—though I am sure she has taken other opportunities that I have not seen.
Baroness Hayman (CB)
I am extremely grateful to the House, and I will be very brief.
No one has mentioned the last time we had a debate, with great passion, on the issue of statutory instruments and voting them down in 2015. I was torn on that occasion between what was a rather elegant delaying Motion, rather than one defeating an SI, and the standard regret Motion. I find myself in a very similar position now. I will not repeat the constitutional outrage that I think this statutory instrument is, or the arguments for maintaining the precedent, protocol and conventions of this House in not defeating statutory instruments, but this cannot go on for ever.
Lord Paddick (LD)
My Lords, we on these Benches associate ourselves with the remarks of the noble Lord, Lord Coaker, on the tragic events in Nottingham.
Like the noble Lords, Lord Pannick and Lord Lisvane, I will not say much about the substance of the SI. If the Home Office had realised that the Public Order Act 1986 needed to be amended before the Bill had left the other place, we would not be here now.
I want to talk about the constitutional issue, described by the noble Lord, Lord Hunt of Wirral, of a Government changing primary legislation by means of secondary legislation within months of this House having voted against that primary legislation. As we have heard, this is unprecedented, or, as the noble Lord, Lord Pannick, put it, a constitutional outrage.
On Monday, this House will have the Second Reading of the British Nationality (Regularisation of Past Practice) Bill. This primary legislation retrospectively changes primary legislation by means of a two-clause fast-tracked piece of primary legislation. Not only is this the proper way of amending primary legislation but it shows that it can be done quickly and easily. There is no need for the will of this House, expressed through a recent Division, to be overruled by means of secondary legislation when a single-clause fast-tracked Bill could have done the same job without creating an unconstitutional precedent.
Noble Lords opposite may say that it is no big deal, but the Prime Minister said that his Administration would have
“integrity, professionalism and accountability at every level”.
I will return to the issue of integrity in a moment, but failing to amend the 1986 Act in the other place clearly shows a lack of professionalism, and failing to correct the mistake by means of primary legislation shows a clear lack of accountability because, as the noble Lord, Lord Pannick, said, scrutiny of secondary legislation is cursory.
On integrity and the Boris Johnson resignation honours row, Michael Gove, a senior Government Minister, said yesterday on the BBC Radio 4 “Today” programme:
“The appropriate procedure was followed”.
He went on to describe it as
“a process we are all familiar with as part of the constitution … it is appropriate to look at all these processes. They all have their own coherence in accordance with past practice and due process … All Governments work according to precedent … those are protocols that govern this particular procedure, and I think Governments overall have been criticised sometimes for departing from due process. I think it was appropriate and right that the Prime Minister and the Government followed due process in this way … I know it’s old fashioned to want to use precedent and independent institutions to establish how all these sorts of things should be decided, but then precedent and independent institutions are, I think, the two of the constitutional bulwarks that are important”.
This House is an independent institution, and this SI breaks long-established precedent. In answer to a question about changing precedent in connection with resignation honours, Michael Gove said:
“The inference of the question is that we should alter precedent, and that we should in some way say to independent institutions that they should operate in a different way from which they have been constituted. I think what we have here are the existing constitutional machinery working as it was designed to do”.
So there we have it: a Conservative Government who believe that independent institutions should not operate differently from how they have been constituted, and that precedent should not be altered apart from when it suits them. That is the very definition of a lack of integrity.
This House voted against the provisions in this statutory instrument by a majority in a Division on primary legislation in February this year. There is no precedent to overturn a decision of this House on primary legislation by means of secondary legislation. I am reminded of the words of the noble Lord, Lord Forsyth of Drumlean, addressing the amendment to deny the Illegal Migration Bill a Second Reading, which he considered unconstitutional. He said:
“I do not think that any Member of this House who respects its values and its role could possibly go through the Lobbies and vote for that amendment”.—[Official Report, 10/5/23; col. 1801.]
