Grand Committee
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Arrangement of Business
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The Deputy Chairman of Committees (Baroness Finlay of Llandaff) (CB)
My Lords, if there is a Division in the Chamber while we are sitting, this Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes. The time limit for this debate is one hour.
Defence Policy: Deterrence
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Lord Trefgarne
To ask His Majesty’s Government whether deterrence remains a core element of the United Kingdom’s defence policy.
Lord Trefgarne (Con)
My Lords, I will not detain the Committee for all the time allocated to me but will do my best to be clear and precise. Deterrence covers a wide range of defence activity. Nuclear is at the top. We have never fired a nuclear weapon in anger, following the two weapons fired by our US allies to end the Second World War. Nuclear weapons are to be used only when our “supreme national interest” so requires. So far, that has not occurred. I hope I can be assured that the new Defence Ministers in post have accepted briefings on these matters, whatever their inclinations may be.
At the other end of the scale, we cast our minds back to 1982 when HMS “Endurance” was on patrol in the south Atlantic. We withdrew it, somewhat unwisely, and the rest is history. The noble Lord, Lord West, who is not here this afternoon, played an important part in the Falklands conflict all those years ago, as I believe did the noble and gallant Lord, Lord Stirrup. Are any British forces deployed to the south Atlantic at present? It seems that potential enemies there are again making unhelpful noises about the Falkland Islands. They were easily deterred last time by a single vessel; when we withdrew it, the rest became history.
Yesterday we heard from the Chancellor about defence spending generally. I felt that her remarks were not wholly awful. But deterrence has to be credible, and I hope that point is made to Chancellor Reeves as well as to the rest of us. There are also threats elsewhere in world, not just in the south Atlantic, and I hope we are taking account of those. I do not intend to detain your Lordships any longer.
Lord Harris of Haringey (Lab)
My Lords, I am grateful to the noble Lord, Lord Trefgarne, for giving us the opportunity to debate this important issue. I will talk about deterrence in the broadest sense. In so doing, I declare my interest as chair of the National Preparedness Commission.
Deterrence is not just about the ability to hit back hard against an aggressor, thereby making that aggression less likely. It is also about demonstrating a level of preparedness against the threat posed and a degree of resilience to recover quickly from any attack mounted. The first duty of government is to keep the country safe and protect its citizens. That is an essential platform on which the nation’s economic growth and prosperity depend.
Increasingly, hostile states pursue their objectives in the grey zone between peace and open conflict. Conventional campaigns are supplemented or preceded by tactics of hybrid warfare involving cyberattacks, campaigns of misinformation and disinformation, and disruption to civil infrastructure, the economy and the vital services on which citizens and communities depend. For example, we have seen a spate of unexplained fires in installations around Europe, and in the past 24 hours have read the news with great interest in that context.
Such grey-zone operations may take place without any associated conventional military activities. They are often conducted by proxies, non-state actors or groups that may be state-controlled, state-sponsored or state-tolerated; or they may be conducted by covert means. They may be plausibly deniable and, although they may fall below the threshold of armed conflict, their consequences are likely to be just as serious as those of a more conventional attack.
Recent years have seen attacks on undersea cables and fuel pipelines; cyberattacks by state-sponsored actors, such as those leading to the SolarWinds hack in 2020 or the Hafnium attack in 2021; the jamming and spoofing of navigation satellite systems; and various sorts of drone activity, which of course can be conducted from hundreds of miles away. A preparedness to respond effectively to such attacks, or to recover quickly from them, makes them less worth while for the adversary and therefore helps to deter them.
The consequences of these grey-zone activities are not just immediate or limited only to recovering from the event itself. Of course there are costs involved in addressing the immediate challenge but, more seriously, there may be a weakening of the nation’s ability to respond effectively to other attacks. More significantly, such attacks and the failure to deal with them effectively may undermine public confidence in the state and the ability of the Government to protect their citizens. That would be a win for any adversary.
Similarly, the objective of misinformation and disinformation campaigns is to sow discord and undermine faith in a legitimate, democratic Government. Such campaigns are fuelled by social media and ever more sophisticated applications of artificial intelligence, but the intent is to undermine citizens’ faith in their Government and the democratic process itself.
Dealing with such challenges may not necessarily involve a military response. It will need a response from the rest of government, local authorities, emergency services and, indeed, the whole of society. Such a level of preparedness and resilience is an essential part of the nation’s defence capability, and it has to be a key component of modern deterrence.
Lord Stirrup (CB)
My Lords, it is a pleasure to follow the noble Lord, Lord Harris of Haringey, with whose remarks I entirely agree. The noble Lord, Lord Trefgarne, has asked whether deterrence is still at the core of the UK’s defence policy; the Minister’s answer will surely be yes, so I shall use my allotted time to highlight just four of the many consequences of that anticipated affirmative.
It is quite clear that this Government, like the last, are committed to the maintenance of our strategic nuclear deterrent, through the continuous at-sea deployment of our Trident-armed submarines. But as we transition from the Vanguard to the Dreadnought, we shall for some time need to operate both classes of boat. However, the two types are very different and will require different crews and different logistic support chains. This will place a considerable strain on the Royal Navy and on defence resources in the round. What planning has taken place to ensure that the strain can be borne without damaging other areas of defence capability?
Of course, nuclear deterrence by itself is not nearly enough. Effective conventional deterrence exercised through NATO is essential if we are to have any chance of avoiding future war. But almost everyone, perhaps most importantly the Secretary of State for Defence himself, recognises that our Armed Forces are too small and inadequately equipped to constitute much of a deterrent at present.
Remedying this will be a long, difficult and expensive task, but, as the saying goes, it is the job never started that takes longest to finish. The substantially increased investment in our fighting capability, our combat sustainability and the defence-industrial capacity that underpins both needs to start now. When will the Government give clear evidence that the security of this country and its people really is their top priority?
I have mentioned nuclear and conventional deterrence, but these cannot be considered in isolation. The NATO doctrine developed during the Cold War recognised the need for a so-called escalation ladder that provided for a graduated response to increasing levels of aggression. One important element of graduated response was the provision of an increased element of choice in the boundary between conventional and nuclear war. Moving from conventional fighting to an all-out strategic nuclear exchange was seen as far too big a step. It would present politicians with almost impossible choices and would leave little or no room for second thoughts on either side. NATO’s tactical nuclear capability is greatly reduced from the Cold War, and the UK’s is now non-existent. What thought have the Government given to these missing rungs on the escalation ladder, which are an important contribution to the overall effectiveness of a deterrence posture?
Finally, deterrence begins in the mind. One area of conflict that is attracting increased attention is termed “cognitive warfare”. It is about getting into the minds of one’s opponents and undermining their will and capacity to resist. It is not a new concept, but new technology such as AI is offering new ways of doing old things. China takes cognitive warfare very seriously, and Russia is already deeply engaged in it. We are currently poor at defending against it, and our offensive capabilities are even worse. We need to do much better if our deterrent capability is to be credible to potential aggressors. What priority are the Government giving to this crucial area of capability?
Today I have been able to do no more than scratch the surface of some very important issues. I hope that future debates will enable me to expand on them. Meanwhile, I ask the Minister to reflect on them most carefully.
Lord Harlech (Con)
My Lords, it is a pleasure to follow the noble and gallant Lord, Lord Stirrup. I declare my interests as a serving Army Reserve officer and a member of the APPG for Climate, Nature and Security. I congratulate my noble friend Lord Trefgarne on securing this important and timely debate. As noble Lords have already alluded to, deterrence is a broad subject, so I shall focus my remarks on the High North.
Due to climate change, natural resources and shifting geopolitical interests, the Arctic High North region has gained significant strategic importance for the United Kingdom. As the region warms, the melting sea-ice creates new opportunities and challenges, establishing the Arctic as a hot zone of environmental degradation, international competition and heightened insecurity. Opening new sea routes makes previously inaccessible resources such as oil, gas and minerals available, transforming the Arctic into a theatre of contest.
The Arctic region is home to critical shipping routes, such as the Northern Sea Route, which are becoming more viable due to melting ice. The NSR runs along Russia’s Arctic coast, providing a shortened connection between Europe and Asia. These routes could shorten global shipping times by nearly 40% and bypass traditional choke points such as the Suez Canal, offering significant economic advantages.
The region contains vast untapped natural resource reserves, including oil, gas and minerals. Control over these resources has become a geopolitical priority for nations with Arctic interests, including Russia, the United States and China, with China self-identifying, despite geographical terms, as a near-Arctic state. The Arctic’s proximity to critical defence zones makes it an area of military interest, particularly nuclear deterrence, early-warning radar systems and missile defence installations. In short, Arctic militarisation is amplifying strategic competition.
Russia has significantly ramped up its military presence in the Arctic, reopening old Soviet bases, building new ones and deploying advanced military capabilities, including nuclear-powered submarines and long-range missiles. The Arctic Trefoil base on Franz Josef Land is one of the most advanced installations, designed to operate all year round in extreme Arctic conditions, equipped with advanced radars, missile systems and infrastructure to support hundreds of personnel.
Russia views the Arctic as vital to its national security and economic future—Arctic oil and gas account for 20% of Russia’s GDP—and its activities there have heightened regional tensions, necessitating a strategic response from NATO and its allies. Russia has deployed sophisticated air defence systems such as the S-400 and Pantsir-S1 to protect its northern territories. These systems can intercept aircraft and missiles at long ranges, providing a protective shield over key Arctic installations and energy infrastructure. Russia has also deployed Bastion coastal missile defence systems along its Arctic coastline. These systems are designed to defend against naval incursions, allowing Russia to control access to the NSR and deter foreign naval forces from operating in the region. Russia frequently conducts large-scale exercises involving thousands of troops, warships, aircraft and submarines.
Deterrence in the Arctic will involve a combination of military preparedness, advanced technology and diplomatic efforts. For the UK, it is vital to maintain a credible deterrent by having the capability to project power in the High North, particularly naval and air power, through all-domain awareness and access considerations for airfields and port infrastructure. Can the Minister say what the United Kingdom is doing to secure supply chains and enhance crisis management capabilities in this region?
To conclude, the UK should focus on deterring aggression, mainly from Russia, and ensuring the stability of crucial Arctic waterways. Through NATO co-operation, military preparedness, and a strong naval presence, the UK can be positioned to safeguard its interests and contribute to the broader defence of the Arctic.
Lord Bilimoria (CB)
My Lords, there is direct deterrence and extended deterrence. The noble Lord, Lord Trefgarne, spoke about the credibility challenge that arises when states question the reliability of a defender’s commitment to protect allies, impacting extended deterrence.
The UK’s continuous at-sea deterrent, the CASD, has kept a nuclear-armed submarine patrolling undetected since 1969 to deter aggression. The nuclear policy in 2024 maintains a minimum credible and independent deterrent, used only in extreme self-defence and authorised solely by the Prime Minister. In 2023 the previous Conservative Government updated and prioritised an integrated multidomain deterrence strategy to counter state and transnational threats, with NATO as central. The UK’s nuclear deterrent pledged to NATO’s defence would be used only in extreme self-defence.
The Labour Government have affirmed NATO as a core to European and global security, and have committed to a new UK-EU security pact and improved defence ties with France, Germany and the Joint Expeditionary Force partners. The current Government pledge absolute support for the UK’s nuclear deterrent, including a triple-lock commitment to four nuclear submarines, continuous at-sea deterrence and future upgrades. Can the Minister confirm all this? Foreign Secretary David Lammy and Defence Secretary John Healey highlighted NATO’s role against Russia’s aggression and reinforced nuclear defence capabilities only in July this year.
Engaging with the moral implications of deterrence policy can lead to responsible decisions regarding the UK’s nuclear arsenal. Effective deterrence requires understanding and addresses complex motivations and perceptions. There are two strategies: deterrence by denial, which seeks to make aggression infeasible and relies on military presence, and deterrence by punishment, which threatens severe consequences but may be perceived as less credible. Historical evidence suggests that denial strategies are generally more reliable than punishment strategies, as they provide clearer signals of intent and capability to potential aggressors. The United States used deterrence effectively in Europe during the Cold War, leveraging its presence to complicate aggressors’ calculations and act as a trip-wire.
Combining deterrence threats with reassurance is crucial to avoiding provoking aggression, as seen with the US strategies towards North Korea. Success in deterrence requires clear communication of what is being deterred and the actions that will follow if ignored.
NATO has now been hugely strengthened by Finland and Sweden joining. At the Madrid summit in 2022, NATO identified Russia as the most significant threat to Euro-Atlantic security and terrorism as a direct, asymmetric threat. Twenty-three NATO allies are projected to meet or exceed spending 2% of GDP on defence, compared to only three allies in 2014. That is very good news. Collective defence is at the heart of the alliance, as set out in Article 5 of the North Atlantic Treaty, which is a huge deterrent in itself.
We must continue to remember that the purpose of nuclear deterrence is to preserve peace, prevent coercion and deter aggression. Collaboration is key to this—the way in which we collaborate with the United States and France on nuclear deterrence, ensuring cost-effective operations. Our independent nuclear deterrence supports thousands of jobs nationwide.
I am a proud honorary group captain in 601 Squadron of the RAF. The “but” here is that the Defence Secretary has expressed concerns that our Armed Forces are unprepared for war, emphasising the need for improved deterrent capabilities against future aggression. The outsourcing of recruits has meant that only 10% of applicants successfully joined the British Armed Forces in 2023. Does the Minister agree that that must change?
I am a member of the GREAT Campaign’s advisory board. We in the UK have the strongest combination of hard and soft power, which gives us great global influence. Our strong nuclear deterrent is a huge element in this combination of hard and soft power.
Earl Attlee (Con)
I am grateful to my noble friend Lord Trefgarne for introducing this Question for Short Debate. I used to read my father’s Hansard when my noble friend was a Minister in the Foreign Office and in the Ministry of Defence.
The noble Lord, Lord Harris of Haringey, is absolutely correct: this is not just about conventional military deterrence. He is right to be worried about the home base and society’s sentiments. If those things were damaged in a conflict, in the grey area, it could have devastating effects on our conventional operations.
I am sure that the answer to my noble friend’s Question is “yes, but”. Many noble Lords have touched on nuclear deterrence, where our defence posture and signalling are absolutely clear and effective. As we have seen, we have not been cowed by President Putin’s nuclear sabre-rattling in the conflict in Ukraine. I am pleased to observe that this Government are as sound as their predecessor on nuclear deterrence but, several years ago, the noble and gallant Lord, Lord Craig of Radley, observed that an inadequate conventional deterrent will result in the nuclear trip-wire being set too low. The noble and gallant Lord, Lord Stirrup, just asked the Minister about tactical nuclear weapons and deterrence; I look forward to his answer.
In conventional deterrence, our signalling is not positive or clear to any potential adversary. For instance, it is easy for a potential adversary to measure our land logistics capability and intent. They will note that we are still selling off perfectly serviceable, brand-new logistic vehicles to meet resource accounting and budgeting requirements. In the current situation, at the large scale of effort we ought to be able to deploy on land in 12 weeks, but I do not think we can do it at all at the moment.
I keep banging on about the essential need to undertake large-scale exercises out of area and overseas to demonstrate and test our conventional capability—or the capability that we should have. My noble friend Lord Harlech touched on the fact that the Russians regularly exercise with large numbers of troops. Yes, it is expensive to do and you can save money by not undertaking such exercises, but it is cheaper than increasing your capability and provides much more conventional deterrence. It also exposes any unrecognised weaknesses in your current capability. Currently, we have too few big exercises and the exercises we undertake are too short in duration, in order to save money.
Noble Lords must not be deluded by the wide range of military operations that we undertake all over the globe at small scale. We are now in the era of state-on-state conflict; that is what we need to deter. We will not achieve that through small operations and exercises, or the completely underresourced Armed Forces that the Minister inherited from the previous Administration.
Lord Harries of Pentregarth (CB)
My Lords, my interest in this area arises from my early academic research on the principles of discrimination and proportion in the just war tradition and their applicability in a nuclear age. This interest was further intensified in my time as dean of King’s College London during the 1980s, when I had the privilege of being a member of a number of think tanks reflecting on the nature of nuclear deterrence, many of them under the influence of the much-missed Sir Michael Quinlan, the architect of British defence policy in its strategic and ethical aspects.
I continue to support a policy of deterrence which contains a nuclear component, but I do so with moral fear and spiritual trembling. It is a morally awesome policy to support. It can be supported only in the belief that it is in principle fundamentally stable, not because human beings are any better than they were—far from it—but because, for the first time in human history, it could not conceivably be in the interest of any power to go to war with another which possessed nuclear weapons. In the words of President Reagan, a nuclear war cannot be won and must never be fought.
I was never a supporter of CND, but it performed an important role in reminding the world of the horrific nature of these weapons. I was appalled a few years ago when there was a period of tension between India and Pakistan to listen to some of the generals involved talking about using nuclear weapons as though they were like any other weapons. They are not like other weapons, and we must never forget that.
We must also not forget that the moral principles which apply to the use of all armed force are equally applicable in a nuclear age: I mean the principles of discrimination and proportion. There are very distinguished ethicists who believe that even the threatened use of nuclear weapons would violate these principles, but when I was most involved, British defence policy was built on the conviction that this was not inevitably the case. I trust that this is so. In that connection, I want to identify with the question raised by the noble and gallant Lord, Lord Stirrup, about graduated deterrence and the ladder of escalation, because that is fundamental to not only British deterrence policy but the possibility of maintaining the use of weapons which are discriminate and proportionate. It is a vital question to which I hope the Minister will be able to give a satisfactory response.
There is an old saying about fighting a present war with the outlook of a previous one. I believe that the major threat at the moment is not the nuclear weapons of another state but their capacity for cyberwarfare. Nuclear weapons are no deterrent to another country that has the capacity to render our whole command and control system inoperative. Although I continue to support our deterrence posture, with its nuclear component, my main concern is in relation to our ability to protect our own command and control structure and our capacity to deter other countries from disrupting it. I hope that the Government will be able to give some reassurance on that.
Lord Balfe (Con)
My Lords, I thank the noble Lord, Lord Trefgarne, for initiating this debate, and I hope that the Hansard is sent to the noble Lord, Lord Robertson of Port Ellen. Of course, deterrence must remain a cornerstone of our defence policy, otherwise there is no reason to have one at all. But it is also important to realise that other countries have a very good grasp of our defence capacity. I do not know whether other noble Lords watched the American series, “Corridors of Power”, a PBS production, from which you could see that the Americans had a much clearer grasp of the limitations of European power than we appear to have.
We need to define much more clearly what we wish to do, then we need to find the resources to do it. I am not terribly impressed with the 2.5% or 3% argument. What we need to look at is what we need and a pathway for achieving it. I was struck last Friday in our debate when the noble Lord, Lord Stevens of Birmingham, pointed out that we had given Ukraine £172 million-worth of equipment, but that it would cost £2.7 billion to replace it. That shows how out of date it was, but it also shows how much money we need to spend to bring our forces up to a level where they can do their job. That is far more important than percentages.
We need to define clearly what our role is in defence. First, it is clearly to defend the home territory. Secondly, I suggest that we need to keep our garrison in the Falklands. Thirdly, we need to keep our bases in Cyprus, which are quite valuable for operations in the Gulf. Finally, we need to pull our resources together with our Baltic allies to look at both the High North, referred to by my noble friend Lord Harlech, and the Baltics, which are within Europe but certainly threatened by Russia. Only by getting together Finland, Sweden and all the countries around the Baltic, including Poland, Germany, the Netherlands and Denmark, are we going to be able to put forward a credible defence. We have to work together and exercise together; we have to have joint exercises and revive the Arctic Council as a viable organisation to talk to the Russians, but also to protect the High North.
Finally, cables and electronic warfare are part of the future, but I often feel that they are seen as an add-on rather than as a key part of our defence capacity, as they should be.
Baroness Smith of Newnham (LD)
My Lords, like other noble Lords, I thank the noble Lord, Lord Trefgarne, for enabling us this afternoon to talk about deterrence and core aspects of UK defence. The noble Baroness, Lady Goldie, the noble Lord, Lord Coaker, and I keep meeting in this venue. We talked about the SDR two weeks ago, we were here again last week, and we are going to meet again in an hour to talk about defence expenditure—so I am not going to touch on defence expenditure, as did the noble Earl, Lord Attlee, and the noble Lord, Lord Bilimoria. I want to pay tribute to the noble Lord, Lord Coaker, and the new defence team, because one concern that the noble Lord, Lord Trefgarne, implied was that the new Government might not be serious about deterrence or about defence.
On Tuesday evening, as a trustee of the Armed Forces Parliamentary Trust, which runs the Armed Forces Parliamentary Scheme, I was at a graduation dinner. Present were the noble Lord, Lord Coaker, because he had been part of the scheme, the noble Baroness, Lady Chapman of Darlington, and Luke Pollard, Min AF. We have among our ministerial ranks people have previously taken the time from the Back Benches or from opposition to ask what defence is all about. It is important to realise that the Government are saying on defence and deterrence almost exactly the same as the previous Conservative Government and almost the same as the Liberal Democrats. We are now all committed to CASD and to the defence of the realm, and we understand the importance of deterrence.
On deterrence and preparedness, which we heard about from the noble Lord, Lord Harris of Haringey, and given that I am winding for the Liberal Democrats, I remind noble Lords of the importance not just of defence commitments but of diplomacy and development, because if we establish the right relationships before we end up in a state where we need to prepare for war, we might make better use of the British budget. Deterrence is important, CASD matters, but so do our alliances, such as NATO and the bilateral relationships which this Government are seeking to build and foster. That is all incredibly important, yet, as we have heard from various noble Lords, the challenges we face in the 21st century are rather different.
In his incredibly important contribution, the noble and right reverend Lord, Lord Harries of Pentregarth, reminded us about a range of issues that we need to think about in nuclear policy and, more broadly, about discrimination and proportionality. He reminded us that our nuclear posture was initially determined in a period of balance: the Cold War, when mutually assured destruction meant that it was unlikely that any side would use a nuclear weapon. They had their deterrent function. In the current world, we face not just state-based threats but threats from non-state actors; not just conventional threats but cyber and hybrid threats. In respect of naval policy, we have the noble Lord, Lord West, repeatedly banging the drum for maritime. Who is banging the drum to deal with hybrid threats and cyber, and to ensure that we have a fully-fledged deterrent alongside our nuclear deterrent?
Baroness Goldie (Con)
My Lords, my noble friend Lord Trefgarne is right to pose his vital Question. It gets to the heart of what a defence capability is, as he, the noble Lord, Lord Harris of Haringey, and the noble and gallant Lord, Lord Stirrup, so clearly described.
On defence capability, it is not enough to want one, it is certainly not enough to talk about one, and there is no point in having one unless it deters. I say to your Lordships that, for me, this all came into sharp relief when Scotland was confronted by the independence referendum in 2014. One of the strongest arguments for staying within the United Kingdom was defence and security, and the attempt by those seeking independence to explain what the defence capability of an independent Scotland would be was risible: no nuclear deterrent, a tiny presence of maritime assets with no strategic purpose, a very small military infantry with negligible assets and a virtually non-existent air capability. As for cyber and space, that was far too far in the future to be worrying about.
The question that such a depleted resource begged was: what is the point of having it? It did not deter, it offered no meaningful contribution to our allies and it was of little interest to NATO. However, this usefully demonstrated that you would actually be better off not having a capability, spending the money on something else and hoping that better-resourced friends would come to your aid if necessary. That is of course not where any of us would want to be and, thankfully, not where the majority of voters in the referendum wanted to be, so independence was rejected.
In fairness to the noble Lord, Lord Coaker, I thought then and still think now that the UK has a strong defence capability. Our continuous at-sea deterrent is at the disposal of NATO, one of only two nuclear powers offering that support. We have invested in the Navy, have modernised equipment for the Army and are actively progressing a successor to Typhoon. Importantly, we have also invested in the new domains of cyber and space. I have to say that I become angry when politicians of whatever stripe diminish that strength, and it is certainly unhelpful for a government Minister to call our capability into question. In fairness to the noble Lord, Lord Coaker, I have never been aware of him doing that.
Underpinning that capability by maintaining investment, demonstrating credibility and ensuring that our deterrent posture is clear requires both vigilance and action by the Government. That is why their attitude to defence, as confirmed by yesterday’s Budget, has got us to a very undesirable position. To talk incessantly about lifting defence expenditure to 2.5% of GDP, to tell everyone in sight that that is your political resolve, to raise a reasonable expectation that you will flesh out the timeline and the trajectory in the Autumn Statement and then to lapse into a deafening silence is deeply damaging on all fronts. By placing a question mark over both the timing and the level of strategic resource for defence, the Government are undermining credibility, and that immediately impacts on our ability to deter. Our allies need to know that they can trust us and that we are solid. Our adversaries need to see that investment and know that we shall not hesitate to deploy our capability when the need arises.
Later today we shall discuss more specifically the 2.5% of GDP in the debate of my noble friend Lord Trenchard, but in my opinion yesterday’s Budget was not good news for defence. It has diminished our stature, impugned our credibility and weakened our deterrence posture. I urge the Minister to use his wisdom and considerable clout to get the Government to review the position.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
I thank all noble Lords who have contributed to this debate. I shall deal with a couple of the important questions that have been posed and then lay on the table some of the Government’s position on deterrence.
I thank the noble Lord, Lord Trefgarne, for bringing forward this important debate. The issue of deterring those who would do us harm is of real significance. The discussion about how you do that, from conventional forces right through to the effect of a continuous at-sea deterrence, is an important question for us all. The noble Lord deserves a lot of praise for bringing this forward.
I shall deal with a couple of issues that are of huge significance to this country, to our alliances and to our position in the world. A number of noble Lords have raised the nuclear deterrent. We as a new Government are 100% committed to the maintenance of the nuclear deterrent. We are committed to it with respect to the continuous at-sea deterrent, with the four new Dreadnought submarines. In answer to the point made by the noble and gallant Lord, Lord Stirrup, about the transition from Vanguard to Dreadnought, there are significant training programmes and work going on about how that transition is best done. I reassure him that considerable work is going on with respect to that.
The noble Lord, Lord Trefgarne, raised the point about the Falkland Islands. The British Government remain absolutely committed to the right of self-determination of the people of the Falkland Islands. These are hugely significant and important questions that were raised by a number of noble Lords and the position needs to be stated at the outset. There is no policy change in respect of that.
The noble Lord asked about the forces commitments there. I visited the Falkland Islands. As the noble Lord will know, there is a huge military presence there of British forces. I think other noble Lords speaking in this debate will have visited that base. There are Typhoon fighters there. There are air defence systems and numbers of troops, as well as regular naval patrols, to reassure the Falkland islanders and to make a statement about the desire and intent of His Majesty’s Government to ensure that that right is protected.
The ladder of escalation was mentioned. It is always difficult to say, as you move from one rung of the ladder to another, exactly which rung you reach is the point at which something should happen. It is particularly difficult to lay that out and say specifically when something should happen, as many others who have taken defence decisions will have found. But you can lay out general principles, and they are laid out in various treaties.
That is why we are defending and doing what we are doing with respect to Ukraine. That is why we have talked, in no uncertain terms, about our determination to work to maintain the law of the sea. That is why we have said that Article 5 of NATO remains a key component. That is why we have said that territorial integrity remains important. When a country seeks to undermine or flout that, your exact immediate response and where you draw the line will sometimes depend on the particular circumstances.
However—this is the point of deterrence, and I take the point of the noble Lord, Lord Trefgarne—it must be known that this country, with its allies, will not stand aside and watch international law or rules be flouted. That is the important statement. That is why, as noble Lords will have heard me say and will have said themselves, what we are doing in Ukraine is so important. We are saying that we will not stand to see those laws flouted. When the noble Baroness, Lady Goldie, was in my position, that is exactly what she said, quite correctly; that is what the then Government said, quite correctly. Those statements are important.
My noble friend Lord Harris was right to raise the issues of cyberwarfare, information and disinformation and the resilience of the population, which are all important matters. They are new aspects of war, especially cyberwarfare He will have visited, as I have, numerous places where we are trying to put defences in place and build resilience into computer systems, datasets and so on to resist those who would attack us. With his knowledge of local government, my noble friend has much more experience than me in the resilience of the population and in civil emergencies and defence, which we will have to address. I will just say that, when I look back in history, I see that the resilience of the British people has been immense when they have had to resist the threat of attack or have indeed been attacked. The whole area of cyberwarfare and information is important, as my noble friend said.
I thank the noble Lord, Lord Balfe, for his remarks about the importance of identifying the threats that we face and trying to configure the Armed Forces in order to meet those future threats. That is important and it is part of what the defence review seeks to do. Indeed, as the noble Earl, Lord Attlee, and I have often discussed, it is important that you know what you are seeking to do in order to configure your Armed Forces to meet a particular threat, which can sometimes be quite difficult. We have heard from numerous noble Lords about the importance of cyberwarfare, so that will be an increasing demand and it will be important for us all to work, across government, on that aspect.
We face other issues, as the noble Lord, Lord Harlech, pointed out. We talk about the threat of China as though China is thousands upon thousands of miles away; with climate change, it is now thousands of miles nearer and, indeed, is seeking to exploit the High North through the opening up of sea passages that were not available even a couple of decades ago. I know that, if you talk to Norway, Iceland and many other countries such as the Baltic states—I mentioned Finland—they are all increasingly concerned about not only Russia, of course, but the implications with respect to China.
The noble Lord can be reassured that, like the work that has happened previously, which the noble Baroness, Lady Goldie, will have been involved with, we are seeking to extend and develop our relationships with those countries. The Joint Expeditionary Force is a classic example of countries coming together to try to see how they meet common threats.
I cannot remember whether it was the noble Lord, Lord Balfe, or the noble Earl, Lord Attlee, who mentioned the importance of the Arctic Council. Going back to the point by the noble and gallant Lord, Lord Stirrup, we are seeking to reinvigorate that and work to ensure that it maintains the rule of law according to treaties that most nations of this world have signed. We will enforce those laws and expect them to be adhered to. Countries should know that there are consequences if they do not adhere to them. That is part of what we seek to do.
The noble Lord, Lord Harlech, will also be reassured that on Monday I am speaking to a conference of Norwegian military and parliamentarians about the High North. Again, it is one of those areas that, even a few years ago, we would perhaps not have thought of in the way that we do now. Many of these things are extremely important.
The noble Lord, Lord Bilimoria, also mentioned the nuclear deterrent. He heard the answer that I gave and will hopefully be reassured.
On the point by the noble and gallant Lord, Lord Stirrup, we are looking seriously at cognitive warfare, and it will have to be an increasing priority for government. It is a capability that we will need to look at to see how we develop it. I thank him very much for raising that point.
On some of the broader points made, let me say this. We talk about hard power. On deterrence, we have a NATO-first policy as a Government. The carrier strike group sailing around the Mediterranean into the Indo-Pacific, whatever route it takes in the end, visiting numerous countries there as an international alliance, says this to countries across the world: we are sailing our carrier strike group, led by the “Prince of Wales” carrier, with aircraft on it, with allies, to assert the freedom of navigation and the rule of the law of the sea, and we expect other countries to adhere to that. That is why we bothered to do that. That is why we have a nuclear deterrent.
There is an issue in the debate about what sort of Armed Forces we will need to ensure that they can fight the battles of the future. The strategic review that we have at the moment is seeking to deal with that. I will tell noble Lords one thing I heard. I thank the noble Baroness, Lady Smith, for her remarks; we will debate the points about money by the noble Baroness, Lady Goldie, more fully in the next debate, and I thank her for her remarks as well. The noble Baroness, Lady Smith, will have heard the CDS make what I thought was a very good speech at the dinner. He said that one of the things Britain should do more than it does—and I totally agree—is to rediscover its own confidence in the things it can do and the things it does to deter others from taking actions that they might. We should all reflect on that. We sometimes look at the challenges we face, which is quite right, but alongside that we should look at the things that we do and do well. This country should have pride and confidence in what it does, not only in this continent but across the globe.
Diets: Fat
(2 days, 17 hours ago)
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Lord McColl of Dulwich
To ask His Majesty’s Government what assessment they have made of the benefits of diets with adequate fat content for reducing appetite, as an alternative to the use of drugs such as Ozempic.
Lord McColl of Dulwich (Con)
My Lords, the Question in this debate lists two different treatments for the same problem: the obesity epidemic. The first treatment is as old as the hills—simply to eat the right amount of the right kind of fat. The other treatment is to use new drugs such as semaglutide, marketed as Ozempic, which have been found to act in the same way as fat. I suggest that the former—the healthy diet—should be where we concentrate our efforts to combat the epidemic.
When we consume healthy fats, gut hormones such as CCK and GLP-1 are secreted in the duodenum, delaying the emptying of the stomach and creating a natural sense of fullness that curbs overeating. When the fat has been absorbed and moves on, normal service is resumed by the stomach. This simple process helps to tackle the root cause of obesity. By contrast, the new weight-loss drugs have serious side effects, including pancreatitis and other problems, along with long-term effects that are as yet unknown.
The new weight-loss drugs require regular injections. They act in a similar way to fat but with a stark difference. Natural fats are safe, inexpensive and readily available in whole milk, nuts, butter and so on. Studies such as those showing lower obesity rates in Canadian children who were raised on whole milk underscore these benefits. Will the Minister ensure that her department considers this evidence instead of the biased propaganda of the food lobby? It was, after all, the food lobby that caused the obesity epidemic in the first place. It put profit over health by encouraging the overconsumption of the wrong types of food.
Since the 1960s the food industry has promoted a low-fat diet, allegedly to address concerns about atheroma, which tends to block arteries. As noble Lords will know from their Greek studies, atheroma is the ancient Greek word for porridge—well, it may be Greek porridge but it is no Scottish porridge, that is for sure. The food industry has excessively promoted low-fat products packed with a lot of sugar; a low-fat diet is pretty tasteless because fat is what gives food its taste. So they had to pour in vast quantities of sugar, which fuels the cravings and excessive calorie intake contributing to today’s obesity epidemic.
Despite evidence supporting the benefits of certain fats, the Department of Health still publishes on the web outdated low-fat guidelines, in part because misleading information such as the Eatwell Guide and the traffic light labelling on food packaging demonises fats without considering their positive role. After years of vilifying fats, we now turn to drugs that mimic fats’ natural benefits—a perfect case of the food industry being hoist by its own petard.
Ultra-processed foods have frequently been blamed for the obesity epidemic, but there is no scientific confirmation of this. It is clear that excessive consumption of UPF can cause obesity, of course. Unfortunately, many so-called scientific publications blur these lines, incorrectly blaming the obesity crisis on ultra-processed foods. Meanwhile, we overlook the impending disaster of nearly 40 million citizens facing premature death from obesity-related diseases.
The argument that obesity is unavoidable because we live in an obesogenic society, with factors such as genetics and thyroid dysfunction, is misleading. These claims suggest that obesity cannot be controlled, which diminishes the role of personal responsibility. The reality is that obesity results from consuming too much food or too much alcohol, regardless of genetics. It does not matter what your genetics are: there is only one way of getting obese, and that is putting too many calories into your mouth. There is no disease that causes obesity per se. A failing thyroid gland is often blamed, but it is the resulting slowing of the metabolism for such a patient that requires fewer calories. If people continue eating the same number of calories, obesity will result.
Beyond the physiological aspects, we need a transparent, evidence-based public health campaign. A well-executed campaign has been successful in the past, although this has been denied in some quarters. Let us look back in history, as most of the answers are in history. The AIDS awareness campaign launched in the UK by the then Secretary of State for Health, Norman Fowler—the noble Lord, Lord Fowler—was highly successful, as was a similar campaign in Uganda. A similar approach to obesity could save the UK economy £98 billion every year.
The Department of Health should encourage practical dietary changes, such as reducing daily intake and incorporating healthy fats, and support these choices through better regulations and labelling to clarify the benefits of healthy fats and reduce confusion about what constitutes a balanced diet. Rather than complex BMI measurements, we need only a simple assessment. For instance, if your waist measurement is more than half your height, you are eating too much of the gross national product.
It is important that this message gets through. The APPG on Obesity criticises the “nanny state” approach, yet if we seek a hands-off solution, more individual responsibility and awareness will be essential. Imagine the impact if each of the 40 million obese people in this country were to reduce their intake slightly, perhaps by skipping a meal a day or choosing foods with fats that encourage fullness. This approach could improve individual health, reduce NHS expenditure and, ultimately, save many from premature death.
Lord Brooke of Alverthorpe (Lab)
My Lords, I am most grateful to the noble Lord, Lord McColl of Dulwich, for this debate. I pay tribute to his long and consistent work in this area. He is experienced in a whole range of different aspects of this, having been a surgeon, and probably knows more about the gut than I ever will. My contribution is one of gratitude for having a peg on which I can hang a coat and pick up several other topics related to obesity.
Obesity, like drink or drugs, comes from filling the empty hole inside us. It can lead to greed, excess and, as we see in many areas, premature death, or certainly an unhealthy later life. It represents a great cost to the NHS and we have to continue working on it. I declare an interest as a member of the Food, Diet and Obesity Committee, which has just produced the report Recipe for Health. We did not focus excessively on fat, but I am sure that colleagues who are better qualified than I may make contributions on that topic.
We did not focus on the new drugs either. I am worried about what lies ahead with the changes in prospect from those drugs. I shall say a little more about that. In the committee, to the extent that I was able to attend, I focused primarily on the fundamental problem of excess sugar being consumed, particularly by children, who I worry about, and the consequences of that. The major reason why children go to hospitals and A&E is dental problems, which in the main arise from sugar.
Like our committee, I should have liked to see taxes introduced to reduce the amount of sugar that we find in soft drinks and elsewhere, but we did not get that yesterday in the Budget. Instead, we got a reduction in the price of alcohol—what a surprise. Our report did not look at the point the noble Lord, Lord McColl, raised about the effect of alcohol on obesity. I welcome my noble friend the Minister, who is listening to me again on this topic. I have been campaigning for years that we should show calories not just on menus but on all drinks. The one area of drinks that is excepted, of course, is alcohol. The previous Government were looking at that and undertaking consultation. I do not know whether they ever concluded it, so could my noble friend say whether they did? She may not have the answer to hand, but could she write to us? If it was concluded, what is the outturn of that exercise and when will we see a Labour Government prepared to introduce calories to labelling on alcohol? Some of her forebears spoke in favour of it when I was campaigning for this over a decade ago. It is sugar that worries me.
The new drugs will be used and needed, but we have to avoid some of the difficulties of lack of regulation and oversight that we have had in the past when new drugs have been introduced. I have done work over many years on addiction related to drink and drugs. I did work on heroin in the early part of this century, when methadone was introduced in lieu of heroin to try to reduce harm. We were spending next to nothing in 2005 on methadone. I cannot now get from the Government a precise or even a round figure on what we are spending currently on methadone, but the rumour is that it is about £1 billion a year, when you take into account not just producing it but the way it has to be administered and the secondary trading that takes place. This is the danger that I bring to the Committee’s attention, which we must be aware of. Unless we keep strict controls on the new drug, we could see it mushroom and spread very quickly indeed—and we could even see secondary markets start to develop. I hope that the Minister is aware of that.
Can we look for incentives to get the food and drinks industry to change its approach? I know that some of them are willing to have conversations about trying to have better formulas in foods, and I hope the Government will be prepared to move on that front.
Lord Krebs (CB)
My Lords, I declare my interests as recorded in the register, in particular my work with the World Cancer Research Fund and the fact that I am a scientific adviser to Marks & Spencer. Like the noble Lord, Lord Brooke of Alverthorpe, I was a member of the Select Committee which reported last week on diet and obesity. I congratulate the noble Lord, Lord McColl of Dulwich, on securing this debate and his introduction to it.
The idea that eating a diet with plenty of fat suppresses appetite is not new. About 50 years ago, Dr Richard Mackarness published a book entitled Eat Fat and Grow Slim. However, like so many other dietary fashions, this one ran into the sands of evidence. I will mention just one study: a double-blind randomised control trial published in the journal Nutrients in 2018. The participants—older, healthy males—were offered one of three calorie-controlled drink supplements containing different amounts of fat, protein and carbohydrate, or a control drink containing virtually no calories. The results showed that adding fat to the supplements raised levels of the gut hormone cholecystokinin, to which the noble Lord, Lord McColl, referred, but did not suppress energy intake from a subsequent buffet meal with ad libitum food. The evidence does not support the idea that eating more fat suppresses appetite.