I adapt his words and apply them to this situation: I do not think that any Member of this House who respects its values and its role could possibly go through the Lobbies and vote to allow this statutory instrument to pass.
Noble Lords on the Labour Benches will be complicit in undermining the status of this House if they do not vote for the fatal amendment. The noble Lord, Lord Coaker, said that the Official Opposition will respect convention and not vote for the fatal amendment. Why, when the Government have not respected convention? I say to the noble Lords, Lord Reid and Lord Rooker: of course it is right that the other place should have the final say, but if we vote down this statutory instrument, the other place can introduce a one-clause Bill to achieve exactly what this statutory instrument is trying to achieve in a non-constitutional way.
If, as appears ever more likely with each passing day, there is a change of Government at the next general election, noble Lords on the Conservative Benches will have created a precedent that they are likely to regret for many years to come, when the incoming Government use this precedent to undermine the will of this House in future. We will vote for the fatal amendment.
Lord Sharpe of Epsom (Con)
My Lords, I thank all noble Lords for their contributions to what has been a fascinating and powerful debate. Before I start my response, I join the noble Lord, Lord Coaker, in his remarks about the situation in Nottingham. As he did, I thank the emergency services and express my sympathies to the victims and their families.
I am obviously going to refute the allegation that this is in some way unconstitutional, or indeed an outrage. I have already set out why the Government have brought forward the measures, and the fact that it is indeed proper. The sequencing of debates and votes during the passage of the Public Order Act 2023 meant that the House of Commons was unable to consider the measures. Now that the elected House has approved the measures, we must respect its will and do the same—a point that has been made powerfully by a number of noble Lords.
The delegated powers being used existed prior to the introduction of the Public Order Act 2023. The powers were available for the Government to use during the passage of the Act—these are comments I made in my opening speech. Those powers were scrutinised by the Delegated Powers and Regulatory Reform Committee, which recommended that a definition of
“serious disruption to the life of the community”
be included in the Police, Crime, Sentencing and Courts Act 2022, coupled with a power to amend the definition by affirmative procedure regulations. This recommendation was accepted and implemented in full.
It is entirely right that the Executive use powers conferred by both Houses of Parliament to allow the elected Chamber to consider the proposed change in law. The other place has now had that opportunity to consider these measures and has approved them, following debate on the Floor of the House. So this is not defying the will of Parliament, as some have suggested, or committing a constitutional outrage. As the noble Lords, Lord Reid and Lord Rooker, pointed out, we are actually respecting it. This cannot be sent back, so to not do this now would be to enshrine a lack of clarity and consistency in protest law, as my noble friend Lady Stowell noted. That will affect the police, the public and of course protesters themselves. Any delay in this fast-moving situation risks, as I pointed out in my opening remarks, continuing to encourage the public to take matters into their own hands—a point that was very well articulated by my noble friend Lord Jackson.
To the noble Baroness, Lady Fox, who knows I respect her greatly, I say that this is enabling the police to do their job with more clarity—a point that the noble Lord, Lord Hogan-Howe, made with considerable force.
My noble friend Lord Hunt asked some very sensible and searching questions about the Explanatory Memorandum, which I would like to address. To the noble Lord, Lord Lisvane, I say that the Government published the Explanatory Memorandum and have updated it. The primary focus of an Explanatory Memorandum is to provide clarity on the content of a statutory instrument’s provisions. Additionally, the vote excluding the similar measure from the Public Order Act was only held earlier in the year. All the information on the vote is readily available in Hansard.
That said, we recognise the Secondary Legislation Scrutiny Committee’s criticism and the importance of transparency in Explanatory Memoranda. So I can confirm, as has been noted, that the updated memorandum has been published. It was not published before the debate in the House of Commons, but the changes to the Explanatory Memorandum are relatively minor; they do not add new information. They reference the votes and clarify the extent of targeted engagement, and are in direct response to concerns raised by the Secondary Legislation Scrutiny Committee. The Home Secretary set this out clearly in yesterday’s debate in the other place.
On the consultation, another subject that has been raised, I again have to refer back to my opening remarks. This statutory instrument does not create new powers. The Government have always been clear that the delegated powers were needed to be able to quickly respond to evolving protest tactics. As they do not grant new powers to the police but clarify the extent of existing powers, it was deemed disproportionate to carry out a full public consultation. Targeted involvement with the National Police Chiefs’ Council, the Metropolitan Police Service and other police forces was the appropriate approach. All have welcomed clarity in the law, and the Metropolitan Police Service specifically welcomed clarity as to how the police should consider serious disruption in relation to imposing conditions.
The noble Lord, Lord Coaker, suggested that new powers were being created and referenced the Chief Constable of Greater Manchester Police. As I have mentioned, and I have to stress again, these measures do not create new powers but clarify existing ones. The Commissioner of the Metropolitan Police Service, the force most affected by protest in England and Wales, has asked for further clarity in the law. I think it is very evident from the events we are seeing at the moment how significant and necessary that clarity is.
I do not think there is much point in me saying very much else in answer to the questions. I think I have addressed the majority of the issues that I did not address in my opening remarks. As I said earlier, I am grateful for the constructive and helpful questions. I will take some of these reflections back to the department and to my noble friend the Leader of the House, who is not here at the moment. These regulations are designed to ensure public order legislation is clear, consistent and current. They will also support the police in striking the correct balance between the rights of protesters and the public. I commend them to the House.
Lord Coaker (Lab)
My Lords, I thank everyone who has taken part in what has been an interesting debate. I start by saying to the noble Lord, Lord Jackson, that nobody is saying that the current protests that we have seen are acceptable. We all agree that something needs to be done about it and that they are unacceptable. The whole debate about the instrument before us is around the appropriate way for the state to respond in balancing the rights of protesters and the public.
My contention is that the Government, through secondary legislation, are changing various measures that we only just passed in the Public Order Act—including, for example, the threshold that the noble and learned Lord, Lord Hope, referred to, where “more than minor” was linked just to the particular offences of tunnelling and locking on. Indeed, I was rebuked when I said that that threshold was too low and we should have a higher threshold; it was said to me that it refers only to the offences of locking on and tunnelling. As the noble and learned Lord, Lord Hope says, what the Government have done—they actually pray in aid the noble and learned Lord, who we have heard is very unhappy with the process—is extend that. That is what this is about.
There has been no opportunity for anyone in this House to say that that is inappropriate as a way of controlling protests. Nobody has been able to say that that threshold is inappropriate; we just have to accept it because it is done by secondary legislation and is unamendable. That is the point.
Then we come to the whole point of process, which is the point of my regret amendment and the point of debate for us all here. There are choices before us in how we respond to the fact that the Government have driven a coach and horses through the way that parliamentary democracy in this country works. There is absolutely no question that that is what they have done.
The convention does not say that you change primary legislation by secondary legislation. The Secondary Legislation Scrutiny Committee says that it cannot find another example of that being done. If you cannot find another example of it being done, it probably means that the convention is that you do not do it. Therefore, the convention must be that, if you want to significantly change legislation with respect to protests, you do so through primary legislation. I think that is the majority view—apart from one or two people shaking their heads at me, which is fine. The challenge before us is how we respond to the fact that the majority of people, I suggest, in this place think that the Government have acted inappropriately in dealing with this issue. That is the question.
You might say that we should do nothing about it and that it does not matter. The Tory Whip will say, “Pour in. Vote down Coaker’s amendment. Support the right to lock up all these Just Stop Oil people. It doesn’t matter. Convention doesn’t matter. The way the constitution operates in this country doesn’t matter. Pour in. Just vote it down. He’ll shut up in a minute, it’s fine”. But what has happened is absolutely outrageous. I say to noble Peers opposite that this is an opportunity for the Conservative Members of this House to abstain and say that they accept that this is the wrong way for Parliament to proceed with respect to this matter. Do not just pour in and say it does not matter. It fundamentally matters.