The National Diet and Nutrition Survey shows that the population-average intake of fat is close to the recommended guideline of 35% of daily energy intake. However, the intake of saturated fat is above the guideline of 11% of daily energy intake. Saturated fat, in particular animal fat rather than fat from dairy produce, is associated with an increased risk of cardiovascular disease and stroke. Therefore, dietary advice is, correctly, to consume less saturated fat, but not because of its contribution to obesity.
Turning to obesity, I will make three points. First, the best way to tackle the obesity crisis is to prevent people putting on excess weight in the first place. This is most effectively achieved, as the noble Lord, Lord McColl, said, by reducing calorie intake rather than by trying to burn it off with exercise—if you try to burn off the calories from one energy drink, you will find out how tough it is.
Secondly, the dramatic rise in obesity during the past 30 years has been driven largely by the increased availability of cheap, highly palatable, calorie-dense food, known colloquially as “junk food”. The report of the Food, Diet and Obesity Committee published last week recommends a raft of policies to deal with this challenge. The overarching theme is that there should be a switch from the 700 or so failed policies based on individual choice to policies based on regulation of the junk food industry and the junk food environment. Does the Minister agree with that general proposition?
Thirdly, it might be tempting to see effective weight-loss drugs such as Wegovy and Ozempic as a “get out of jail free” card. They will have an important role, but they are not the answer to treating the millions of obese people in this country and a much larger number around the world. At the moment they are very expensive, although it is possible, with many drugs in development, that the price will come down. More importantly, they require a lifelong commitment: it is not just about taking the drug for a few weeks; it is about taking it for ever. Recent data from the United States, where one in eight people has tried a weight-loss drug, show that two out of every three obese people give up taking the drug within a year and then regain the weight they have lost.
The Government have said they want to shift from treatment to prevention as one of the three pillars of reforming the NHS. Can the Minister explain to us in broad terms how she envisages this shift from treatment to prevention being applied to diet and obesity, the second-biggest avoidable risk of ill health? In this context, I want to cite one example and ask the Minister to comment on it. My local sports centre, owned by Oxford City Council and which I visit regularly, has an entrance packed with junk food—sugary drinks, ice creams, doughnuts, the lot. Does the Minister think that that is an appropriate way for a local council to run a fitness centre?
The Earl of Caithness (Con)
My Lords, I declare my interests. I am a member of the committee to which noble Lords have already referred and I have a problem in keeping my weight down, so it is a subject that has been of great interest to me and I am very grateful to my noble friend Lord McColl for introducing this debate.
One of the difficulties, perhaps the greatest difficulty, when we are discussing food and diet is the tendency now to use hyperbole and oversimplification in dealing with a very difficult, complex subject. Of course, the press loves hyperbole and simplification, because it increases sales, but it does not actually solve the problem of obesity.
From our report I take out two important factors. One is that obesity has overtaken tobacco as a risk factor for disability in England. The second is that the total cost of obesity is now calculated at £100 billion a year, equivalent to a tax rate of £400 per head. So, there is a lot to be gained by getting obesity under control.
When we talk about simplification, the word “fat” is an oversimplification. There are good fats and bad fats, as my noble friend Lord McColl said. Some fats are extremely important to us. They are a source of energy; they help vitamin absorption; and they provide fatty acids, particularly omega 3 and omega 6, which are essential for keeping our nervous and brain systems healthy. Indeed, fat can be used to help reduce the urgency for food. Sarah Berry, associate professor at the Department of Nutritional Sciences at King’s College, says:
“Fat makes us feel full for longer. It delays the rate at which our stomach empties food, which again helps us create that feeling of fullness. So, it also controls our blood sugar levels as well, so that we tend to consume less calories, potentially later in the day”.
The idea that one can solve this problem of obesity with weight-loss jabs and get people back to work, which the Prime Minister seems to think is a good idea, is very flawed. Trials of the drugs have shown that people need help as well as just taking the drug. Eligible people who will require support cannot access the support to achieve behavioural change. These drugs will not work for everyone; all the trials have shown that. I repeat that obesity is a complex issue and trying to solve it with an injection is a poor cure when prevention would be far better.
There is of course the question of obesity stigma in the workplace, which is a huge barrier to satisfactory employment and leads to poor well-being and burnout. On the barriers, it is not obesity alone that causes a person to be unemployed; there are many other problems.
When we talk about oversimplification, we must remember that diets and our bodies are very complex. New research is demonstrating the importance and relevance of our gut microbiome. It demonstrates that we need to eat over 30 different plants of different colours weekly, 30 grams of fibre a day and around 100 grams of protein a day. We need to stop eating foods that are high in fat, sugar and salt, especially those that are ultra processed. There are other issues. We need to eat within a certain timeframe. All our daily consumption should be within a 12-hour period.
To pick up the point made by the noble Lord, Lord Krebs, exercise is not the panacea. I was very sorry to hear Chris Whitty say that this was going to be the new solution to obesity; it is much more complex. Exercise can help on the fringes, but it is not the main solution. The main solution is eating a healthy, balanced, varied diet, but that is not what the Eatwell Guide tells us to do. I hope the Minister will look at our report where we analyse this very carefully, because we come up with some sensible solutions, including raising tax on people that produce the wrong food for us.
Lord Mitchell (Lab)
My Lords, I thank the noble Lord, Lord McColl, for securing this short debate. It is certainly of the moment, but I come at this issue from a slightly different viewpoint.
I am not in the habit of discussing my weight in public, but this is the moment of truth; I am going to out myself. For the past two years, I have been injecting myself every week with either Ozempic or Mounjaro. As a result, I have lost over 12% of my body weight and I am keeping it off. Yes, it is expensive and, yes, I will probably have to continue my injections for the rest of my life, but to me it is worth every penny.
I was not fat, but I was in danger of getting on the wrong side of chubby. I knew the risks. I never eat desserts nor sweets nor any junk food, but still the dial went in one direction. The key to weight loss can be summarised in two words—eat less—but that is easier said than done. I suppose the corresponding two words are: exercise more. Fewer carbs, more carbs, protein only, no fruit, skip breakfast, do not eat after 6 pm, fast for 18 hours a day and of course the 5:2 diet—I tried them all. The trouble is, you work hard at it, perhaps you reach your target weight and then it creeps back again. You are always miserable.
As for exercise, those who know me can attest that I can bore for Britain on the subject. Three intense workouts every week, and my phone tells me that I average 7,200 steps per day over a year and often over 10,000 paces—all this is to no avail.
Then along came Ozempic. A weekly self-administered injection is all that it took. It suppresses the appetite and reduces the craving for food—you just lose interest. To me, the difference between dieting and Ozempic is that when you diet all you ever think about is food. When you inject, all you ever think about is the next morning’s rendezvous with a weighing machine.
However, there is more to Ozempic than just weight loss. First, there are all the other health benefits. This week, the Economist, not known for hyperbole, called it the most important drug ever. A drug that started out being used to regulate diabetes can now reduce weight. There is strong evidence that it can control the incidence of kidney and liver disease, cardiovascular issues and sleep apnoea, and reduce drug addiction and opioid inflammation. They say that it can contain ageing and even Alzheimer’s. That is a lot of things. This medication is up there with statins, Prozac, aspirin and even the contraceptive pill in changing our health and behaviour.
Then there are the economic benefits. Some 25% of the population are obese. Many are prone to illness. Their potential productivity is often diminished. At present, the annual cost of obesity to the NHS is around £6.5 billion, and it is expected to increase by 50% by 2050. It is the second-biggest preventable cause of cancer. Add to that the cost of treating all the other illnesses that I have mentioned which GLP-1 might be able to arrest, and you can see that the NHS could make some major savings from the wholesale employment of GLP-1.
If these drugs are as game-changing as I suggest they are, they will have a profound and positive effect on our health and on our economy. They are to be encouraged.
Baroness Jenkin of Kennington (Con)
My Lords, I, too, thank my noble friend Lord McColl for initiating and introducing today’s debate. He and I have shared a tiny cupboard—sorry, room—for the past 10 or so years and have spent many happy hours discussing obesity, its impact on the population and the cost to the country. It is great to be expanding those private conversations into a more public arena today. For many years, this topic was rather a niche interest; my noble friend I were almost the only people to raise it in the Chamber. However, I am delighted that more people are now aware of the urgency of the situation, as the financial and personal costs have rocketed.
I am delighted to be the fourth member of the Food, Diet and Obesity Committee, which reported last week, to speak today. I hope my noble friend and the Minister will forgive me for straying a little outside the subject of today’s debate to make some broader comments about a healthy diet, including learnings from our report. As we have heard, the report, Recipe for Health: A Plan to Fix Our Broken Food System, has been widely welcomed by food campaigners and others active in the sector. I urge noble Lords who were not on the committee, especially the Minister, to read at least the report’s conclusions and recommendations.
What became clear over the course of hours of evidence is that our food system is broken and needs to be fixed for people to have better diets and healthier lives. The statistics speak for themselves and are terrifying. Two-thirds of adults are overweight or obese, while the situation with children is as bad—and growing. The costs are enormous: at least 1% to 2% of UK GDP, with billions in healthcare costs and lost productivity.
This public health emergency is driven primarily by the overconsumption of unhealthy foods. As we have discussed, today’s debate is not about ultra-processed foods, which now make up nearly 70% of the average young person’s diet; there will be plenty of opportunity to debate those and the responsibility of the food industry in greater detail when—in the not too distant future, I hope—our report is discussed. Rather, it is about having a healthy and balanced diet, and how we can achieve that for both children and adults.
All of us in this Room—at least, those of us speaking —grew up eating real food: meats and two veg, liver, stews and roasts, all freshly cooked. There was little choice, and there was no constant marketing or encouragement to snack between meals. There were no takeaways or out-of-home delivery services, which add significantly to excess calories. Today’s children are more likely to be drinking puréed fruit from pouches than biting into an apple. They are more comfortable opening packets or takeaway trays and are hardly able even to recognise real food. Our parents would find today’s dietary patterns absolutely unrecognisable.
Only last month, the Prime Minister said that the NHS was in a critical condition and that there would be no extra money without reform. The review of the noble Lord, Lord Darzi, and the Secretary of State’s response to it confirmed the analysis of Henry Dimbleby’s food strategy and highlighted the importance of prevention, as the noble Lord, Lord Krebs, and others mentioned. It was disappointing, therefore, to see seemingly nothing in the Budget to address this matter. We have a major health problem on which, if it were a communicable epidemic, the Government would be forced to act. People want to do the right thing but need help and support. The recommendations in our report are clear; I urge the Government to act on them.
Lord Rennard (LD)
My Lords, I am a type 2 diabetic. I overcome some embarrassment about my weight to say that I have lost more than 30 kilos over the past 30 years. More importantly, I have kept it off.
Self-evidently, however, I need to lose more weight. My diabetic control has been very difficult and required major lifestyle changes, but they were not enough. So, in the past four months, I have been assisted in improving my diabetic control and reducing my weight by a further few kilograms with the help of Mounjaro, a drug from Eli Lilly. Since being diagnosed with diabetes in 1994, I have always had great support from St Thomas’ Hospital. It advised me a few years ago that a typical type 2 diabetic like me, in their 50s and 60s, can be expected to put on an average of between one and two kilos every year. Over a decade or two, that gain of between 20 and 40 kilograms is likely to have catastrophic health consequences requiring significant and costly medical intervention.
For many people struggling with their weight and diabetic control, these new injections give great hope, but we should not see any of the different injections becoming available as a silver bullet to achieve weight loss. We should recognise first that they are helpful in improving diabetic control, which can be very difficult, as your pancreas becomes less and less effective at producing insulin and your sugar levels rise. The associated weight loss with these drugs is also helpful, but such treatment is far from appropriate as a first resort and some people struggle with unpleasant side-effects from them.
However, we should never accept an approach towards obesity or diabetic control which says little more than, “Pull your socks up, make yourself eat much less, but eat more fat”. This approach will lead only to the obesity crisis in many of the more affluent countries becoming even greater. It will result in great damage to the health of their populations, their health systems and their economies. The Atkins diet is now widely discredited after the demise of the author of the books on it.
The British Dietetic Association says that fat plays an important part in our diet and that people need a small amount of it. But it has warned against a high intake of saturated fats, which are often found in processed foods and associated with weight gain, making diabetic control harder, causing joint problems and some cancers.
The questions for us to discuss should be about how to take strong steps to help prevent people becoming obese in the first place and how to help them achieve and maintain healthier lifestyles, manage their diets better, and adopt healthier lifestyles, including regular exercise.
As the excellent report from the Select Committee on Food, Diet and Obesity, chaired by my noble friend Lady Walmsley, suggested last week, we need a broad range of measures to tackle the obesity crisis. I would begin with healthy, nutritious, and free school meals and stopping the proliferation of fried chicken and burger shops in close proximity to schools. We need, as the Select Committee says, to reduce the prevalence of marketing and advertising of unhealthy ultra-processed foods, especially to children. We need also to promote health education and physical activity in schools and after school.
Poverty must also be recognised as a significant factor in many people having unhealthy diets and suffering from health inequalities. Poor parents struggle to provide healthy diets for their families. Healthier foods are more than twice as expensive per calorie as less healthy foods. One of the most important poverty-relieving measures would be to scrap the two-child limit for universal credit or tax credits. I am disappointed that this was not in yesterday’s Budget.
In conclusion, we need to follow medical advice and look at evidence over time about the use of injections assisting diabetic control and weight loss. We cannot simply let people think that they can just resort to expensive weekly injections provided by the state. But nor can the state ignore the tremendous costs of obesity and diabetes.
Lord Kamall (Con)
My Lords, I thank my noble friend Lord McColl for securing this debate on a timely and important matter, but I also thank all noble Lords in this debate for their contributions. I warn the Minister that I tend to take a rather Socratic approach, so I will have lots of questions. The noble Baroness may not be able to answer all of them but I am happy for her to write to all of us.
The noble Earl, Lord Caithness, and the noble Lord, Lord McColl, have shared some interesting statistics: an NHS survey estimated that 28% of the population are obese, and a further 38% are classified as overweight. As other noble Lords said, this is not only a health issue but an economic problem. The question is: how do we as a society encourage people to lose weight—to help them live healthier lives but also to reduce the cost to taxpayers of the NHS treating obesity, be that through medication or lifestyle changes?
As someone who believes in personal freedom, I would not oppose anyone who decided to take Ozempic, as long as it was safe for them to do so and they were aware of the risks, as the noble Lords, Lord Mitchell and Lord Rennard, testified. However, there have been reports that the popularity of such drugs has led to a market for dangerous counterfeit drugs that mimic these effects. Can the Minister confirm whether the Government are aware of the proliferation of cheaper alternatives? Have the Government made any assessment of the safety of these alternatives and of whether some are in fact counterfeits?
While medical advancements such as Ozempic can help to manage someone’s weight, surely it is important that we explore and promote alternative approaches, as the noble Lords, Lord Brooke and Lord Krebs, said. As my noble friend Lord McColl and the noble Earl, Lord Caithness, suggested, research shows that diets with enough healthy fat content, especially unsaturated fats, can be effective in making people feel that they have eaten enough and reducing their appetite. These diets can also stabilise blood sugar levels, which is critical for weight management and overall health.
Education and prevention are just as important. Many people may not understand the impact of their dietary choices on their long-term health; they may not realise that better diets will not necessarily cost more; and they may not be aware that a small increase in physical activity can contribute to better physical health and mental well-being—although it is not a panacea, as the noble Lord, Lord Krebs, and the noble Earl, Lord Caithness, said.
Can the Minister reveal whether the NHS is prioritising cost-effective lifestyle approaches, rather than focusing on weight-loss drugs as some sort of magic bullet? I urge the NHS and the Office for Health Improvement and Disparities, as well as the department, to ensure that accessible support is available to those from all backgrounds. Often, those from the most disadvantaged backgrounds face the greatest challenges in accessing healthy food and exercise facilities, leading to higher incidences of obesity within those communities.
Noble Lords may have seen daytime television programmes—I know they work very hard, but in their rare moments of relaxation they might switch on the TV—where families are taught to cook healthier meals, which can often be cheaper than ready meals from the freezer section of a supermarket. When I was a Minister, I often wondered how you transfer these daytime TV lessons into people’s homes. I know that my noble friend Lady Jenkin has taken an interest in this issue for many years.
One of my students recently wrote an assignment on Brite Box, a fantastic project in Kingston upon Thames that provides families with ingredients and an illustrated recipe guide so that they can cook a healthy meal on a budget together. What happens is that cooking together leads to meals being family occasions rather than one parent being stuck in the kitchen. Can the Minister tell us how the NHS, the Department of Health and OHID are working with similar local community projects across the country to encourage families in poorer communities to eat healthier diets? What steps are being taken to enhance dietary and health education in our schools, workplaces and community spaces?
Finally, as weight-loss drugs such as Ozempic gain popularity and we start to see the results of the trial of tirzepatide in Manchester, we have to recognise the psychological aspect of obesity. Can the Minister tell us about how weight-management initiatives will consider the link between poor weight management and the mental health of individuals? What mental health support is available to overweight individuals with underlying mental health conditions, and how do we avoid the unintended consequences of those who suffer from eating disorders such as anorexia or bulimia?
Once again, I thank my noble friend Lord McColl for securing this debate and all noble Lords for their contributions. I look forward to the Minister’s responses.
The Parliamentary Under-Secretary of State, Department of Health and Social Care (Baroness Merron) (Lab)
My Lords, I thank the noble Lord, Lord McColl, for bringing this important issue to the fore. He is a doughty campaigner and I know he has many strong views, to which I have listened not just on this occasion but on many occasions. I welcome the airing that we are having today. I thank other noble Lords, too, for their contributions. As ever, there is a fair amount of common ground and quite a bit of divergence in the opinions about how we tackle what is an obesity crisis. I particularly thank noble Lords, including my noble friend Lord Mitchell and the noble Lord, Lord Rennard, for sharing their very personal experiences; that always assists us.
As many noble Lords have said, there is no doubt that obesity is significant in our country—and not just our country. As the noble Lord, Lord Kamall, observed, over 28% of adults are living with obesity, which puts them at risk of a whole range of health conditions. Obesity is also estimated to cost the NHS more than £11 billion per year, with total costs to the UK of £74 billion per year. The noble Baroness, Lady Jenkin, rightly referred to children’s obesity. It is shocking to realise that children with obesity are five times more likely to be living with obesity as adults. In other words, the seeds sown at the beginning are reaped in a none-too-positive way later on down the line. As mentioned by a number of noble Lords, obesity is particularly concentrated in the most deprived areas, with prevalence for children in the most deprived areas being more than double that in the least deprived areas. That gives some idea of what we are up against. As the noble Lord, Lord Krebs, and other noble Lords indicated, it is absolutely clear that we have to take action.
I share the view expressed that the challenge before us is complex. It would be wrong to see it any other way. Indeed, I share the view that obesity is primarily caused by the consumption of excess calories. We have a food environment where unhealthy foods have become cheaper and more readily available. The noble Lord, Lord Krebs, made a point about a local fitness centre display in his own area. I certainly echo his sentiment that this is not an appropriate way to assist people’s fitness. If the noble Lord has not already, I encourage him to complain to his local authority, because we need a cultural shift as well as a number of practical shifts.
In addition to the food environment that we are in, portion sizes have increased. The noble Lord, Lord McColl, rightly shines a light on this, and we are committed to addressing it. We have made a good start, and our mindset is very much about prevention over cure.
On the question from the noble Lord, Lord Krebs, we have committed to implementing junk food advertising restrictions on TV and online and to limiting schoolchildren’s access to fast food. Our 10-year health plan will also reform the NHS by shifting the focus from sickness to prevention, as noble Lords have already observed.
On the point raised by my noble friend Lord Brooke, as announced by the Chancellor yesterday we will take steps to ensure that the soft drinks industry levy remains effective and fit for purpose. That will be done by ensuring that the levy is uprated to reflect inflation since it came into force and in the future. Importantly for me, the Government will also review the soft drinks industry levy’s operation and structures, to aim to further drive down the sugar content in soft drinks. We will also review the sugar thresholds at which it applies and the exemption for milk-based drinks. I will be pleased to keep noble Lords informed on this development.
I heard the observation by the noble Lord, Lord McColl, that he considers that there is—if I may use this term—a demonisation of fats. I assure him that the dietary recommendations are about promoting a balanced diet. The advice given tells people not to avoid fat per se but—the noble Lord, Lord Krebs, referred to this—to eat foods containing saturated fats less often and in smaller quantities, and to swap to unsaturated fats where possible. The reason for this focus is that there is robust evidence that switching saturated fat for unsaturated fat lowers blood cholesterol and reduces the risk of heart disease by almost a fifth. With more than 150,000 deaths from cardiovascular disease every single year, this is crucial. Indeed, the guidance and the policies, such as junk food advertising, cover both saturated fat and sugar—something of great interest to my noble friend Lord Brooke—so it is not one thing or another, as is often the case when we are speaking about this matter.
Over 12 million people are living with obesity, so we need to provide support for them too—a number of noble Lords correctly outlined the importance of that support. The NHS and local government provide a wide range of services, including behavioural support programmes that provide advice to help people to adapt to a healthier diet.
There are more specialised services for people living with severe obesity and for associated comorbidities. These can prescribe some of the newer obesity medicines as well as offering surgery. However, I emphasise that they should be considered further down the treatment pathway. Exactly what is appropriate for any individual is down to clinicians to advise, in discussion with that patient, and to consider clinical guidance.
The noble Lord, Lord McColl, referred to Ozempic. As he will be aware, it is licensed to treat type 2 diabetes, and healthcare professionals have been reminded in guidance that it should not be prescribed solely for weight loss, although the obesity medicine Wegovy is approved for weight management on the NHS. However, obesity medicines are not a first-line treatment. Other things need to be tried first and other support needs to be in place.
I agree that the primary focus should be on supporting behavioural change, including a healthier diet, and that is confirmed through NICE guidance, but we should acknowledge that obesity medicines can be very effective at helping some people to lose considerable amounts of weight, as my noble friend Lord Mitchell and the noble Lord, Lord Rennard, have described and demonstrated. The losses are considerable—in some cases, over 20% of body weight—and that is a benefit to health.
However, as I said, these medicines should not be given alone, and support on diet and increasing physical activity, which the noble Earl, Lord Caithness, spoke about, are crucial. We need the food environment to be supportive for those managing their weight, ensuring that it is easier for people to eat more fibre, more vegetables and less sugar and salt, and to swap saturated fat for unsaturated.
I turn to the reference to “jabs for jobs”. I am grateful that noble Lords have raised this issue today, because it is an opportunity to address the media coverage. The suggestion is that the Government will somehow target people who are unemployed with such medicines to help them to get back to work. I want to be clear: the NHS continues and will continue to treat people on clinical need. We are not targeting those who are unemployed. The coverage in the media refers to a study funded by the manufacturer of one of these obesity medicines. It will build evidence to increase our understanding about the potential wider value of such medicines, and it will look at the impact on health and healthcare use and collect data on things such as change in employment status.
I turn to some of the other points raised. In answer to my noble friend Lord Brooke, we are indeed looking at incentives for reformulation and considering the balance of mandatory and voluntary measures.
I thank the noble Earl, Lord Caithness, and the noble Baroness, Lady Jenkins, for raising the work of the House of Lords committee. I am glad to see that it has recently published its final report, and I look forward to looking at it and considering the recommendations.
There are a number of specific questions that I have not been able to address, and I will be very pleased to pick up specifics in that regard.
To conclude, obesity medicines are not to be seen as the first thing to turn to—the guidance is clear on that—but they have a place for some people when other options have not worked. We and the NHS are looking at how best to make the medicines that we are considering today available in a safe and effective way.
Defence Spending
(2 days, 17 hours ago)
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Viscount Trenchard
To ask His Majesty’s Government what progress they have made in laying out the roadmap to spending 2.5 per cent of gross domestic product on defence.
Viscount Trenchard (Con)
My Lords, I must declare my interests as honorary air commodore of 600 (City of London) Squadron in the Royal Auxiliary Air Force, and as a consultant to Mitsubishi Heavy Industries Ltd.
It is timely that we have a chance to debate defence spending today. Since the passage of the Defence of the Realm Act 1914, three days after the start of the First World War, it has rightly been maintained that the first duty of the Government is to protect and safeguard the lives of their citizens. The Armed Forces covenant, promulgated in 2011, starts with these two sentences:
“The first duty of Government is the defence of the realm. Our Armed Forces fulfil that responsibility on behalf of the Government, sacrificing some civilian freedoms, facing danger and, sometimes, suffering serious injury or death as a result of their duty”.
Churchill was fond of quoting the Latin adage, “If you want peace, prepare for war”. In 1943 and 1944, more than 40% of GDP was spent on defence. If this country should again become directly embroiled in a major military conflict, it is reasonable to assume that the Government would again have to spend a huge proportion of our national output on defence to fulfil their first duty. Surely it is absolutely necessary to spend enough on defence now to make it as unlikely as possible that we will again become embroiled in a major war. We all know that we are already involved, with our NATO allies, in Ukraine’s fight for survival against the Russian invader; it is a conflict that we cannot allow Ukraine to lose.
Today’s debate is not the occasion to discuss yesterday’s Budget. It is deeply disingenuous of the Government to go on and on about the black hole against a background where tax revenues are £21 billion higher than the OBR had predicted. I expected that the Chancellor might take the opportunity provided by the Budget to set out the long-awaited road map to spending 2.5% of GDP on defence. I feared she might say that we would have to wait until the report of the strategic defence review by the noble Lord, Lord Robertson of Port Ellen—for whom I have the very highest regard—is published, but she did not even say that. She said that
“we will set a path to spending 2.5% of GDP on defence at a future fiscal event”,—[Official Report, Commons, 30/10/24; col. 822.]
but she has also said that there will be one Budget a year. Does this mean that we will not even know the pathway to spending 2.5% until the next Budget next autumn? In that case, how can the noble Lord, Lord Robertson, produce a coherent defence review next spring?
However, we surely know that we must anyway spend at least 2.5% of GDP on defence now. It is quite possible that the SDR will find that the military capabilities we need now will cost a lot more than can be afforded even by spending 2.5% of GDP on defence.
In the debate introduced by the noble Lord, Lord Robertson, on the SDR on 9 October, the noble and gallant Lord, Lord Stirrup, referred to NATO’s recent assessment that if its members are
“to contribute military capabilities adequate to the challenges that the alliance now faces, they will need to spend around 3.7% of GDP on defence”.—[Official Report, 9/10/24; col. GC 224.]
If NATO is correct, investment in defence needs to be above 3% of GDP, not the 2.5% that the Government say they aspire to but for which, even now, they have not so far set out a firm plan.
As the Committee is well aware, the world is in a more turbulent and unpredictable state than it has ever been since the end of the Second World War. The noble Lord, Lord Robertson, has described China, Russia, Iran and North Korea as the deadly quartet. As I pointed out in the debate on the SDR, the previous Government’s paper, Defending Britain: Leading in a More Dangerous World, published in April this year, explained that any delay in setting out a pathway to reaching 2.5% was likely to lead to front-line cuts at the worst possible time for our Armed Forces.
Spending more will not in itself be enough. Reform of the Ministry of Defence to build a less risk-averse department and improve its procurement process is also essential. Can the Minister confirm that the fact that the SDR was to be reported to not only the Prime Minister and the Secretary of State for Defence but the Chancellor of the Exchequer was not significant? On that occasion, the Minister said:
“The Government have an absolute commitment to 2.5%. I know that that is not what some people want to hear and that there is no timeline given to it, but there is an absolute commitment to 2.5%. It is not an aspiration”.—[Official Report, 9/10/24; col. GC 262.]
We now know what that means: merely setting a path at a future fiscal event.
The noble Lord, Lord Robertson, will assess what threats we face and what capabilities we need to address them, but his task has been made all the more difficult by the Chancellor’s signal that the uplift in defence spending is not the Government’s urgent priority, which it should be. It is at least welcome that the AUKUS programme is protected.
The UK has been one of the few NATO countries to meet the 2% spending target, and our response to the Russian invasion of Ukraine was much appreciated by our allies and by the Ukrainians. However, we are now placing our ability to provide leadership in military operations at risk, because we have in recent years been increasing our defence expenditure at a much slower rate than other nations. Germany, which in 2014 was spending only 1.2% of its GDP on defence, has committed to spend $97.7 billion on defence this year, which is an increase of 29.45% over 2023. France has increased its defence budget by 6.05%, and the United States by 7.21%. Against that, we have managed to provide an uplift of only 1.73% after adjustment for the implementation of the new accounting standard, IFRS 16. That is one of the smallest increases among NATO members. It means that Germany will be spending nearly 40% more than we are. The Chancellor announced an increase of £2.9 billion for next year, but that is not nearly enough given the serious threats we face and the current underfunded state of the Armed Forces. Recruiting is badly affected by inadequate, poorly maintained accommodation and facilities. It is shocking to hear that there are now more civil servants in the MoD than the total strength of the Royal Navy and Royal Air Force.
As a precondition of deploying our aircraft carriers, or indeed any major maritime or land-based assets, to any conflict zone in partnership with our allies, it is absolutely necessary to control the air environment. That is why we need the Global Combat Air Programme —GCAP. Its advantage over alternatives includes its greater range. It will bring a contribution to NATO that nobody else can bring. If we do not fulfil our commitment to our partners Italy and Japan to deliver this project by 2035, it will be disastrous for our international relations and will signal the end of our ability to bring in partners to major defence projects. Some 70% to 85% of our defence exports in the last five years have been combat air in nature, so to fail to honour our commitments to this project would have huge implications for our defence industrial base.
Will the Minister now give a much-needed commitment, or at least say more than the Government’s position on GCAP, which is that
“we continue to progress on that”?—[Official Report, 25/7/24; col. 723.]
That is not quite the firm commitment that our Japanese and Italian friends are seeking. Having heard the Chancellor’s disappointing words yesterday, their concerns and those of all our allies will be seriously heightened.
I thank all noble Lords who are to speak in this debate, and I look forward to their contributions and to hearing what the Minister has to say.
Lord Bilimoria (CB)
My Lords, in defence expenditure as a share of GDP, Poland is at 4.12%, Estonia at 3.43%, the United States of America at 3.38%, and we come ninth at 2.33%. With 2.33% we are nowhere near 2.5%, which is supposedly the target pledged by both the Labour Government and the previous Conservative Government, and NATO’s baseline is of course 2%. If we go up to 2.5%, we will be higher than Finland and Denmark but we still below Greece, the USA, Latvia, Estonia and Poland. I say again: the Labour Government have committed to reach the 2.5% target but have not specified a completion date. The Conservative Government had a date as far away as 2030. Can the Minister give us a commitment to that?
Additional funding of £5 billion was allocated post the invasion of Ukraine, with planned annual increases through 2027-28. The Ministry of Defence faces budget gaps, including a £3 billion deficit in equipment planned for 2024-25, and a £3.9 billion gap for 2025-26. Of course, in the Budget we have had this announcement of £2.9 billion. That is good news but it is nowhere near enough.
The UK’s increased defence spending aligns with NATO’s collective defence strategy, reinforcing our commitment to alliance-readiness. I am like a stuck record: in 2019, in our debate in the Chamber on the 70th anniversary of NATO, I first said that we should be spending 3% of our GDP on defence—not 2.5% but 3%. That was five years ago. Five years ago, there was no sign of Putin invading Ukraine, or of 7 October and the tragic situation in the Middle East since. Since the end of the Cold War and the fall of the Berlin Wall in 1989, we are closer to global conflict than ever before, and then 3% will be nowhere near enough.
As a country we have provided £12.8 billion in support to Ukraine, including £7.8 billion of military support and £5 billion of non-military support. One of the proudest parts of my career was being president of the Confederation of British Industry and, within that, there is my pride at helping British industry help Ukraine, from literally days after the war started, with medical kits, ration kits, food supplies and so on.
Our support for Ukraine has been amazing. As the noble Viscount, Lord Trenchard, said, we cannot let Ukraine lose. But the defence of Ukraine is possible only if the United States continues its support. It has provided over $100 billion of support; if it pulls out its support, that war is over. The election in America is next week; the repercussions will be very serious indeed and we must be prepared for that.
I am a proud honorary group captain in 601 Squadron of the Royal Air Force, and I thank the noble Viscount, Lord Trenchard, for leading this debate. He is an honorary air commodore, so I have to salute him.
We heard in the defence debate earlier today about the outsourcing of recruitment in our Armed Forces. It is appalling. How can you outsource the esprit de corps of our finest Armed Forces? The recruitment should be done by the Armed Forces and services themselves. Please will the Minister confirm that he will stop this?
The UK should join the Quad—the Indo-Pacific alliance between the USA, Japan, Australia and India, to make it Quad Plus. We are at the top table of the world. We have a permanent seat on the UN Security Council, we are the second-biggest power in NATO, and a member of AUKUS, Five Eyes, the G7 and the G8, though sadly not the EU any more. We have the finest, most respected Armed Forces in the world, which we should all be proud of.
The “but”, as I have said before, is that, in real terms, we were spending £57 billion in 2010 and today we are spending £54 billion. Our Armed Forces are too small, at 192,760. The SDR, chaired by the noble Lord, Lord Robertson, is wonderful news, and it is crucial that we get it absolutely right.
To conclude, as I have said, the noble and gallant Lord, Lord Stirrup, has said that we have a
“shrinking and hollowing out of our Armed Forces”.—[Official Report, 9/10/24; col. GC 226.]
and the noble Lord, Lord West, has said that
“money is the elephant in the room”.—[Official Report, 9/10/24; col. GC 227.]
The price of freedom is not free. We need to spend at least 3% of GDP on defence.
Baroness Buscombe (Con)
My Lords, I am pleased to have this brief opportunity to speak of the road map to spending 2.5% of our GDP on defence, particularly given that I was unwell and therefore unable to contribute to the recent SDR debate. I will focus on the need to apply a substantial proportion of the £2.9 billion increase announced yesterday to reinvesting in our Armed Forces personnel.
Taxpayers’ money is there but the priorities for government expenditure are just wrong. A cursory comparison with our welfare spending alone makes the moral case. In April this year, the Government’s forecast for our total defence budget in 2024-25 was £55.6 billion. At the Department for Work and Pensions, figures for the same period forecast a spend of £315.8 billion on our social security system. Working-age benefits go to 9.3 million people, a huge proportion of whom are capable of working.
There are principles involved here. To give just one small but significant example, in contrast with our brilliant Armed Forces, benefit claimants receive a Christmas bonus for doing nothing. In addition, the reliance on Armed Forces charities to purchase the most basic items for wardrooms and messes, such as televisions, is scandalous, given our current expenditure on fully serviced hotels and weekly cash payments given to illegal migrants.
If we are to confront the many challenges referred to by noble Lords in the SDR debate, we must seriously invest in our Armed Forces personnel. As the noble and gallant Lord, Lord Stirrup, said in that debate, we must
“make good the shrinking and hollowing out of our Armed Forces that has been the handiwork of successive, delinquent Governments”.—[Official Report, 9/10/24; col. GC 226.]
Having listened to a brilliant ex-Army officer in January this year—I emphasise “ex”—telling me that some of his fellow officers were being asked if they would continue to serve unpaid, the picture is clear: it is dire.
My plea to the noble Lord, Lord Robertson of Port Ellen, who I am pleased to see in his place, is to visit some bases and barracks unannounced. We all know that the military is adept at putting on a good show. I experienced this myself as Minister for Armed Forces Veterans at the Department for Work and Pensions. Just turn up to an RAF or Fleet Air Arm base and listen out for a plane in the air, and you will be lucky to hear or see anything. Go into the empty wardrooms and look around the desolate acres. Visit Army barracks and more desolate acres. Check out the equipment—what equipment is there, where is it and does it actually work?
I said in your Lordships’ House on 20 May this year that Armed Forces personnel in the Navy would be better off being subject to the process of court martial from the Navy than being discharged on medical grounds, given the outdated and inhumane processes in place. Following correspondence with the Navy this summer, I am sad to say that I hold firmly to that position.
In addition, the system of what is known as holdovers, leading in some cases to training taking more than seven years instead of three because we have not invested in the right equipment for training, is, frankly, shocking. Careers are blighted before they have begun, at enormous wasted expense to the taxpayer. Furthermore, equality of opportunity, which I believe is sacrosanct, is very different from the equality, diversity and inclusion now in vogue. EDI entrenches difference. It is an expensive and divisive diversion from what needs to be done and does nothing for morale. For many, VAT on private school fees will be the last straw.
It is not enough to stamp a letterhead with the words, “Global, Modern, Ready”. If we are to confront the many challenges referenced by noble Lords in this month’s SDR debate, we must prioritise and invest in a complete review and overhaul of how we recruit, train, properly incentivise and thereby support and retain our Armed Forces. Given all the petty regulations that just grow, and the satisfaction expressed in some quarters for the status quo, that review must be independent of the MoD.
I gather that serious consideration is being given to creating an integrated force. That would of course be a radical move, but it might present the best opportunity for a total reset and renewal for the future. It would require serious investment in the short term, but I predict that the investment would prove well spent and invaluable to our future defence force.
Lord Mountevans (CB)
My Lords, I congratulate the noble Viscount, Lord Trenchard, on securing this important and timely debate. The Chancellor’s announcement yesterday in the Budget of an additional £2.9 billion for the Armed Forces, for all that it is most welcome, does not represent an adequate investment in our forces, their people and their equipment. The additional payments that seem to have become a feature of recent defence financing represent sticking plasters rather than a serious attempt to bring the forces to the level that is required in the current international and geopolitical condition.
Of course we all realise and welcome that the much respected noble Lord, Lord Robertson of Port Ellen, is currently leading the strategic defence review, but my concern is that cost will be the key decider of how much money and resource is allocated, like small boys laying out their pocket money on the shop counter to see what sweets they can afford. Money is tight at this time, but the nation and especially the Government need to rethink priorities. With a changing world order and greatly increased threats, we desperately need to reprioritise. Defence is a long-term issue, particularly in the fast-changing world that we inhabit. It is simply not possible to make up lost ground over a short period. We are seeing that now, following— I regret to say—the neglect of the Armed Forces and our defences since the so-called peace dividend following the end of the Cold War. We and the democracies in general took our eye off the ball. We now have seriously and rapidly to address our weaknesses. Most other NATO countries are doing this.
I strongly recommend an increase to 3% of national income to be allocated to defence, as proposed by the noble Lord, Lord Bilimoria, and the famous Chief of the Defence Staff from the RAF. The vast majority of our countrymen wish to be a force for good, to be able to defend the nation and to play our full part in NATO as well as, on occasion, further afield. But the Secretary of State recently admitted on a Politico podcast that the Armed Forces are not ready to fight in a war and must do more to act as a deterrent against future aggression. He added that the forces would need to become more effective if the UK had to go to war.
It is not just for our Armed Forces to try harder and work smarter. There is a chronic need for resourcing adequately. For example, the defence-industrial base needs consistent government policy and time, due to the fact that the base has been allowed to shrink so profoundly over recent decades. It requires time for the base to be expanded, and then outputs will be swifter and more lethal.
Noble Lords will be aware of the questions around American support for NATO, especially if the Republican candidate were to succeed in the US presidential election next week. More generally, it has to be faced that attention in the United States is turning towards the Indo-Pacific. Europe will be expected to take greater responsibility for its own defence.
More widely, if the US is to continue to regard the UK as a key ally, we must maintain the fabric and capabilities of our Armed Forces. If not, they will regard us differently, as having less value as an ally. Having left the EU, Britain has to reinvent itself and find a new role. The alternative is that we be regarded as a small country facing many challenges. It is important that we remain a strong contributor to the rules-based order and world peace.
Strong and effective Armed Forces are an arm of foreign policy and an asset to the UK as we shape our new role in the world post Brexit. The success of the Joint Expeditionary Force is an excellent example of where our Armed Forces can play a highly positive role. The JEF can be regarded as essentially a British initiative. The Swedes and the Finns found that they work well with other JEF participants—all NATO members, of course. The equipment was compatible, and the people liked and trusted each other. A good chemistry had been established so that, when Putin commenced his illegal war on Ukraine, generating great alarm in the Baltic, it felt natural for these two highly respected nations, Sweden and Finland, to join NATO.