Baroness Stowell of Beeston (Con)
The noble Lord, Lord Coaker, is giving a customarily powerful closing speech. Will the noble Lord at least acknowledge that it is not just, as he is alleging, the Government who have driven a coach and horses through convention over the past few years, but that Parliament, in this House and down the Corridor in the other place, has also done that? My contention earlier was that it takes two to tango. We have got to a situation here whereby the Government are being forced to do unconventional things because of the way in which we collectively have had to conduct ourselves. It should be for him and I to agree that we need to move on and find a better way in which to conduct business than we have seen of late. It requires us all to reflect and not just for the Government to do so—although I accept that they need to do so.
Lord Coaker (Lab)
That leads me nicely on to the point that I am trying to make. Conservative Peers have a choice to make as to how they respond to the way in which the Government have undermined the conventions of this House by abstaining on the vote. I have a choice to make and I am saying to my party from the Front Bench that we should respect the conventions of this House by not voting down the will of the elected House of Parliament. I am being criticised for not supporting the fatal amendment. As the noble Lord, Lord Paddick, and the noble Baroness, Lady Jones, have just said, they think that I should be suggesting that to my party. That undermines convention and I will not recommend it to His Majesty Opposition; it is inappropriate. That is the way in which I am seeking to respect conventions of this House—by not suggesting to His Majesty Opposition that they oppose what the elected Government of this country have put forward.
I have to accept my responsibility and make suggestions on how my party should vote on this. The noble Lord, Lord Paddick, will have his view about how he thinks his party should vote. The noble Baroness, Lady Jones, has outlined how she thinks the House should vote. I am saying to Conservative Peers that they have an opportunity now, through the vote they make, to deliver their verdict on how the Government have operated with respect to the conventions of this House. I contend that they have driven a coach and horses through the conventions of this House, whereby primary legislation is not changed by secondary legislation.
At its heart, that is what my regret amendment is about—trying to respect the conventions of the House while expressing regret with respect to the way in which these public order regulations have been carried through. At the end of the day, that is a choice that people will have to make. I have made my choice with respect to my party. I am saying that we should abstain on the fatal amendment but support my regret amendment. Others will have to make their choice. I hope that they make the right one.
Baroness Jones of Moulsecoomb
Leave out all the words after “that” and insert “this House declines to approve the draft Public Order Act 1986 (Serious Disruption to the Life of the Community) Regulations 2023 because Parliament has already rejected during consideration of primary legislation the proposals contained within those Regulations”.
Baroness Jones of Moulsecoomb (GP)
There are two ironies here. The first is that I do not think for one moment that this piece of legislation is going to catch any more protesters. People who think that they are defending the planet are very dedicated and creative. They will come up with other ways of protesting, so this particular law is likely to catch other people.
The second irony is that I, who complain endlessly about all of the ridiculousness that happens here and am very short of patience when I am told not to run in the corridors and things like that, am defending the status quo. That is an irony—that I want us to respect the conventions. Therefore, I should like to test the opinion of the House.
Financial Services and Markets Bill
Tuesday 13th June 2023
(11 months ago)
Lords ChamberRead Full debate Financial Services and Markets Act 2023 View all Financial Services and Markets Act 2023 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 124-III Third marshalled list for Report - (9 Jun 2023)
Lord Holmes of Richmond
“Designated artificial intelligence officer
(1) The Secretary of State must by regulations provide that companies operating in the financial services sector who use artificial intelligence (“AI”) must have a designated AI officer.(2) The AI officer under subsection (1) has responsibility for ensuring the—(a) safe,(b) ethical,(c) unbiased, and(d) non-discriminatoryuse of AI.(3) The AI officer under subsection (1) also has responsibility to ensure that data used in any AI technology is unbiased.(4) Regulations under this section are subject to the affirmative procedure.”Member’s explanatory statement
This amendment would require firms in the financial services sector that use AI to have a designated AI officer.