The UK is also of course a key participant in the AUKUS deal. UK defence has played a role in strengthening peace prospects in the Indo-Pacific. I believe we can be very hopeful that this important co-operation project will give courage to south-east Asian and other Indo-Pacific nations that they can be part of a response to a bullying China. The GCAP agreement is similarly a positive development in alerting those facing challenge that we recognise their situation.
Some 40% of Russian state expenditure is now on the military. Should Russia be successful in Ukraine, many analysts feel that Putin will be emboldened to embark on further military action in Europe. As noted by the noble Lord, Lord Bilimoria, it is significant that prominent among NATO states with the highest proportion of national income spent on defence are Baltic countries bordering on Russia. If Britain continues to respond to the risks and challenges inadequately, it would all come back to haunt us.
There is never enough money for welfare payments. Would the Minister like to comment?
Earl Attlee (Con)
My Lords, I am grateful to my noble friend Lord Trenchard for introducing this debate. The noble Lord, Lord Bilimoria, said that our Armed Forces were the finest in the world. I have to say that I am not absolutely convinced about that, and my noble friend Lady Buscombe outlined some of the problems. My noble friend Lord Trenchard talked about the problems that the noble Lord, Lord Robertson, may have in producing a defence review when he does not know how much money he has to spend, but he does know how much he can spend—it is about 2.5% of GDP.
If a defence analyst was to analyse both me and the Minister, he would find it very difficult to get a fag paper between us. I think we both think that we want to spend at least 3% of GDP on defence, but no more than 5%. The problem is that we live in a democracy, and political parties tend to use focus groups—and they ask the focus groups what their priorities are. We know what the priorities are for focus groups: it will always be the health service at the top, and the welfare state—all the lovely things that we want to be able to do. It is understandable why the electorate want that. If you ask them about defence, the focus group will attach a very low priority. But we do not explain to the focus groups or the general public the consequences of insufficient defence expenditure; we talked about that in the last debate on the failure of deterrence and its consequences. If you asked a focus group, “Are you happy for your daughter, son, sister or brother to be compulsorily conscripted for an overseas military operation that is not doing very well?”, just as we experienced in the 1940s, I suspect you might get a rather different answer.
Lord Shinkwin (Con)
My Lords, I congratulate my noble friend Lord Trenchard on securing this debate and his powerful opening remarks. I completely agree with other noble Lords that making rapid progress in laying out the road map to spending at least 2.5% of GDP could not be more important.
The Budget states that the Government
“will set a path to spending 2.5% of GDP on defence at a future fiscal event”.—[Official Report, Commons, 30/10/2024; col. 822.]
I think this misses the point. The point is Putin. He has to be the starting point because, ultimately, it is not a future fiscal event that is going to determine UK defence spending—it is a future military event, orchestrated by Putin and his allies.
So the question is: how committed are we to ensuring that that military event is not a third world war? As noble Lords have said, it surely depends on the extent to which we are prepared to invest now in defence and deterrence as a means of averting war.
I do not question the sincerity of the Minister here and the Secretary of State in the other place, John Healey, but I fear that yesterday’s Budget will be interpreted by Putin as confirmation that we intend to continue living in a never-never land. That is reinforced by this sentence in the policy paper on the Budget:
“This underlines the government’s commitment to strengthening the Armed Forces and protecting national security during a period of geopolitical instability”.
I must say, I sense the hidden hand of Sir Humphrey in such an understated, anodyne turn of phrase. I am not sure that it quite captures the urgency of the situations in Ukraine, Lebanon, Gaza, Yemen, Iran—the terrorist puppet master—Georgia, Taiwan and North Korea. The list is long, and it is red hot.
As the excellent report from the International Relations and Defence Committee of your Lordships’ House, Ukraine: A Wake-up Call, makes clear, any increase in defence spending
“should be seen in the context of decades-long defence cuts and recent inflationary pressures on the defence budget”.
However, one thing is clear: it would be unfair to accuse the Chancellor of producing a Budget for defence—including, as my noble friend Lord Attlee alluded to, the defence of items of expenditure such as the NHS, which focus groups say are so important to them, bearing in mind Putin’s fondness for targeting maternity hospitals and other crucial civilian infrastructure. Sadly, yesterday’s Budget was a vital missed opportunity, because it was in no way a wake-up call for Vladimir Putin. In fact, I suspect that he is laughing at us—laughing at our increased indebtedness and our reduced readiness for war.
I conclude with one question for the Minister, who will know that the economic and financial dialogue between the UK and China was paused after the imposition of the national security law in Hong Kong. Since more than 60% of the components used to prosecute Putin’s illegal war in Ukraine come from China, can the Minister assure the Committee that the UK will not seek to deepen trade relations with China, which is making not only the continuation of conflict in Ukraine possible but a third world war far more likely?
Baroness Smith of Newnham (LD)
My Lords, like other noble Lords, I thank the noble Viscount, Lord Trenchard, for giving us the opportunity to discuss defence expenditure. I fear that already, after not yet four months in office, the Minister may be getting a little tired of the record that says, “All the main parties committed to 2.5%, but when on earth are this Government going to deliver?”, because it is clear that whether the Government deliver the 2.5% of GDP is in the hands not so much of the Secretary of State for Defence or the Minister of State for Defence as of the Treasury.
The noble Baroness, Lady Goldie, keeps suggesting that the Minister—or the noble Lord, Lord Robertson of Port Ellen, when doing his review, where he is capped at 2.5%—should go to the Treasury and say, “Give us more money”. Yes, we need to be spending at least 2.5% of GDP, but I want to raise something that we have not really talked about: how we are spending that money. The aspiration is important, but when looking at defence procurement matters, we need to think about more than just what pennies we have in the sweetshop. I thought that was quite a good analogy, because you do not get many sweets for pennies now; you need pound coins and so on. Similarly, if we are looking at pennies for defence, we are not in the right quantum.
It is already clear that if we are going to backfill what we have given to Ukraine then we are looking at costs that are in billions rather than millions of pounds. There are real questions about how we are going to procure the kit that we need, for which there are already black holes, and to backfill the equipment which we have rightly given to Ukraine. So how we spend matters, how we procure matters and moving beyond the exquisite is important.
There are two or three other economic factors that matter. The Prime Minister and the Chancellor of the Exchequer have talked a lot about growth. In a growing economy, 2.3% of GDP being spent on defence, which is roughly what we have at the moment, would be of far greater interest than in an economy that is stagnant —and at the moment we appear to be in a stagnant economy. So the 2.5% matters, but so does the economic growth that would mean that we could increase defence in real terms. Inflation is currently low, but traditionally defence inflation runs much higher than RPI. The exchange rate also matters, and at the moment the dollar exchange rate is relatively good. All those factors are outside the influence of the MoD, but they all make a real difference to what we can deliver. Although I join other noble Lords in saying we need that timeline to understand when defence expenditure will increase in terms of GDP, it is vital that we see economic growth to be able to expand our defence budget.
I very much agree with the suggestion by the noble Baroness, Lady Buscombe, that we should be putting a lot of the additional £2.9 billion into personnel, but one of the headlines in the Budget was how much is going on employers’ national insurance. Of the £2.9 billion, how much is the additional wage bill for the MoD arising from the increase in the employer’s national insurance contribution? It is sort of a cost on the Armed Forces but certainly not one that will benefit our service personnel—and we need that.
We need to find a pathway, but we also need to think about how best to deploy our limited resources to make sure that we are as capable as we desire to be. We have had the best Armed Forces in the world, and we should ensure that we continue to. I pay tribute to all our service personnel and veterans and their families.
Baroness Goldie (Con)
My Lords, it is clear from the contributions today how informed about and engaged in the defence of our nation your Lordships are. That knowledge was manifest in my noble friend Lord Trenchard’s contribution, and I am grateful to him for bringing this debate before us.
I am not going to patronise noble Lords with a preamble about why defence is the most important obligation of any Government; it is, and we know why. I am going to examine how the current Government are discharging that responsibility.
It all flows from budget—the money—because, quite simply, that is what shapes the capability. Yesterday, after all the repeated rhetoric and reassurances over many months from the Prime Minister downwards that the Government believe in defence, are committed to 2.5% of GDP and will lay out the trajectory to that point, we held our breath and waited. Notably, the Minister for the Armed Forces, Luke Pollard, addressing air and space chiefs at a London conference in July this year, said:
“How we get to 2.5% will be laid out by the Chancellor, Rachel Reeves, at a fiscal event, which is government code for a budget, or an autumn statement. So looking at that, she will be setting up the path to that”.
We are still holding our breath. What did we get? Clarity? No. Leadership? No. Instead, we got a deafening and supine silence. We got a sticking plaster of £2.9 billion for 2025-26. In defence budget terms, we know that that is sticking a finger in the dam and hoping for the best. There is nothing strategic about it, no trajectory to anywhere. While this response says a lot about the Government, and I do not expect the noble Lord, Lord Coaker, to comment on that, I am much more concerned about what it says to our allies, friends and global partners.
We are a respected global power, a perception underwritten by our defence capability. As a Minister, regularly visiting south-east Asia, I saw at first hand how many of these countries value their relationship with the United Kingdom; how carrier strike group 21 had a massive impact in the region and on the stature of the UK in that area; how the legacy of the permanent deployment of HMS “Tamar” and HMS “Spey” through the region had a tangible effect; and how so many of these countries wanted to pursue a closer engagement with the United Kingdom. I know that the Minister has diligently and effectively prosecuted these relationships.
How is the Government’s ambivalence on defence spend likely to play out to our European friends, our NATO allies, our partners and friends across the globe? Well, 2.5%, as my noble friend Lord Trenchard indicated, is the minimum we need to spend to keep up with allies and competitors. The current NATO estimates for 2024 spending put the UK as the third highest spender in NATO, now overtaken by Germany, and we stand at 2.33% of GDP. The difference between 2.33% and 2.5% is significant but not massive, and the previous Government committed to that by 2030. Just to clarify for the benefit of the noble Baroness, Lady Smith, that is the position I supported then and it is the position I support now.
The present Government have been talking about this for months—they have now been in Government for nearly four months—and that is why the failure by the Chancellor yesterday to bring clarity is so serious. The Government are saying to our allies, “We cannot tell you anything about our strategic defence spend and we do not know when we will be able to”. What a message. What about our adversaries? They must be rubbing their hands in glee: this chaos is music to their ears. The only message any onlooker can infer from this mess is that neither the Prime Minister nor his Chancellor get defence. I know that the noble Lord, Lord Coaker, does get defence, and I have sympathy with him. He will put up a stout and loyal response to this debate, but his position is unenviable.
Let me mention the Government’s imposition of VAT on school fees having an immediate and deeply damaging impact on defence families. Approximately 4,000 children of service personnel get the continuity of education allowance, which is to mitigate the disruption to education of regular postings. It does not cover the full fees, and many parents, despite that CEA, will struggle to meet the additional cost created by VAT. All that has been offered is a proportionate increase in the CEA, but it is the balance over and above that that many service families will find unaffordable. I am at a loss to understand how the Chancellor does not get that. It seems an extraordinary insult to our Armed Forces personnel. The Government need to exempt the children of all military personnel from VAT on school fees with immediate effect.
I have the highest regard for the Minister, and I know that defence has a doughty advocate in him, so I exhort him to relay the pungent message that he has heard this afternoon to his colleagues in government.
The Minister of State, Ministry of Defence (Lord Coaker) (Lab)
I start by thanking the noble Baroness, Lady Goldie, for that ringing endorsement. My colleagues always read your Lordships’ debates with intense interest and scrutiny, so they will no doubt look at that. I thank the noble Baroness, Lady Goldie, for the way in which she puts her remarks strongly but also in a proper and challenging way—I appreciate that.
I will come on to some of the specifics about the 2.5% but before I forget, I want to take on the point the noble Baroness, Lady Smith, made, and I will put my head above the parapet on this one. My understanding of employer national insurance is that the public sector does not pay it. I think that answers her question. I have given that answer out of my own knowledge and professional experience of these matters, plus the fact that I heard Kate McCann on Times Radio yesterday. The question was asked about the impact of employer national insurance on the National Health Service, to which the reply was that the National Health Service does not pay employer national insurance because it is a public sector body. If I am wrong, I will write to the noble Baroness and to every other member of the Committee, but I think I am right. If I am not, I will correct the record, because it is an important question, but I do not think that the Armed Forces pay it.
I will answer the specific questions of noble Lords, but the position of the Government is as was laid out in the Budget, and it is on the various pages in the Autumn Budget report, which noble Lords will have read. There is not a scintilla of difference between any of us about the desire to protect our nation, to have the Armed Forces that we need and to meet all those threats. There is a discussion and a debate about how we get to 2.5% and when we should do that. Indeed, as the noble Lord, Lord Bilimoria, raised, as well as the noble Lord, whose name escapes me—
Lord Coaker (Lab)
Yes. They talked about 3% and beyond. I have even heard people then start to talk about 3.5% or 4% or whatever. So, there will be a debate on what one considers to be right, but the Government have said that we have seen what the policy is and 2.5% will be at a future fiscal event. That will be laid out, and the additional £2.9 billion for next year will be laid out with that.
Of course, alongside that, the defence review is looking at various issues. A number of your Lordships —the noble Earl, Lord Attlee, the noble Baroness, Lady Smith, and others—talked about the fact that how we actually spend that money is as important as the actual amount. What are the threats that we need to face in the future? With those few introductory remarks, that is the position of the Government, and that is where we are, so let me turn to some of the specifics raised in the debate. I know that the noble Baroness, Lady Goldie, will be disappointed, but that is the position of the Government, which I am reiterating to the Committee.
I thank the noble Viscount, Lord Trenchard, very much for ensuring that we have this debate. He was very fortunate that it came the day after the Budget—I might have preferred it the day before the Budget, but there we go. The serious point is that he has brought forward an important debate, he made the points about the Budget and I responded in the way I have by laying out the Government’s position.
I want to go through some of the questions that were raised, alongside the whole issue of the Budget. The noble Viscount is absolutely right about AUKUS and the importance of that within the defence review, and it is protected within that. There will be a debate and a discussion about the best way of delivering that. It was started under the last Government—the noble Baroness, Lady Goldie, was involved. That is protected within the overall strategy of the defence review, although there will be a discussion about the best way of delivering it, and the noble Viscount would expect nothing else.
The noble Viscount is a firm and stout defender of the Indo-Pacific. He will know that, notwithstanding the Government’s NATO-first policy, we also understand the importance of the Indo-Pacific. He will know that when I have been there, I have talked about the indivisibility of conflict: that what happens in the Indo-Pacific impacts on Europe, and what happens in Europe impacts on the Indo-Pacific, on the south of our globe and on the High North. All those things are interrelated. The challenge of the future and of funding for the future, not just for our country but for others, is how we establish that global alliance of free, democratic nations in response to the threat from Russia, China, North Korea and Iran. There will be debate and discussion about how we do that, but it is very important.
The noble Viscount, Lord Trenchard, talked about the sixth-generation global combat aircraft. Last week I was at the Italian embassy, and the week before at the Japanese embassy. He will know that, time and again, I go and discuss with them the sixth-generation fighter and its importance within the defence review, which will come to its own conclusions. He will also know that we have just signed the treaty allowing the governance of that project, and we continue to make progress.
I know the noble Lord, Lord Bilimoria, will be disappointed by my remarks about the Government’s position, but that is our position and it is an absolute commitment. Our Treasury Minister is here, who will also have heard it. The 2.5% commitment will absolutely be delivered. At present, we cannot give a timeline, but we are determined to deliver it and will do so when we are able. We all know how much the noble Lord has helped Ukraine, not just with military support but with the medical and other support that he has given. He is to be much congratulated on that work.
I cannot predict the outcome of the American presidential election. It is not for me to discuss that or say who we would want to win, but I will say that the importance of the US-Europe relationship is crucial to the defence of democracy and the free world. We will have to ensure that, whatever the outcome, we work with our American colleagues and friends, and the American system, to deliver that. I believe that the American system, founded on one of the greatest declarations of independence and the establishment of freedom, will not forget its roots.
The noble Lord and the noble Baronesses, Lady Buscombe and Lady Smith, mentioned the problem of recruitment and retention. A review is ongoing on that; it has not yet reported but it will look at many of the matters that noble Lords have mentioned, including the inability to recruit the numbers that we need, skilled labour shortages, retention and the important point about accommodation and welfare. All of those will be looked at as a package. We are starting to try to invest the money in housing, some of which is not acceptable.
Baroness Buscombe (Con)
I am sorry to interrupt, but is that review independent of the MoD?
Lord Coaker (Lab)
No; it is being conducted within the MoD. I am pleased that the review is taking place, and it is being done without fear or favour. We want it to come forward with proposals on those very real problems, and I have great confidence in that being done.
The noble Lord, Lord Mountevans, mentioned the crucial question of the defence industrial base. There is no doubt that we and our allies have not looked at how we ensure that we have the defence industry capability that we need to prosecute a war of some length. That has caused all of us to reflect on what we do about it. Our response has been to appoint a National Armaments Director—I believe we have already done so but, if not, we will—who will look at how we ensure that we have the armaments we need. One of the most distressing things about Ukraine—the noble Baroness, Lady Goldie, would have witnessed it; it might have happened when she was the Minister—was to read about Ukrainian troops having to retreat because they did not have sufficient ammunition or shells. That is not acceptable to us. Everyone is looking at what we do there.
The noble Baroness, Lady Smith, made a point about procurement. We absolutely need to look at that. She heard what I had to say about the National Armaments Director. She was right to make the point about economic growth: of course, 2.5% of a growing economy is more than 2.5% of a declining one. One of the arguments that might be made about the Government’s economic strategy is that, in the short term, they are making difficult choices to allow the economy to grow in a way it might not otherwise do; that will be of benefit, notwithstanding the short-term discomfort it may cause some of us.
I have, I think, dealt with most of the major points made. I finish on something said by the noble Lord, Lord Shinkwin, because it is a really important point that I want to make sure is heard by our allies and friends. It is important for us in these debates—in this Committee, in the Chamber and in the Commons—to have the confidence to let our allies know that, notwithstanding our debates and discussions on the right configuration of our Armed Forces and the right amount to spend on them, we as a country are determined, alongside our allies, to defend freedom and democracy wherever they are threatened across the world. That is the message Putin should hear and understand.
We will not relent or step back in the face of Russia’s illegal invasion of Ukraine. This country has never stepped back when it has faced an adversary in this way; that is the message we should take forward. The fact that we can discuss what we are debating today in a democracy, without fear or favour—even if our opinions are unpopular—is something that we have fought for long and hard. Whatever our disagreements about the Budget, that is the message that Putin, China, as one noble Lord mentioned, Russia, Iran and North Korea should hear. This country has always stood up for democracy and always will.
Employment: Tax Policy
(2 days, 17 hours ago)
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Lord Leigh of Hurley
To ask His Majesty’s Government what assessment they have made of the impact of tax policy on employment.
Lord Leigh of Hurley (Con)
My Lords, I draw noble Lords’ attention to my entry in the register of interests, which notes the businesses I have started, invested in and grown over the years, including my main business, Cavendish Financial plc, which I started with one colleague and a PA and, I am pleased to say, now employs over 200 people.
The timing of this QSD seems remarkably fortuitous—I cannot claim it was wholly planned this way—and will perhaps allow us to consider the rationale and effect of some of yesterday’s Budget as well as reflecting on how future changes to tax policy might affect employment and related areas.
The Minister will be pleased to know that I will not be spending all my allotted time digging in the illusory black hole, as the OBR has rightly confirmed that, other than a possible contentious £9.2 billion, the £22 billion was not something that it could support—at least in respect of the reserves, where the underspend is yet to be determined. We will have to leave that matter there. I suspect that the Minister will also be pleased to know that we will not spend the whole of the next four years going over this, to our mutually enormous pleasure. That is not really the point here, other than to note that Labour created a reason to increase tax and so, like every other Labour Government, increase tax they so did.
As I am sure the noble Lord, Lord Bilimoria, will recall, we were warned by the CBI earlier this week when Mrs Newton-Smith said:
“If we see a rise in national insurance contributions paid by employers … that will make it more difficult for businesses”.
That warning was echoed by the respected economist Paul Johnson of the IFS, who pointed out that NI is a tax felt solely by working people and employers. His response to the actual rise has been to remind us that the OBR suggests that three-quarters of the impact of employer NICs will be felt by employees, even if the changes do not immediately show up on their payslips. Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years. Someone will pay for the higher taxes, and it will largely be working people.
The employers’ NIC rise will further increase the incentive for employers to switch to contracting with the self-employed or, as many will have heard on today’s radio broadcasts—and this is really worrying for us here—to subcontract to overseas production. Indeed, I have talked to employers today who have said to me that they are cutting down on their future recruitment. Radio 4’s “Today” programme said it had not found one business person who thinks that yesterday’s Budget will help their business to grow and employ more people.
Incidentally, Paul Johnson also opined that a rise in employers’ NI would be a straightforward breach of Labour’s manifesto. His views on the damage to employment that the rise will cause has been echoed by normally non-political characters, such as the CEO of Lloyds Bank, and of course for certain industries, such as the hospitality sector, it will be a disaster. Mark my words: care homes will close after this Budget.
A Mrs Christina French from Birmingham, founder of Diverse Sparks Ltd, an electrical contractor, has been quoted in the press as saying that the rate rise and the threshold drop has meant that she has now to consider selling her business. Her exact words were:
“It’s rubbish because I’ve created jobs and apprenticeships for the last 12 years, and now that’s not going to be an option for us”.
That is the reality of life for business owners. Sadly, Labour’s Front Bench has not much experience of starting a business and hardly any of running a small business, so they may not be aware of the pressures facing business owners. If they are not going to listen to business creators and owners such as Mrs French and me, perhaps their friends at the OBR might persuade them that, when it points out that,
“The employer NICs rise is estimated to reduce labour supply by 50,000 average-hours equivalents”
and promptly downgrade the UK’s growth prospects, it should be listened to.
The wonderfully named Growth Commission, which one would have thought would take pride of place at Labour’s top table, has modelled a rise in NI and predicts that it leads to a negative hit to GDP, peaking all the way to 2030 but still impacting GDP negatively in 2045-6. One has to wonder whether the gamble, which has been taken to fill a hotly disputed black hole with a tax rise on jobs, really makes sense? Perhaps the Minister can explain the thinking here, particularly given the hugely respected Growth Commission’s views.
I am grateful to some other great folk, such as those at the Jobs Foundation, chaired by my noble friend Lord Elliott of Mickle Fell, who remind us that businesses and entrepreneurs provide 80% of the jobs in the UK. Their mantra comes from Winston Churchill, who famously said—though I refrain from doing the accent—that:
“Some people regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon”.
Famously, the Chancellor herself referred to an increase in NI as a jobs tax. This was in 2021, when criticising the proposals then to raise national insurance. Her point was that NI is purely a tax on people who go to work and those who employ them. She then said, revealingly, that, if you earn an income through dealing in stocks and shares, you do not pay a penny more in NI. That is revealing because it shows that Labour does not really understand and appreciate the difference between capital gains and income. Perhaps the Minister can explain to the Chancellor that dealing in stocks and shares is not a source of income: it is an activity that requires you to risk capital, which you might lose because of the great uncertainty. This brings me to my concern about the effects of other tax rises on employment.
For businesses to grow and employ more, they need capital. Many, like mine, have been to the capital markets through the Alternative Investment Market—AIM. That market has become harder and less liquid, despite the best efforts of Jeremy Hunt and the Mansion House compact. The decision taken yesterday to reduce business property relief—BPR—on inheritance tax by 50% will be a hammer blow to many entrepreneurial family businesses. When a family member passes on, they will now have to find 20% of the current value of the shares and pay for that in cash. That will simply lead to more firms closing down, selling up and having to sell assets to release cash, simply for the Exchequer.
This huge rise in IHT for private business owners has yet to be fully assessed. In its booklet, the OBR does not split out APR and BPR, so we have no idea of the true cost. We do know that this move and, of course, the potentially disastrous decision to tax the non-doms, in particular by including the EPTs in inheritance tax, means that wealth creators who create jobs are despairing at the effects that this Budget will bring to employment.
In my opinion, these measures are not just about raising tax but about ramming through ideological dislike for inherited wealth and, indeed, private enterprise. Sadly, the measures taken will, in reality, really damage everyone employed in the UK. I ask the Minister what assessment HMG have made of the impact of their tax policy on employment. I beg to move.
Lord Davies of Brixton (Lab)
I thank the noble Lord, Lord Leigh of Hurley, for raising this issue. As he says, the debate is extremely timely. I have set up and run a small business—not at all on the sort of scale that he has achieved but it has given me a perspective that he perhaps suggested in his speech did not exist on this side of the discussion. Many noble Lords who take the Labour whip have been successful in business, so I think the suggestion that we on this side of the Committee do not know what is required to achieve success in business is wrong.
I will not pursue the issue of the £22 billion, which has been well trodden, but will pick up on the noble Lord’s comment that Labour created a reason to increase tax. It was not Labour that created the reason; it was 14 years of Conservative mismanagement of our economy that created the situation that has led to increases in tax.
I spoke briefly to the noble Lord, Lord Leigh, yesterday, and we agreed that it is a general issue and not just about the Budget. Looking at the issue in general, it is quite clear that if firms have to pay higher tax then there will be impacts on employment, on the pay that can be given to employees, and presumably on profits. Of course, profits does not just mean entrepreneurs; it means pension funds and other investors who hold those investments. Clearly, those effects exist—I do not think anyone would argue about that.
However, in truth, it is a lot more complicated, because the Government receive the money and then spend the money—they do not bury it in a hole in the ground. The Government increase their revenue and use it to create employment, through providing their own services, and to create the society infrastructure that is required for business to operate. Higher quality infrastructure means more successful businesses. The Government also purchase, using that money significantly to buy from the private sector—and much of the private sector depends on government revenues for its economic success. There are two sides to that equation and we cannot assume, a priori, that one side is more significant than the other. We have to look at the evidence.
I thank the Library for its relatively short briefing. It identifies that this whole area is contested, at the least. It is very difficult to identify cause and effect in this area because the whole system is moving on. It is not an isolated, scientific experiment, with a control for all the variables involved; to reach a definitive conclusion is not straightforward. For example, there is the vexed issue of incentives and disincentives. The situation as it works in practice is not quite as clear-cut as the anecdotes that are often advanced to try to argue on one side or the other. The general issue, as I say, is a lot more complicated than perhaps was suggested by the noble Lord in asking his Question.
The noble Lord quite rightly identifies that we have an interesting case study in yesterday’s Budget of what the effect of the increase in national insurance contributions will be on employment. The Office for Budget Responsibility’s report makes for interesting reading. Of the net effect of the measures in yesterday’s Budget, principally the increase in national insurance contributions, it says that:
“The unemployment rate is forecast to average 4.3% in 2024, a small increase on 2023, before remaining close to 4.0%. The employment rate (for those aged 16 and over) is expected to remain close to 60% over the forecast”.
Whatever the impact of the increase in national insurance contributions by itself, the overall effect of the Budget is to maintain employment and, ultimately, provide the basis on which our Government will move forward and achieve the sort of growth we need to repair our public services.
Lord Bilimoria (CB)
My Lords, the Government, the Chancellor and the Prime Minister keep talking about growth. The investment summit at the Guildhall had a huge sign saying “Growth”. But, to do that, the private sector has to be supported to grow. It is private sector growth that creates the jobs that pay for the taxes that pay for public services—no growth; no taxes. If you put up taxes, you get no growth. That is the paradox.
I thank the noble Lord, Lord Leigh, for his excellent opening speech. Taxes on employment generate £454.8 billion. That accounts for 45% of total public sector receipts. It is huge. Employment tax revenues represent almost 17% of UK GDP. For a married worker with two children earning an average salary, the UK has a tax wedge of 27%, above the OECD average of 25.7%. Higher employment taxes can discourage firms from hiring, reduce wages and affect workers’ decisions to enter the workforce or seek higher-paid jobs. Corporate and consumption taxes also influence that. Employment corporate taxes can deter investments in jobs. I am sorry but the previous Government have to be blamed for raising taxes to their highest level in 70 years and, in particular, putting up corporation tax from 19% to 25%. That was a huge mistake and should not have been done.
Consumption taxes create a wedge affecting labour, demand and supply. Higher taxation is associated with reduced labour supply, and studies show that a 1% rise in tax correlates to a 0.5% drop in hours worked. Of the 17 OECD studies, only five found no significant negative impact of taxes on unemployment. The remaining studies indicate that higher labour taxes increase unemployment levels. A 10% reduction in the tax wedge could lower equilibrium unemployment by 2.8% and raise the employment rate by 3.7%. That is what we are talking about. The fiscal drag that the previous Government put in place until 2028 is also hugely damaging, affecting 7 million tax payers.
The Labour Party has promised to maintain corporation tax at 25% and not raise income tax, employees’ NI or VAT. That is all great, but the noble Lord, Lord Leigh, mentioned the hugely damaging effect of the taxes on non-doms and the removal of the non-dom regime. Inheritance tax reforms will drive investment away from this country. I know many people who have already left. Some 75,000 non-doms pay £9 billion of tax; they spend and invest in this country. Those people are mobile and that money will fly.
The increase of capital gains tax from 20% to 24% was not as bad as we thought, but the elephant in the room is the £40 billion of tax increases. The OBR warned that this could weaken long-term growth in the UK economy. Sure enough, the forecasts for growth do not even reach 2% in the years ahead, at about 1.5% or 1.6%. Increasing national insurance by 1.2% to 15%, raising approximately £25 billion, is a tax on jobs. I agree with the noble Lord, Lord Davies, that if you spend more and increase infrastructure then that should help productivity, but our public spending will reach 44% of GDP by the end of the decade, funded by tax and borrowing. Businesses are bearing the brunt of this £40 billion tax increase. The threshold of NI going down from £9,100 to £5,000 will bring many more people in as well. The business rates discount put in place by the previous Government of 75%, which has really helped, is going down to 40%. How many pubs and restaurants and how much of the high street will be able to take that?
On top of that, we have a £5 billion cost on the impact of employment regulation, and we have flexible employment, which is a huge advantage over a country such as France. If you make our workforce less flexible, it has a cost to it, and it makes us less attractive for investment. Inflation is now predicted to go up to 2.5% or 2.6%.
To conclude, since 2008, over those 16 years of financial crisis, austerity, the Covid pandemic, the Ukraine war, with inflation up to 11%, energy inflation, the cost of living crisis, 7 October and the tragedy of that day and the tragedy since, and with the uncertainty in every direction you look in the world, how much more can business put up with? How much can business deal with? How resilient can our businesses be? As the noble Lord, Lord Leigh, said, 80% of the jobs are provided by it, and then there are the 5 million SMEs and the jobs that they provide. How can we carry on and deal with just one challenge after another? Then we get this Halloween Budget, burdening business with higher taxes. This is a tax, borrow and spend Budget, not a growth Budget. It is not a pro-business Budget or a pro-entrepreneurship Budget. The Government’s job is to be a catalyst and create the environment for businesses and entrepreneurship to flourish and grow. The Budget does exactly the opposite.
Lord Elliott of Mickle Fell (Con)
My Lords, I congratulate my noble friend Lord Leigh on securing this timely debate, which feels like a dress rehearsal for the actual Autumn Budget debate on 11 November.
I wish to contribute three points today. First, I want to share some views from business leaders outside London on employment taxes. Secondly, I want to highlight what appears to be an inconsistency in government policy. Thirdly, I want to focus on the need to encourage UK-born entrepreneurs to stay here and create jobs rather than going overseas.
On my first point, I draw the attention of noble Lords to a report launched by the Jobs Foundation this week. As my noble friend Lord Leigh kindly mentioned, I am president of the Jobs Foundation, as declared in the register of interests. The report is called: Two Million Jobs: How Businesses Play a Crucial Role in Helping People from Welfare into Work. It is a ground-breaking piece of research that tries to help the Government to deliver on their highly commendable ambition to increase the employment rate to 80% by helping 2 million people from welfare into work.
The author interviewed business leaders, employees and stakeholders in four locations—Sheffield, Loughborough, Hartlepool and Pembrokeshire. These locations were chosen to cover the length and breadth of Britain, and represent the individual needs of a city, a town, a coastal community and a rural community. Many policy areas were discussed, and I know from these conversations that some elements of the Budget will have been very much welcomed, including the measures to improve transport links. But a consistent theme from the interviews was a concern about increasing taxes on employment, so I know that many of the business leaders spoken to, who are all involved in helping people from welfare into work, will be concerned about the announcement on employers’ NI in yesterday’s Budget.
That brings me on to my second point. Listening to the Budget, I was struck by the apparent inconsistency in government tax policy. On the one hand, the Chancellor announced an increase in the soft drinks levy, presumably to discourage people from buying sugary drinks; a rise in alcohol duties to discourage drinking; and an increase in tobacco duty
“to maintain the incentive to give up smoking”.—[Official Report, Commons, 30/10/2024; col. 819.]
All these tax rises are premised on the correct assumption that increasing taxation reduces consumption. But, on the other hand, there seems to be little recognition that increasing taxes on jobs by increasing employers’ NI will similarly reduce demand for employees, and potentially reduce the number of people in work. If increasing taxes on tobacco is designed to reduce smoking, surely increasing taxes on employment reduces the number of jobs? I would be interested to know whether the Minister expects the number of jobs in the UK to fall with the increase in employers’ NI. If that is the case, will it not hinder the Government’s laudable efforts to get 2 million people from welfare into work?
My third and final point is that we need to focus on how taxation affects where entrepreneurs locate themselves and their businesses. Earlier this month, I attended the GITEX conference in Dubai, which gathered together over 6,500 entrepreneurs from over 180 countries. It was a wonderful window into the future and so inspiring to see innovators enacting their ideas and creating the world of tomorrow. However, something was painfully striking: the number of young UK-born entrepreneurs who had left the UK to pursue their dreams and ambitions. I asked them why they had chosen to do this, and a consistent theme was the UK’s business environment, including, but not solely, the level of taxation. One might ask: why is this a problem? It is a problem because start-ups create far more new jobs than established companies.
A report by the Ewing Marion Kauffman Foundation in 2022 looked at the United States and found that, in 2019, companies in their first year created 5.24 new jobs each, while companies older than that created, at most, 0.4 new jobs each. Therefore, it is essential that we incentivise start-ups to locate here in the UK to create some of the 2 million jobs required to increase the UK’s employment rate. Sadly, some entrepreneurs are already looking to vote with their feet. A recent survey by the Startup Coalition found that more than 80% of the start-up founders it represents were considering leaving the UK. We need the young entrepreneurs I met in Dubai to want to stay here in the UK to build their companies and create jobs, and that requires a tax system that encourages entrepreneurship and incentivises wealth creation.
Lord Petitgas (Con)
My Lords, I thank my noble friend Lord Leigh of Hurley for this debate about the impact of tax policy on employment. I repeat the title, because I can see that the exam question has moved to the impact of the Budget on business. Unfortunately, I will probably fail as well.
I talked about a “boom in gloom” in the short debate on foreign investment in September. At that time, business had already grown fearful about slowing growth, with a foreboding that we were heading away from a market economy towards big state-led economic management. Confidence was waning. Employment is a barometer of business confidence and investment, so will this Budget shore up or further blunt such confidence? The answer boils down to whether business trusts the Government to spend their higher tax and new borrowings productively and deliver the future growth dividend ultimately to balance the books.
Many, if not most, are sceptical about this tax, borrow and spend Budget package. It seems doubtful that it can deliver the innovative entrepreneurial economy that the UK should aspire to. The OBR’s own revised forecasts on inflation, rates and growth made for poor reading overnight, while sovereign yields widened in the gilt market. That is not anecdotal; it was on the Financial Times website all day. Rates will stay higher for longer, increasing the cost of capital for the economy, the Treasury and mortgage holders.
The impact of these tax measures on employment is the key for growth. I shall frame this around three observations, first addressing the impact on business and employment. Business is facing a trifecta of a high minimum wage, increased NI and a new set of labour rights. Let us not pretend that, by taxing business, the impact will not fall on working people and consumers themselves. This is taxing employees through the backdoor. It will sap confidence, increase costs and hurt employment. An increase in income tax, although equally regrettable, would at least have been more transparent and given workers a clearer idea of the impact on them. It is rather complicated to get to the same money. The OBR report says:
“The rise in employer NICs in this Budget will further erode profits and we assume firms are only able to pass on around 60 per cent of the cost to employees in the short term”—
probably rising to more than 80%. Moreover, uncertainty about new labour rights represents a policy risk.
All this will feed into the real economy through high prices, low consumer spending and a slow labour market. This painful trifecta will raise costs for business, discourage expansion, and hurt staffing levels and hiring plans. Certain sectors, such as hospitality and retail, and SMEs, which cannot cushion from shocks easily, will have to pass on these higher costs if they can and, if they cannot, they may need to lay off. It is misleading to suggest that, by taxing business, you are not taxing employees—unless, of course, they are in the public sector. What analysis has been prepared, sector by sector and for SMEs, on the impact of these measures on employment?
My second point concerns inflation. We, along with the OBR, should worry about continued inflation. The “tax, borrow and spend” spree is happening at pace while the returns of large public investments, if any, will come through only in the long term. As the noble Lord, Lord Davies, said, a fundamental issue is the mismatch between borrowing the money now and spending it and the long-term returns; that is not to say we do not need more infrastructure. Confidence is therefore crucial to seeing us through the interim years. However, so far, the OBR, the markets and business are all showing grave misgivings. The costs of capital and of doing business in the UK have gone up. It is a difficult quandary and a real dilemma. Did the Government assess the impact of their new labour rights, raised minimum wage and public sector awards on inflation?
Let me end on the NHS. It is, as I see it, one of the case studies on investing in infrastructure for the long term. It binds two key aims: ensuring a healthy workforce, and the productive use of money. These are crucial, because the welfare bill is growing faster than GDP while too many working-age people are unfit to work. The Government have rightly said that they want greater emphasis on preventive care—I appreciate that this is not necessarily the Minister’s area of expertise—but preventive care is about telling people how to live their lives in healthier ways. Is money the obstacle, therefore, or is it more about finding the right language and legitimacy for the state to have these conversations? I say that not to belittle the huge issues facing the NHS, including its need for money, but to highlight the fact that it is not always about spending more money—and the same applies to education. It is also about setting productivity targets and changing the culture.
Lord Razzall (LD)
My Lords, the noble Lord, Lord Petitgas, suggested that this QSD would make a good exam question. I have often thought of it as a possible topic for PhD study; perhaps somebody has done it already.
Before I get on to the detail of the Budget, let us look at the positive use of tax policy in this country’s economy. I can think of three good examples. Let us take the agriculture industry: without the use of tax subsidies since the Second World War, we would not have the farming industry we currently have. Secondly, let us take the use of tax relief for microbreweries, which the Government want to encourage—I think that is somewhere in these documents. The tax relief given to microbreweries has created a lot of employment in the sector for people creating small breweries. Thirdly, the obvious example is the use of tax relief for the film and television industry, which provided a massive subsidy. If you make a film that qualifies in the UK with a budget of £100 million, you get back £25 million to £30 million in cash the moment you deliver the product. This has meant a huge increase in the number of films made in the UK; almost every Hollywood studio no longer makes its films in Hollywood but in the UK, entirely as a result of the positive use of the tax system to benefit our economy.
Inevitably, as the noble Lord, Lord Leigh, said, we must touch on what happened in the Budget. I do not think that I have so far heard anybody defend what happened in terms of the use of NI to raise £25 billion. Actually, it is not just the use of NI that is potentially damaging to small businesses, care homes, pubs and restaurants. It is also the triple whammy of the possibility of an NI increase, the increase in the minimum wage and the changes to zero-hours contracts. Nobody quite knows how those will impact on small businesses, particularly in the entertainment sector. The OBR says—this is common ground, I think—that, as a result of these policies, at least 50,000 jobs that would not have been lost otherwise will be lost and that our growth rate will be a lot lower than it would have been otherwise.
I am slightly disappointed that I have not yet heard a speaker in this debate say what they would have done as an alternative. We have heard all the arguments as to why this is a lot of rubbish; the noble Lords, Lord Bilimoria, Lord Leigh and Lord Petitgas, all suggest that it is what they would not have done, but we have not heard what they would have done. There seems to be some common ground; although the noble Lord, Lord Leigh, denied the existence of the £22 billion black hole, which I do not want to get into, I do not believe anyone thinks we do not need to raise more revenue to improve our public services. In that case, how do we do it? Bearing in mind that the Labour Government boxed themselves in by saying they were not going to increase income tax, VAT or NI, they had to do something.