Lord Holmes of Richmond (Con)
My Lords, in moving Amendment 108 I will speak also to Amendment 109 in my name and, in doing so, I declare my technology interests as set out in the register. The purpose of both amendments is predicated on the fundamental truth that AI is already extraordinarily powerful and pervasive across our financial services, impacting so many elements of people’s experience and ability to access and avail themselves of financial services. If AI is to human intellect what steam was to human strength, we see the extent of the issue.
In Committee, the Minister perhaps rightly suggested that it would be wrong from a policy perspective to have an AI reporting officer in financial services and not consider this across the whole of the economy. If so, will my noble friend take back to the Treasury the need to work across departments—with the Business Department and the newly formed DSIT—to consider an approach where an AI-responsible officer on the boards of all companies would be considered, for the benefit of all those involved in the provision of those services; in this context, financial services? Perhaps this would be a good topic to work up for the AI summit which will be taking place in London later this year. Similarly, the UK has an extraordinary opportunity to be a leader in ethical AI, and I ask my noble friend whether it would make sense, with colleagues across government, to expand the specificity of these amendments in financial services and look at how they might be implemented, coming off the back of the AI summit in the autumn.
The Bill provides an opportunity to raise the whole question of AI. I bring these amendments to do just that. I believe that it would make a real difference to financial services—consumers, businesses and regulators alike—if these amendments were considered in that context, but I completely accept that there is a broader context and would welcome my noble friend’s comments on both the specific and the broader context. I beg to move.
Lord Harlech (Con)
My Lords, I thank my noble friend Lord Holmes of Richmond for tabling these amendments for discussion. The Government are firmly of the view that artificial intelligence has the opportunity to revolutionise every aspect of our lives, and we are committed to unlocking the enormous benefits that it can bring, in a way that is fair and allows everyone in society to benefit.
In March 2023, the Department for Science, Innovation and Technology published proposals for a new regulatory framework for AI regulation in the government’s AI regulation White Paper. This sets out a proportionate, adaptable framework for AI regulation, underpinned by five potential cross-sectoral principles, which include concepts such as fairness, safety and transparency, to strengthen the current patchwork approach to regulating AI indirectly.
Through the proposals for the new AI regulatory framework, we are building the foundations for an adaptable approach that can be adjusted to respond quickly to emerging developments. The vast majority of industry stakeholders we have engaged with so far agree that this strikes the right balance between supporting innovation in AI while addressing the risks it presents. We are committed to a proportionate approach to AI regulation that allows us to maximise the benefits that AI can bring to the economy and society and can effectively respond to the fast-moving risks presented by AI.
The White Paper is currently undergoing public consultation until 21 June 2023. We will continue to work with experts and stakeholders across the AI economy during the consultation period and beyond in order to identify emerging opportunities and risks and ensure that the regulatory framework can adapt to them. Furthermore, the FCA, the PRA and the Bank of England recently published a discussion paper on how regulation can support the safe and responsible adoption of AI in financial services. Last week, the Government announced that the UK will host the first major global summit on AI safety this autumn.
While I am very sympathetic to the intentions behind my noble friend’s Amendments 108 and 109, the Government believe that they could result in unintended complications in the use of artificial intelligence in the financial services sector. I hope that I have sufficiently reassured noble Lords that the Government remain committed to an effective and consultative approach to the use of artificial intelligence within the financial services sector. Noble Lords can be reassured that the Government will continue actively to involve Parliament in decisions in this area, particularly in relation to the future creation of a digital pound. Therefore, I ask my noble friend to withdraw his amendment.
Lord Holmes of Richmond (Con)
My Lords, I thank the Minister for his full response, which is appreciated. It is a thoroughly good thing that, particularly this year, we have heard more conversations and considered thought around AI, both in this place and in wider society, than we probably had in preceding years. I hope that we can have increasing public engagement and public debate around AI to ensure that everybody is enabled to take the benefits, understand the risks and understand that they are mitigated, managed and eradicated by regulators and legislators so that the UK can be the place where ethical AI is championed for the benefit of businesses, consumers and communities alike. I very much look forward to the global summit later this year. I beg leave to withdraw the amendment.
Baroness Penn
“(aa) Part 5 of Schedule 2, and section 2 so far as relating to that Part;”Member’s explanatory statement
This amendment would bring the amendments made in Part 5 of Schedule 2 to the Bill (which relate to the third country CCP run-off regime) into force on the day the Act is passed.
“(e) section (Politically exposed persons: money laundering and terrorist financing);(f) section (Politically exposed persons: review of guidance).”Member’s explanatory statement
This amendment would ensure that the new Clauses on politically exposed persons to be inserted after Clause 71 would come into force on the day the Act is passed.
Viscount Trenchard
“(4A) The Treasury must make regulations under subsection (3) so as to bring section 1 and Schedule 1 into force for the purposes of revoking, within the period of two months beginning with the day on which this Act is passed, the provisions mentioned in that Schedule connected with Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers.”Member’s explanatory statement
This amendment ensures that the retained EU Law which replaced the Alternative Investment Fund Managers Directive and associated legislation will cease to have effect no later than two months after the passage of the Bill.
Viscount Trenchard (Con)
My Lords, I have tabled Amendment 120 in the same form as I tabled Amendment 246 in Grand Committee, and I am again grateful to my noble friend Lady Lawlor for adding her name in support of it.
I confess to having been rather disappointed by my noble friend the Minister’s response when she replied to that debate. She started by reminding the Committee that throughout this Bill the Government are seeking gradually to replace all retained EU law in financial services,
“so that the UK can move to a comprehensive FSMA model of regulation”.—[Official Report, 25/1/23; col. GC 68.]
She said that the Government were prioritising those areas that offer the greatest potential benefits of reform and mentioned three such areas: the Solvency II review, the wholesale markets review, and the listings review undertaken by my noble friend Lord Hill of Oareford. She provided some statistics which show that the UK is the world’s second-largest global asset management centre, with $11.6 trillion of assets under management, representing a 27% increase in the past five years. My noble friend rightly suggested that the asset management sector is in good health. However, I am bemused that she and the Treasury officials who advise her have already forgotten the controversy over the introduction of AIFMD. She suggested that the Government were not aware of any evidence that reform of the alternative fund sector is a widely shared priority across the sector. She specifically said that it is the Government’s intention to move all retained EU law in the financial services field into the FSMA model and that this will apply to this area too, but not as one of the first wave of priorities.
I agree that reform in the three areas that the Minister recognises as priorities is also a priority, but all of them are more complicated and I do not believe that any of them are candidates for complete revocation without partial replacement. She may remember that I have long advocated the abolition of the unbundling provisions for research contained within MiFID II and have argued for many of the recommendations made by my noble friend Lord Hill with regard to listings. From the beginning, the Solvency II regulations were inappropriate and disproportionately severe for the UK insurance market, many of whose participants believed that they were a deliberate attempt by the EU to damage the London insurance markets. However, none of those pieces of legislation are, in their entireties, candidates for revocation without partial replacement. But AIFMD is such a candidate.
My point is that this Bill is principally an enabling Bill, and it hardly revokes any EU law right away. However, AIFMD was universally resisted by the industry, the regulators, the Treasury and the Bank. It was foisted on us. It is unnecessary, so why do we not get rid of it now? We do not need further consultations on it. It has diverted many small asset managers away from the UK over the years, and the costs and burdens involved in compliance with it are completely disproportionate. Many innovative, so-called alternative strategies are developed by small companies, and I am aware of many that have failed to bring their ideas to market or have been forced to merge with another firm because of these regulations. As I explained in Committee, the motivation for the unexpected introduction of AIFMD was political, driven by French and German allies of Mr Manuel Barroso, who was seeking reappointment as Commission President. Charlie McCreevy, the Internal Market Commissioner at the time, was opposed to the measure.