Personally, I would not have done this. Our policy would have been to look to raise tax revenues elsewhere. We would have looked again at a better windfall tax on the oil and gas companies. We might have reversed the tax cuts that the Tories gave to the banks, and we might have looked at the obvious group that can provide more revenue for us: the large social media companies. We could have found creative ways to raise the money without doing this, which in a lot of ways is a tax on jobs.
We are all very pessimistic at the moment, but I have always been a bit optimistic. I remember standing in the Chamber in about 1998 or 1999 when the Labour Government introduced the minimum wage, and every speaker on this side said, “This is going to be a complete disaster; the minimum wage will destroy jobs and destroy our country as we know it”. It did not, and I hope this does not either.
Baroness Vere of Norbiton (Con)
My Lords, it is a great pleasure to follow the noble Lord, Lord Razzall. I agreed with some of what he had to say, which is a bonus for me today, so I am enormously grateful for his contribution. I am also grateful to my friend Lord Leigh for tabling this debate. Who knew that it was going to be so well timed? Like many others, I too will fall into the trap of focusing on the Budget because it is top of mind at the moment, and not in a good way.
I have to say, from listening to my noble friend Lord Leigh’s opening remarks, that he brings extraordinary expertise of commerce and the private sector, as of course do many other speakers in this short debate today, notably my noble friend Lord Petitgas and of course the noble Lord, Lord Bilimoria. Unfortunately, that is more than can be said of the current Chancellor and indeed the wider Cabinet—I think some analysis has been done, and private sector experience is somewhat lacking—so I hope that the suggestion made by the noble Lord, Lord Davies of Brixton, that some of the Labour Peers are promoted to positions of greatness such that they can share their private sector expertise, is taken up. It is definitely the case that there is private sector expertise on the Labour Benches; it just does not seem to have got up to the top levels.
Yesterday the new Labour Government raised the tax burden to the highest level in our country’s history. Despite making an outright promise not to raise taxes on people, they raised taxes on working people. In hiking the employers’ national insurance contributions—NICs for short—to raise a headline figure of £25 billion, the Government have committed a straightforward breach, according to the IFS, of their manifesto. Furthermore, there are numerous examples of the now Prime Minister and Chancellor promising before the election not to hike taxes. Can the Minister give the Committee any insight into how the discussions went when drafting the section of the manifesto about no increase in taxes on working people? Was it a cunning sleight of hand that left the words “national insurance contributions” unencumbered by the “employees’” qualifier, or was it just incompetence?
The noble Lord, Lord Bilimoria, made an excellent contribution. I appreciate his comments about the last Government. As a Conservative, I can say that no one wants to see taxes go up—it is just not in our DNA.
I remember many debates when I was a Treasury Minister and the noble Lord, Lord Livermore, in opposition, would slam me for tax rises. I was going to come up with various quotes today about the number of times he has previously slammed me for tax rises, but I thought that would be really cruel.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
Could the noble Baroness not be bothered to do so?
Baroness Vere of Norbiton (Con)
No; my speech is already six minutes long, but I will do it next time.
Of course, at that time, we were dealing with the pandemic and its fallout, and the fallout from the energy price support we had given. Therefore, we had a very firm footing on which to raise taxes.
The Minister will try to bring out his fictitious black hole; I sincerely hope that he will not, given what the OBR has now said about it—I am starting to feel a bit embarrassed for him. Plainly and simply, promises have been broken, and we need to now think about what we can do to ensure growth in the private sector. The views of the private sector on this are now well known. Can the Minister share with me whether anyone in the private sector thinks the rise in employer NI is a good idea?
I want also to look at what the OBR has to say in its economic and fiscal outlook. My noble friend Lord Elliott is right. It is like beer, which is going down by 1p in a pint—that is huge, is it not?—and wine: the more you tax it, the less you get. The noble Lord, Lord Razzall, was very helpful in this regard. If you tax the film and creative industries less, they grow more. Unfortunately, we have seen taxes go up, so—surprise, surprise—the labour supply is forecast to come down by 0.2%. I do not know whether the Minister is happy with this, but I wonder what the Government will do to mitigate for those people who would otherwise have been in a good job.
But it is worse than that. Real earnings will then stall in 2026 and 2027, as firms rebuild their margins and pass on the costs of higher employer NICs. Real wages are not expected to resume growing in line with productivity until beyond the forecast horizon. What interventions will the Minister set out in terms of increasing productivity such that we can get some sort of real wage growth going?
It is not just the OBR that has an issue here; it is also HMRC, which reflects that 940,000 employers will lose an average of £800 per employee. This is not good news for employment, and it is not good news for growth. Labour’s No. 1 mission is to secure the highest sustained growth in the G7. I am an optimist, but this Budget literally has the forecasts for growth coming down. I cannot see how that is compatible with Labour’s No. 1 mission.
The noble Lord, Lord Razzall, asked for alternatives. I will give him two that are still on the table. First, if we increased productivity to pre-pandemic levels, we would get £20 billion a year. Secondly, reforms to adult welfare would save £34 billion a year. That was our plan; we did have a plan but, unfortunately, we were not able to put it in place.
Lord Livermore (Lab)
My Lords, I congratulate the noble Lord, Lord Leigh of Hurley, on securing this debate and on his opening speech. I thank all noble Lords for their contributions.
The manifesto this Government were elected on promised to invest in our public services and prioritise working people. Keeping those promises was at the core of yesterday’s Budget. Many noble Lords focused today on specific tax decisions made in the Budget, and the impact and analysis of those decisions as set out by the independent Office for Budget Responsibility. It may be helpful to noble Lords if I begin by explaining the background to the decisions we made.
First, in July, as the noble Lord, Lord Leigh of Hurley, kindly mentioned, the Chancellor exposed a £22 billion black hole at the heart of the previous Government’s plans—a series of promises they made but had no money to deliver. This Government yesterday published a line-by-line breakdown of that £22 billion black hole, and the OBR published its own review of the circumstances surrounding the Spring Budget forecast.
For the benefit of the noble Baroness, Lady Vere, the OBR’s report says that the previous Government “did not provide” them “with all the information” that was available and that, had the OBR known about these
“undisclosed … pressures that have since come to light”,
its spring forecast would have been “materially different”.
Secondly, the country inherited not just broken public finances but broken public services too, with NHS waiting lists at record levels, schools literally crumbling, and rivers filled with waste. Yet, since 2021, there had been no spending review—no detailed plans for departmental spending set out beyond this year.
Thirdly, the previous Government had failed to budget for costs which they knew would materialise, including funding for compensation schemes for the infected blood scandal and the Post Office Horizon scandal.
Put together, these three things—the black hole in our public finances, the compensation payments which they did not fund and their failure to assess the scale of the challenges facing our public services—meant that, in order to meet our first fiscal rule, yesterday’s Budget needed to raise taxes by £40 billion.
So, we had in yesterday’s Budget some very difficult decisions to take in order to rebuild our public finances and our public services. In doing so, we made an important choice: to keep every single commitment we made on tax in our manifesto. We did not raise taxes on working people—their income tax, their national insurance or VAT—and we were able to go further, by not increasing fuel duty and by not extending the last Government’s freeze of income tax thresholds, which hit working people so hard, as the noble Lord, Lord Bilimoria, mentioned.
Of course, in the circumstances I describe, any responsible Chancellor would need to take difficult decisions to raise the revenue required to fund our public services and to repair our public finances. So, in yesterday’s Budget, the Chancellor announced an increase in employers’ national insurance contributions by 1.2 percentage points to 15% from April, and that the secondary threshold would be reduced from £9,100 per year to £5,000.
We know that it is particularly important to protect our smallest companies, so we also increased the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will not pay any national insurance at all next year, and over 1 million will pay the same or less than they did previously. In the Budget, we also increased the lower rate of capital gains tax from 10% to 18%, and the higher rate from 20% to 24%, which means that the UK will continue to have the lowest capital gains tax rate of any European G7 country.
Alongside these changes to the headline rates of capital gains tax, we are also maintaining the lifetime limit for business asset disposal relief at £1 million, to encourage entrepreneurs to invest in their businesses. Business asset disposal relief will remain at 10% this year before rising to 14% in April and 18% from 2026-27, maintaining a significant gap compared with the higher rate of capital gains tax.
We also published a Corporate Tax Roadmap, which confirms our commitment to cap the rate of corporation tax at 25%—the lowest in the G7—for the duration of this Parliament, while maintaining full expensing and the £1 million annual investment allowance and keeping the current rates for research and development reliefs to drive innovation.
The Budget also set out additional tax measures, including reforming inheritance tax and measures on tobacco duty, vehicle excise duty, air passenger duty and alcohol duty.
We also delivered on our other commitments, which some noble Lords addressed during this debate: to abolish the non-dom tax regime and replace it with a new residence-based scheme; a new approach to the way carried interest is taxed; reforms to the stamp duty land surcharge tax for second homes, and to the energy profits levy; and we introduced VAT on private school fees. In total, these changes—alongside our measures to tackle tax avoidance—will raise over £9 billion to support our public services and restore our public finances.
We are asking businesses to contribute more, and the Chancellor acknowledged in her speech that the impacts of this measure will be felt beyond businesses, too, as the OBR has set out and as noble Lords raised in today’s debate. In addition, as my noble friend Lord Davies of Brixton observed, the employment rate will increase by 1.2 million over the forecast. These are, however, very difficult choices, and not ones that the Chancellor took lightly. But, in the circumstances we inherited, we believe they are the right choices to make.
Several noble Lords mentioned growth, and it was of course welcome that the OBR was so clear: this Budget will permanently increase the supply capacity of the economy, boosting long-term growth. However, there is of course much more to do.
It is important that we also consider in this debate the purpose of the difficult decisions we have taken on tax, which enable us not just to repair the public finances but to begin to rebuild our public services. It is worth noting that, in this debate, some noble Lords spoke in favour of some of this investment, but without supporting the taxation necessary to fund it. Because of the difficult decisions the Chancellor has taken on tax, day-to-day spending from 2024-25 onwards will grow by 1.5% in real terms, while total departmental spending, including capital spending, will grow by 1.7% in real terms.
In this, the first phase of the spending review, the Chancellor has prioritised day-to-day funding to deliver on our manifesto commitments. We will increase the core schools budget by £2.3 billion next year to support our pledge to hire thousands more teachers into key subjects; to triple investment in breakfast clubs to put them into thousands of schools; and to provide an additional £300 million to our further education colleges, while taking steps to transform the apprenticeship levy into a more flexible growth and skills levy.
We will deliver a real-terms funding increase for local government next year, including £1.3 billion of additional grant funding to deliver essential services and £200 million to tackle homelessness and rough sleeping. We are also providing funding to support public services and drive growth across Scotland, Wales and Northern Ireland, with the largest real-terms funding settlement since devolution delivering an additional £3.4 billion to the Scottish Government, £1.7 billion to the Welsh Government and £1.5 billion to the Northern Ireland Executive in 2025-26.
Finally, we are fixing the NHS after years of neglect. Because of the difficult decisions the Chancellor has taken on tax, which we are debating today, and because of our commitment to a new investment rule, yesterday’s Budget announced that we are now able to provide a £22.6 billion increase in the NHS budget over two years. That is the largest real-terms growth in NHS spending outside of Covid years since 2010. Many NHS buildings were left by the previous Government in a state of disrepair, so we will provide £1 billion of health capital investment next year to address the backlog of repairs and upgrades across the NHS estate. To increase capacity for tens of thousands more procedures next year, we are providing a further £1.5 billion for new beds in hospitals across the country and more than 1 million additional diagnostic tests, as well as new surgical hubs and diagnostic centres, so that the people waiting for treatment can get it as quickly as possible. Because of this record injection of funding, the thousands of additional beds that we will secure and the reforms that we are delivering in our NHS, we can now begin to bring waiting lists down more quickly and move towards our target of an 18-week waiting time by delivering our manifesto commitment for 40,000 extra elective appointments a week.
The difficult decisions on tax that we made in yesterday’s Budget, which have been debated here today, were made for a purpose. We made choices to rebuild the public finances and our public services, to invest in the national interest and to keep our manifesto commitment to prioritising working people. It is perfectly possible to make different choices, of course, but noble Lords should keep in mind that, at the last election, the country voted for change. They did not reject the previous Government so overwhelmingly because they thought the choices they had made were the right ones; they gave this Government a mandate to fix the foundations of our economy and to deliver the change they voted for.
As the noble Lord, Lord Razzall, observed, we did not hear very much about any credible alternative during this debate. We believe that any responsible Chancellor would have had to take action in the circumstances we faced, but, of course, it was possible to choose not to act. Some noble Lords may think that it would have been better to choose the path of irresponsibility and ignore the problems in the public finances altogether. If that is their choice, they should say so. I believe that the choices the Chancellor set out at the Budget are the right choices for our country, to repair our public finances, to protect working people, to fix our NHS and to rebuild Britain.
Other choices could have been made, of course, but let me be clear: not making the choices that we have made would make it impossible to protect working people; not funding public services in the way that we have would mean cuts to schools and hospitals; not supporting our investment rule would mean delaying or cancelling thousands of projects that drive growth across our country. We have made our choices—the only responsible choices—to protect working people, to fix the foundations of our economy and to invest in Britain’s future.
Baroness Vere of Norbiton (Con)
Before the Minister sits down, if I may say so—he has a minute left—I am concerned that he is answering the wrong exam question, as he did not seem to mention employment. However, he did mention the NHS and the £22 billion for it. How much of that sum is the RDEL compensation for the public sector, which will not have to pay employers NI?
Also, I would like the Minister to write, if possible, to cover the question from my noble friend Lord Petitgas about any sector-by-sector analysis of the impact of this tax policy on employment.
Lord Livermore (Lab)
I am very happy to write. I did mention employment: I set out that there would be an increase of 1.2 million over the course of the forecast. That is the question I was asked.
House of Lords
Railway 200
(2 days, 17 hours ago)
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Lord Faulkner of Worcester
To ask His Majesty’s Government what support they are giving to Railway 200 to celebrate the two-hundredth anniversary of the birth of the modern railway.
Lord Faulkner of Worcester (Lab)
My Lords, I beg leave to ask the Question standing in my name on the Order Paper. I refer to my railway interests as listed in the register.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
My Lords, Railway 200 marks the anniversary in 2025 of the first public passenger railway in the world and will celebrate the railway’s contribution to the nation’s and the world’s development and connectivity. A reformed railway is vital to the Government’s commitments to deliver more growth, jobs and housing. Railway 200 is a celebration not only of the past with heritage railways but of the present and the future, including the UK’s exciting technical and engineering innovations and the career opportunities across Britain that they offer. My department is playing a full role in this.
Lord Faulkner of Worcester (Lab)
My Lords, that is a great Answer. In 1845, 20 years after the first passenger railway, Benjamin Disraeli wrote:
“The railways will do as much for mankind as the monasteries did”.
He was right about that. Can my noble friend the Minister be a bit more specific about the support that the Department for Transport is giving to Railway 200, particularly the financial contribution? Does he agree that the celebration provides a great opportunity to not only showcase what the early railway pioneers did but to look forward to what the railways can achieve in future?
Lord Hendy of Richmond Hill (Lab)
I have to agree with Disraeli after all these years. The railway is currently, and will remain, publicly supported to a great extent but with significant private sector contributions. As my noble friend would imagine, we are appealing to all the people whose businesses support the railway, to make sure that the public sector contribution is as low as possible at a time of financial stringency. We have not finished that process yet. Meanwhile Network Rail, which is supported by the department, has contributed some support to get the project going. I cannot say exactly what the department’s contribution is. I expect it to be as low as possible, and in due course if my noble friend asks we will be able to tell him. At the moment we are still collecting financial contributions from those people whose businesses support the railway and vice versa. As far as the nature of the celebration goes, quite clearly the benefits are not only a good celebration of history but of the fact that the UK’s railways are leading the world with technological innovation. Those are the things that we will be clearly showcasing alongside, as I said, the career opportunities offered.
Lord Parkinson of Whitley Bay (Con)
I too agree with the first Earl of Beaconsfield. As Heritage Minister, conscious that plans for the anniversary might be derailed by an intervening general election, I encouraged people from across the sector to liaise with the now Minister in his capacity as chairman of Network Rail. Little did I know that after the election he would be in such an excellent position to help deliver it. The Minister shares the passion of so many, particularly in that cradle of the railways the north-east of England, to ensure that this anniversary celebrates the past and inspires people for the future. I imagine he shared my dismay to hear the news in the Budget yesterday that the Government are not minded to honour the £15 million of capital funding for the National Railway Museum in York which we announced in March. Will he use his good offices to try to persuade his colleagues across government not to cancel that funding, particularly at such a historic juncture?
Lord Hendy of Richmond Hill (Lab)
It is a great pleasure to see the noble Lord in front of me. He was material in moving this project on at an earlier stage, for which I thank him very much. I had not caught the issue that he raises and my best course of action is to go away, inform myself, and then see what can be done about it.
Lord Ravensdale (CB)
My Lords, I declare my interests as set out in the register. The Midlands Rail Hub project is eagerly awaited by stakeholders right across the region, not least in addressing those east-west links in the region that have been such a problem in the past. I heard no mention of the Midlands Rail Hub in yesterday’s Budget. Can the Minister update the House on progress within the department on this vital project?
Lord Hendy of Richmond Hill (Lab)
It is as with so many other projects; this Government found when they took office a very large list of projects with a much smaller funding envelope to deliver them. The Secretary of State for Transport has commissioned a full review of all transport infrastructure projects. This needs to be done properly. As I have said before here, everything you do with the railway lasts 150 years. When we have finished reviewing all those projects we will have a plan to go forward to invest in the best possible way.
Baroness Randerson (LD)
My Lords, one of the commercial supporters of the celebration the noble Lord referred to is Alstom, a train manufacturer based in Derby. Some months ago, there were serious concerns about jobs in and the viability of Britain’s train manufacturing companies, caused by intermittent orders. Given that there is a lack of information from the Government so far about how the system will work in the future under nationalisation, and given that they have not committed to touching the roscos and the system of ordering trains, can the Minister reassure us that those threats to well-paid, skilled jobs have now receded?
Lord Hendy of Richmond Hill (Lab)
The Government are absolutely committed to maintaining jobs in the railway manufacturing sector. The noble Baroness needs to know that the creation of Great British Railways will enable the Government for the first time for a very long time to produce a long-term plan for rolling stock strategy for Britain, which will give much more clarity to the manufacturing industry about what will be replaced when.
Baroness Winterton of Doncaster (Lab)
I know that my noble friend the Minister believes, as I do, that rail freight is as important now as it was 200 years ago. Can he assure me that he will continue discussions with companies such as Freightliner, which has a base in Doncaster, which are eager to see a rail freight strategy to move more freight on to rail and help the Government meet their environmental targets?
Lord Hendy of Richmond Hill (Lab)
Indeed, I recognise that. I met the managing director of Freightliner on Tuesday. I met the managing director of DB Cargo on Monday. I met the managing director of GB Railfreight three weeks ago, and I have met the industry collectively since I took office. The Government recognise the importance of rail freight and the need to grow it. A target for the growth of rail freight with be part of the Great British Railways commitment.
The Lord Bishop of Newcastle
My Lords, the father of the modern railways, George Stephenson, was born in Wylam in my diocese. The noble Lord, Lord Parkinson, has already referred to the pride that the north-east feels in his legacy. Would the Minister consider adding his name to those of colleagues from all sides of this House and the other place in pledging support for the reinstatement of the Leamside line in the north-east, adding a modest 21 miles of connectivity to that region?
Lord Hendy of Richmond Hill (Lab)
The Leamside line is one of many projects—I have already had a question about the Midlands Rail Hub—that are part of the review commissioned by the Secretary of State for Transport. We need to allocate the funding we have for railways in the best possible way. The comprehensive review she has commissioned will seek to do just that.
Lord McLoughlin (Con)
My Lords, I welcome the department’s contribution to the 200-year anniversary. Will the Minister acknowledge that we have seen massive growth on the railways over the past 20 years, with passenger journeys going up from 700 million to 1.8 billion before the Covid pandemic? What is the Government’s plan to see them continue to grow? That growth has been brought about by bringing in the private sector.
Lord Hendy of Richmond Hill (Lab)
We all recognise the growth in passenger traffic on the railways in the past 20 years. There are many reasons for it. Sadly, post Covid, the railway has less patronage than it did and certainly less income than it did, so the Government’s proposals for a reformed railway have to address the issues on the railway as they are now, not what happened in the past.
Young People: Government Policy
(2 days, 17 hours ago)
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Baroness Anelay of St Johns
To ask His Majesty’s Government, further to the Duke of Edinburgh’s Award report Youth Voices 2024, published on 23 July, what assessment they have made of how young people are represented in Government policy development and decision-making.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)
The noble Baroness mentions a report that highlights how young people feel disengaged from politics and policy-making. We know that if we fail to involve young people in the development of policies that affect them, we may widen the disengagement gap between young people and politics. This Government are committed to empowering young people to make a difference in their communities and are working work with them to develop a new national strategy for young people.
Baroness Anelay of St Johns (Con)
My Lords, the Minister refers to a new strategy. In the real world, there is a key ask in Youth Voices 2024, which reports on a wide consultation. The key ask is to say, “Can there be in that strategy a commitment to involve meaningful representation of young people and involvement at all levels of policy-making?” Does she agree that that will be in the strategy? How will it be delivered?
Baroness Twycross (Lab)
The Secretary of State is incredibly passionate about the new national youth strategy and the principle of coproduction with young people and the sector. She is clear that it will support the next generation to succeed. Unfortunately, I have to say that further details will be announced shortly, but I and the Secretary of State are clear that integrating the youth voice in policy-making can strengthen the quality of policies that affected people, build bridges between young people and government and make sure that the policies that affect them are the ones that they want and that recognise and reflect their needs and aspirations for the future.
Lord Blunkett (Lab)
My Lords, I know that the Minister will welcome the initiative by the Lord Speaker and the education and outreach service from Parliament. Perhaps she would also indicate how critical it is that citizenship is taught in schools and that citizenship encouraged in terms of youth provision is vital. On a day when my grandchildren, Finley and Harriet, are in the gallery, will she, with the education service and the Minister of State, help to make this work for the future, because it is crucial to our democracy?
Baroness Twycross (Lab)
Absolutely, and one of the things that was striking from the Duke of Edinburgh’s Award survey was that two-thirds of the young people surveyed were politically active but only 40% were likely to vote in a general election. For me that was really telling. Young people are engaged and we need to use every mechanism to make sure that they see their political activity reflected in the type of politics we engage with in your Lordships’ House and in the other place. I will speak to the Minister of State in the Department for Education about this, but I am confident that the curriculum review will allow for a proper assessment of what is required for future education in this space.
Baroness D'Souza (CB)
My Lords, does the Minister agree that one of the main conclusions of the excellent Youth Voices report is the failure to reach young people? And does she further agree that one way of encouraging participation would be to have mandatory and tailor-made citizenship classes at both primary and secondary level?
Baroness Twycross (Lab)
The noble Baroness correctly identifies that schools are the place in which we can reach children most systematically. I will feed that back to the Minister of State. I had understood that citizenship did run through the curriculum, but I stand to be corrected and I will pick that up with my noble friend.
Lord Addington (LD)
My Lords, do the Government agree that it does not matter what you do unless you get that information out to the group that is going to consume it? Are the Government going to have a strategy for having online news and information about politics that is targeted at the young where they are liable to read it? Because it is quite clear they are not engaging with traditional forms of news and information.
Baroness Twycross (Lab)
The noble Lord correctly identifies that one of the reasons young people do not engage with traditional politics is that we do not engage with them. I will feed back the points he raises but I assume that, as the national youth strategy is going to be co-produced with young people, how politicians communicate with young people, including what resources we need online, will be part of the development of that strategy.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am delighted that the noble Baroness and the Government are helping to ensure that people of all ages can play their full part in our democratic processes, but how does she square that with the Government’s proposals to remove people from one of our Houses of Parliament based solely on their age?
Baroness Twycross (Lab)
The noble Lord might have to wait until that comes up through the legislative process to have a further debate on that point.
Baroness Taylor of Bolton (Lab)
Will my noble friend the Minister look at the recent experience of the Hansard Society—I declare an interest as the chair—in running mock elections with many schools in this country at very short notice and developing a comprehensive and effective way of engaging young people in our democratic process?
Baroness Twycross (Lab)
My noble friend makes a valid point. From my own experience, my first formal political engagement was through the democratic process when I voted for the first time as an 18 year-old. But we had had a youth election at the school. I am not sure I won it, but it is a really important way and I pay tribute to everybody, including schools, who managed to put together mock elections at such short notice.
Baroness Smith of Llanfaes (PC)
My Lords, in recent months I have visited a number of schools and colleges and young people have told me that they fear that they are not going to be able to afford to buy their own home in the future and will not have a job after they leave education. What are the Government going to do to ensure that they meaningfully engage with young people to find out what priorities they care about and to involve them in the solution?
Baroness Twycross (Lab)
Going back to the report the Question relates to, housing did come up as one of the key issues, and the cost of being able to afford somewhere to live. Obviously, it is not just an issue of people needing to stay at home; they cannot envisage getting out of house shares or flat shares. I hope they will recognise that the Government’s planned investment in housing for first-time buyers and social housing reflects their need and desire to have their own home.
Baroness Coussins (CB)
My Lords, are His Majesty’s Government willing to reconsider extending the franchise to 16 and 17 year-olds?
Baroness Twycross (Lab)
We are planning to introduce votes for 16 and 17 year-olds because they can work, pay tax and serve the country in the Armed Forces. We think it therefore stands that they should be entitled to vote and have their say on the issues that affect them and their future. We will legislate to lower the voting age to 16 for all UK elections when parliamentary time allows.
Lord Anderson of Swansea (Lab)
My Lords, I was very happily surprised to learn that one of my grandsons, who lives long-term in Prague, is able to take the scheme. Is the scheme not a valuable contribution to people beyond our shores and should not this be noted?
Baroness Twycross (Lab)
I was not aware that it was available to young people in Prague, but I welcome that point. The role of the Duke of Edinburgh’s Award scheme in opening up activities to young people who might otherwise not have the opportunity to take part in them is recognised on a cross-party basis.
Earl Russell (LD)
My Lords, young people are deeply concerned about the climate crisis. What efforts are the Government considering to set up a national volunteering service to encourage our young people to get involved in helping to fight the climate crisis in a way that is beneficial to everyone?
Baroness Twycross (Lab)
I do not want to pre-empt the work that the Secretary of State is going to do, working with young people. I recognise from my own family the deep concern young people have about the climate crisis, but I think we should leave it to the Secretary of State and the young people she is working with to focus on how that would best be delivered for them.
Food Banks
(2 days, 17 hours ago)
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Baroness Kingsmill
To ask His Majesty’s Government what steps they are taking to eliminate the need for food banks.
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Sherlock) (Lab)
My Lords, this Government are committed to reducing mass dependence on emergency food parcels. Tackling poverty and getting Britain working will be the foundation of our approach. The Child Poverty Taskforce will publish a UK-wide strategy in the spring, and we will soon publish a White Paper setting out our plans to reform employment support to help people enter work, and stay and progress in it.
Baroness Kingsmill (Lab)
Does the Minister agree that the very existence of food banks in the UK is shameful? Notwithstanding our admiration for the amazing efforts of the thousands of volunteers around the country in community groups, schools and churches and their efforts to tackle food poverty, it is nevertheless shocking to learn that there are nearly 3,000 food banks in this country. Special thanks must go to the Trussell Trust, which operates 1,400 of them. Hungry families should not have to rely on charity to feed their children in one of the richest countries in the world. It is the political choices made over the past 14 years that have caused this. What choices will the Government now make to eliminate the need for food banks?
Baroness Sherlock (Lab)
I thank my noble friend for raising this extremely important issue. I join her in paying tribute to the Trussell Trust and to the many community and faith groups that run food banks. I have seen them in churches, mosques and community centres, and it is wonderful that people volunteer. However, like her, I am concerned that they have gone from something at the margins to help someone when they run into trouble, to mass dependence and an integrated part of the system. Something has gone wrong in recent years that we now see 2.3 million people living in households where a food bank was used in the last 12 months. We are committed to ending mass dependence on emergency food banks.
My noble friend talked about families with children. The Secretary of State made this one of her early priorities. She gathered around her a food poverty round table with experts and charities. She has a child poverty strategy, which will be produced in the spring. In the meantime, as a down payment, the Budget yesterday announced additional help for those struggling with debt and for carers. We will offer free breakfast clubs in primary schools. We are getting in and doing things at the start, but above all we need to make sure the system works for families, and we will.
Baroness McIntosh of Pickering (Con)
My Lords, does the Minister not share my concern that the need for food banks might actually grow in the coming months? There has been a bad harvest and we produce only 16% of our own fruit and vegetables. Food prices are going up and the Budget yesterday will impact negatively on farmers. What does she propose to do to reduce the dependence on food banks, rather than increase it?
Baroness Sherlock (Lab)
My Lords, what we are going to do is to support families. People should be able to support their own families, but research has found that if you look at households where somebody had used a food bank in the previous 12 months, 40% of those people are in jobs. Working people should be able to go to work and bring home enough money to feed themselves and their families so, for a start, the Government have just made a significant announcement about an increase to the national living wage. We have a plan to make sure that work pays so that people get into decent jobs and keep them, bringing home enough money to support their families. In the short term, we will make a real difference: free breakfast clubs in every primary school mean that children will not be hungry there. That helps the children and takes a big pressure off their families.
Baroness O'Loan (CB)
My Lords, despite everything that the Minister has said about the Budget yesterday, it is being widely reported that it will lead to lower incomes for people generally. Does she think that this will assist in reducing the numbers reliant on food banks, or will it inevitably end in an increase in those who have to rely on them?
Baroness Sherlock (Lab)
My Lords, the strategy came through loud and clear in my right honourable friend Rachel Reeves’s Budget yesterday. We have to get this country back to work and get it growing. If we are to reach a point where we can not only repair the damage done to our public services but rebuild our country, we have to make it work. The foundations were laid really well and clearly in the Budget yesterday. The Government have a plan to make work pay. We have a White Paper coming out on that and are reforming the whole of employment support. We want people to be able to get into jobs, keep them and progress in them—not just to make a difference to themselves but to rebuild our country.
Baroness Janke (LD)
My Lords, to pay for the Government’s healthy eating recommendations, the poorest 10% of UK households would need to spend 74% of their post-housing disposable income on food. The consideration of healthy eating is not a factor in calculating benefit rates. Do the Government believe that the poorest and most vulnerable people should have access to healthy food and, if so, how will calculations about benefits in the future reflect this?
Baroness Sherlock (Lab)
I absolutely agree about the importance of access to healthy food and there are schemes out there to help the lowest-income families access it, particularly pregnant women and the parents of younger children. Having been asked by a noble Baroness previously about breakfast clubs in primary schools, I went off to check and discovered that they are to be covered by the school standards for food, so we will make sure that there are nutritious breakfasts there. But in the end the noble Baroness, Lady Janke, raises a really important point: we have to tackle the child poverty at the root of this if families are to be able to feed their kids appropriately. That brings us back again to the child property strategy but I am delighted that, in the short term, there were some down payments. One small thing, which will not have gone widely noticed, is that we will introduce a fair repayment rate for universal credit. It sounds really technical but reduces the total cap on deductions from universal credit from 25% to 15%. That means that 1.2 million of the poorest households have £420 a year more to spend, which makes a real difference.
Viscount Younger of Leckie (Con)
My Lords, compared to pre-Covid times, when people tended to visit a food bank for emergency purposes—as a result of a home emergency—there is anecdotal evidence, as I am sure the noble Baroness is aware, that visits per head are more sustained and that the needs of those visitors are more varied. It is not just about poverty. It is about rising cases of mental health and domestic abuse, so what are the Government doing to help food bank volunteers to cope and to spot these signs in customers?
Baroness Sherlock (Lab)
My Lords, our local jobcentres are doing very good work, as I am sure the noble Viscount will know from his time doing my job. There are incredibly good arrangements, including partnership schemes to engage with all kinds of local charities to make the connections, but the most important thing is to have somewhere to refer people to. I am afraid that our mental health service has been in such decline that, even if problems are identified, it is quite hard for volunteers to know where people can go. This Government are committed to restoring our mental health support and investing in child and adolescent mental health. As a down payment on that, we will recruit another 8,500 mental health professionals to work with children and adults. I am really grateful to the noble Viscount for raising that really important point.
Lord Sahota (Lab)
My Lords, before I ask my question, can I wish all noble Lords a happy Diwali? When all food banks are eliminated, do the Government have any plan for what will happen to all the surplus food that has been donated by the supermarkets and other retailers over time to them?
Baroness Sherlock (Lab)
My Lords, obviously I dream of that day. I have visited a fascinating place in the north-east called REfUSE, based in Chester-le-Street in County Durham. It gets free food and has people, as either volunteers or staff, who can help to create meals where people then pay what they can afford. It has branched out from that to start doing catering for events, such as weddings. This does a couple of things. It raises awareness of the tragedy of food waste, while showing how we can reuse things creatively to produce brilliant food; it also helps all of us to think better. If we do not want to end up with food shortages, we all need to get better at reusing and recycling, and buying well in the first place.
Baroness Boycott (CB)
My Lords, I declare my interest as the chair of Feeding Britain. The Minister has just outlined one of our social supermarkets, which are a bridge between a food bank and getting people back into normal eating and being able to afford food. We sell surplus and waste food for about 30p in the pound with people joining a club depending on their status, area and income. They are taught to cook and allowed to shop with honour, and our cafes become self-sustaining after the initial costs of setting up. Will she agree to meet us or to come and visit some of our supermarkets? I can see that she has already visited one. They are a way forward, whereas the food bank is a way back.
Baroness Sherlock (Lab)
My Lords, they both have their place, at least at the moment, but I would be very happy to visit. I have visited other such things but I am always interested in the creativity behind this. I have visited a brilliant one over in Waterloo, run by Oasis and the Catholic Church. It was fascinating that they were able to engage with and provide support to people who came in, finding out their problems and dealing with them at the root. But there was also a pantry, and somebody proudly told me how he could not only go and get food from it but had been able to cook dinner and invite his neighbours in. That is a wonderful thing to do; it tackles isolation and gives him the opportunity to give something out to others and to learn along the way. It is brilliant and I commend the noble Baroness for her work on this.
MV “Ruby”: Ammonium Nitrate
(2 days, 17 hours ago)
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Lord Berkeley
To ask His Majesty’s Government what discussions they are having with the Great Yarmouth Port Authority about additional safety precautions to be put in place to enable the MV Ruby to dock with a cargo of ammonium nitrate.
The Minister of State, Department for Transport (Lord Hendy of Richmond Hill) (Lab)
The Government have engaged with Peel Ports, which owns the port of Great Yarmouth, and the ship’s management company. They have provided guidance and advice to ensure the safe transfer of this cargo from the motor vessel “Ruby” on to another vessel for onward travel. Ammonium nitrate is regularly handled at UK ports and standard health and safety procedures have been, and are being, followed.
Lord Berkeley (Lab)
I am grateful to my noble friend for that Answer and declare an interest as an honorary president of the United Kingdom Maritime Pilots’ Association. The cargo of 20,000 tonnes of ammonium nitrate is benign on its own, but I know from construction experience what happens when you mix it with a little bit of diesel and an explosive: in Beirut, about two years ago, it demolished most of the city, as I understand it. Is Great Yarmouth a great place to have a transfer like this, when that ship has been sitting in the North Sea for probably weeks, if not months, trying to get some port somewhere to accept it and unload the cargo? I would be interested in my noble friend’s response.
Lord Hendy of Richmond Hill (Lab)
My Lords, the explosion in Beirut occurred because of the incorrect storage of a large amount of ammonium nitrate over a prolonged period. It was stored in a shed, alongside fireworks that caught fire and caused the explosion. The ammonium nitrate on the motor vessel “Ruby” has been stored correctly and is not believed to be compromised in any way. The port of Great Yarmouth has experience of handling agricultural dry-bulk cargoes including ammonium nitrate, over 200,000 tonnes of which are imported into the United Kingdom through various ports.
Lord Bellingham (Con)
My Lords, I declare an interest as a former MP for a constituency very near Yarmouth. I can endorse what the Minister has just said. He is aware, obviously, that this port, owned by Peel Ports, has state-of-the-art handling facilities for hazardous goods, including ammonium nitrate, and I have every confidence in Peel Ports’ ability to carry out this trans-shipment contract. Is he aware that it is going to be very important for the local economy? The port is doing well, but this is a big contract. Can he just comment on one point? The vessel was originally en route from the northern Russian port of Kandalaksha to, I think, Lagos via the Canary Islands. Is there an issue regarding sanctions here?
Lord Hendy of Richmond Hill (Lab)
I echo what the noble Lord says about the port of Great Yarmouth. The department has engaged with HMRC and the Department for Business and Trade, which have separately considered whether the goods on board the “Ruby” are subject to import sanctions. They have confirmed that ammonium nitrate, the substance on board the motor vessel “Ruby”, is not subject to import sanctions under the Russia (Sanctions) (EU Exit) Regulations 2019.
Baroness Randerson (LD)
My Lords, as the previous question has illustrated, there is a complex background to this situation. A couple of years ago, it was discovered by the Secondary Legislation Scrutiny Committee that the Department for Transport had fallen badly behind in transposing international maritime law into British legislation, a situation exacerbated by Brexit as we no longer had to follow EU law. Can the Minister assure us that the UK is now fully signed up to our international maritime obligations and therefore fully protected in a sensitive and complex situation?
Lord Hendy of Richmond Hill (Lab)
The noble Baroness is obviously right that this is an important issue. I will write to her about the current position in this respect, but I have to say that the position of the motor vessel “Ruby” is not affected by the situation in the past that she talked about.
Lord Moylan (Con)
My Lords, I agree with the tone of what the Minister has said about not spreading alarm unnecessarily, but can he say what actions the port authority has taken to engage with communities in Great Yarmouth to address their understandable concerns?
Lord Hendy of Richmond Hill (Lab)
I am told that handling ammonium nitrate is a normal operational activity at Great Yarmouth, as we have heard. My understanding is that there has been no special public consultation and, in fact, the transfer of cargo has begun and is regarded by the port as not being an exceptional activity.
Lord Greenway (CB)
My Lords, I welcome the Minister to what I think is his first maritime Question. I agree with him entirely about the transportation of this particular fertiliser, many hundreds of thousands of tonnes of which are transported safely around the world every year. He mentioned the Beirut explosion. This particular commodity can be set off only through shock or heat in a confined space. On that occasion, having been poorly stored for several years, as the Minister said, the fireworks caught fire and exploded, providing the perfect whammy for the major explosion which followed.
Lord Hendy of Richmond Hill (Lab)
The noble Lord is right that it is my first maritime Question. I was not expecting to be so knowledgeable about ammonium nitrate 48 hours ago, but I am now and I welcome his information about the explosion in Beirut.
Lord Kamall (Con)
My Lords, can I just follow up the question from my noble friend Lord Moylan about the information given to local residents? It is a routine operation, as the Minister rightly says. But given the extended publicity around this particular transfer and this particular docking, it may well be that some local people who were not aware that this was routine are now alarmed. Can the Minister have another go at answering the question of whether there are any concerns, given the media coverage of this ship docking there?
Lord Hendy of Richmond Hill (Lab)
Given what the noble Lord has said, I will ask again, but I emphasise that as far as the port is concerned this is a routine activity and accounts for no more than removal of the cargo from one ship by means of lorries on the quayside and putting it in a second one.
Lord Dannatt (CB)
My Lords, I am delighted to be able to come to the assistance of the Minister and can assure him that there has been very responsible coverage of this incident in Great Yarmouth, as I live not terribly far away. The Eastern Daily Press yesterday and this morning showed the ship very safely in the outer harbour, with the ammonium nitrate being handled in the way that it has been handled on many occasions in the past. I congratulate Peel Ports, Great Yarmouth and the borough council for the way in which they have carried out this operation, despite the scare stories that have appeared in the media, which, by and large, have been groundless.
Lord Hendy of Richmond Hill (Lab)
I thank the noble Lord for that information.
Lord Lancaster of Kimbolton (Con)
My Lords, it is one of those odd occasions when you realise that you have some slightly strange expertise: I declare my interests as a firework maker and a bomb disposal officer. I think the tone of this Question is exactly right. Poor old ammonium nitrate is perfectly safe in its own condition, but when it is mixed 16:1 with diesel it becomes a high explosive. I simply suggest that the best approach the Minister could take to reassure local residents is to reassure them that there is no diesel seepage and therefore no threat.
Lord Hendy of Richmond Hill (Lab)
I thank the noble Lord for that. I hope he goes nowhere near Great Yarmouth for the foreseeable future. It is a serious point, and the Health and Safety Executive has been fully engaged. It has been helpful and supportive in providing advice and guidance to the ship’s management company and Peel Ports to ensure that the handling of this cargo is in line with UK regulations and, of course, safe.
Lord Blunkett (Lab)
Given the intervention of the noble Lord opposite, can we have a reassurance that he will be checked very carefully next Tuesday?
Baroness Altmann (Non-Afl)
My Lords, I also wish everyone celebrating a happy Diwali. What was the rush to get the ship docked when it was? It had already been in the North Sea for quite some weeks and had been turned away by Norway and Lithuania. Might it not have been more reassuring for the public had it waited until after 5 November?
Lord Hendy of Richmond Hill (Lab)
Indeed, happy Diwali. The ship was on its way to its home base of Malta and, given the likely conditions in the Bay of Biscay and the weather at the time of year, the ship’s management company took the commercial decision to make repairs to the ship instead of risking the safety of the 19 crew members on board. The Government therefore supported them in convening conversations with UK ports and authorities to identify an appropriate port for the offloading of this cargo type, and I think that is a very responsible thing to do for mariners who were otherwise at sea for a prolonged period in a vessel that was clearly not fit to finish its journey.
International Engagements
(2 days, 17 hours ago)
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Lord Callanan (Con)
My Lords, we welcome the news that the Prime Minister and the Foreign Secretary, and indeed the noble Lord himself, attended the Commonwealth Heads of Government Meeting. CHOGM is an opportunity to reinvigorate the Commonwealth, which is well-equipped to continue its status as a leading forum for discussion. With a combined Commonwealth population of 2.7 billion, His Majesty the King as the new head of the Commonwealth, and a new secretary-general elect, the future looks bright. Samoa did a great job of hosting the meeting and demonstrating that a small Pacific island state has equity of membership with some of the bigger Commonwealth nations.
It seems that the Government were outmanoeuvred on the issue of reparations. While of course we must never forget history, we must move forward to a brighter future and focus on the pressing issues of today. British international investment alone has created employment for hundreds of thousands of people in Commonwealth nations. The UK provides expertise in financial services and pandemic research, as well as Commonwealth and Chevening scholarships. How does the Minister view our commitments to international investment following yesterday’s Budget, which seemed to actually reduce some of that funding?
In the CHOGM communique, the wording in paragraph 22 implies the UK’s openness to “reparatory justice” in relation to the abhorrent slave trade. It is perhaps not as off-limits as the Prime Minister had previously stated. What is His Majesty’s Government’s actual red line on reparations? Given the Foreign Secretary’s well-known views on the topic in the past, is this yet another example of saying one thing in opposition but then doing something entirely different in government? Can the Minister tell us whether he agrees with the Foreign Secretary’s frankly clumsy tweets on this issue? On paragraph 16, what is the Government’s position on UN Security Council reform? Will the Minister rule out giving away our permanent seat?
In conclusion, we welcome that His Majesty’s Government attended CHOGM. Let this be the start of a bold new age, with His Majesty the King at the helm. If the Minister could provide some clarity on yesterday’s Budget and the content of the communique, I am sure the House would be grateful.
Lord Purvis of Tweed (LD)
My Lords, the Commonwealth is a greatly valued institution, in which the UK should be playing as full a part as possible. Therefore, the communique from CHOGM requires very careful study. These are the priorities of our Commonwealth partners, and the UK has a special obligation to support them in the delivery of them.
I want to ask a number of questions to the Minister regarding the Statement, primarily in regard to intra-Commonwealth trade. I declare an interest: in 2018 I co-chaired an inquiry into intra-Commonwealth trade with the then Nigerian Trade Minister. I welcome the technical support and the elements of supporting intra-Commonwealth trade, but what is the Government’s ambition? What is their estimate as to how much intra-Commonwealth trade can grow? Under the previous Government we had an aborted investment summit for African nations and within the Commonwealth. What is the Government’s intent when it comes to ensuring that the UK, with our trade partners, can be an investment priority and can migrate continuity trade agreements with our Commonwealth partners into full free trade agreements?
Primarily, I wish to ask about the part of the Statement that said:
“We will be confident about championing the power of international development so that we make progress wherever we can,”
and recognise that putting our best foot forward in all we do at home and around the world is
“in everyone’s best interests, not least the British people”.
Can the Minister explain how this Statement, given on Monday to the House of Commons, was then reflected in the Budget on Wednesday, in which development assistance was cut to the lowest level in 17 years? We have seen development assistance cut in a truly terrible way by the previous Conservative Government; very few people would have been expecting further cuts under a new Labour Government. The cuts now are stark, with £2 billion in reductions. This means that development assistance has gone from 0.58% to 0.5%. In addition, there are real-term reductions in the Foreign Office budget overall.
How will the ambitions in the Statement be met? Of the 45 least-developed countries in the world—the poorest nations on earth—14 are Commonwealth countries. It is one thing for the Government to say that they do not intend to provide funding for reparations, but it is starkly another thing for the Government to cut development partnership assistance to the very nations that need it most, especially those in the Commonwealth.
The Parliamentary Under-Secretary of State, Foreign, Commonwealth and Development Office (Lord Collins of Highbury) (Lab)
I thank the noble Lords for their questions. I will start with the question asked by the noble Lord, Lord Purvis, who referred to cuts. He and I expressed shock and horror when the previous Government cut ODA from 0.7% to 0.5%. This was not just about the principle of working within the economic circumstances then; it was the way those cuts were adopted and the speed of them. There was not a planned approach; bilateral programmes were simply stopped midway through, causing damage to our reputation. That is not what we are doing.
We are committed to creating a world free from poverty. To do this, we will take a new approach to international development, based on genuine partnership, trust and respect. We will once again restore our position as a leader in development, particularly with partners, and will reform international institutions. The FCDO’s ODA programme budget in 2025-26 will be £9.24 billion—the highest level in recent years. I do not accept the noble Lord’s characterisation of where we are. We are determined to ensure that we have effective spend on our ODA and we are looking at the priorities.
On the CHOGM element of the Statement, it is really important that we focus on what the Commonwealth can deliver for our partnership approach. The noble Lord, Lord Callanan, mentioned my own participation. I deliberately went to CHOGM at the start, when all the fora were taking place. I had seven bilateral meetings, five of which were with delegations from Africa, including from Gambia, Malawi, Zambia, Uganda and the Cayman Islands. I met with civil society, including the Commonwealth Trade Union Group and the Commonwealth Disabled People’s Forum. It was a busy CHOGM in those forums. I spoke at the Commonwealth Equality Network on LGBT equality. I also spoke at the high-level sports breakfast, profiling the launch of the Commonwealth Games in Glasgow. We had a very positive engagement. This was the first CHOGM in a Pacific island that a Prime Minister attended. We are absolutely committed to it and to strengthening our partnerships.
I turn to the final communique. We fully recognise the horrific impacts of the transatlantic slave trade and the understandable ongoing strength of feeling on the issue across communities in the United Kingdom and our Commonwealth family. Commonwealth heads agreed in Samoa that the time has come for a meaningful, truthful and respectful conversation on the issue. We remain committed to continuing that dialogue with our partners in the Caribbean and beyond as we work to tackle the issues of today, in particular strengthening our partnerships for the future. We are focused on making a real difference to the lives of people today, building partnerships to address challenges such as how to catalyse growth, tackling the climate and nature crisis, and empowering our youth. Minister Dodds in the other place made it absolutely clear that there is no contradiction and no change in our policy in relation to reparations. It has not changed, but having a positive dialogue with partners is the vital point that we make.
On Security Council reform, I point out to the noble Lord, Lord Callanan, that his party, when in power, and my Government today have had a long-standing policy about strengthening the Security Council by expanding its membership, reflecting the realities of today and not the realities of 1945. I spoke at the Security Council in August, supporting the African case for permanent representation from Africa. It is that policy that we are expanding and pointing out. There is no question about our permanent seat on the Security Council—I do not know why the noble Lord raised it. He should reflect on his own party’s policy to support the expansion of the Security Council, in particular to include Africa, which by 2025 will make up one-quarter of the world’s population. The idea that they should not be represented on the Security Council is absolute nonsense.
Baroness D'Souza (CB)
My Lords, can the Minister confirm that the parliamentary visit by the former president of Taiwan, Tsai Ing-wen, planned for earlier this month, was in fact cancelled on the advice of the FCDO because of the Foreign Secretary’s forthcoming visit to China?
Lord Collins of Highbury (Lab)
The invitation extended by the representatives of the Government has nothing to do with that. There was no issue about advice or a challenge. The timing is very much up to the people who invited the former president of Taiwan and certainly nothing to do with the Foreign Secretary’s visit to China at all.
Lord Anderson of Swansea (Lab)
Does my noble friend agree that a key justification of the Commonwealth is allowing smaller countries, particularly island countries, to walk tall? Is there not a danger that reparations could be a diversion from the real tasks facing the Commonwealth today? I fear that that issue will not go away, however. Is there not a danger also that expectations will be raised and we will be led unwillingly along a path we do not want to take?
Lord Collins of Highbury (Lab)
All I can say is that genuine concern is being expressed. The transatlantic slave trade is a diabolical stain on our history, and we do have to remember what happened in the past, condemn it and say why it was entirely unacceptable. That is the sort of dialogue we need to have with our partners in the Commonwealth. What I do know is that the agenda discussed at CHOGM was far more extensive and was looking to the future, particularly that of small, developing island states, which will experience the huge impact of climate change. I was at several launch meetings in CHOGM where we directly addressed that issue by providing information and support. The Commonwealth is dynamic and forward-looking, and I have every confidence we will be able to face the challenges of the future.
Lord Alton of Liverpool (CB)
My Lords, we are about to commemorate our war dead. Will the noble Lord reflect on the 1,000 British soldiers who died during the Korean War—more than in Afghanistan, Iraq and the Falklands combined—and on our agreements with the dynamic democratic Republic of Korea as it faces dangers on the peninsula itself as well as in Europe, with North Korean soldiers fighting alongside Putin in his illegal war? How can we strengthen our relationship further with the Republic of Korea and ensure that we see off what the noble Lord, Lord Robertson, has described as a “deadly quartet” of dictatorships that is a threat to our democracies?
Lord Collins of Highbury (Lab)
I am glad that the noble Lord has raised our relationship with the Republic of Korea; I think he and I share a respect for its democratic credentials. Our relationship is as close as ever, and certainly, the Downing Street accord elevates that relationship to a global strategic bilateral partnership, placing it second only to that with the US in terms of strength. The noble Lord said that it looks like the DPRK is extending tensions further globally. The assessment is that its troops could be deployed in Ukraine, and that would be a very significant and concerning development. I reassure him that our relationship with the Republic of Korea has never been stronger, and we are determined to develop it.
Lord Ahmad of Wimbledon (Con)
My Lords, perhaps there is a typo in the Statement. The first sentence refers to reconnecting Britain. From my seven years as Minister, I recall us being pretty well connected and respected.
I congratulate the excellent new secretary-general elect, Shirley Botchwey, who has done some fantastic work in co-operation with the United Kingdom. A number of countries were not represented at leader level, including South Africa, India and Pakistan. What assessment have His Majesty’s Government made of their absence, and of the importance of elevating the Commonwealth and working with the new secretary-general elect in ensuring that the Commonwealth is at the heart of British policy?
Lord Collins of Highbury (Lab)
I reassure the noble Lord that I completely respect his commitment to the Commonwealth and his engagement when he had that responsibility; he did an excellent job, and I hope to ensure that I can continue his work. In that respect, the attendance at CHOGM was incredible. Despite the travel difficulties, we had the highest level of participation from all Governments. The communiqué reflects the importance all our countries place on developing that partnership, which does include economic and trade relationships but is also focused on the challenges the world faces at the moment.
I am hugely optimistic about the role of the Commonwealth in the future. The fact that it is growing and people are expressing an interest in joining is a reflection of its becoming even more relevant today. One of the things I kept saying at the CHOGM meeting when I met government officials is that the Commonwealth is more than Governments and Heads of State, and that is why I spent so much time with the civil society fora talking about building those relationships. So I am very optimistic about the future, but I acknowledge the noble Lord’s work and hope to continue it.
Baroness Prashar (CB)
My Lords, I absolutely agree with the noble Lord that the Commonwealth is a commonwealth of people and that strengthening the civil society connections is therefore very important. Going back to the question of reparations, I like the approach of a constructive dialogue, but it does seem rather vague to me. Does the noble Lord agree that we need to create a structured forum through which a dialogue can take place, and where there can be a proper conversation about the past and how you reconcile dealing with some of the future issues? At the moment, it seems rather vague—a dialogue, but to what end? A structured forum would be of some help.
Lord Collins of Highbury (Lab)
I acknowledge what the noble Baroness says, but it is important not to be too prescriptive. We will have such opportunities next spring, at the UK-Caribbean Forum, where I think this issue will be raised and we can have that honest exchange and dialogue. I will be absolutely clear: there is no change in the position of the United Kingdom Government on reparations. But the change is: how do we address those issues and have an honest, open dialogue? That was the important thing in the Commonwealth, and if you read the whole of that paragraph, it does say that the Commonwealth is the place we can be honest with each other, and that is what we will continue to do.
Lord McNally (LD)
My Lords, during many years, on all sides of the House, there was a campaign for 0.7% of GNI on overseas aid, not just as a number but as a direction of travel. No one doubts the Minister’s commitment on these issues, but it is very worrying that virtually the first step of a new Labour Government should be a step backwards on overseas aid.
Lord Collins of Highbury (Lab)
I do not accept that definition—we are not stepping back. We remain committed to restoring ODA spending to 0.7% of GNI as soon as fiscal circumstances allow, but, sadly, the OBR’s latest forecast shows that ODA fiscal tests are not due to be met within the Parliament. We will continue to monitor forecasts closely each year and will review and confirm, in accordance with the International Development (Official Development Assistance Target) Act 2015, whether a return to 0.7% for ODA is possible against the latest fiscal forecasts.
As I say, next year’s spend and the year after’s will be some of the highest. I have said to the noble Lord, Lord Purvis, before that this Government are committed to ensuring that we have effective spend on ODA; it will be about the priorities in building that partnership. I have a strong view that, if we are to deliver the SDGs, it will be on the basis of a partnership of all aspects of society, including the private sector. We have to get investment back into Africa; we have to join that partnership and get jobs going. That is why I was at the Financial Times conference yesterday morning, focusing on how we can deliver partnership for growth across the African continent.
Baroness Lawrence of Clarendon (Lab)
My Lords, my understanding is that the transatlantic slave trade is always talked about as historical, but if slave owners were receiving money until 2015 then it is not historical. This Government and the previous Government seem to have missed the fact that countries’ resources were reaped and taken, and the people suffered so much. Now is the time to apologise and think about reparation, because countries have suffered. Every time each Government speak about this, they seem to forget that slave owners were being paid until 2015.
Lord Collins of Highbury (Lab)
I recognise my noble friend’s strength of feeling on this subject. She is absolutely right to describe the horrific nature of the slave trade, which is a stain on our history and something we need to have honest and open dialogue about. I believe that the current Government’s position is clear: we will focus on the future and build an inclusive and fair economic partnership for the future. We will focus on addressing the real and genuine challenges that the world faces at the moment—primarily climate change and security.
Baroness Butler-Sloss (CB)
I respectfully ask the Minister whether words may be part of the problem. It is clear that such overseas aid as the Government have will be distributed to various countries, including in the Caribbean I would expect. I hope the Government will be able to give this as part of overseas agency and not in respect of reparations—the money would be there, but the wording could perhaps be changed.
Lord Collins of Highbury (Lab)
Let me be clear that we are committed to supporting overseas development and those countries that face challenges today. That is what we will do. I do not have a problem with words when committing to that partnership for growth and delivering economic development. We need to acknowledge the genuine feelings that exist. It was an abhorrent trade, and its consequences are still being felt by people today. If we do not acknowledge that then we are not part of the human race.
Lord Polak (Con)
The Statement talks about the Prime Minister announcing
“a new UK trade centre of expertise”,
based at the Foreign Office. Do I read into that the demise of the Department for Business and Trade? My second question is on the Disasters Emergency Committee in the Middle East. Can the noble Lord be confident that the money will reach the people who need it, not those who have a history of abusing it?
Lord Collins of Highbury (Lab)
I will address the latter point first. We are absolutely committed to ensuring that the hundreds of thousands of people affected get that aid. Our problem currently is getting it in. I assure the noble Lord that, like the previous Government, we are absolutely determined to ensure that those most in need get it, and we will continue to do that.
My absolute common narrative with the eight African countries I have visited in the last three months has been how we develop a partnership for economic growth. That win-win situation develops from trade too. I see myself not in competition with the Department for Business and Trade but rather in partnership. We are taking a one-government approach, working together.
Lord Callanan (Con)
My Lords, if there are no further Back-Bench questions, I will have another go at getting an answer from the Minister. In his reply to the noble Lord, Lord Purvis, and me, he spent some considerable time saying that he had worked with the noble Lord, Lord Purvis, when they were both in opposition, to condemn the reductions in overseas aid under the previous Government. That is a reasonable point. However, he neglected to say why that therefore meant that the current Government were going to cut it even further.
Lord Collins of Highbury (Lab)
The straightforward answer is that the economic circumstances that this country now faces are very much down to his party and his Government. We should fully understand that. I find it rich for him to lecture me on overseas development, when we had a Prime Minister who crashed the economy of this country and caused huge damage. We are absolutely committed to returning to 0.7% and to getting value for money from our ODA—nothing will change from that. I will give the noble Lord a straight answer: we are giving the maximum amount under the 0.5% commitment. We are sticking to that commitment and will increase it when fiscal circumstances allow.
Lord Ahmad of Wimbledon (Con)
If we have time, I will ask a question based on that final point. The previous Government invested a great deal, and both the noble Lords, Lord Collins and Lord Purvis, supported the international development strategy that the Government delivered. Can the Minister reassure me that the new Government are absolutely committed to the international development strategy? A lot of time went into its creation and the consultation. I hope the Government will keep it as a guiding principle for development assistance and support around the world.
Lord Collins of Highbury (Lab)
The noble Lord knows that, when Andrew Mitchell launched his international development White Paper, he repeatedly said that he did it in consultation. I do not recall the consultation, but I was very happy with the contents of the White Paper. As the noble Lord knows, the new Government are absolutely committed to drawing from its elements. That is why we have asked for an international development review from a Cross-Bench Peer—I have a mental block and cannot remember her name. We are committed to a review that will, I hope, be published in the new year, and it will reflect and build upon that. I know that there is banter in competitive Opposition/Government politics, but one thing we are absolutely determined to do in the international development space is ensure the long-term picture. Far too often there has been short-termism; so much of our international development work requires a longer-term strategy, so we will build upon it.
Baroness Hodgson of Abinger (Con)
My Lords, while we cannot undo the painful wrongs of the past, did the meeting consider the question of slavery that continues today? Is there a move across the Commonwealth to ensure that people are properly paid for the work that they do?
Lord Collins of Highbury (Lab)
I am pleased that the noble Baroness has asked that question, because I think that is absolutely right. Modern slavery was addressed, and certainly when I addressed some of the civil society groups, we looked at that issue. However, it is not just about issues of modern slavery, which is outrageous; it is also about the exploitation of workers across the board. Supply chains and labour have been a real focus, which is why I found the meeting with the Commonwealth Trade Union Group and other trade unionists in CHOGM really interesting. They were concerned that we work within the ILO, promote ILO conventions and ensure that those supply chains truly reflect our aspiration for people to be delivered sustainable development goal 8 in terms of fair employment. That was absolutely discussed, and it was a very positive exchange.
Community and Voluntary Sector
(2 days, 17 hours ago)
Lords ChamberRead Full debate Read Hansard Text Watch Debate
Baroness Morgan of Drefelin
That this House takes note of the contribution of the community and voluntary sector to society across the United Kingdom.
Baroness Morgan of Drefelin (Lab)
My Lords, I am genuinely humbled to be introducing this debate, given the unparalleled collective wisdom that I see across the House among all those taking part today. That is why I am delighted that we gather to acknowledge and celebrate the indispensable role of charities in our nations. I look forward to the maiden speech of the noble Baroness, Lady Porter of Fulwood.
Charities are indeed the backbone of our society: they are on the front line wherever things are in crisis in our communities. From the riots in the summer to the pandemic to the devastating cost-of-living pressures still being experienced across the country, charities are there for people at the worst of times. However, charities are also there for things that make life better and communities richer. They build bridges; they bring people together where there is division; and they are deeply trusted, often where the state is not.
I am delighted to share, hot off the press, figures from the National Council for Voluntary Organisations’ annual voluntary sector almanac. This shows the size and shape of the sector and provides rich data to understand the trends and challenges that are being experienced. The latest data published only last week shows that, in 2021-22, we had 166,000 voluntary organisations across the UK, and a striking eight out of 10 of these were small charities with income below £100,000. These organisations provide essential services, from health and social care to homelessness, and we will hear so much more about that today. While some services receive government funding, let us remember that many do not.
Charities strengthen our communities by engaging volunteers and creating spaces for connection. They are led by volunteers, who give their time and skills as trustees, and many are entirely volunteer run. Moreover, they amplify the voices of the marginalised, ensuring that they are heard by decision-makers. It is such a key role for the sector. Last year—we will hear more about this this afternoon—the Association of Medical Research Charities invested £1.7 billion in UK research. It has contributed much more than money to the sector, supporting R&D that focuses on patients, accelerates impacts and addresses areas of unmet need.
Charities play a crucial role in our economy, as everyone knows. They develop skills in communities, supporting people back to work and providing opportunity to young people. As organisations, charities are major employers, running businesses with a social purpose. Charities contribute an estimated £20 billion per year—or 1% of GDP—to the economy. That is very impressive. Andy Haldane, former chief economist of the Bank of England and now chief executive of the Royal Society of Arts, has estimated that, when the impact of volunteering is accounted for, this contribution increases tenfold to £200 billion, which looks like 10% of GDP. In 2024, the sector employed 3% of the UK’s workforce, and the sector’s workforce has grown by 30% since 2011. Believe it or not, charities employ more people than all the major supermarkets put together.
Charities raise funds from diverse sources, including philanthropy, social enterprise and innovative partnerships with businesses. In 2021-22, the sector generated £69.1 billion, with the public contributing an amazing 48% through donations, legacies and trading activities in charity shops. Notably, according to the UK Giving report, some of the least affluent areas are the most generous—it is such an impressive observation. Government funding accounted for 26% of the sector’s income in 2021-22—down, I am afraid, from 30% in previous years—and this is part of a long-term decline in government funding to the sector. I very much hope that this might be about to change.
As the Prime Minister said at the launch of a new civil society covenant earlier this month, charities are innovative and dynamic. They are, indeed, resilient. However, crisis upon crisis, experienced by many charities, means they are struggling. More people than ever are turning to charities for the support that they cannot get elsewhere. According to the latest VCSE barometer from the Pro Bono Economics observatory, most charities expect demand to rise for their services. One in three charities do not expect to be able to meet this demand, which is very concerning.
I believe that, with the right focus, we have the opportunity to create a better environment, where voluntary action can thrive, especially in deprived areas where the impact can be so great. There are three main areas on which I want to quickly focus, because I know we have so much to talk about today.
First is the relationship that the sector has with local and national government. Charities and volunteering are essential, as we know, for building a healthy, resilient society, yet the relationship between the voluntary sector and government has become truly strained in recent years. This is especially true for the vast majority of charities that are small, local and heavily reliant on local government support—support that has been continuously cut over recent years. Despite these challenges, 61% of the public believe that Britain would be a better place if charities and community groups had a stronger voice in decision-making. Initiatives such as the VCSE accord in Greater Manchester show what is possible when civil society and public bodies collaborate effectively together, but these successes need to be more widespread, and there is huge potential for that.
NCVO and the Association of Chief Executives of Voluntary Organisations are effectively working together to change the dynamic with government, and I know that the Minister will want to say more about that. Following the publication of their Voluntary Sector Manifesto, they are engaging directly with government to reset the relationship with civil society. On 17 October, I was delighted to hear, a ministerial round table and a reception hosted by the Prime Minister in Number 10 kicked off the development of this new civil society covenant—a vital opportunity to redefine how we all work together. NCVO and ACEVO are engaging with civil society to bring them in and help shape the covenant, including charities and voluntary organisations, particularly including those small organisations I have talked about. The new covenant has a real chance to build meaningful, long-term partnerships for social change. That is what it is all about. For this to succeed, both government and civil society must commit to collaboration, ensuring that charities can continue their mission while helping shape a more equitable, engaged society.
The second area that I think is worth focusing on briefly is how the voluntary sector is indispensable to public services. It delivers nearly £17 billion in services each year, reaching people often left out of mainstream systems. Charities bring innovative, efficient solutions across health, social care, housing, the environment and education, meeting essential needs, often where government services fall short. Yet austerity measures have cut deeply into local and departmental budgets—we know that. Many charities are now subsidising public services out of their own limited funds. According to NCVO’s March 2024 research, 72%—a striking number—are starting to step away from public service delivery, with more than one in 10 forced to return contracts before they are completed, despite serious financial and legal consequences for the organisation.
The Government’s redrafting of the national procurement policy statement, which underpins the Procurement Act 2023, is a vital opportunity to emphasise the inherent social value that charities create. The policy statement has the opportunity to clarify that commissioners must account for this social value and reinvest the surplus in innovation and service delivery, where possible. There should be recognition that charities typically do not operate in markets in any conventional sense of that phrase.
Thirdly and finally, I want to say something about volunteering. I can see that everyone around this Chamber has some experience of volunteering; I know the incredible work that that noble Lords do to promote the sector. Volunteering, as everyone here knows, plays a vital part in our society and our economy. The evidence shows that around 14.2 million people volunteered in the UK through a group, club or organisation in 2021; many more volunteered informally. The ONS calculated that, in 2012, frequent formal volunteering produced around £24 billion of economic output, or 1.5% of GDP. That is pretty amazing. If occasional and informal volunteering had been included, that figure would have been much greater.
People give their time to their communities and to the causes that they care about in diverse ways. Volunteers for the RNLI save lives at sea. People in hospitals provide social connection. Governors support the strategic direction and sustainability in schools. Breast Cancer Now campaigners champion access to modern treatments. Volunteers run over 160,000 charities across the country, with 1 million people serving as trustees. Volunteers play a vital role in supporting our communities, delivering public services and building social cohesion. Eight in 10 volunteers give their time in their local area—what a feeling of community this has the opportunity to develop. Volunteering brings significant benefits to individuals, communities and society. It supports positive social, mental and physical health and well-being. It helps to develop skills, knowledge and experience, sometimes serving as a stepping stone into employment. It helps people to build social connections and capital, fostering that sense of community that we all know matters so much. When asked why they volunteer, people say—there are no surprises here—that the most common motivation is the desire to make a difference.
However, fewer people are volunteering now, particularly in formal roles, and this decline in volunteering is particularly challenging for smaller organisations. There are many barriers to volunteering today, which need to be addressed. People living in deprived areas find it more difficult than others to volunteer. Disabled volunteers and people from the global majority are less satisfied than other volunteers, so there is much that we could do there. Younger people are more likely to cite financial issues as a barrier. I therefore support calls for the uplift in the approved mileage allowance payments scheme, which would allow volunteers using their cars to be reimbursed to reduce that financial burden. I also support calls to broaden Section 50 of the Employment Act 1996 to give trustees reasonable time off to carry out their duties, similar to the current provisions for magistrates and school councillors. These ideas could help address the challenge in recruiting trustees, as there are currently 100,000 trustee vacancies and 62% of people who volunteered in the last three years say they could be encouraged to take part in volunteering again. We should look at that huge potential.
In closing, I am extremely honoured to be the president of NCVO, and I take on that role following the incredible contribution of my noble friend Lady Pitkeathley, who is in her place today. I acknowledge the incredible work that she has done. NCVO supports campaigns, such as Volunteers’ Week and the Big Help Out, and celebrates volunteers, encouraging people to get involved. NCVO regularly brings together those involved in the sector to support volunteers across the country, and it is one of the partners of Vision for Volunteering, a 10-year collaborative project to create a better future for volunteering.
I am looking forward to hearing the contributions from across the House and to learning a great deal from the noble Lords speaking today. I also look forward very much to hearing the contribution of the Minister, who I know is very thoughtful on these matters. I beg to move.
Baroness Fraser of Craigmaddie (Con)
My Lords, I thank the noble Baroness, Lady Morgan of Drefelin, for securing this important debate and for her excellent introduction on the—as she said, indispensable—contribution of the voluntary sector. I declare my interests as set out in the register; in particular, as chief executive of a voluntary sector organisation, Cerebral Palsy Scotland. The work that we do supports people with CP, their families, the NHS and education and social care services. It seems, however, that too many people think that we can do this for free.
This sector is not voluntary. As the noble Baroness said, it employs around 1 million people, the majority of whom work for smaller organisations with fewer than 50 employees, which will all be struggling with yesterday’s announcements regarding increased employer NI contributions and an inflation-busting 6.7% increase to the living wage. According to the SCVO’s Scottish Third Sector Tracker, Scotland’s voluntary sector is facing unprecedented challenges. We have had years of warm words and promises of multi-year funding from the Scottish Government, which have yet to be fulfilled. Crises such as the pandemic and increased costs of goods and utilities have all put the sector under increasing pressure. As costs for organisations have risen, so too has demand for services. The sector is in crisis, and many organisations are having to close their doors.
Headway is the UK-wide charity that works to improve life after brain injury. Key information and vital services provided by local Headway charities have propped up statutory services but, now that financial pressures are accumulating from all sides, this has become unsustainable. Over the last two years, four local Headway charities have had to close their doors—three volunteer-led branches have also closed—leaving many vulnerable brain injury survivors and their families with no support. Three more are scheduled to close in the next couple of months. The strain placed on families as survivors can no longer access specialist daycare services will be unsustainable. Many will not cope, leading to family breakdown due to family carers becoming unable to meet their loved ones’ needs that previously were met by Headway services, and unable to access respite care.
Small and medium-sized charities such as Headway are the most likely to close. Charities with an income of under £1 million each year accounted for over 97% of charity closures for each of the last 10 years. As these organisations have seen diminished statutory funding over the years, a decline in meaningful corporate support and not enough philanthropists, they have become over-reliant on funding from trusts and foundations.
However, in recent months, several large and well-known funders, such as the Foyle Foundation and the Schroder Charity Trust, have closed applications and are spending down their funds. Others, such as the Henry Smith Charity and the Tudor Trust, have changed their priorities. Their motivation is often rationalised by pointing out that they receive many more applications than they can fund, and how few of these can be successful.
The sector is facing a perfect storm, and I am deeply concerned about what the future looks like for many, many charities. We face a situation where organisations are closing due to cash flow, not based on their impact. This will affect beneficiaries as well as essential public services. NPC, which the noble Baroness referred to, estimated recently that charities prop up state services by £2.4 billion a year. These organisations are key partners and it is about time we treated them as such. When will there be recognition that this sector is not voluntary, it is essential?
Baroness Scott of Needham Market (LD)
My Lords, I congratulate the noble Baroness on securing this debate. It is easy to see that NCVO continues to be in great hands. The number of speakers today is testament to both the importance of the subject and the wide range of experience in this House. I am sure we have all been impressed by the many briefings that we have received, which show the sector in all its diversity. The recent praise for the sector from both Keir Starmer and Lisa Nandy has been very good to hear, as was their commitment to resetting the relationship. Hopefully, the days of government telling charities that their deeply held views are somehow woke and undesirable are behind us.
One of the problems with getting to my age is the constant sense of déjà vu—covenants, compacts, big society and so on—and how few lessons are ever learned from what has happened in the past. I am a member of the advisory board of the Institute for Volunteering Research at the University of East Anglia, and I can point the Minister and her team to some excellent analysis of what works and what does not, when it comes to the relationship between government and the sector.
There is not time today to go into why this relationship can be so problematic, but it is like that popular book from the early 1990s: Governments are from Mars and charities are from Venus. Charities have their own specific purposes, which do not always dovetail with the conventional way that government like to do things. Nowhere can you see this better than in commissioning. There is a body of advice available to government on making procurement practices really work for this sector and on the need for sustainable funding models, but it is too often ignored. NCVO reports that 84% of the organisations it surveyed reported that their grants and contracts had not covered their costs since 2020.
Community Action Suffolk, the county’s infrastructure body where I live, reported that 65% of respondents were oversubscribed and underfunded on projects for which they receive statutory funding. It seems to me that this is based on the myth that charities have a bottomless pool of volunteers on which they can draw and that it is somehow free labour—and that funding will always be met by an endless stream of philanthropy. Of course, none of the above is true. Volunteers need to be recruited, trained and managed, and, in an ideal world, we should meet some of their basic costs, such as bus fares. In any event, as we have heard, volunteering is in decline. Many people are working longer hours, older people are undertaking childcare duties and some cannot afford the basic costs of volunteering.
There are a few things government can do, as we have just heard from the noble Baroness, such as enabling more employer-supported volunteering. However, one of the lessons of the past is that top-down initiatives —snazzy apps and so on—simply do not provide results. The fact is that volunteering is an expression of an individual choice to give your time to something that you value; it is not really under the direction of the state.
Larger charities do have a bit more in the way of resource to recruit and manage volunteers, but we know that 77% of organisations have an income of under £100,000 a year and 47% have under £10,000 a year. I want to end with a plea for local infrastructure bodies such as Community Action Suffolk, where I was a trustee. They provide advice and support to hundreds of community-based voluntary organisations: everything from trustee recruitment and training, volunteer portals, a directory of funding opportunities and help with IT, DBS and charity commission compliance. We have heard a lot about investment and infrastructure, so let us not forget our social infrastructure.
Baroness Grey-Thompson (CB)
My Lords, I too thank the noble Baroness, Lady Morgan of Drefelin, for tabling this debate. I draw noble Lords’ attention to my registered interests: I am chair of trustees for the Duke of Edinburgh’s Award, president of the Local Government Association and chair of Sport Wales.
Voluntary organisations and community groups are the backbone of social and economic provisions across the United Kingdom. In 2021, the voluntary sector injected £17.8 billion into the economy and employed nearly 1 million people, making up 3% of our national workforce. But there are many challenges for volunteering, which is an important part of the sector.
Youth Employment UK have said that the volunteering participation rate among 11 to 30 year-olds has reduced from 24% in 2023 to 17% in 2024. As more young people become socially isolated, more sedentary and resultingly more vulnerable to physical and mental health issues, I am particularly worried about the impact on young women. Girlguiding’s Girls’ Attitudes Survey 2024 has shown that the number of young girls who feel unsafe due to sexism has doubled over the past decade; it has gone from 17% to 47%. That is just one organisation that helps young women volunteer.
Organisations such as the Duke of Edinburgh’s Award continue to champion youth volunteers because we recognise the profound impact that volunteering has on young people. Overall, more than 545,000 young people across the UK are currently working towards a DoE award. Participants gave 4,725,825 hours of volunteering in their communities. This is equivalent to over £24 million in paid working hours. Young people come from a variety of backgrounds; among last year’s participants, 15.2% were experiencing poverty, 26.7% were from ethnic minority backgrounds and 7.8% had additional needs. It is important that volunteering opportunities are open to everyone.
The Local Government Association’s 2010 Hidden Talents report, which is still valid, shows how volunteering helps build the confidence of young people, instilling in them invaluable interpersonal skills that they may not receive in the classroom. Whether it is volunteering at a sports club, helping in a charity shop or even shopping for an elderly neighbour, these experiences foster real-world interactions that are so evidently lacking in a world that revolves around technology. I know my own personal experience of volunteering had a huge impact on my life. When I was an athlete, all my coaches were volunteers; I could not have done what I did as an athlete without them.
Local authorities are under huge pressure and we must find ways to strengthen the relationship that they have with other organisations. Without cohesion and support, these organisations cannot close service gaps within communities, nor will they be able to provide adequate assistance to the most vulnerable in our society.
Finally, while I welcome the Government’s introduction of the new Civil Society Covenant Framework, I urge the Minister to maintain continuous dialogue and co-ordination with the devolved Governments. In order to achieve the full, positive impact of this covenant, it is essential that it resonates across all nations within the United Kingdom.
The Lord Bishop of Newcastle
My Lords, I thank the noble Baroness for bringing this timely debate to your Lordships’ House and I look forward to the maiden speech of the noble Baroness, Lady Porter.
I recently had the privilege of attending the North East Charity Awards. I wish I could highlight all the inspiring charities and individuals featured but, for the sake of time, I will limit myself to two. The North East Young Dads and Lads Project is a support service dedicated to helping young men and fathers play an active and meaningful role in the lives of their children and wider society. The project works with them to build a greater sense of self-worth and resilience, reducing social isolation and challenging negative perceptions. Smart Works Newcastle helps unemployed women with clothing and coaching into employment, transforming their lives. Some 69% of clients gain employment within one month. These are small, local north-east charities that understand the needs of their communities and make a tangible impact. It is so often the small charities with personal relationships that can most effectively bring about lasting change in people’s lives.
When it comes to funding, 85% of charitable income in England and Wales goes to just 4% of registered charities, with small charities often struggling to raise the funds they need. What steps are the Government taking to rebalance charitable funding and ensure adequate investment in smaller charities that possess a deeper understanding of their communities?
I must also recognise the work that local churches and faith communities do to serve their communities. In Newcastle, the cathedral plays a vital role in responding to prison leavers, those seeking asylum, those sleeping rough and those struggling with drug and alcohol misuse within the city. What steps are the Government taking to support the work of faith groups in their communities?
I expect there will be more to say on this in the forthcoming Budget debate, as the noble Baroness, Lady Fraser of Craigmaddie, alluded to in her excellent speech. For now, I welcome the Government’s recently announced civil society covenant and the emphasis that it places on partnership. So much can be gained from government and civil society working together, but we must also ensure that it is a constructive partnership, as the noble Baroness, Lady Morgan of Drefelin, mentioned in her opening speech, not one where the work of the voluntary and charity sector becomes a substitute for effective government policy.
The value of the community and voluntary sector across the UK cannot be overestimated nor taken for granted. It is the glue that fills in the gaps in our society, and I am glad that this House is recognising this today.
Lord Kestenbaum (Lab)
My Lords, I thank the noble Baroness, Lady Morgan, for securing this important debate. I declare my interest as a trustee of Teach First.
This debate, coming as it does one day after the Budget, could not be more timely. Yesterday, we heard a passionate, well-reasoned argument on the vital role of the state: where it can intervene, where it makes a difference, where it can change lives—and rightly so. Yet Governments themselves are the first to acknowledge the limits of the state. However well intentioned, it has those limits. We have long understood that overcollectivist economies are deeply flawed, not least as inhibitors of growth. However, this country has also seen and indeed lost faith in the alternative too, namely that what we cannot achieve collectively as a state we will achieve as individuals. The state withdraws; the free market does it all. Were we not told once:
“There is no such thing as society”?
Yet in each case, profound social ills continue, while expectations of services are in danger of outgrowing our ability to fund them. We know that between the overinterventionist state and the minimalist state lies the most potent force of all, found in localities, voluntary associations and faith groups: the force of community. It is in communities that we find—indeed learn—the virtues that sustain the common good: integrity, compassion, neighbourliness. These are the kind of virtues that both state and market are too impersonal—at times too arbitrary—to nurture. It is in communities that we find shared belonging.
For that reason and more, I, like other noble Lords, welcome the Government’s creation of a civil society covenant, a new era of partnership that will help to tackle some of the country’s biggest challenges. The very concept of covenant, as used in this instance by the Government, is inspired. That is not just semantics, for covenant is at the heart of a community’s power. Most economic and indeed many political relationships are by no means covenantal. They are, as we all know, contractual; they assume a coming together of broadly self-interested parties that benefit from an exchange. Contractual relationships are transactional.