I wish the Bill had been designed to abolish without delay not just AIFMD but parts of MiFID II, EMIR, et cetera. But AIFMD is the one piece of anti-UK bureaucratic red tape foisted on us by the EU, and more than two years have passed since the end of the transition period. It is depressing that my noble friend suggested that it will, in due course, be replaced rather than revoked. Those who are interested in the story should read A Report on Lessons Learnt from the Negotiation of the Alternative Investment Fund Managers’ Directive by Dr Scott James of King’s College London, prepared for the British Venture Capital Association.
Baroness Lawlor (Con)
My Lords, I support my noble friend Lord Trenchard’s Amendment 120, to which I have added my name and which I spoke in favour of in Committee. He then spoke of the history of this legislation, which was unintended by one EU commissioner and then pushed through, for matters of politics, by his successor under José Manuel Barroso: Michel Barnier, who saw it as part of the plan for a banking and monetary union for the EU—a plan that the UK was and is not part of and has no intention of joining.
The whole UK financial sector accounts for 8% of our economy—the same proportion as in the US and Canada—whereas financial services account for only 4% of the two major economies of the EU. The ironic thing about this legislation is that 75% of alternative funds were in UK businesses then, and the funds account for that sort of proportion in our own sector today.
My main concern is that this diverse sector, which has flourished in the UK under UK law, remains under an opaque legislative system. EU regulation is unpredictable and the EU’s system, with the precautionary approach, seems to cover every eventuality but in practice it can fall short. It often favours big players over small and nimble entrepreneurs and the challengers. There is little certainty about transactions in advance, and little predictability as to how the regulators will judge.
We spoke about this in respect of the whole sector in Committee, but it is important for the alternative funds industry in particular. If we move, we need to move away from the way of thinking into which our regulators have crept. They have absorbed this precautionary approach to regulation from the EU—as well they might, after two decades.
I was glad my noble friend suggested that the hope —the intention—is that we will end EU law, but I stressed then, and would like to stress again, the importance of ending the thinking about precaution and hesitation in grasping the opportunities once we are out. That is very important for the regulators in this sector.
I shall just give a few examples. We have in English law an approach to business which, given the principle of contractual autonomy, means that the law honours contracts and contractual arrangements. It does not rely on the subjective principle of good faith, which creates uncertainty for practitioners about the expected moral and other standards of behaviour. In German civil code, parties must observe good faith in both negotiation and in performance of contracts but, without a definition of good faith in German contract law, things are uncertain.
The other aspect of UK law that I think is good for the sector is that it is flexible. This is a very flexible sector, and the judiciary’s ruling, interpreting and developing of law through its application to specific cases in different sectors moves with the times and adapts to innovation—the new structures and transactions of a fast-moving business. But that cannot happen under the rule books or their architects, the courts, or indeed in the thinking, because courts, by contrast, are not subject to the constraints of the legislative process and can react and achieve change more effectively, and this judiciary is recognised globally to be wise, deeply knowledgeable and authoritative.
I took heart from the Minister’s assurance in Committee, and again during the first day of Report, about the intention to revoke all EU laws and replace those that were considered necessary with—I use her words—an “appropriate replacement” before eliminating any aspect of the legacy. But perhaps I could ask her to think again about AIFMD. Waiting for an “appropriate replacement” sounds more like Whitehall-speak for regulation of the type that has been absorbed and reflected by our regulators under the Treasury in recent decades. Perhaps this piece of legislation could be used as a pilot for ending something that, as the noble Viscount said, was not wanted by the sector, and which the Committee warned could have dangerous repercussions for the UK’s role in global markets and in dealing with America. Because of that, there are very good reasons to let it go, because it is not a consumer-facing industry; it is for the sector itself. It can only be to the good if this sector is set free without any replacement, so that it can benefit under the benefits of UK law.