Covenantal relationships, as found in communities and voluntary organisations, are not transactional at all. They are about common good; they foster trust, reciprocity, loyalty. Economists of course call this social capital. We have seen that without the features of social capital—such as mutual help, compassion and kindness—societies break down. Such social capital is not created by isolated individuals or remote mechanisms of state, but by the strength of community networks and the bonds of volunteerism. Societies rich in social capital, with strong, inclusive communities and vibrant voluntary organisations, will have high morale, a strong sense of belonging and greater cohesion.
We are blessed in the UK to find these ties up and down the land. I personally have experienced their impact particularly strongly in my faith community. The Jewish community, of which I am proud to be a part, through its multiple voluntary organisations and its care for the vulnerable aims to be a community of dignity and purpose, and in so doing helps make Britain a better, stronger society. As we have just heard, it is so often in faith communities that we help others, and they help us, without calculating relative advantage. As the late Lord Jonathan Sacks, former Chief Rabbi, whose eloquence hovers across this Chamber, has written:
“The virtues of the common good are found not where people are brought together by exchange of wealth or power, but by a commitment to one another and to a larger common cause”.
For the foreseeable future we will be beset by social problems which will yield neither to state intervention nor to private initiative. This is indeed the moment for a partnership to be forged between politicians, communities, voluntary organisations, churches, entrepreneurs and others. Underpinning it all is a vision of society where we can bring our diverse talents and traditions as gifts to the common good.
Lord Bassam of Brighton (Lab)
My Lords, I begin, as others have done, by congratulating the noble Baroness, Lady Morgan, on initiating this debate. Apart from being a highly effective Minister in the last Labour Government, she has for many years skilfully led Breast Cancer Now. Her work has undoubtedly saved many lives and raised awareness of this awful disease.
I also declare my interest as a co-director of Place, working for Business in the Community, a role I share with the noble Baroness, Lady Valentine—I am told, the oldest job-share in the UK. We are the UK’s largest and most influential responsible business network dedicated to building a fairer, more sustainable world. We work in the UK’s most deprived communities, mobilising leading figures from FTSE 100 companies to transform the lives and opportunities of millions. Led by our inspirational CEO, Mary Macleod, we aim to operate in 50 places by 2032, focusing on literacy, training, food poverty, upskilling and capacity building. Our business-led boards focus on physical regeneration projects like housing and transport.
However, we are one small part of the eco-structure of the 166,000-plus voluntary organisations identified by the NCVO. Although a major charity in NCVO terms, we have fewer than 250 staff. In a “bang for buck” ratio, our impact, like that of other voluntary organisations, is immense. The sector is estimated to contribute nearly £18 billion to the economy and employs, roughly speaking, a million people but mobilises over 14 million a year as volunteers. Our impact is unquantifiable.
Without the voluntary sector, community cohesion, the drive for social justice, economic fairness and greater equality would have long ago withered. We campaign, provide life-saving services, change lives, and shape opportunities. Our research changes perceptions.
However, we should not kid ourselves that everything in the voluntary sector is rosy or that we could not do better. Worryingly, there are signs that our work and impact may be faltering. A recent DCMS survey found that participation rates in formal volunteering have fallen. The NCVO too found a significant drop-off. Most concerning is the decline in young people volunteering, down 7% in 2024.
Like others, I welcome the Prime Minister’s announcement of a fundamental reset. His aim to unlock and harness the sector’s dynamism, innovation and trust is timely. The covenant framework, incorporating high-level principles of recognition, partnership and participation is most welcome, and I applaud the desire to engage across government.
The strength of voluntary organisations is, as others have said, our ability to be different, to innovate and to challenge. These strengths have been sorely tested over the last 14 years, as government has looked to us to solve its problems. Too often, we have been seen as a cheap option or substitute for government intervention.
Lisa Nandy was right when she said that we should be recognised as a “trusted partner” but, to fulfil that role, we must find ways to collaborate better, maximise our impact, and acknowledge that there is overlap and duplication. As a quid pro quo, we need long-term funding commitments from central government and our local and regional partners. UK businesses, like BITC’s partner, Aviva, could be better incentivised to support communities.
Finally, as a piece of advice to the Government, while there is no free money on offer to fund initiatives, there are dormant assets. Gordon Brown’s scheme was given a boost by the last Labour Government, but it barely scratches the surface in unlocking assets tucked away in the banking, insurance and financial systems that could provide billions for social purposes. Will the Minister urge the Government to reconvene the commission that examined options for expanding the scheme? There is an estimated £800 million coming through the new scheme, and it could fund the community wealth fund that provides essential services for long-term investment. There are other funds that could be tapped from dormant assets: £1 billion in unclaimed gift cards; £3 billion in Amazon gift cards; and Sadiq Khan estimated there is a quarter of a billion pounds in balances on Oyster cards. Unused assets like these could be unleashed to transform the lives of millions of people across the UK and unlock the real potential of our civic institutions.
Baroness Blake of Leeds (Lab)
My Lords, can we just be mindful of the four-minute advisory time, please?
Baroness Porter of Fulwood (Con) (Maiden Speech)
My Lords, at a time when our country is facing challenges on so many fronts, the unique role of your Lordships’ House is more important than ever. It is a privilege to be joining at such a critical time.
I have appreciated so much already the collegiality and warmth of this place. I would like to especially thank those who have made my introduction to this House so smooth—Black Rod and her team, and the doorkeepers. I would also like to thank the clerks, as well as my noble friends Lady Vere of Norbiton and Lord Johnson of Lainston, who supported me at my introduction, and my mentor, my noble friend Lady Wyld, all of whom have given me valuable advice.
Like others in your Lordships’ House, I have spent many years working in government across various departments as an adviser. I have been privileged to serve in Defra, the Cabinet Office, the Department for Transport, the Ministry of Justice and No. 10. I have also worked in business at the heart of the City, helping countries and companies from around the world raise capital and advising some of the world’s largest public and private businesses on their corporate reputation. During the Brexit years, I saw first hand the value of this House when I was working at the London Stock Exchange Group, and we were navigating many detailed, complex regulatory changes. The tireless work of so many here was invaluable.
I am very aware that life is not just—in fact, not even primarily—about formal institutions, whether Parliament or the City of London. As a mother of young children with no extended family living nearby, the invisible mesh of mutual support and care from others in my community is what makes life possible. We all know this, and during Covid it was the glue that held the country together. It takes all these elements: business, politics, media, community and family. We are at our best as a country when these parts understand each other and work well together. They are, though, too often siloed and at cross-purposes. This House has a special role to play in its ability to offer a dialogue between our country’s formal and informal institutions, and to foster and build the social capital that our future depends on as a country.
It is this that brings me to today’s debate. One area where we need to focus in coming months where this is especially true is criminal justice. This country has roughly 90,000 people locked up—almost double the number of people who were in prison when I was born, just over 40 years ago. Anyone who has been involved with criminal justice will tell you the same stories of heartbreaking, layered problems: gangs; drug abuse; mental health issues; a lack of mentors or family figure role models; children growing up who barely stood a chance. They will also tell you stories of transformation, where the practical commitment of a volunteer, or the deep care of a family member, has been the key to someone finding the strength to turn their life around.
Circumstances are forcing our hand on prisons. We should not look for quick fixes for this crisis but rather far-reaching reform. As the Government respond to this practical imperative, they need to use this moment as a jumping-off point for a proper rethink of how we approach criminal justice and the role of prison more generally. The part that community and the voluntary sector plays in this must be at the heart of this reform. Charities are able to provide a level of personal support and resource that government simply cannot. The charities Clean Slate Solutions and Recruitment Junction are both great examples of this, helping people who have been in prison adjust when they get out.
I started by referencing the breadth and scale of the challenges the UK faces. These are serious times. They are also times that require us to take a look at how we have been doing things and think anew. I look forward to working with other noble Lords who are focused on these issues to bring about lasting change.
Baroness Stroud (Con)
On behalf of the whole House, I congratulate my noble friend Lady Porter on her excellent maiden speech. It is a privilege to speak after her, and we can all see just how much she will contribute to this House.
We have known one another for many years. I first met my noble friend when she was working for the Maxim Institute in New Zealand, which is a think tank that works to promote the dignity of every person by standing for freedom, justice, compassion and hope. It therefore came as no surprise to me that, with this background, she pursued her commitment to human dignity, freedom and justice and made her way to the UK, expressing those principles in both the business world and the political world as a special adviser. It came as even less of a surprise to hear that she had rightly been elevated to this place, and that at the first opportunity she chooses to contribute to a debate on the importance of the community and voluntary sector. We are delighted that she is here.
It is easy in today’s individualistic world to conclude that there are two entities that make up our society: the individual and the Government. The noise in the public square in the advent of social media makes individuals feel atomised and makes the state feel powerful, but there is supposed to be a space between the individual and the Government, and that space is called family, civil society, community and the voluntary sector; together they bring life and vitality to our nation. It is the place where you can give and where you can receive. It is a place of reciprocity and mutuality.
I can remember a young girl in the care system saying, “I just want someone to take me to the dentist who wants to take me to the dentist and not because they are paid to do so”. It was a cry for family. It was a cry for community. In our atomised society, the danger for the voluntary sector is that in its pursuit of funding and professionalism, it forgets its unique contribution to the space between government and the individual—that is its humanity. There are many reasons for this. It is the voluntary sector that can break the norms of a maintenance culture and bring healing and transformation. What is it that transforms the human heart and restores the soul? Is that not sacrificial love? Person after person around this nation is serving their neighbour sacrificially in a volunteering capacity.
For 17 years, I used to run a community project for homeless people. We were able to say to them that if they came across someone who was hungry, they should feel free to give them something to eat; that if they came across someone who needed a coat, they should feel free to give them theirs. What professional organisation is still free in the 21st century to say these things to people? The act of sacrificial love coming from a volunteer was healing and dignifying for both the individual giving the care and the individual receiving the care. It was human.
The voluntary sector is free to intervene early, too; the voluntary sector is free to get ahead of social breakdown. For many years, many of us have spoken about the need for government programmes to be built around early intervention. It was the noble Baroness, Lady Stedman-Scott, who co-chaired the CSJ’s work on Breakdown Britain 20 years ago, who said that it was better to build a fence at the top of a cliff than to drive an ambulance at the bottom. Even though there is nothing new about how obviously right this early intervention is, over the last 20 years, with Governments of all colours, who all believe that early intervention is the right approach, none of us has found a systematic way through the funding structures of the Treasury to change the orientation of government social programmes away from picking up the pieces towards early intervention on a systematic scale.
So far, it is only the voluntary sector that is genuinely free to do that. Take, for example, Safe Families, which is a great example of a voluntary sector programme that can save the Government literally millions of pounds by caring for children ahead of a family breakdown, so that the children do not need to go into care. Made up of over 5,000 volunteers from over 1,000 churches and community groups, with a staff of around 150 passionate, talented and dedicated people the UK, they care for children and families before they reach breaking point and prevent them from going into prison. We all know that, but can a Government—of any colour—get funding to reflect that? No. But that does not stop the determination of the voluntary sector or Safe Families. So let us not burden the sector; let it be deeply relational, let it take time with people, do not overprofessionalise it, and allow it to be free.
Lord Dubs (Lab)
My Lords, I welcome this debate and I am grateful to my noble friend for having initiated it. I declare my interests having been the chief executive and chair of a number of voluntary organisations and having served on various boards. I will talk about three things: the relations between the voluntary sector and government; the influence on debate and legislation by the voluntary sector; and some important voluntary initiatives.
The voluntary sector is a crucial part of a democracy, and I welcome very much the recent speech made by the DCMS Secretary of State, when she said that it should be up to charities to tell government when it has got it wrong and to co-operate with government to get things right. That is in contrast to the disparaging comments made by some people from the previous Conservative Government, who told the voluntary sector to stick to their knitting and the RSPB that it should not stray from nesting boxes and bird feeders. Clearly, what we want, and what we have now, is a much better relationship, which was initiated at the meeting in No. 10 and the consultation on the civil society covenant. It is fundamental to the voluntary sector that it should be able to criticise government and to state its views on government policy—provided that these are within the general terms and scope of what that voluntary organisation is about. In the past, attempts have been made to stifle the voluntary sector from making comments on policy.
I think we all welcome the fact that voluntary organisations contribute by briefing us on debates and amendments to legislation. Some of us depend very much on this help and support. It ensures that our debates are better informed and based on the experience that the voluntary sector itself has, as opposed to just theoretical concepts. I have worked very closely with both the Refugee Council and Safe Passage on supporting the cause of asylum seekers and refugees, and I very much welcome the help that they have given us. Of course, there are so many other organisations—I cannot mention them all—including the Holocaust Educational Trust, the MS Society and Humanists UK. In Northern Ireland, the Integrated Education Fund has played a key role in ensuring that integrated schools play a larger part in educational provision there. We depend on the voluntary sector. When we come to debate on assisted dying, which will be quite an issue—first in the Commons and then possibly here—we should get briefings on opposite sides of the argument. That is not unhealthy; it is a good thing.
I must mention one or two important initiatives from the voluntary sector. I particularly welcome the part played by volunteers in refugee camps abroad—for example, in Calais—where individuals from this country have gone and given a lot of their time, sometimes years, to support the most vulnerable of their fellow human beings. The Refugee Council has done enormously good work on this. The Duke of Edinburgh’s Award is also important. I will give one example. Some years just before the pandemic, the Chelsea and Fulham football foundations—I say this as a Manchester United supporter, alas—joined together to provide an evening of football training for refugee boys on Fulham football ground, inspired by Gary Lineker. It was a great evening and a very important contribution to the understanding by refugees of sport in this country. All over the country, there have been initiatives such as Wandsworth Welcomes Refugees and so on, and refugees have come. It is a privilege to have been involved with the voluntary sector, which has helped me with some of the contributions I have made to debates in this Chamber.
Lord Murphy of Torfaen (Lab)
My Lords, it is a great pleasure, as always, to follow my very good friend—my noble friend Lord Dubs—and to congratulate the noble Baroness, Lady Morgan, on her wonderful introduction to an important debate. I pay tribute to the noble Baroness, Lady Porter, for a very impressive and effective maiden speech; we look forward to hearing far more of her speeches in the years ahead.
A few weeks ago, I spoke in this Chamber in the debate on social care and referred to the work of my own local authority in Wales, Torfaen County Borough Council, on the importance of community and voluntary groups in trying to solve the social care issue. That also applies to other issues and problems as well. Today we celebrate the community groups, voluntary groups, churches, Rotary International, charities, pensioner groups and youth groups, all of which play an enormous part in our society, locally and nationally.
Very often, they are unco-ordinated. Local voluntary groups can come together—of course they can—but I will bring to the Minister’s attention the work of my own local authority, which employs what it calls “community connectors”. These are individuals who go into various parts of the local authority, work with the community groups, identify issues such as isolation and then report back to the local authority.
The reason I wanted to say that to the Minister is because there is a tendency to ignore what happens across the River Wye in Wales—or, for that matter, in Scotland and Northern Ireland as well. For the five years when I was Welsh Secretary, it was often a battle against the establishment in Whitehall to learn best practice from the devolved Administrations. It was referred to as “devolve and forget”. In fact, we should do the opposite: devolve and work together.
The NCVO has pleaded that it should be allowed to have a more structured engagement with the United Kingdom Government and to make its comments on the civil society covenant framework, which the noble Baroness, Lady Grey-Thompson, referred to. It seems to me that we can learn from each other in a very special way. Very often, we criticise each other in the different nations, countries and regions of our United Kingdom, but the Government themselves have decided that there should be a Council of the Nations and Regions. There is already a British-Irish Council and a British-Irish Parliamentary Assembly, which bring together Governments and Parliaments from across these islands—and we learn from each other. There is still a reluctance in government here in London for that to happen. If one thing can go from this debate to my noble friends and colleagues in government it is: connect, connect, connect with what goes on elsewhere in the United Kingdom. Devolution does not mean separation; it means working together as much as anything else.
Lord Addington (LD)
My Lords, I totally agree with the last sentiment. We tend to find that Governments think that the voluntary sector is a great idea until it starts to criticise their current policy, as my noble friend Lady Scott referred to. It is almost universal; Governments of all colours have done that. As the noble Lord, Lord Dubs, said, when we deal with any subject in this House, we get our information from the voluntary sector. They are outside groups that lobby us and make us better at our job. I encourage all of them to keep that stream of information coming, because without them, the process of government is worse, and government itself will not be able to answer the questions it should on all its legislation.
I welcome—as I should have done earlier—the noble Baroness, Lady Porter, to our midst. The first 30 years are the worst, in my experience. Somebody with outside experience and new experience is always welcome here. She has started well and I hope that the next steps are at least pain-free.
The one section of this that I really wanted to raise has already been touched on, which is reaching those who are, as we used to say, in danger of offending: those who have had bad experiences going through life. People with bad experiences, bad educational backgrounds et cetera, end up filling up our prisons. We will all be drawing attention to a charity that I have had some interaction with: TackleLondon. It is a rugby-based charity. Your Lordships would never have guessed, would you? What we do there is something that has been referred to by many. We go in, speak to young people who have had, in our terminology, ACEs—adverse childhood experiences such as family breakdown, losing a house, something that puts you on a path towards educational failure, disruption and being in that group that is vulnerable to getting sucked into the criminal justice system.
A major problem that we have down there, after you have got through people from the Atlas Foundation such as me who are raising money for them, which is always a battle, is the interaction with the state. We want to get into schools. We have got expertise, volunteers, people coming forward, people who like their sport, people who think that it should go forward and people who enjoy getting information out there. Remember, it should be people who enjoy what they are doing and enjoy giving. We are not looking for masochistic saints. If you are, you will have nobody to do this. What are the Government going to do to make sure that we can get into that school, that section, and do it easily? We know that we have to do DBS checks and all the rest of it. If we are prepared to do this, how will the education sector embrace this expertise?
As to positive experiences, rugby union is a good sport because it is complicated. You have nice authority figures. Other sports may be better for playing but, for giving authority and structure, rugby union is great. Many other sports do not have their rules described as “laws”: we are a very authoritative sport. How will the Government enable the volunteering charity sector, if they approve of it, to get into the education system and give support? It is a problem that we have had for a long time. It is a resource that we do not make the best of. I look forward to hearing what the Minister has to say about this, if not today then at least in the future.
Baroness Wilcox of Newport (Lab)
My Lords, I am delighted to speak in this debate, called by my noble friend Lady Morgan of Drefelin, whom I congratulate. I also congratulate the noble Baroness, Lady Porter, on her maiden speech, and welcome her to her place. I associate myself with the wise words of my noble friend Lord Murphy of Torfaen.
Volunteering is recognised by the Welsh Government and the Third Sector Partnership Council as an important aspect of strong communities and something to be promoted and supported. Jane Hutt MS, the Minister for Social Justice and Chief Whip, made an Oral Statement last year outlining the development of a new approach to volunteering in Wales. She noted that the approach will be one that is fit for the future, for generations of volunteers and including the voluntary, public and private sectors. In preparation for this debate, I, like others, was contacted by the Wales Council for Voluntary Action, the national membership body. It welcomes the launch of the Government’s new civil society covenant framework and, as others have already mentioned, it believes that the covenant should include a commitment to continuous dialogue with devolved Administrations across the UK. That ensures the co-ordination of all policy, legislative and funding decisions.
Last week, we had the annual celebration event of the Gwent Association of Voluntary Organisations. Due to parliamentary business, I was unable to attend. It celebrated volunteers who have been nominated by the community in 12 different awards. It was an excellent evening and my Newport colleagues, Jess Morden MP and Jayne Bryant MS, had great photographs of the event on their social media pages.
I have decided that one way to highlight the work of volunteers would be to record the immense contribution that individuals have made to my own experience of working together with them over my 20 years as a local councillor. Sadly, Joan Davies is no longer with us. However, as I said when I had the honour to give the eulogy at her funeral two years ago, Joan was the heart and soul of the Maesglas community in Newport. She dedicated decades to volunteering, running a branch of the Newport credit union from the community centre, where people could save money and take affordable loans. She was a key figure in running the centre, where she held the wonderful Wednesday night bingo club. Over the years, the people of Maesglas, one of the lowest socioeconomic wards in the city, under Joan’s leadership raised many thousands of pounds for charities. In 2018, Joan was given the High Sheriff of Gwent award. When asked for my nomination, as leader of Newport City Council, without hesitation I nominated Joan, who was the epitome of what it meant to serve the community.
The spirit of volunteering lives on in Newport today. In closing, I will mention two further people who volunteer in the important area of school governorship. I worked beside them on the governing body for many years at the John Frost School in Newport. Sue O’Brian is not only a committed and supportive chair of the governing body; she is at the heart of girl guiding in Newport and runs one of the many popular Brownie packs in the city. Similarly, the vice-chair of governors, Jan Atkinson, has a long background in the community, including foster caring, raising funds and cooking a Christmas lunch in one of our community centres for people who would otherwise be alone on Christmas Day.
I am glad that this debate has allowed me to put on record their achievements and the importance of people such as Joan, Sue and Jan to the future of the sector in communities in Wales, and indeed across the whole of the UK.
Lord Black of Brentwood (Con)
My Lords, I join others in congratulating the noble Baroness on leading this debate and my noble friend on her excellent maiden speech. I am a trustee of a number of charities that are listed in the register and declare an interest accordingly.
I want to talk about a specific set of charities that rely on an army of incredible volunteers in communities across the country to look after one of the most vulnerable groups in our society: our pets and animals. Mine is one of the 57% of UK households that own a pet. Over a quarter of a century of owning cats, I have seen up close the work of animal welfare charities, which is not just about caring for animals that have been abandoned or cruelly treated—the tragic face of so much work in this sector—but about education for young people, giving support to bereaved pet owners, and many other areas that are crucial to a caring society.
Every day, the UK’s largest animal welfare charities—Cats Protection, Dogs Trust, RSPCA, Blue Cross, Battersea and PDSA—do astonishing work on limited resources that is made possible by the work of around 29,000 volunteers, contributing an average of 2.5 million hours of work each year. Cats Protection values its 9,000 volunteers’ priceless gift of time at around £37 million each year, while volunteer cat and dog fosterers at Battersea each gave an average of 200 hours of volunteering last year. PDSA has volunteer vets and nurses within its veterinary hospitals, providing essential care. As Cats Protection says to its volunteer army, and it is the same across the sector, “We wouldn’t be here without you”.
What these charities and their remarkable volunteers—increasingly, people under the age of 35 and many who identify as disabled—achieve in incredible circumstances is remarkable. Volunteers are there for not just animals but their owners. Anyone who has ever loved a pet knows full well the terrible pain of parting. Blue Cross is there to help by running a wonderful bereavement service, with volunteers dealing with over 20,000 calls, webchats and emails each year from those in distress.
It is not just the big charities that gain so much from volunteers: smaller ones rely on volunteers even more. Take the Suffolk Owl Sanctuary, where my husband and I help sponsor Titch, a tawny owl. Its volunteers get involved in aviary cleaning, feeding rounds for the birds and painting, decorating and gardening—all essential to the smooth running of a really small charity.
Equally vital is the role that volunteers play in raising funds. They give money themselves, organise events and encourage their friends and colleagues to do so as well, helping to ensure that 15 million people each year donate to animal charities.
There is another crucial role that volunteers for all these charities play as vocal ambassadors for animals, providing an independent voice for those who have none, ensuring that animals always remain high on the political agenda here in Westminster and in local authorities, and ensuring that we are held to account for delivering for those in need of care.
There are many things we can do to assist this army of volunteers, as the noble Baroness said, not least by developing a civil society engagement strategy and charter, as set out by the NCVO, to reduce barriers to volunteering. Training passports would help too, allowing volunteers to develop transferable skills, such as in health and safety or safeguarding, across different charities.
This debate has shown of how much we have to be proud as a country. I take this opportunity to applaud the tireless, selfless and often unsung work that so many volunteers undertake for our pets and animals, and to thank them for their devotion and energy. They are a jewel in the crown of our civic life; without them, our society, two-legged and four-legged, would be so much the poorer.
Lord Parekh (Lab)
My Lords, I congratulate the noble Baroness, Lady Morgan of Drefelin, on initiating the debate so very well. Basically, we are concerned with exploring the relationship between civil society and the state. Civil society represents the idea of persuasion and the state represents the idea of compulsion. The question for any kind of civilised society becomes: what is the role of persuasion and what is the role of compulsion? Which areas of life are best left to persuasion and which to compulsion? Once you have formulated it in this way—I find it easier to handle—you begin to see how it applies to our own situation.
This is a problem that every society faces, because every society involves both coercive machinery in the form of the state and a voluntary set of institutions in the form of associations. One could say, for example, that the two should be merged, as is the case in Germany. In Germany, the state collects taxes for churches. In France, it is the opposite; the two are totally separate. The state has little to do with civil society.
Our approach has been mixed. We rely on the state in certain cases, on civil society in other cases. We expect the state to intervene in certain areas of civil society. This mixed approach has been a source of much beneficence, but also much unease. I will briefly point out why it has led to some degree of unease.
First, when you talk about civil society, will you support organisations concerned with protest—for example, against Israeli actions in Gaza, the Indian occupation of Kashmir or whatever? The state would say that it is not going to support that; it is against its policy. What happens to the issues concerned? As we have not been able to handle this question, the result is that we periodically hear issues about people not being allowed to protest and why.
Secondly, the state draws a conventional set of lines. Within those lines and that framework, civil associations are supposed to function. That is all right, but it leads to the bureaucratisation of civil society, and that bureaucratisation does not allow associations to function properly.
The third difficulty is that it concentrates on certain material things. A philanthropic activity is one where you give money, but what about those societies where money is not given or prized, but time or concern is given? I come from a society where per capita philanthropic contributions would be rather low, but per capita time or attention would be far greater. Would you therefore say that one society is more philanthropic than another? Our society, by and large, has been concentrating on money and matters other than personal sympathy and concern for rehabilitating individuals. This can be seen in relation to prisoners.
Lastly, the relation between civil society and state is not ultimately a matter of ad hoc contestation and compromise. It is a matter of culture, and a culture has to develop that allows that society to throw up responsible civil associations.
Lord Hastings of Scarisbrick (CB)
My Lords, we all love a debate of this nature, because it shows the very best of British brilliance, so I thank the noble Baroness, Lady Morgan, for allowing us to have this wide conversation together. All of us have interests that express our passion for communities and our voluntary engagement, and we all know that, as much as we may give voluntarily, we receive immense delight, joy, respect and purpose in the time and resources that we give away to others.
My many interests are in the register, but I will focus on a few. As president of UK Community Foundations, I am proud that we are in every single constituency of the UK, through our 47 community foundations that cover every postcode of the UK. Some £190 million of resources are contributed to individual and community needs every year through the Community Foundations network. We provided small things such as basic laptops, in the Covid years, which individuals needed so that they could undertake work from home. We provided support and resources for people to get access to psychiatry and individual support for mental health, so that people can ensure that they can work. That is the value of Community Foundations, and that money is gathered mainly from local contributions and giving. People feel so proud; 86% of people feel proud to give locally, volunteer locally and support locally.
I am also chairman of the Pathway Fund, and I am glad that the noble Lord, Lord Bassam, raised dormant assets, because we are awaiting the Government’s release of information on the availability of dormant assets and the expectation that the Pathway Fund will be one of those. I ask the Minister at what point a decision will be reached on the release of dormant assets for 2024-25. We are expecting a substantial allocation to do the work that the Pathway Fund was set up to do. I only recently became its chairman, in the last couple of months.
One of the greatest areas to which I contribute voluntarily is ongoing. I refer with grateful respect to the maiden speech of the noble Baroness, Lady Porter, which raised issues of criminal justice. I have spent 21 years as a trustee and chairman of Crime Concern, where we helped to create neighbourhood watch and Victim Support. To this day, neighbourhood watch is probably one of the best community access linkages that we have across the UK. I know that from my own area, where you just watch the angst of the people going back and forward and their joy in realising that we are not under threat.
Community crime prevention was Crime Concern’s theme and we have carried that on into Catch22, which I was also delighted to found in 2009. All these interventions save the taxpayer substantial amounts of money but allow individuals to give to the better estate of preventing crime and making communities safer.
I am also the co-founder of My Brother’s Keeper, which is a prisoner engagement programme. On Tuesday, I made my 11th visit to HMP Isis, where it was delightful to spend time with 46 young men in the prison. Our team of eight is mentoring those 46 and has seen the transformation of that particular prison and its culture. None of us gets paid and we do not seek to be paid; the payment is in the delight of witnessing transformation and life for others.
As the Government look around for ways to save money, as well as invest it better, I ask them to please rely more heavily on the voluntary sector and volunteers to do the great work that we all love to do. Give others life and freedom.
Baroness Thornton (Lab)
My Lords, I congratulate my noble friend on securing and opening the debate. I also congratulate the noble Baroness, Lady Porter, on her maiden speech.
This is an important debate because our Government have the chance to restore the mutually productive trusting relationships with civil society that we have enjoyed in the past and which have been eroded in recent years. I unreservedly welcome the words of my honourable friend the Minister, Stephanie Peacock, who said,
“this government has announced a commitment to reset the relationship with civil society and work together to develop a new Civil Society Covenant”.
As someone who started their working life at Gingerbread then moved to the citizens advice bureau and then worked for Michael Young at the Institute for Community Studies, I have huge commitment to this sector going back 50 years.
From the Ministers in the last Government I am afraid we saw attacks on charities to generate headlines and attempt to stoke culture wars. We should be pleased that the public has sound instincts on this. We all know about the campaigns to undermine the work of great charitable institutes such as the RNLI and the National Trust—it did not work. Attacks on the National Trust by political campaigners have included everything from its research into the historic places in its care to “secretly woke” scone recipes. Public trust in the National Trust has, I am glad to say, only increased since all this began, but it represents a waste of charities’ scarce resources. Let us hope that, under a new leadership, and with the influence of noble Lords opposite, there will be a change in attitude toward the voluntary sector.
As I said, the resetting of the relationship with civil society is wholly to be embraced. However, I have to ask my noble friend where social enterprises and social and community businesses feature in this new world. Because of an accident of supine government, the social enterprise world ended up in the DCMS, along with civil society organisations, several years ago. There are more than 131,000 social enterprises in the UK, with a collective turnover of £78 billion and employing around 2.3 million people. They can be SMEs or very large suppliers of public services. Therefore, this is not a small matter, as they match in size the voluntary sector. It feels that, at the moment, they are slightly losing out in the policy world. Unless I am mistaken, I cannot see any mention of social businesses in the proposals for the new compact.
If we wish to fulfil our manifesto commitment to build diverse business models to support the regeneration of our economy, co-operatives, mutuals and social enterprises have an important part to play. The same is true of civil society organisations, but the support and policy that they need are not the same.
I asked this question during the King’s Speech debate and I ask it again: how is that diversity to be achieved? How will social enterprises be involved in the important discussions around procurement, reform of our public services and things such as regional investment? I and the sector have long believed that social enterprises and social businesses should be the responsibility of the Business Department not the DCMS, because they are businesses. At the very least there needs to be a plan to promote and support social businesses. Will my noble friend the Minister help to organise a meeting with her honourable friend Stephanie Peacock, social enterprise leaders and me to find a way forward with this dilemma?
Lord Griffiths of Burry Port (Lab)
My Lords, it is a great privilege to speak in a debate of this kind and to thank my noble friend for giving us the opportunity to share experience in this way.
I have spent my entire working life in the voluntary sector and have struggled very hard throughout that time to maintain the balance between administrative roles, management and client-facing co-working with the people one is serving through the voluntary activities in question. That is an immense privilege, as my dear and noble friend Lord Hastings in the corner alluded to—why he sits in the corner, I do not understand. His practical experience is a model for all of us. He has held high office at a number of very significant institutions and yet it is the person-to-person relationship that strikes home whenever one meets him. I would hope that that would be my emphasis too.
I pay tribute to this little man sitting next to me, my noble friend Lord Parekh, whose books I read years ago, whose leadership I enjoyed on visits to South Africa and other places as part of building relationships across international borders, and whose thinking has always been so clear and helpful.
I am unashamedly going to speak about churches today, and have been given encouragement to do so by my noble friend who, from a Jewish perspective, seemed to open the door for that. Years ago in my work, I had responsibility for a day centre for homeless people in Seymore Place, Marylebone, and for halfway houses for young offenders in Wandsworth. The Home Office approved a centre for prisoners on remand, resourced by an astonishing criminologist from the University of Cambridge, and a self-referral place for people fearing that they were dependent upon substance abuse. In that context I have witnessed human suffering at an extraordinary level. In order to catch the picture properly, I remember, for example, sleeping in Lincoln’s Inn Fields or in shop doorways with the homeless as we built relationships that would allow for a conversational approach to the way we handle what we on the giving side too often describe as problems when in fact they are situations that can be entered into and dark places that people can be brought out of simply by having someone else they can trust.
In my cozy retirement in leafy Croydon, and attending church—no longer running the wretched place because it was so complicated in the end—it is wonderful to have the space and the people who bring people from the community together. We help people with mental health problems, we hold art classes and University of the Third Age sessions, we host winter sleeping shelters on rota with other churches in the region, and those of us who do not need our £300 winter fuel allowance put it into a fund so that it can be administered on behalf of those who need it most. In all these ways, such wonderful opportunities occur. I so agree with my noble friend in the corner that what you receive is far more than anything that you give.
The last thing I want to say, although noble Lords will get the sense that I could go on a long time, is that I picked up the Methodist Recorder—who has heard of that?—this morning on my way here. It carries a report from the National Churches Trust that shows how—it has been quantified and worked out by experts—churches save the NHS £8.4 billion per year through the direct and indirect services that they offer to their public. So let us note the decline in numbers who go to church, but glory in the fact that those who do punch above their weight.
Baroness Sater (Con)
My Lords, I thank the noble Baroness, Lady Morgan, for securing this debate today and I congratulate my noble friend Lady Porter on her excellent speech. I am fortunate enough to be on a fellowship programme with the Industry and Parliament Trust, focusing on corporate social responsibility and looking at how companies and organisations are delivering their employee workplace volunteering programmes. Today, I will talk about the contribution that businesses and their employees can make to charities, voluntary organisations and communities, and how society and the economy are benefiting from their work. I declare my interest as a trustee of the Dartington Trust and vice-chair of the Specialised Healthcare Alliance.
Volunteers provide a vital resource to charities and volunteering organisations across the UK, many of which work to support the most vulnerable members of society. In turn, volunteers benefit hugely in personal satisfaction from knowing the value their contribution makes and from the skills that they can acquire. The Time Well Spent report from the NCVO—the National Council for Voluntary Organisations—backs this up, with 74% of volunteers feeling more confident and 71% feeling that their skills have improved.
I recently visited the impressive Felix Project charity in Poplar and was overwhelmed by the contribution that volunteers were making daily to help deliver meals to local communities. A survey of some 200 corporate volunteers visiting one of its farms this year reported that 92% said it improved their relationship with their colleagues and made them more aware of the issues around food waste.
Analysis conducted earlier this year by Pro Bono Economics—PBE—highlighted that workplace volunteering benefits individual employees and their employer by improving well-being and delivering improved skills. This combination drives productivity and means that £1 spent by employers on good-quality workplace volunteering schemes can generate between £1.50 and £3.60 in benefits. The Business in the Community 2024 State of the Nation report surveyed CEOs from some of the largest companies and found that 78% believe that progress on addressing societal and environmental issues can also help with business growth. BITC is a responsible business network that works with charities, voluntary organisations and local authorities. More than 20% of the UK workforce, some 7 million employees, are its network, which shows the potential scale of what can be achieved.
These behaviours, values and cultures are becoming increasingly important to young people. When they are looking for a job, they will sometimes be the reason that they will choose one company over another. A KPMG study last year revealed that nearly half of UK office workers considered a company’s ESG credentials important, with this sentiment most pronounced among young groups. This potential new group of volunteers in business can help communities continue to make a difference in tackling social injustices and improving our environment with much needed additional capacity at a crucial time, with six out of 10 charities struggling with volunteer recruitment, as reported by the VCSE Data and Insights National Observatory at Nottingham Trent University in May this year.
However, charities, voluntary organisations and business should not be burdened with these responsibilities alone. Government also has a role to play. The PBE report in April cited some £1.6 billion to £2.8 billion of net productivity benefits to the economy from rolling out more workplace volunteering. Companies and organisations are required to report on many things and need no more burdensome obligations, but I wonder whether there may be a benefit in voluntary reporting of employee hours spent volunteering, both in business and perhaps across the Civil Service. With PBE reporting that 17 million to 23 million employees do not have the opportunity to access workplace volunteering, that tells us we have a long way to go, but the potential is huge.
Baroness Pitkeathley (Lab)
My Lords, I thank my noble friend Lady Morgan for this debate. It was an honour to precede her as president of the NCVO and to listen to the maiden speech of the noble Baroness, Lady Porter. I have worked in or with the charitable sector for most of a long working life and I was privileged to chair one of your Lordships’ Select Committees on charities in 2017. I begin with a quotation from the report we produced:
“Charities are the eyes, ears and conscience of society. They mobilise, they provide, they inspire, they advocate and they unite … their work touches almost every facet of British civic life”.
The then Government took 10 months to respond to the report that my committee submitted, and, when it came, the response was not worth waiting for. Although there was general acceptance of the problems facing the voluntary sector, there was no plan for dealing with them and much of the tone of the response could only be called dismissive.
Indeed, this rather typified the relationship between the previous Government and the voluntary sector, which is why the Labour Government’s renewed approach has been so welcomed by colleagues. A fundamental reset was needed and has now been announced by the Prime Minister in the form of a covenant, as we have heard.
We are in the engagement period now for that covenant, when consultation is going on between the Government and the sector; and the sector, as we know, will not be reluctant to make its views known. However, the huge variety of the sector, as we have heard, from tiny kitchen-table charities to multi-million-pound enterprises, makes it very difficult to consult in any meaningful way, although the intermediary bodies such as the NCVO and ACEVO do a magnificent job.
Up until 2010 I had the honour of chairing the advisory body for the third sector. This was set up by the Labour Government to encourage, promote and facilitate communication and co-operation between the sector and the Government. All the appointments to it were made through a public appointments process and members sat, not as representatives of their particular sector, but to act as a sounding board and a conduit for issues of concern to both the Government and the sector. All parties seemed to find this helpful and I wonder if the Minister would consider reactivating the idea. It was wound up by the incoming coalition Government but I believe it did a useful job. Our Leader, the noble Baroness, Lady Smith of Basildon, was Minister for the Third Sector at the time. She had a lot of contact with us and I am sure could be consulted about the role of such an advisory body going forward.
I will just say a word about partnership. If I had £1 for every time I had heard Governments, the NHS and local authorities say they wanted to work in partnership with the voluntary and community sector, I would be a rich woman. We have to ask what partnership means. It does not mean deciding what services you want to provide for your citizens, progressing those plans, and then throwing a crumb or two out about what you want the volunteer sector to do when it was never even in the room when the plan was devised. This is very short-sighted for two main reasons. First, you do not get the best out of any partner unless you involve them at the earliest possible stage in planning, and secondly, you are ignoring the priceless contribution of the voluntary sector, which is its contact with consumers. Every piece of research about consumer involvement shows that people, especially those who are disadvantaged or vulnerable, engage more readily with charity or non-statutory agencies than someone perceived to be from the Government or the council. This is one of the many priceless contributions that the voluntary sector brings to the public life of our country.
Baroness Gohir (CB)
I congratulate the noble Baroness, Lady Porter, on her maiden speech and thank the noble Baroness, Lady Morgan of Drefelin, for securing this debate and for her excellent introduction. I declare an interest: I am the CEO of a women’s charity and a trustee of another, so I will focus my comments on the women’s charities sector, which is underfunded and undervalued.
A study commissioned by the Rosa fund for women and girls, the National Lottery and the Esmée Fairbairn Foundation found that women and girls’ charities get less than 2% of grants and that these are often micro grants. The study showed that 50% of the grants are for £10,000 and less, so the grant value going to women and girls’ organisations is far less compared to other organisations, and the situation is far worse for minoritised women’s groups.
Some of the factors contributing to this include the fact that the sector is undervalued. It is expected to do the work for little or no money. Also, the previous Government made it very hard for small organisations to access funding to address violence against women and girls. They changed a very simple grant process to a complicated tender process and raised the income threshold so that only large charities could access that funding. Smaller organisations had to form coalitions so their collective income could meet the threshold, but managing coalitions is very difficult and resource-intensive.