Lord Moylan (Con)
My Lords, I will speak only briefly in support of my noble friend Lord Trenchard. It was commonly known, and widely reported in the newspapers at the time, that following the financial crash of 2008, the EU, which has always had its doubts and scepticism—indeed, hostility—about what it referred to as Anglo-Saxon finance, withdrew the indulgence that it had previously shown towards the City of London as part of the European Union and started to enact legislation that was injurious to the City of London, and quite deliberately so, to the annoyance of the Chancellor of the Exchequer at the time, George Osborne, who was reasonably open about his opposition.
This instrument, the alternative funds directive, was the prime example of that, although there were others. It contributed significantly to the fact that there was much more support for Brexit in the City of London than people often wanted to admit at the time, or have admitted since, because they understood that that oppositional turn had taken place and the tide was now flowing against the City. So I agree with my noble friend that it is very difficult to see why, now that we have the opportunity to remove it, we continue not to do so year after year—and there are other examples of that.
I also support the remarks of my noble friend Lady Lawlor. There is a prevalent idea—and not just in financial legislation—that, as we get rid of European Union legislation that we no longer need, we need to replace it with legislation that almost replicates what the European Union was doing. A prime example of that outside the field of financial services is the Procurement Bill, a massively complicated piece of legislation replicating European Union legislation, almost in great detail. In fact, the procurement legislation of the European Union—which was obviously designed for 28 states, not simply for the United Kingdom—was there largely to deal with problems embedded in a history of municipal corruption, which were manifest in various European states but, I am glad to say, of which the United Kingdom has a long, proud history of being pretty free, with one or two exceptions. It was not necessary to replicate it in the detail in which it was done.
There are genuine concerns, certainly among those of us on this side of the House, that insufficient dispatch is being brought to getting rid of injurious legislation that we inherited from the European Union but can now get rid of, and that there is a mentality that the right way to get rid of something is, in effect, simply to re-enact something very similar after a period of consultation. I have great sympathy with what my two noble friends said, and I hope that the Minister, when she replies, will be able to give them some comfort.
The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)
My Lords, I am afraid that, as my noble friend Lord Trenchard set out, his amendment has not changed since Grand Committee and neither has the Government’s response, which he so adeptly summarised on my behalf. We are not able to support the amendment for those reasons.
While I recognise all three of my noble friends’ strength of feeling on this issue, it is important that we do not inadvertently damage the UK fund sector or its access to international markets. However, I reinforce the Government’s commitment to revoking all EU law in financial services—but with prioritisation and process. I hope that all three of my noble friends will take heart from the fact that we are on the last amendment on Report and near the end of the process by which we can see the Bill on the statute book. We can then begin the process of the revocation of EU law and its replacement—or perhaps not, depending on the individual circumstances—with an approach that is guided by what is best for the UK and our financial services sector, to support growth in that sector and across the whole country. That is something that we can all support as a result of the Bill. I hope that my noble friend is able to withdraw his amendment.
Viscount Trenchard (Con)
My Lords, I thank my noble friend for her reply. I am slightly more reassured than I was by her reply in Committee. I nevertheless do not feel that she yet recognises the very clear point that this regulation was hugely controversial and was opposed by everybody involved in the financial services industry—there were no supporters of it. I am afraid that we have become rather inured to operating under it, but I can assure her that there are still very large sectors of the asset management industry that would be delighted if the Government would show that this is a priority area for revocation when she gets going with the job of revoking EU law and replacing it with a more reasonable UK-friendly alternative regime.
I thank my noble friend for her response. I also thank all those still in the Chamber for their patience in sitting here right to the end and sharing in this final amendment. I beg leave to withdraw my amendment.
Correction
(11 months ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate
The Deputy Speaker (Lord Beith) (LD)
My Lords, I must report a correction to the voting figures on the amendment in the name of the noble Baroness, Lady Jones of Moulsecoomb, for the previous business. The corrected figures are: Contents 68; Not-Contents 154. That does not change the outcome.