Other barriers include local councils having their budget slashed, which means less or no money going to local women’s groups. Also, several charitable foundations and trusts, which are very good at giving money to women’s groups, have paused their allocation of grants temporarily for more than a year while they refresh their strategy—something highlighted by the noble Baroness, Lady Fraser. I wish they had consulted and spoken to each other and staggered that process, because they have made life very difficult for charities such as mine.
Now I turn my attention to the Budget. I welcomed some announcements which are helping to put more money into the pockets of women. However, some announcements are going to hit the charity sector very hard. As mentioned by the noble Baroness, Lady Fraser, the rise in employer national insurance contributions is going to significantly increase the wage bill. If you take that in combination with the rise in the national living wage, plus pay rises that charities would like to give their workers in line with national inflation, even with the employer allowance it is going to be a significant increase. Last night I was number-crunching what the salary bill for my charity is going to be next year and thinking about how I am going to raise that money in a very precarious, unstable funding environment.
Women’s organisations, with that rise in demand that has already been highlighted, are having to do a lot more for a lot less money. Staff are getting burnt out and they are leaving the sector. On top of that the charity sector will probably have no choice but to scale back services, close down some of them and make staff redundant, and unfortunately many charities will end up closing.
This is deeply concerning because the women’s charity sector is an essential source of support. It is also a source of employment, as highlighted by the noble Baroness, Lady Morgan, and an essential source of volunteering. I started my second career, after caring for my children, by getting back into volunteering and that has led me to your Lordships’ House. Pro Bono Economics has estimated that women in the charity sector contribute £19 billion to the economy, £9.9 billion through volunteering and £9.2 billion through employment. How are the Government going to support the charity sector? Will they increase funding to it and make that funding accessible, including through the dormant assets highlighted by the noble Lord, Lord Bassam?
Baroness Prosser (Lab)
My Lords, along with others, I thank my noble friend Lady Morgan of Drefelin for introducing this debate. I have long held a very fond memory of the voluntary sector and the role of volunteers. Many years ago, I was lucky enough to work in the voluntary sector in the London Borough of Southwark. At that time, the Home Office had its community development programme and Southwark was one of the boroughs fortunate enough to be funded in this way. The CDP, as it was called, was established in an area of the borough that was up for regeneration. It was generally seen as pretty deprived. The work we did there was in reaching out to the local community and making ourselves known, via mother and toddler groups and the local youth centre—back in the days when we had youth clubs, of course—or through the churches and any organisations within that part of the borough where people met and got to know each other.
The whole difference between the voluntary sector providing services and services provided by what we might call the more formal authorities, such as the local authority or the Government, is that it is in a position to go into areas where local people meet and go about their business. We could set up our own little schemes by making ourselves known and giving confidence to those people who have questions to ask or are in need of some sort of service and advice. In that part of Southwark, there were a lot of what used to be described as problem families—they gave lots of problems to lots of people in the area, that was for sure. Those people really did not know how to organise themselves. The pity of it was that many children were therefore not properly brought up, advised or guided. We had community workers who worked with those young people, getting them back into school and a bit more on the straight and narrow.
We then applied for funding to establish a law centre, and I was fortunate enough to find work there. We had four qualified lawyers and two of us who did welfare rights advice and support. Again, we went out into the community, meeting tenants’ organisations and residents’ groups et cetera, to make sure that our services were known to everyone.
Back in 2010 David Cameron, now of course the noble Lord, Lord Cameron, launched what he called the big society. At the time—I have never been convinced otherwise since—I drew the conclusion that he had absolutely no idea what the big society was supposed to do and how it would be able to do it, because there was no recognition of the need for some kind of structure or support. There needed to be some kind of link to local government, to the Government themselves and to the community in general. I think it was somehow supposed to come out of thin air.
In much later times, I have been grateful for support from the voluntary sector in a different way. I am advised, helped and guided by a volunteer from Sensory Services by Sight for Surrey, an organisation that works across the county of Surrey, where I live. Its volunteers come and enable people like me who are now registered as partially sighted to do all kinds of things that, on our own, we would not be able to do. That is a very different kind of volunteering but it is just as good, as important and as meaningful as the voluntary sector where those being paid operate. I congratulate my noble friend Lady Morgan again because this is a very important debate.
Lord Rooker (Lab)
My Lords, I congratulate the noble Baroness, Lady Porter, on her excellent maiden speech.
Last Thursday, at a fund-raising quiz in Ludlow Brewery, Susie O’Hagan, the chief operating officer of the charity Hands Together Ludlow, outlined the aims of the charity: reducing isolation and loneliness; helping people remain independent; supporting the most vulnerable; and building networks across the town. Ludlow is a wonderful market town with much history, but it has wards in the most deprived categories and the numbers of people registered disabled and children on pupil premium are above the national average. Salaries in Ludlow are 12% below the national average, and it is the southern tip of a financially failing council. Hands Together Ludlow receives no public finance and raises running costs from trusts, individuals and fundraising. The brewery fundraising quiz was sponsored by MFG Solicitors.
To best illustrate the work of Hands Together Ludlow, Susie simply described the work it had carried out in three days last week—last Thursday evening, she described Monday to Wednesday. Volunteers collected 145 kilograms of surplus food from local supermarkets and stocked the community fridge they operate. In those three days, the community fridge served 57 people and distributed all the surplus food. Some eight people worked in the men’s shed, which also caters for women. Rough sleepers were fed and supported to engage with other services. Someone was provided with a phone and a quiet space to access universal credit. The charity organised for a 90 year-old with no food in the house to be taken shopping, followed up with a visit to the doctors’ surgery and a social worker to agree a forward plan. It liaised with 30 organisations across the county to identify sharing-information opportunities and keep Ludlow on the map. It explored improvements in the referral process for the household support fund and looked at how it could better support people to apply to the fund. It also responded to issues received from Facebook, the telephone and the website—from finding financial advisers to offers of free wood, requests for a befriender and how to dispose of white goods.
Some 37 people were fed at the community lunch, and the charity served another 22 in its own community space; 10 people were taken for a social walk around town followed up with refreshments. The charity provided mindful colouring and board games social sessions, walked a dog whose owner was ill, planned for an event to highlight and celebrate volunteering in Ludlow, and met with the town council to plan co-delivery of a new food project. Some nine lonely people spent an hour with a volunteer befriender, and the charity organised and supported 40 volunteers to deliver 111 hours of activity. All that happened in just those three days.
That was Susie’s brief introduction to what the evening was about. These activities cannot be delivered without a secure infrastructure of small staff and building costs. The charity has to stay flexible to meet the needs of the town, as statutory services are cut, closed or moved out of town to Shrewsbury. Last year, 18,332 hours of volunteer time was given. Small local charities, such as those we have heard about today, keep society going. They reduce isolation for individuals and help them maintain independence, and they support the most vulnerable.
Finally, the thing noble Lords will want to know—the quiz team we were on included the mayor, and we came fourth.
Baroness Barker (LD)
My Lords, I welcome the noble Baroness, Lady Porter. Noble Lords who, like me, have visited Fulwood, will appreciate that it is one of the best places in Britain to test new models of buses and possibly the worst place to sit your driving test, as you head up those hills out to the Peak District. I wish her all the best.
I thank the noble Baroness, Lady Morgan of Drefelin, for this very timely debate. Every new Government come into power and have a vision for the voluntary sector. It is good that we get to discuss it at this point. I am not sure what a covenant is, but I am going to make some suggestions about what I think it might be. As others have said, the voluntary sector is important. I declare my interests. I have always worked in the voluntary sector. I have a consultancy, which works primarily with charities. I am on the board of GiveOut, a charity developing philanthropy to support LGBT human rights around the world.
If you want to know about the importance of the voluntary sector—my noble friend Lord Fowler is here; I will call him my noble friend on this occasion—look at the progress made over the last 40 years on HIV. None of that would have happened at the pace that it did without the ability of innovative voluntary organisations to bring together scientists, Governments, health and everybody else, with intensity and purpose. When Governments get that the voluntary sector has a powerful presence and part to play in convening different sectors, things begin to happen at pace.
I hope that a covenant means that the Government are going to properly treat charities as professionals. I hope for one thing they dismiss the suggestions in the last few days that the NI increase should not apply to charities. We are professional bodies; we employ professional people. Yes, we do a lot as well and have a very different role and approach to what we do, but we are at heart professional. That is why government—local government as well—needs to start treating us as professional bodies which add value to what they do. I hope that we will stop treating charities as organisations that subsidise public services but instead as ones that bring value to them. I would like to ask the Minister whether the procurement regulations will be reviewed, and if we will go back to looking at the social value Act, which I think is a key point about how we treat charities properly.
One of the big announcements in the Budget yesterday was £22.6 billion for the NHS. As a user of NHS services, along with everybody else, I have come to wonder whether we have a National Health Service. I really do wonder whether it delivers care pathways, as it often says it does. I suspect quite often it does not; I think it delivers episodes of care, not many of which are joined up to form a pathway. It is often informed voluntary organisations, such as the one chaired by the noble Baroness, Lady Morgan, which does the work of developing care pathways. Will the Government be bold—they are not, at the moment, appearing to be a very bold Government, but they should be—in making a large part of that £22 billion conditional upon proper involvement of the voluntary sector? They should make sure that some of that £22 billion goes to the voluntary sector, that day in and day out covers many of the deficiencies of a malfunctioning service.
I have a great deal of sympathy for chief executives of local authorities, whose budgets are disappearing. As part of what they have to do, they focus on the statutory responsibilities and are often forced to cut the voluntary sector. I would like the Minister to say whether the Government will be looking at the way local authorities in jeopardy and the voluntary organisations within them can be maintained and helped to endure. They are very much needed in those situations.
Now, people have heard me speak about this subject before, so it will come as no surprise that I want to return to one of my particular hobby-horses—the fact that the majority of central government funding for youth services goes to the National Citizen Service. The National Citizen Service is a good organisation and does good things, but it was set up under the previous Government with an enormous amount of political cover and investment. It was given a royal charter body status, which it did not deserve and does not need. I think it is now time that the National Citizen Service should be reviewed, and there should be a comparative review of what it does alongside other youth services, to see whether or not—and I make no prediction about the outcome—it deserves to continue to have that favoured status. As we all know, around the country, youth services have been badly hit.
I want to follow up the point made by the noble Baroness, Lady Thornton, about the development of the social enterprise sector. It is a long-running and very technical issue—charity “anoraks”, put them on now: this is your moment. Enabling individuals who do not mind investing in the social capital of their area to do so by liberalising the rules on social investment bonds is something various Governments have looked at and run away from. Now is the time, under a covenant, if you like, to look again at that issue.
In recent years the Charity Commission has done a very good job of digitising and improving its information systems, but like the EHRC, it has been very politicised under the last Government and has strayed—admittedly not as far as the EHRC—from its purpose. It is time to depoliticise the commission and get it back to doing its job, which is the impartial regulation of charities. There is enough to be doing on the technical regulation of charities and social enterprise without becoming another warrior in the fake world of woke wars.
This covenant could be a good thing if, in particular, it got an agreement from government to work with the sector on costing models for prevention. We know that in pretty well every government department—Home Office, Justice, Environment—the imprint of the voluntary sector does save money. Prevention saves money, but we have never been able, nationally or locally, to come up with a costing model that enables an authority, particularly one with statutory responsibilities to deliver services, to defend the funding of something preventive at the expense of something immediate and urgent. If the Government assembled a task force to do that—it could include all sorts of economists and so on—that would be a very important service.
One group that should be involved, although we have not spoken a lot about it, is the big tech companies. I am old enough to remember when there were towns that were company towns, where everybody worked for a particular company. The people who owned those companies had a strong sense of social responsibility to the places where they were based. Not Google, not Microsoft—I look at the towns up north, which I know very well, and such companies contribute nothing. They might come along and find the brightest and best in schools and take them out to work for them, but they do not contribute at all. They have got away with so much. A bold Government would challenge them, first, on the paucity of what they call their charitable donations, and most of all on what they take from communities and fail to return.
I thank noble Lords for this debate. I hope the Minister is going to go back to her department with some specific arguments for being bold and making an actual difference to the voluntary sector.
Viscount Younger of Leckie (Con)
My Lords, the noble Baroness, Lady Morgan, allows this House once again to highlight the importance of community work and the role of the voluntary sector in our lives. This has been an excellent debate, and I pay tribute to my noble friend Lady Porter for an excellent maiden speech. I am sure that her experience in government, No. 10 and the City will stand her in good stead for her future contributions in this House.
Speaking of maiden speeches, volunteering happened to be a core theme of my own back in 2010, and it is just as important and relevant now as it was then. What I said in speeches then rather chimes with remarks made by the noble Lord, Lord Parekh, who I see is not in his place. I said that this is
“all about effecting a behavioural and cultural shift for individuals within communities. It is about extending the concept and values of volunteering and self-help from societies and geographical areas where they are working to those where they are not”.—[Official Report, 11/5/11; col. 955.]
As was alluded to by the noble Baroness, Lady Morgan, the voluntary sector contributed £17.8 billion to the UK economy in 2020-21, according to NCVO estimates, equating to approximately 0.8% of total GDP.
Volunteering is indicative of a way of thinking, or a philosophy, based on stepping up and solving problems. Essentially, it is altruism in its purest sense: working to the benefit of others. There are numerous examples of generous and selfless work all over the country, and we have heard many examples this afternoon. In my local area, I witness small groups of people picking up litter along roads, way beyond the boundaries of their own front doors; people generously giving to food banks; and professionals giving their time and expertise pro bono in legal advice clinics, for example. It would be fair to describe volunteering as a British value of which we can all be very proud.
In my role as Minister for Communities back in 2019, I saw much good work undertaken by a small and dedicated team of civil servants embedding themselves in specially targeted communities, such as Wolverhampton. Success was measured by the work these people did to initiate and encourage the development of nascent communities, then backing away when they were operating and flourishing. I witnessed diverse communities mingling and families coming to know each other and becoming firm friends, with their children playing together; thus, a cohesive community, imbued with self-help, was born. It was satisfying to watch that. Can the Minister update the House on the progress of these initiatives, admittedly five years on?
From such work, I urge the Minister to help people lead by example. The nature and number of successfully burgeoning projects should be broadcast both regionally and nationally. I believe that this will generate interest, develop momentum and, I hope, encourage copycat activity in other localities. Is this government policy? I hope the Minister agrees that there is a balance to be struck, so does she also agree with me that the Government should not micromanage the sector? The voluntary sector should be allowed to flourish and do what it does best: use local expertise to help local communities and people.
I want to highlight an example of volunteering that is not often enough honoured, applauded or even venerated: the lifeboats, alluded to by the noble Baroness, Lady Morgan. I do not have an interest to declare, but I have a badge in the form of some yellow wellies on my lapel. A fortnight ago, I was privileged to visit the impressive RNLI centre in Poole, where lifeboats are manufactured and lifeboat personnel trained. More than 10,000 of the operational crew members and around 100 lifeguards are volunteers. A further 14,000 volunteers fundraise and help the charity in other ways. To date, in 2024, the lifeboats have launched around the UK—wait for it—7,307 times, saving 160 lives and helping another 6,795 people, 98% of whom found themselves in difficulty onshore rather than offshore, which is an interesting statistic. We should remember that lifeboat volunteers are often on call and have to drop everything at their jobs or in their beds, if at night, to go and risk their lives in their difficult work.
However, examples of a voluntary spirit do not always take the form of heroism. Sometimes, they just make the world a more tolerable place. Here, I am talking about pubs. The pub in my local village closed about two years ago, but it has been rescued through a funding collaboration by not only villagers but many supporters much further afield. We read of similar stories in the papers.
A line must be drawn between where the state—mostly in the form of local government—is obliged to help and where local communities should support themselves. I think this point chimes with questions raised by the noble Baronesses, Lady Morgan and Lady Scott, and the noble Lord, Lord Addington. Where do the Government think that the line should be drawn? That is perhaps rather a challenging question.
This debate would not be complete without mention of the Duke of Edinburgh’s Award scheme. It was mentioned yesterday by the noble Lord, Lord Boateng, and today in the Chamber, notably by the noble Baroness, Lady Grey-Thompson. We know the scheme focuses on young people aged 14 to 24 developing their own programmes, with the gold award the ultimate goal. It is run not just in schools but in youth clubs, hospitals, fostering agencies and prisons. The noble Baroness, Lady Grey-Thompson, stole my thunder in reading out a number of key statistics from the award scheme, and the House will be relieved to know that I am not going to repeat these. Will the Minister tell us what commitment the Government are giving to provide our young people with activities that prepare them for—to quote the Duke of Edinburgh’s Award scheme—
“the opportunities, responsibilities and experiences of later life”?
We know that many young people are struggling with mental ill-health and that rising NEET rates are taking their toll. We were made aware of those disturbing figures on Tuesday in the Chamber. Participation in the Duke of Edinburgh’s Award helps to engender positive outcomes for young people. They include improved skills and independence, improved social mobility, and improved mental and physical health, including reduced likelihood of mental ill-health in later life. It can also foster non-academic skills and soft skills that can lead to successful career pathways. Can the Minister outline the steps that the Government are taking to engage the young in voluntary work?
Access to youth work and positive activities is directly correlated with a reduction in incidents of anti-social behaviour and low-level crime, and with improvements in school attendance. That is a key point to make. I will now ask the question that was asked by the noble Lord, Lord Addington: to what extent are schools including this in their curriculum? Are they perhaps including the spirit of citizenship? What are the Government doing here?
When given the opportunity, communities are more than capable of coming together and achieving truly astonishing results. This was never clearer than during the lockdowns, when people dropped off supplies at the houses of those who were sheltering. Coronation and jubilee street parties have been a magnificent, visible and prime example of how volunteering to organise a community event can raise people’s drawbridges and bring them out to meet, talk and engage with one and other—sometimes for the first time.
I believe there is more that can be done to encourage people to come out of their front doors, to put away their mobile phones, to not look at the next episode of reality TV, and, simply, to help in their neighbourhood. I look forward to some answers from the Minister.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)
My Lords, I thank my noble friend Lady Morgan of Drefelin for securing this excellent debate on such an important topic, not just for my department but for society as a whole. She has a wealth of experience in this field, as do so many noble Lords who have spoken today. I congratulate my noble friend on her recent appointment as president of the NCVO.
I congratulate the noble Baroness, Lady Porter of Fulwood, on her maiden speech. I have no doubt that the noble Baroness will make a valuable contribution to the work of this House.
We are quite tight on time and a lot of questions were raised during the debate, so if I do not respond to specific questions, I will write and place a copy of the letter in the Library.
As the title of the debate acknowledges, the voluntary and community sector plays an absolutely vital role in all areas of public life, right across the UK. It is no surprise that there is general cross-party recognition of the sector’s value, as has been reflected in today’s debate. I personally had the pleasure of working in the charity sector, being a trustee, and working closely with the voluntary and community sector as chair of the London Resilience Forum. I know that the sector has a hugely valuable role, not least during the Covid pandemic, as has been noted in the debate.
The right reverend Prelate the Bishop of Newcastle referred to the sector as the glue that holds society together, a point reflected in the speech of the noble Baroness, Lady Porter. My noble friend Lord Parekh noted that the relationship between the voluntary sector and the state is one, essentially, of culture.
My noble friend Lady Morgan highlighted the economic value of the sector. The Government highly value the work that the sector does and the social value it delivers; it is an incredible force for public good. We recognise the sector’s economic value, with civil society contributing over £22 billion to the UK economy and employing approximately 981,000 people. A 2023 survey by the NCVO reported that, for every £1 generated by a community organisation, £2.50 is created for the local economy. There have been numerous other statistics cited in this debate.
There are approximately 160,000 registered charities in England, 9,000 in Wales, 25,000 in Scotland and 7,500 in Northern Ireland. The breadth of the sector is vast, both in the types of organisations within it and the variety of work that they do. Organisations might be large multinational charities responding to international crises, such as the Disasters Emergency Committee, which recently launched the Middle East humanitarian appeal through which the Government are matching public donations to provide urgent humanitarian assistance up to £10 million. However, we must not forget—noble Lords definitely have not—the importance of the thousands of local groups run solely by steadfast volunteers, including sports clubs and community libraries.
There were so many examples of the contribution of this sector; I had meant to reflect some of the examples that noble Lords gave, but there are far too many for me to list without going way over time. All of them are clearly making a valuable contribution, both locally and to our society. I particularly recognise the point from the noble Baroness, Lady Barker, about their role in innovation, which is one that we forget at our peril.
As my noble friend Lady Thornton noted, social enterprises and community businesses also make an incredibly important contribution as part of the broad umbrella of civil society organisations. The DCMS is currently delivering the Social Enterprise Boost Fund to drive local growth and innovation. We recognise that the issues affecting such organisations are different from those of other civil society groups and we will, and do, work closely with colleagues from DBT and HMT to develop policy solutions in this space.
I particularly welcome the focus by the noble Viscount, Lord Younger, on his legacy during his time as a Minister. I will write with an update on the projects that he mentioned, which I have not been able to secure in time for today’s debate.
It is clear that civil society organisations perform a multitude of functions, including the relief of poverty, tackling environmental issues, supporting conservation and heritage, and providing education and training. The sector consistently rises to some of the major challenges that society faces, whether that be the Covid-19 pandemic or the civil unrest this summer. I reassure the noble Baroness, Lady Fraser, that we do not view the voluntary sector as an add-on; we view it as essential. I noted my noble friend Lord Griffith’s point about the role of churches.
Voluntary, community and social enterprise organisations are an essential and major provider of services across the country, delivering almost £17 billion-worth of UK public services each year, including 69% of contracted homelessness support and 66% of contracted domestic and sexual violence support. The noble Baroness, Lady Gohir, focused particularly on the charities and organisations that support women in this sphere.
The sector plays an important role in advocacy and campaigning, with an ability to amplify the voices of different groups, evidence people’s lived experience and speak truth to power. This includes work by my noble friend Lady Morgan during her tenure as the chief executive of Breast Cancer Now and in her continued work within the sector.
One of the sector’s unique strengths is voluntary and community organisations’ rich understanding of the areas and communities in which they are embedded. Indeed, they are often trusted when formal public services are not and are able to reach underrepresented groups in society to provide critical support and services to those most in need. In 2018, 90% of households reported having used a charity service at some point.
The sector is therefore essential to deliver our government missions effectively. I will not touch on all five but, as an example, the sector will be a critical partner in building an NHS fit for the future, with direct delivery responsibilities for a large array of community-based health services. Civil society will play a particularly pertinent role in the preventive space, including interventions to tackle loneliness—which has come up in the debate—or employment coaching for those returning to work with health conditions or disabilities.
The noble Lord, Lord Addington, raised charities’ access to schools, and I will raise his points with my noble friend the Minister of State for Education. However, voluntary and community organisations are, in the Government’s view, fundamental to our approach to improving opportunity for all. For example, the charity Football Beyond Borders found in its 2021-22 impact report that young people at risk of exclusion who participated in the programme were 11 times more likely to achieve their GCSE English and Maths than those excluded from school and attending alternative provision.
The noble Baroness, Lady Porter, and the noble Lord, Lord Addington, both raised points around youth. The Government are committed to intervening early to prevent young people being drawn into crime and other poor outcomes. Fundamental to this is the delivery of the Young Futures programme. The Young Futures hubs will reach every community, delivering universal youth programmes as well as support for young people at risk of being drawn into crime, or facing mental health challenges. The establishment of prevention partnerships in every local authority will help map local provision, identify at-risk young people, and bring together local services to tackle local drivers of serious violence and better support young people.
This Government understand that, to achieve our vision for these missions throughout the whole of the UK, we must work more effectively and in genuine collaboration with the voluntary and community sector. Doing so will help us deliver for the public, 61% of whom—I was surprised it was only 61%—believe that Britain would be a better place if charities and community groups had more involvement in decision-making at a national level, according to the Law Family Commission on Civil Society in 2020.
As my noble friend Lady Pitkeathley said, a reset with civil society is needed. This Government, led by our Prime Minister, are committed to resetting the relationship with civil society and ensuring that the sector is recognised and valued for the crucial support it provides to so many people. I hear what my noble friend said about the importance of partnership and I will pass on the points made by the noble Baroness, Lady Barker, on this issue.
My noble friend Lord Kestenbaum focused on the value and significance of the word “covenant” and the covenant itself. DCMS has worked closely with key civil society bodies to develop a framework for the new covenant between the Government and civil society, which was launched by the Prime Minister earlier this month. There is currently an eight-week period of engagement during which we want to hear from the rich diversity of the civil society sector across the UK. My noble friend Lady Wilcox raised the importance of including devolution in the mix of the covenant. I reassure her, and my noble friend Lord Murphy, that we recognise the importance of learning from best practice across the devolved nations.
Policy on civil society and many of the issues that civil society organisations focus on are, as my noble friend Lord Murphy highlighted, devolved. Over the coming months, DCMS plans to engage and listen to devolved Governments and civil societies across all four nations, to help inform the development of the covenant framework.
I am proud that DCMS holds responsibility for civil society policy across government, recognising and responding to the pressures the sector faces. I acknowledge, however, that this is not an easy time for voluntary and community organisations, many of which have had to reduce or adapt their services, or even close their doors, in the face of the financial pressures of the last few years.
In response, DCMS supports the sector through a variety of mechanisms. This includes the delivery of direct funding to voluntary and community organisations, such as in the response to the Covid-19 pandemic and to the cost of living challenges last year. Our role at DCMS also covers developing other funding sources for the sector, from growing the impact investment market to supporting organisations to apply for government contracts. It includes driving innovation and best practice, such as through the Know Your Neighbourhood Fund, focused on increasing volunteering and tackling loneliness.
My noble friend Lord Bassam, the noble Lord, Lord Hastings, and the noble Baroness, Lady Gohir, referred to the potential of the dormant assets. The dormant assets scheme has unlocked £982 million across the UK to date. In England, this has been directed to independent, expert organisations to deliver innovative programmes seeking to address complex social challenges at scale. The Government will shortly set out how they intend to allocate the £350 million expected to flow into the dormant assets scheme in England between 2024 and 2028 to the named causes: youth, financial inclusion, social investment and community wealth funds.
We have taken a phased approach to implementing the expansion of the scheme into the three new sectors. Any further expansion will need to be carefully considered and will require close collaboration between the Government, RFL and industry. The Government recently ran a call for evidence, seeking views on the expansion of the scheme.
I will now touch on the points raised by the noble Baroness, Lady Gohir, about the implications of the Budget, including the potential impact of national insurance contribution and minimum wage increases—a point on which I feel she and the noble Baroness, Lady Barker, potentially differed in their views. These decisions and the minimum wage increases were necessary as part of the package in the Budget to restore economic stability. I also highlight that the minimum wage increase will potentially benefit some of the lowest-paid workers in the sector, so we need to understand the balance.
However, the Government recognise the need to protect the smallest businesses and charities, which is why we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance contribution liabilities will either gain or see no change next year. Businesses and charities will also still be able to claim employer national insurance contribution reliefs, including those for under-21s and under-25 apprentices, where eligible. More broadly, our tax regime for charities, including exemption from paying business rates, is among the most generous of anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.
My noble friend Lady Morgan raised points around charities withdrawing from public sector delivery. I am aware that cost increases will compound the fact that public sector grants and contracts have often not covered rising services costs for organisations in the sector. On an individual basis, commissioners are able to adjust contract terms where appropriate, through existing provisions in contracts.
On procurement, mentioned by the noble Baronesses, Lady Barker and Lady Gohir, and my noble friend Lady Morgan, a key initiative being introduced by the Cabinet Office is the new Procurement Act, which includes a host of reforms that make it easier for smaller providers, such as VCSEs, to bid for public contracts. On the points made by the noble Baroness, Lady Barker, about public procurement and social value, this Government recognise social value as a vital element of public procurement. DCMS is also working to deliver the VCSE contract-readiness programme to help improve the capability of VCSE organisations when bidding for public contracts.
Crucially, the tough decisions taken in the Budget will allow for vital investment into public services. The Chancellor announced yesterday that the Government are providing an additional £233 million in grant funding for homelessness services, over £250 million to continue testing children’s social care reforms and a £1 billion uplift to SEND and alternative provision funding other public services, to allow local authorities to further support those most in need. Much of this investment will of course be delivered through the voluntary and community sectors, as outlined by many of the examples in today’s debate.
Yesterday’s Budget was focused on “investment, investment, investment”, and this includes exploring a way for socially minded investors to support the Government to deliver better social outcomes, aligned with their missions, with further details to be announced in the spring. Alongside the important funding landscape, the Charity Commission for England and Wales, as well as the charity regulators in Scotland and Northern Ireland, help to ensure that charities are appropriately and robustly regulated and carry out their responsibilities effectively and in line with the law. I noted the noble Baroness’s points on the Charity Commission and will feed them back to the Minister, Stephanie Peacock.
A number of noble Lords, including the noble Baroness, Lady Scott, mentioned the importance of volunteering, not just what it contributes to society but what it gives to the person volunteering. The Government are aware that what really drives civil society are those people who constitute it—both the staff and the amazing contributions of volunteers. In 2021-22, approximately 25 million people in England volunteered at least once, and my noble friend Lord Rooker gave a vivid portrait of what volunteers deliver. We want to see as many people as possible getting involved and taking action on the causes that mean the most to them. My noble friend Lord Bassam also raised the challenge of recruiting volunteers, and we support people to volunteer through a range of government policies and programmes, including supporting this year’s Big Help Out campaign in June, which amplified local volunteering programmes and opportunities for people to support their communities. Despite this, the recruitment and retention of volunteers is an increasing challenge for charities, with barriers ranging from a lack of awareness to opportunities to time constraints—I am aware I have one of the latter.
We are committed to removing these barriers and to supporting organisations to adapt to a changing world where increasing numbers of volunteers want to get out in a less formalised way. The Government’s reform of employment rights should help enable this. I probably do not have time to go into the points from the noble Baroness, Lady Sater, on the volunteering premium and the benefits, but I will revert to her. I will also respond to the noble Baroness, Lady Grey-Thompson, and the noble Lord, Lord Black, on volunteering and community ownership, and to the noble Viscount, Lord Younger, about young people volunteering.
We know that charities and their trustees play a valuable role in society, and I am hugely sorry not to be able to go through all the other points I had, but I note the time. I finish by taking this opportunity to say thank you again to the noble Baroness, Lady Morgan, for securing this debate, and to all those Peers who have taken part, and to say a heartfelt thank you to all those working and volunteering in the sector for the invaluable work they do day in, day out.
Baroness Morgan of Drefelin (Lab)
My Lords, the Minister speaks on behalf of us all when she thanks those volunteers throughout the country. I have only a couple of minutes. I congratulate the noble Baroness, Lady Porter of Fulwood, on her lovely maiden speech. I also thank each and every Member of your Lordships’ House who has taken the time to join this debate and furnish us with yet more insights into the way that the voluntary and community sector adds incredible value to our society.
We have been reminded that the voluntary sector must not be complacent. It has to continue to think about inclusion and how to drive up volunteering rates. We have been reminded of the sector’s power to convene and the responsibility that that brings with it. The incredible variety and diversity of the work of the sector has been discussed brilliantly today. We have also been encouraged—and I want to say this very clearly—to learn from all our nations, particularly sWales. There is so much to learn and so much positivity that can be gained by all the nations working together on the covenant. We learned about the importance of the word “covenant” and how it means not being about transaction but very much about values.
We have heard about people from all over the UK, from Ludlow to Newport, and about the North East Young Dads and Lads. There have been so many great insights in this debate. Something that really piqued my interest is the potential for finding new dormant assets, and I wonder whether the Minister might want to look at that. Perhaps she will write to us about that when there is more to say.
Finally, I say another huge thank you to everyone who has taken part in this debate and to all the voluntary organisations throughout the sector which have sent briefings to your Lordships and supported us in making this such a tremendous debate.
Science and Technology: Economy
(2 days, 17 hours ago)
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Viscount Stansgate
That this House takes note of the contribution of science and technology to the UK economy.
Viscount Stansgate (Lab)
My Lords, to say it is a privilege and an honour to open a debate of this kind is an understatement. I have been in the House for just three years, and this is the first time that we have had a general debate about the contribution of science and technology—including engineering, research and innovation—to the UK economy. I welcome everyone in the Chamber today. A very impressive range of expertise shines through the speakers’ list, which includes my noble friend the Minister, for whom this is his first debate as Minister. In fact, we will hear from several other distinguished former Ministers of Science, whose experience in some cases stretches back over 30 years.
I am sure that there will be a bipartisan spirit this afternoon, but I begin by paying tribute to the noble Lord, Lord Waldegrave of North Hill, whose 1993 White Paper, Realising Our Potential, was the first time that science policy emerged in the modern era, having been ignored by Governments for far too long. The title of that White Paper remains very relevant today.
I welcome the range of attendance in this debate, and I am sorry that noble Lords have only four minutes to speak. I will highlight the maiden speaker. I made my own maiden speech three years ago this month, and I know just how the noble Baroness, Lady Freeman of Steventon, feels right now. I thank her for choosing today in which to make her own maiden speech, to which we all look forward.
When we begin our speeches, we often make reference to our register of interests, and I am proud to be president of the Parliamentary and Scientific Committee, which is Parliament’s oldest all-party parliamentary group by a long way—85 years this year. That is not in any way a financial interest. I am very pleased that our former chair, Stephen Metcalfe, is with us in the Public Gallery watching the debate. In his own parliamentary career, he also chaired the Science, Innovation and Technology Committee in another place. Now that the Parliamentary and Scientific Committee has been reformed for the new Parliament, I very much hope that Members from all sides of the House will take advantage of the activity we undertake. For example, noble Lords should come to the STEM for BRITAIN event held in March and see the astonishing work of our early-career researchers who represent the future. If they cannot come, they can read about it in Science in Parliament, which is available in the post room and in their pigeonholes.
One of the great benefits of initiating the debate is that it has triggered a wealth of informed briefing from a wide range of scientific societies. Sadly, I cannot possibly make use of most of it in the time available, but it is important that Parliament understands what a formidable array of expertise exists in the country. My profound thanks go to the Royal Society of Biology, the Institute of Physics, the Royal Society of Chemistry, the Physiological Society, the Geological Society, Cancer Research UK, the Institute of Cancer Research, the University of Leeds, the Russell group of universities, the Microbiology Society, the Royal College of Pathologists, the Campaign for Science and Engineering, the Society for Experimental Biology, the Royal Astronomical Society, the Society of Chemical Industry and the Royal Society—not to mention, of course, POST and our own House of Lords Library. With the leave of the House, I intend to place a copy of all the briefings that I have received in the Library, so that it can be of use to Members.
Today is an excellent time to have this debate because of yesterday’s Budget, which referred to our
“extraordinary strengths in science and innovation”.
It also follows the investment summit earlier this month. Both events stressed the Government’s aim to create the long-term stability that is needed to use science and technology to grow the economy. This is a Government who are openly committed to growth and the core message from today’s debate will undoubtedly be to emphasise just how much science and technology contribute to the UK economy. Science is a long-term enabler of opportunity. Scientific advances underpin all areas across our economy and are essential to the Government’s five missions.
I forget who coined the phrase “punching above our weight” to describe the UK’s record in science. The basic statistics are well known. For example, we have about 1% of the world’s population and yet produce 16% of the most highly rated scientific papers. Our scientific research is truly excellent. The Government spend over £20 billion a year on R&D. Oxford Economics has estimated that, in 2023, the life sciences sector alone contributed over £13 billion. DSIT estimated in 2022 that the value of the digital sector, which includes everything from information technology to digital content and media, was over £158 million. In March last year, DSIT also estimated that the value of the UK’s AI sector was already £3.7 billion and growing. In February, the Energy and Climate Intelligence Unit reported that the gross value added of the UK’s net-zero sector, which includes renewables, carbon capture manufacturing et cetera, was already £74 billion.
Also, there is no shortage of science sectors emphasising their own contribution. I will give a few examples. The Royal Astronomical Society says that the growing space sector is worth £19 billion a year. The Institute of Physics points out that the photonics industry, which is the technology of light, had an output of £15 billion in 2023, employing almost 80,000 people—as many as the automotive and aerospace industries combined. The Rolls-Royce small modular reactor programme is forecast to create 40,000 jobs and could generate an enormous export market of up to £250 billion by 2050. Meanwhile, the Royal Society of Chemistry points out that the chemical sciences sector generated £3.2 billion for the Exchequer. The Institute of Cancer Research says that its research has saved the NHS £68 million per year by updating clinical radiotherapy practice for cancer patients. Meanwhile, Cancer Research UK says that every £1 invested in cancer research in 2021 generated £2.80 of economic benefit, to the tune of nearly £1 billion.
In this Parliament and its successor, the life sciences sector holds enormous potential to drive economic growth and productivity, delivering goods, services, treatments, medicines and vaccines that are critical to the nation’s health and our resilience against—I hope not—any future pandemic. Overall, it is estimated that every £1 of public investment in R&D unlocks between £2 and £4 of private R&D investment in the longer term. I am pleased that the DSIT budget will increase from £12.5 billion for 2024-25 to £13.9 billion in 2025-26, which is real-terms increase of 8.5%.
So we have a lot going for us. We have world-class universities, not to mention places such as the Crick Institute, the Wellcome Foundation, the Catapult Network and so on. We have world-renowned public sector research establishments such as the National Physical Laboratory. I well remember a story told by a former Minister of Technology, to whom you might say I have a hereditary connection. He went to visit the NPL. When he was shown around, the director proudly said, “Here we can measure down to the smallest unit of measurement ever known, the POBA”. The Minister, being inquiring, asked, “What is a POBA?” He said, “Oh, Minister, it means point one of bugger all”. I hope that, when my noble friend the Minister next visits the NPL he will discover that it is still using the same unit of measurement today.
A word about the institutional landscape: the Government have been bequeathed a scientific landscape and institutional structure that can be made to work. Building on the science and technology framework published last year, the Government have just published an important industrial strategy Green Paper. This is central to the growth mission and its success will depend, crucially, on the application of science and technology. The Green Paper has identified eight sectors that drive growth: advanced manufacturing, clean energy, defence, creative industries, digital technologies, financial services, life sciences, and professional and business services.
We have UKRI. We have had the Nurse review. We have our world-class universities, a plan for a national data library and Project Gigabit. We also have ARIA, about which I hope we will hear more. We need to take advantage of the UK’s unique strengths to enable world-leading companies to grow and seize opportunities to lead in new and emerging industries. As yesterday’s Budget said,
“we are not doing enough to capitalise on these strengths”.
We must fund successful scale-up companies and not leave other countries to exploit our science to make millions for themselves.
I think our current structure will help. We now have a proper department in DSIT, with a Secretary of State at the Cabinet table for the first time in 30 years and distinguished Ministers in both Houses. We have a Cabinet committee chaired by the Prime Minister. Its job is to
“consider matters related to science and technology, to drive the United Kingdom’s economic growth and national security”.
Those are pretty much the same terms of reference as for this debate. We have a Chief Scientific Adviser and a network of advisers embedded in all departments, and we have a Science Innovation Network, which is embedded in all our embassies.
With a renewed commitment to an industrial strategy, we need to take advantage of the UK’s unique strengths to enable world-leading industries to grow and seize opportunities. If we match our undoubted research expertise with an industrial strategy that plays to our strengths, we can make an impact.
I will give the House an example. Your Lordships’ Science and Technology Committee, of which I am a member, is nearing the end of an inquiry into engineering biology, which is a very exciting new area of science. Put simply, in the future we will be able to make things by growing molecules and cells. Last week, the Government’s Chief Scientific Adviser, Dame Angela McLean, came to us and held up for the committee a handbag. It was not made of leather, nor of plastic; it was made of coconut oil that was processed by bacteria. The food industry is developing meat that is not real meat; it is grown in a laboratory. In the aircraft industry, there is real interest in producing synthetic jet fuel without using carbon or oil. All these new developments offer the additional benefit of recycling and helping us to reach our net-zero targets. That is why, incidentally, it is absolutely right for the Government to set up the regulatory innovation office to exploit these new areas.
What of the future? There are one or two things we must try to do. First, there is no doubt that we need to start with education. It is absolutely vital that we enthuse and inspire the next generation, and it must start in primary schools if not before, opening young hearts and minds to the wonders of science. We must make use of all the many scientific role models that exist, whether it is Maggie Aderin-Pocock on astronomy, Hannah Fry on maths or Hamza Yassin on wildlife photography. Brian Cox’s latest TV series on the solar system has been watched by millions. Of course, David Attenborough remains our national treasure, inspiring us with his documentaries: everything from “Life on Earth” to the new series, next weekend, which I think is entitled “Asia”. I think I am right in saying that my noble friend Lord Winston recently went to a school in Northamptonshire and the head teacher reported an upsurge of interest in science after his inspiring visit.
Secondly, we need to create and sustain a public and society that understand the importance of science and technology and are supportive of innovation. Whenever I meet someone who expresses great scepticism about science or, in recent years, vaccines, I say to them, “Well, just look at your mobile phone. There is not one iota”—perhaps I should say one POBA—“of a feature of a mobile phone that isn’t the result of science. It would not exist without science”.
Thirdly, another key to the future is to be as international as possible. The UK must maximise all available international co-operation. We should join and collaborate with as many international countries as we can, including countries in the Indo-Pacific. We have rejoined Horizon Europe—good—but now we need to prioritise an expanded role in its successor, Framework Programme 10. I have lost count of the number of times that I have been told that we need a visa system, with its costs, that attracts talent rather than deters it.
Fourthly, we must not take our universities for granted. On the contrary, the House is only too well aware of the signs of stress in the HE sector and the funding of our universities. There was a breakfast briefing for Peers on this subject last week.
Fifthly and finally, although I mean no disrespect to my noble friend the Minister, science and technology is too important to be left to DSIT alone. We need nothing less than a sustained cross-departmental science strategy to attract foreign direct investment and the global scientific talent that we need.
By the end of this Parliament, when we use the phrase “science superpower”, I for one want to feel that it is a reality and not a slogan. I beg to move.
Lord Markham (Con)
My Lords, I thank the noble Viscount, Lord Stansgate, for securing this important debate. We on this side feel fortunate to have the Minister in his new role. His previous role in this area is very relevant and we welcome him to his first debate. We are delighted to have someone with such knowledge in his position.
I hope to conduct my speech in the constructive manner proposed by the noble Viscount. We all know and recognise the incredible impact that science and technology has in this country. The 4% that it is estimated to add to the economy is a massive boost. We can all point to massive scientific successes. One of the biggest illustrations of this is that, of the 10 Formula 1 teams, six are based in the UK. You cannot get more cutting-edge science and technology than Formula 1. We have those that noble Lords will know—great British names such as McLaren, Williams and Aston Martin—but also other well-known brands such as Mercedes, Renault and Red Bull. Yes, those foreign brands’ Formula 1 teams are located in the UK because they know that we are the best and most cutting-edge.
I will take the limited time available to talk about the area I know best from my former health role: life sciences. We have some fantastic examples in this field too. Google’s AlphaFold project will see many breakthroughs. The Government’s involvement in Covid and the Minister’s involvement in the Moderna deal that followed are a good example of putting long-term relationships in place.
But what I have seen all too often at first hand is what I call the UK disease: we are very good at innovation but pretty poor at the rollout. I saw this particularly in medtech. The joke I always heard is that the NHS has more pilots than British Airways. Those pilots were good in their innovation but so often fell down when it came to rolling out across the network. We would often see them lost to the US, which would come in with the funding and the rollout programme, and we would see a brain drain of our expertise.
One of the last things we tried to do was introduce what we called a medtech rules-based pathway, which tried to provide a pathway so that there was a way that exciting parts of medical technology could be rolled out through the NHS under a set of well-known rules. We were consulting on that around the time we left government. I would be pleased if the Minister could update me on the findings—it would be super to have that by letter if he does not have them to hand.
Another area was the data for R&D. As we all know, AI is only as good as the data that it comes from. We are fortunate in the medical space to have probably the best data in the world, as I have been told by many people, dating back to 1948—primary care, secondary care and biobank data. We were working on a project to bring this all together to create the possibility of a Silicon Valley of life sciences. I would be delighted to hear where we are in the progress of that project.
I end on a note of caution. A £1 investment achieving a £3 to £4 return is a case of modern-day alchemy, but it requires deep pockets, long-term investment and hard work to achieve those rewards. Anything that diminishes those rewards will be a threat. My concerns about the latest Budget, dare I say, are the moves on tax increases. The crowding out of private finance that the OBR is concerned about puts this at risk, so I hope that we are careful and make sure that we do not kill the golden goose that we have in this space.
Baroness Northover (LD)
My Lords, I too thank the noble Viscount, Lord Stansgate, for securing this debate and for opening it so comprehensively. I declare my higher education interests. The Minister has rightly been welcomed to his position, and he has a major strategic task. He will need to reach right across government if science and technology are indeed to be at the heart of the Government’s industrial strategy and plan for growth.
I was a Minister in the coalition Government, latterly in DfID. Vince Cable as Business Minister developed an industrial strategy, ably supported by David Willetts—now the noble Lord, Lord Willetts—and others, analysing the UK’s strengths and weaknesses. They established catapults in promising areas and committed funds, for example, to the globally significant Francis Crick Institute, despite the post-2008 financial constraints. Universities were supported. We brought the aid budget up to 0.7% of GNI, with a proportion for research relevant to developing countries.
Chris Whitty, then DfID’s chief scientific officer, took me to Oxford and Cambridge to hear about ODA-supported research. In Cambridge, I learned about work in Vietnam that sought to improve the productivity of small-scale pig farmers and at the same time to reduce the co-living of humans and animals, risky markets and the use of bat droppings for fertiliser. Pandemics that cross species were already worrying scientists, post the SARS and MERS outbreaks, anticipating “disease X”, which was to hit us a few years later with massive effects on our society and economy.
In Oxford, I visited the Jenner Institute and learned about its vaccine work, so relevant then to the west African Ebola outbreak. Sarah Gilbert and Catherine Green, in their superbly readable book Vaxxers, noted the contribution that ODA money made to their work which was the groundwork for their Covid vaccine. Then what happened? Aid was cut, DfID was in effect abolished with no consultation, Boris Johnson spoke of cashpoints in the sky. Was that joined-up government? I think not. That was compounded by the huge damage done to our scientific and university sectors by Brexit, the failure to remain in the Horizon scheme and the barriers to continental students and researchers coming to the UK, barriers which persist.
The UK has certainly had an exceptional scientific and technological base, but that cannot simply be assumed to continue despite batterings. The new Government propose an industrial strategy again with science and technology at its heart, and that is very welcome. Science and technology have long underpinned economic development, such as in the Industrial Revolution, the chemical revolution which enabled Germany and the US to power ahead, and the green technology revolution which is right now powering China and needs to power us as well.
The noble Viscount, Lord Stansgate, effectively laid out the range of our strengths in science and technology, and we will hear more today about that promise but also that universities are under threat and that the UK’s growth depends on investment, skills, the removal of barriers and a willingness to take risks and to allow those risks to be taken plus assistance in scale-up, as the noble Lord, Lord Markham, said. Governments promise to be joined up. The Minister has a special responsibility to seek this in this Government. He will know how damaging it can be when one part of government fails to see the impact of its actions on another. I look forward to his response.
Baroness Greenfield (CB)
I congratulate the noble Viscount, Lord Stansgate, on drawing attention to this important issue. I declare an interest as CEO and founder of a small biotech company, Neuro-Bio Ltd, pioneering a novel approach to Alzheimer’s disease and spun out originally from Oxford University.
In the light of my experience over the past 10 years, I would like to focus on opportunities for the UK economy to benefit from its science and technology even more than is currently the case. For example, dementia is costing the UK £42 billion this year, rising to £90 billion in 2040, so the value of developing an effective therapeutic intervention would be enormous, and not only for the huge saving. Such a treatment developed in this country would provide an incalculable boost to our national pharma industry.
But there are unnecessary headwinds. SMEs are now losing out by some 50% compared to 2023 for R&D tax credits. If we factor in the significant amount of time required, new administrative rules and the risk of HMRC inquiry, smaller companies may abandon making a claim altogether. The recent changes, including those in subcontracting rules, may provide a negligible uplift in the tax revenue but come at a great cost.
R&D tax credits should be a UK co-investment, hand in hand with the company, into innovation happening on its shores, creating jobs and value immediately, followed by an incredible dividend when resulting in a globally competitive technology. These credits should be restored to at least previous levels. Big multinationals might then expand their footprints in the UK, rather than divesting as they do now.
Today, UK public investment in R&D of 0.44% GDP needs to be 50% higher just to reach the average OECD spend, let alone to be ahead of the competition. It could be argued that, pound for pound, we already outcompete most other countries, but the UK is heavily underinvesting in itself, banking on the high innovation input of our academia and industry—after all, it is an easy short-term win on the budget line.
Why would we not see this as a brilliant reason to invest even more, rather than as an excuse to get away with less? True, there are government loans and schemes and grants, but the former places a stressful burden on repayment within a fixed period while the latter may entail a time-consuming amount of effort that is more than likely to be wasted. The latest Innovate UK competition saw a success rate of a mere 4.5%. As with claims for tax credits, many may feel that applying for a grant is just not worth the time that could otherwise be spent progressing the science itself.
Then there is the question of gender. Less than 2% of total VC funding goes to female founders. Earlier this year, a Women in Innovation grant offered some 50 awards for a very modest £75,000 per project. Less than 4% were funded. Programmes levelling the playing field for women should go a distance towards changing the present blatant inequality, not entrenching it further.
More generally, it is the baked-in and oftentimes biased decision-making that stifles the otherwise great economic impact of our entrepreneurs. It is safer to fund small, transitional technologies, at the cost of truly disruptive innovation, because there is very little in the way of incentives or protections if an investment does not work out. There is much willingness to charge capital gains on investments where success can be shared but no appetite for sharing the consequences of a failure—hence the mindset to back only cautious advances at a cost of truly transformative ways of thinking.
This lack of support often forces disruptive scientists into looking further afield for funding to grow. Once they enter, say, the US ecosystem, it is that economy which will ultimately benefit from the stimulus provided by innovation which the UK has fostered in its infancy. Too often this country is seen as a feeder ecosystem into the US, not giving full rein to its homegrown ingenuity.
STEM innovation is the crown jewel of our economy. It is high time we invest at least as much as others to show the world what the UK science and technology sector can achieve. But without an improved national strategy and support, R&D-stage companies such as mine will have no choice but to consider M&A overseas. It is high time we think of innovators and the Government as partners in building the economy of tomorrow, the foundations of which should be laid today.
The Lord Bishop of Newcastle
My Lords, I thank the noble Viscount, Lord Stansgate, for bringing this important and timely debate. I look forward to the maiden speech of the noble Baroness, Lady Freeman, and welcome her to your Lordships’ House.
I want to focus my remarks on the north-east region’s rapidly growing science and tech sector as a huge asset to the UK economy, attracting skills and investment from across the world. At the heart of the sector in this region are its five distinguished universities: Durham, Newcastle, Northumbria, Sunderland and Teesside. This month they announced their new partnership, known as Universities for North East England, that will strengthen their collaboration, making a greater contribution to everyone who lives, works, and studies in the north-east and driving regional economic growth.
In his opening remarks, the noble Viscount alluded to the urgent need for cross-departmental work in government, as did the noble Lady, Baroness Northover, in her excellent speech. I think this point demonstrates that. Access to skilled workers is a vital component of a flourishing science and technology sector. With 67,000 people studying STEM subjects across these universities, the region has the highest proportion of STEM students in the country, resulting in a plethora of highly skilled and employable graduates. There is a clear partnership between the universities and businesses within the region, demonstrated by the increasing number of spinouts from universities. In 2023, spinouts from Newcastle University alone raised £40 million in investment.
One development that is demonstrating innovation in the region is the Newcastle Helix—a 24-acre site in the city centre bringing together industry leaders, businesses and top researchers in an internationally renowned innovation cluster. What makes this development stand out is not only its world-leading research but its integrated approach of growing fiscally while strengthening communities. The Helix is committed to creating growth for businesses and investors, but also to driving positive change through its purpose to help families in communities and cities around the world to live healthier, longer, smarter and easier lives.
Another advancement was this year’s announcement that Northumbria University would become home to the North East Space Skills and Technology Centre. Funded by investments from a US aerospace and defence firm and the UK Space Agency, the centre will transform the UK space economy through the research of world-leading space experts and by bringing together industry with academia. It is expected to create 350 jobs and to inject £260 million into the north-east’s economy, further demonstrating the growing recognition of what this region has to offer.
I welcome the emphasis that yesterday’s Budget placed on this sector through the record levels of research and development investment, as well as the greater regional powers granted through the North East Combined Authority and its mayor, which will unlock funding and powers to further the growth of science and technology in this region. I feel that we must now ensure its future success, and that the potential of this region is fully unlocked through continued recognition and investment.
Baroness Donaghy (Lab)
My Lords, I thank my noble friend Lord Stansgate for introducing this debate. He is a whirlwind of knowledge and energy, as anyone who has attended one of his STEM events in Portcullis House will know.
I was a member, and subsequently chair, of two of our former EU sub-committees, on internal markets and services. Among other activities, we visited universities and catapults, and invited representatives of the UK’s space industry, just referred to by the right reverend Prelate, to give evidence to our committee. I notice that another member of that committee, the noble Lord, Lord Rees of Ludlow, is in his place, and I look forward to hearing what he has to say. Some of the issues raised will not surprise anyone here: skills gaps, the importance of attracting and retaining talent, international interdependency, the mobility of skilled labour and the need for long-term strategy. Incidentally, talking about catapults, the House of Commons Science and Technology Committee reported that SMEs that had worked with catapults grew 50% faster than those that had not, with an average of five times return on investment.
As a former university administrator of over 30 years, it pains me to see the dire straits to which our universities have been reduced. Their significance for research and development should not be understated. As the daughter of an aero-engineer who worked for Armstrong Siddeley, which became Bristol Siddeley and then Rolls-Royce, it was the space industry which captured my imagination —perhaps it was also listening to “Journey into Space” on the radio. In pride of place on my bookshelves, which I inherited from my father, are the complete works of HG Wells—but it is not just a romantic interest.
The Minister has already answered questions this week about medical research, defence research and the importance of curiosity-based research. These are all vital, but I want to draw his attention to the importance of the UK space industry, which employs 50,000 people. According to the World Economic Forum, the global space economy will be worth $1.8 trillion by 2035, up from $630 billion in 2023—almost twice the rate of global GDP growth. It will connect people and goods and play an increasingly crucial role in mitigating world challenges, ranging from disaster warning and climate monitoring to improved humanitarian responses. This will involve agriculture, construction, insurance and climate change mitigation.
The Minister will be aware of the previous Government’s policy paper Space Industrial Plan: From Ambition to Action published in March this year. It was obviously too late in that Government’s election cycle to do much about it, but it stated:
“Global satellite services … underpin at least 18% of UK GDP (£370 billion), supporting everything from mapping to weather forecasting, to monitoring the power grid and enabling every single financial transaction”.
I ask my noble friend the Minister: do the Government recognise the potential importance to the UK economy of the space industry, and what action do they propose to take to ensure its growth and future potential?
Lord Mair (CB)
My Lords, I too am grateful to the noble Viscount, Lord Stansgate, for introducing this important debate. Science and technology could not be more vital to the economy than at the present time. As an engineer, both in practice and at Cambridge University, I welcome the Government’s very recent Green Paper. Invest 2035: The UK’s Modern Industrial Strategy identifies eight key growth-driving sectors. Three of these are advanced manufacturing, clean energy and digital technologies. Engineering is at the heart of all three, driving innovation and economic growth. It also plays a key role in many aspects of other sectors, such as defence and the life sciences. Engineering is integral to achieving outcomes from science and technology. The resulting new products, services and enterprises generate jobs, boost the economy and benefit society.
Demands on engineers are greater than ever, with the world facing challenges and opportunities that depend on substantial engineering input. Chief among these are the climate emergency and the rapid progress in artificial intelligence and related digital technologies. At the heart of the Government’s agenda is making the UK a clean energy superpower, with zero-carbon electricity by 2030. This involves major investments in wind and solar power, carbon capture and storage, hydrogen and long-term energy storage. Nuclear power will also be essential, and small modular reactors—mentioned by the noble Viscount, Lord Stansgate—have considerable promise. To be successful, all these technologies will require increasing numbers of engineers and technicians.
However, the UK faces an acute engineering skills gap. The Royal Academy of Engineering’s National Engineering Policy Centre has laid out how to bridge this gap—by reversing the shortage of STEM teachers, increasing apprenticeships and promoting engineering as an attractive career choice in the application of science. We should take a leaf out of Germany’s book: 20% of its 25 year-olds have a higher technical qualification; in the UK, the present figure is only 4%. Further education colleges and their role in science and technology have been neglected for too long, so I welcome yesterday’s Budget announcement to increase the funding of further education by £300 million. The plans to reform the apprenticeship levy are also welcome. In addition to supporting our world-class universities, an enhanced future for apprentices, including degree apprenticeships, will be especially important if this country is truly to become a technological superpower.
Our world-class, research-intensive universities are undoubtedly national assets and are highly regarded globally. As well as their key roles in education, training and curiosity-driven research, their science and engineering departments are hugely important drivers of economic growth. But many universities are now in a precarious financial state. In the upcoming spending review, their R&D needs further investment and support from the Government so that they can continue to innovate, attract foreign investment and stimulate industries. “Invest, invest, invest” was the mantra of the Chancellor in her Budget speech. Enhanced support for science, technology and engineering in our universities and for university-business collaboration could not be a more important investment. It will be crucial for the successful delivery of the industrial strategy, for growth and for the economy.
Lord Waldegrave of North Hill (Con)
My Lords, it is a great pleasure to follow one of our great civil engineers and to precede one of our distinguished science communicators, who I am sure will add greatly to the debates of this House. This is not just because he was nice about me, but surely—I address this to the Front Bench opposite—some way must be found, however we are selected for this House, for the noble Viscount, Lord Stansgate, to continue to give us his wisdom, because we need it.
Disraeli warned us against falling into anecdotage, but I will tell one story from my own time. When I left my role as Chief Secretary to the Treasury, I left a note for my successor, the much-lamented Alistair Darling, who was a great public servant and a very good Chief Secretary and Chancellor. The practice of leaving a note ended later, because somebody tried to make political capital out of it, which was silly. My note said that he had to support two things in particular that did not have votes in them: the intelligence services and science. You need them and you never know when you are going to need them—but, my goodness, when you have not got them, you know it.
It is a wonderful thing that cross-party support for science over recent years has developed as a result of some outstanding Ministers; I think of Lord Sainsbury of Turville and my noble friend Lord Willetts. The infrastructure of support in this Parliament and across the country for our scientific effort is a vital part of our science effort.
I congratulate the Minister on a very good first settlement in the Budget. Some of it is for one year, but that is better than it not being for one year. I congratulate him on getting the Horizon subscription properly funded, which is absolutely vital. But—and there is always a but—there is more for him to do, and we are lucky to have him. I genuinely think that he will be another of these Science Ministers who will be remembered.
There is, as other noble Lords have said, an emerging slow cascading crisis in our universities. The business model does not work anymore. We cannot subsidise research and lots of other things, through arguably overpriced foreign students. They may not continue to come, and they are beginning not to come. I think the Russell group estimates that there is a £5 billion funding gap in research, which is cross-subsidised at the moment and is vulnerable. This is beyond the remit of the department in which the Minister serves, but it is vital to his interests, and all our interests, that the Government turn their attention to this.
One more specific item I would like to raise is supercomputing power. The previous Government announced the project in Edinburgh. It was then stopped because it was said not to be properly funded and so on, and it is being reviewed. It is absolutely essential, particularly to the skills available in AI and others which we have in this country, that we have first grade supercomputing power available, but we do not have it. We are not in the top league.
Finally, I once went off as a junior Minister and sat at the feet of a great man at Caltech, a hero of mine, Murray Gell-Man. He said that there was too much rowing and stuff in Cambridge. There was some science, but the vital thing we had in England was long-term funding. Of course, we immediately threw that away. The Minister is doing his best, I believe, to try and bring it back with seven and 10-year rolling contracts. I give him all our support in attempting to do that.
Baroness Freeman of Steventon (CB) (Maiden Speech)
I thank the noble Viscount, Lord Stansgate, for initiating this debate and giving me an opportunity to introduce myself to your Lordships’ House. This is a very welcoming place, with its wonderful staff—especially the doorkeepers, with their encyclopaedic knowledge—and also all the noble Lords who have come to introduce themselves to me and make me feel welcome. I thank them.
I thank especially my mentor and supporter, the noble Viscount, Lord Colville of Culross. We were colleagues at BBC Science, where we were documentary-makers trying to communicate the importance of scientific ideas and make them relevant to people’s lives. Some people might say I have come a long way from my first job there, “Walking with Dinosaurs”—
Baroness Freeman of Steventon (CB)
Moving swiftly on.
I worked both at BBC Science and at the BBC Natural History Unit after doing a doctorate in what my father—initially, concernedly—thought was “not a proper science”. He was trained as a chemist; my sister is a mathematician; my mother is a theoretical physicist. I, of course, was a biologist—and, worse, I studied animal behaviour. But, under the firm tutelage of Professor Richard Dawkins, I learned to apply scientific ideas to any subject, and even my father finally admitted that the scientific method applies everywhere.
The other supporter I was honoured to have at my introduction to your Lordships’ House was Onora—the noble Baroness, Lady O’Neill. When I moved from the BBC to Cambridge University to study the slightly different art of evidence communication, it was her philosophy that guided our work. She says that, to be trusted, you must be trustworthy, and, to demonstrate trustworthiness, you must be open and clear about all the processes that lead you to your conclusions, so that people can follow them, understand them and assess them—wise words that I try to live by.
At the Winton Centre in Cambridge, we worked on how to communicate evidence in a trustworthy way to support decision-making. We all need evidence, whether we are patients choosing treatment options, parents choosing education or police chiefs choosing policies, and that evidence comes from the application of scientific methods. So, although science can obviously bring us great inventions with direct economic benefits, it is much broader than that.
Working at the statistics department in Cambridge helped me realise that science as a method is a way of us learning from past experiences to foresee likely futures, and even to put some kind of likelihoods on those possible futures. By applying scientific methods, we can understand and tease apart cause and effect: the link between smoking and lung cancer, or between CFCs and the ozone layer. The field you apply it in does not matter. We even do it in animal behaviour—and human behaviour.
At the Winton Centre, we worked with the UK’s wonderful What Works Network to help communicate the evidence it brings together from experiments done on all sorts of problems—education, crime prevention, tackling homelessness—to test potential policies. Science not only helps us understand causality from past experience and get glimpses, however fuzzy, of possible futures; it allows us to make decisions that are most likely to take us along the paths we want to follow. How can you calculate the value to the economy of being able to foresee the future and how you might be able to affect it?
When talking about science’s contribution to the economy, or industrial strategy, or science policy, we often talk about the great inventions, with their direct economic benefits. And we often also talk about the value of curiosity-driven research. But I want to make sure we recognise a third category in the middle: researchers seeing how something could be of direct societal or environmental benefit, with no direct economic benefit but huge economic benefits anyway—like getting people fit and active, children being better educated, reducing crime, or testing existing drugs and treatments for Covid, as in the UK’s world-leading recovery trial, which discovered that the commonly used steroid dexamethasone was very effective. This kind of science does not aim to make direct profits for anybody: it is probably invisible to the Treasury. It is bypassing the Treasury and directly benefiting society—but that saves the Treasury money.
The Minister knows this kind of research well from his previous roles, so, with this in mind, I have two asks for him. First, I know from own experience that, when you are a researcher at a university, there is all sorts of support for you to spin out enterprise into profit-making companies. But, if you are doing the kind of research that would be better served as a not for profit or a social venture, there is a lot less obvious support for you. Secondly, can the Minister help communicate that scientific methods, applied to all fields, are crucial to both society and the economy, through helping us choose and reach the futures we want?
Baroness Bennett of Manor Castle (GP)
My Lords, it is an honour and a privilege to be the first to commend the powerful and important speech of the noble Baroness, Lady Freeman of Steventon, and to welcome her to this House—I will describe her accurately, if perhaps not technically, as my noble friend. Her diligence in listening and learning as a new Member has, I am sure, been noted across this House—scientists like evidence. I have long proclaimed, to audiences up and down this land, that we need more people from a scientific background in this House, and indeed across politics. I am very glad that the noble Baroness in particular heard that message, for, with her long experience in health and environmental issues, and particularly her knowledge and skills in explaining risk, the House is truly getting a gem.
As the noble Baroness explained, she joins us from her role as the executive director of the Winton Centre for Risk and Evidence Communication, part of the Cambridge Faculty of Mathematics. If that sounds a little daunting, I should add that she also has experience in designing websites, games and social media content, so we need have no fear of incomprehension. For those in the House who, like me, are subscribers to the frequently terrifying Retraction Watch, it is worth noting that she has a long-time interest in reforming the science publishing system and led the UKRI-funded Octopus platform for primary research publication.
The noble Baroness referred to her work with the BBC. One of her other programmes was “Climate Change by Numbers”. Some of the noble Lords who took part in last week’s climate action impact debate might like to reconsider their approach for the future.
But what about dealing with politics in your Lordships’ House? Preparing for today, I went back to the noble Baroness’s Oxford PhD thesis, which in part covered the mocker swallowtail butterfly. The females are polymorphic—have many different body forms—and come in three main groups of colours. That sounds like good preparation for your Lordships’ House, at least as currently instituted.
Like everyone else, I thank the noble Viscount, Lord Stansgate, for securing this debate. My speech very much follows on from that of noble Baroness, Lady Freeman, for the economy is a complete subset of the environment: the physical, biological and social environment determines what our economy is like. This morning, I was at a round table discussing the Carnegie UK Life in the UK 2024 report, which reported “persistent inequality” and a “stagnation” in well-being. Our collective score for well-being was 61 out of 100 —in many university contexts, that would be a fail. The science is telling us about the reasons for that and we need to do much more to listen to that science, for the benefit of all of us, as well as for the economy.
I draw attention to an event this morning. Defra, operating on behalf of three government departments, has settled the legal case over the tragic death of Ella Adoo-Kissi-Debrah, who was killed by air pollution in 2013. The scientists keep telling us, again and again, at increasingly higher levels, how much damage air pollution is doing. Just this week, a report highlighted how about 4,000 premature deaths are caused by gas cooking in the UK each year—54% of UK homes use gas cookers.
As the noble Baroness, Lady Freeman, said, there is much focus on science making money, but we need a lot more focus on science that looks after our society and its well-being. With that thought, I welcome the Minister to his place and ask one question—I will understand if he needs to write to me. Agro-ecological approaches to producing healthy food are absolutely crucial to fixing our broken food system. How much of the research going into agriculture is going into agro-ecological approaches?
Lord Winston (Lab)
My Lords, in 2023, Sir Paul Nurse reported on how best we might keep Britain’s scientific research world-leading. One excellent example he chose to identify in his report was the role of the Medical Research Council’s so-called research units. Sir Paul’s report made it very clear how vital these were and how they must be supported to maintain our scientific expertise in healthcare and so on. These 20 units are scattered around the country and most are associated with universities—Oxford, Cambridge, Dundee, Glasgow, Edinburgh and certainly UCL in London. These units are truly world-class and are recognised worldwide as being absolutely outstanding but threatened. One such is the Cognition and Brain Sciences Unit at Cambridge, which I first visited about 20 years ago and was deeply impressed with what they were doing there. It has an 80-year history of cognition and brain science and its remit includes mental health; it focuses on the current global mental health problems, developmental disorders, stroke, dementia, and the nature of human consciousness.
People at the unit tell me that they do not think they can survive on the funding that is now being offered to them as the MRC has changed its funding plan, as we heard on Monday from my noble friend Lord Vallance when he answered my Question. I am sorry that I have not actually warned him of my speech in advance but, of course, I have been besieged by phone calls all day from different research units across the country that are seriously and deeply concerned about this problem. They think that they cannot survive. The Cognition and Brain Sciences Unit is one of six units in Cambridge that would have to be supported by the university if the MRC ceased the full funding that it currently has. The university has certainly not agreed to fund it—as, indeed, as far as I am aware, no university has agreed to fund any of the host units.
I will refer briefly to another unit that I think is particularly interesting: the Prion Unit in London. That one, of course, is famous for its work on mad cow disease, and how that particular dementia was a result of a protein that could affect the brain and fatally change its other proteins. At a recent meeting in China only a few weeks ago, members of the Prion Unit in London were greeted as the world leaders in this, feted all over, particularly at the main Chinese meeting, and the Chinese are now pouring millions into this research—for what reason I am not sure, but certainly these prions are going to come back. There are lots of species that look as though they could be vulnerable, and certainly the risk of mutation in animal species, perhaps in America, could really recur, and this would produce a massive disaster. The Prion Unit still has a very important role to play.
In answer to my Question on Monday, we heard from my noble friend Lord Vallance, the Minister of State, that the MRC had decided to change the funding model in such a way that the units are now expected to reapply for continued funding for a maximum of 14 years, with a review halfway through, after seven years. It is proposed that the host university funds the principal investigators up to 80% of their salary and the on-costs, and the surviving units will be limited to £3 million per annum. That is quite inadequate to maintain what they are doing: it is probably about one-quarter of what they actually need for their current expenses. Of course, many of these units are lab-based and therefore much more expensive.
I listened to my noble friend Lord Vallance very carefully on Monday when he answered my Question. I was extremely grateful for his care in taking up so much of his time to explain the current position, and also for speaking to me outside the Chamber on various occasions. Ultimately, I do not think that the format of an Oral Question could possibly give him anything like enough time or scope to address the concerns that the scientific community and the employees have about these units. They are certainly worried about their jobs: it is likely to affect up to 200 professors, perhaps, and around 2,100 scientists, which is of major concern.
Of course, my noble friend Lord Vallance was absolutely right to express the need for response-mode funding as an alternative but, unfortunately, as Paul Nurse pointed out, these units are truly unique in so many ways and losing their research output, training and maintaining of technical expertise will be extremely serious. Does my noble friend the Minister accept that the way the research councils have been set up means that we cannot interfere with their decisions on money? But we should indeed have some consciousness about their strategy and this is certainly where politicians have a right to decide. Of course, we all hope that my noble friend the Minister might find a better solution to a crisis which is adversely affecting UK science and those who contribute most effectively towards its success and its continued financial income.
Baroness Wheeler (Lab)
My Lords, I respectfully remind noble Lords that the speaking time limit is four minutes. I urge all noble Lords to keep within that so that the debate may be concluded within the time allowed without the Minister having to cut short his response.
Lord Willetts (Con)
Quite right. My Lords, I congratulate the noble Baroness, Lady Freeman, on her excellent maiden speech; we look forward to many more of her interventions in the House. I also congratulate the noble Viscount, Lord Stansgate, for such an excellent opening to the debate, displaying his typical enthusiasm and making a subtle case for the hereditary principle.
I should declare my interests, particularly as chair of the UK Space Agency. I am also a member of this club of former Science Ministers, which has been referred to several times. It is great to see the noble Lord, Lord Drayson, in his place; we look forward to his speech. There is a very crude view of the role of the Science Minister: to extract money from the Treasury. I am sure that the noble Lord, Lord Vallance, has a much higher and more strategic view of his role than that, but he nevertheless did very well this week and I join those congratulating him on seeing off what looked like a significant threat.
I congratulate the noble Lord also on the speed with which the funding for science announced yesterday is already moving. There was an announcement of £520 million for the life sciences innovative manufacturing fund; it was up on the Government’s website by midnight, with the first round of applications for grants now open, with a deadline of 30 November. That is an excellent example of moving vigorously in an innovative environment. I hope, in that spirit, that the Minister will commit that the Government will indeed be implementing my proposals on improving the business case process so that it is similarly efficient and fast-moving, rather than cumbersome and bulky. We must not be complacent, however. There are of course challenges to face in the CSR, and we wish the Minister the best on that.
I would like very briefly to put three specific points to the Minister. First, cell and gene therapies are a great British scientific and technological success. However, they are suffering from the very uncertain VAT regime for cell and gene therapies sold to the NHS. HMRC defined these therapies as “work on goods”, apparently on the argument that the cells start from the human body and are eventually returned to the patient’s body and, in the meantime, they have just had a service, rather like a car going into a garage. In some cases, VAT is charged at 20%, which, in turn, affects the NICE calculations of the cost-benefit ratio in these treatments. Sometimes they are exempt. The best way forward would be for all these treatments to be clearly zero-rated and treated consistently.
My second point, if the Minister is able to comment, is that yesterday we also heard in the Statement from the Chancellor very good news on investment in the railway link between Oxford and Cambridge. Progress is gradually being made in the recreation of the old Varsity line, although it is a pity that there is a large housing estate somewhere between Bedford and Cambridge on the route of the original line.
Can the Minister confirm that, with this investment in transport, there will also be a recognition of the value of the Oxford-Cambridge supercluster and an attempt, alongside the claims of many other parts of the UK, to recognise and support that?
Finally, if he were here, I think the noble Lord, Lord Knight, would make an important point about investing in science teaching. The Government make a lot of the 6,500 new teachers. It is equally important and, in some ways, more cost-effective to invest in upskilling and retaining the teachers we have already have. Improving CPD for science teachers, so that they remain up to date, would be of great value.
Lord St John of Bletso (CB)
My Lords, I join in thanking the noble Viscount, Lord Stansgate, for introducing this debate in such a comprehensive and impressive fashion, and in congratulating my noble friend Lady Freeman on an outstanding maiden speech.
There is no doubt that the United Kingdom stands at a pivotal moment in its scientific and technological development. While I welcome the Chancellor’s commitment in her Budget speech to drive innovation to protect
“record funding for research and development to harness the full potential of the UK’s science base”,—[Official Report, Commons, 30/10/24; cols. 814-15.]
the reality is that the UK and Europe tech sector is massively underpowered and underfunded compared to the United States. What are the equivalents of Meta, Alphabet, Tesla, Apple and Microsoft in Europe? While we have much to be proud of in our achievements in science and technology in the UK, the reality is, sadly, that we are failing to fully commercialise our advantages in research excellence in our top global universities, as well as the growth in fintech and health tech companies.
I wish to focus my brief remarks on the life sciences sector, where the advances in technology have huge potential both to cut costs and to promote patient care, especially in imaging, diagnostics, and predictive analytics, as well as in administration. In this regard, AI and quantum computing have played, and will continue to play, a major contribution in harnessing more efficiencies and breakthroughs in new treatments and pharmaceuticals.
The United Kingdom is well recognised as a world innovation hub, but we have to retain that. To grow its true potential, we need to retain our talent pool. We have some of the highest costs of visa applications compared to other European nations, which has sadly resulted in the loss of a lot of talent. We certainly need to be a lot more proactive in promoting and retaining highly skilled talent. We have hugely successful science parks, particularly in Oxford and Cambridge, which have driven commercialisation, despite the infrastructure challenges of the lack of lab space.
Time restricts me from elaborating on the challenges of IP commercialisation. Many spin-outs have lost substantial equity to foreign interest, with UK universities retaining only 20% equity, which has led to substantial IP leakages in company commercialisation abroad. Can the Minister elaborate on the scope for setting up a cross-departmental implementation taskforce for streamlining funding mechanisms for scaling SMEs in the tech sector? We need to create specialised regulatory pathways for emerging technologies and develop incentives for preventive healthcare. A lot more could, and should, be done to fund longevity research initiatives—particularly for this House.
In conclusion, I say that there is no one lever to pull, but making the UK tech sector more attractive to global capital is key. The integration of science, technology and healthcare offers significant potential for economic returns and improved population health outcomes. Without immediate action, Britain risks falling behind in the global race for technological supremacy. The time for decisions is now.
Lord Liddle (Lab)
My Lords, I add my congratulations to the noble Baroness, Lady Freeman, on an excellent maiden speech. I have to say that I hesitated to put my name down for this debate. There are so many able people, including our wonderful introducer, the noble Viscount, Lord Stansgate. The whole debate has shown this House’s great expertise in and knowledge of science and technology issues.
I am afraid I am a classic of what used to be —I hope—wrong with the British education system. I was a humble grammar school boy who got a scholarship to Oxford, where I did two degrees—but I did not even have a science O-level. I hope that weakness has now been remedied.
Since then, I have tried to make up for it by taking a close interest in science and technology policy, as a result of a close interest in industrial policy. For seven years, I had the great privilege of chairing the council of Lancaster University, on which I was ably assisted by the noble Baroness, Lady Neville-Jones, who knew far more about the scientific issues than I did. Lancaster is an interesting institution. It was born in the “white heat” era—Harold Wilson opened it in 1965—but in the late 1990s, it decided to make a major commitment to science, building new departments in chemistry, physics and engineering, and a medical school, all opened up while Pauline—the noble Baroness—and I were on the council. This was an interesting attempt to build a strong science base outside the golden triangle. I would like to know what the Government’s attitude is to building research bases outside the golden triangle. I hasten to add that I am all in favour of the golden triangle, and I think that one should invest in places that are globally successful, but what contribution can a small but research-intensive institution like Lancaster make?
One of the things that was essential to us was Horizon. That brought us into partnerships with continental universities in areas of expertise. We also built partnerships in the UK, but I was always pushing the vice-chancellor harder on this. I thought: why do we not merge with a comparable institution where our scientific expertise would be complementary? What are we doing to help universities outside the golden triangle to build on their strengths?
What are the Government doing to make spin-offs from universities more effective and to increase them? When I worked with Peter Mandelson—the noble Lord, Lord Mandelson—when he was Industry Secretary, I chaired an advisory panel on new industry and new jobs, and came across the wonderful Hermann Hauser, of Arm. One of his ideas was the catapult initiative, which I think the noble Lord, Lord Willetts, in his time took forward. What more are we doing to incentivise the better use of scientific research in stimulating innovation and new enterprise? This is a very big unanswered question which I hope the new Government are going to take very seriously.
Lord Stevens of Birmingham (CB)
I declare my interests as the incoming chair of King’s College London and the chair of Cancer Research UK.
I start by picking up where the noble Lord, Lord Waldegrave, left off: congratulating the Government on not whacking the science budget to the tune of £1 billion with the Horizon costs in yesterday’s Budget. That is clearly a bullet dodged, but that is not the same as success assured. The question between now and the spending review, when decisions are made as to what the next decade’s worth of science funding will look like, is: are we going to get the sort of progress that we need?
I will make three brief observations, the first of which concerns, as has been touched earlier, the current state of universities as providers of the research excellence and scientific and technological progress we all want to see. Unfortunately, the reality is that, in yesterday’s Budget, universities got what we now can describe as a “POBA”: point one of bugger all. Essentially, there was no great reference to universities and no attempt—yesterday, at least—to deal with the underlying funding pressures and the opaque cross-subsidies that are just about keeping the show on the road, but which nevertheless constitute the slow and inexorable decline in the relative performance of UK science and research compared with other countries, as measured by most of the relevant league tables.
We want strength to the elbow of the Science department, but that cannot be seen in isolation from what is happening at the Department for Education. As other noble Lords have said, there is a funding gap between the cost of research undertaken and the resourcing to deliver it—only £0.69 in the pound is being funded across the sector in the full economic cost of research, and £0.74 in the pound for the most research-intensive universities—a huge wedge that is being cross-subsidised through international students and other mechanisms. That cannot continue over the next decade if we are going to see the kind of progress we want.
Secondly, we need to connect the debate we have just had with the debate we are having. Charities’ support for medical and life sciences research, in particular, plays an enormous role in the overall ecosystem: north of £1.7 billion in research funding; and in the case of Cancer Research UK, which I chair, over £4 billion in the last decade for cancer science, providing three in four NHS patients being treated for cancer with some of the drugs they receive. That is half the cancer drugs on the WHO’s top 100 list. Yet the ratio of the cost of science being funded through charities is even lower than that from the research councils: some £0.58 in the pound through that route. One of the great things that the last Labour Government did was to introduce the Charity Research Support Fund, which has somewhat atrophied in the intervening years. That would need to double, roughly, to get the charity funding contribution back to the £0.80 in the pound that is necessary to sustain the excellence we see in university research.
Finally, to pick up on the excellent maiden speech of the noble Baroness, Lady Freeman, I almost want to argue with the exam question that the noble Viscount, Lord Stansgate, has set us. It is quite easy in these debates to become relatively reductionist about the role of translational science at the technology-commercial interface and the economic benefits that has, whereas we need to remember that basic science— discovery science—in all sorts of serendipitous ways is the secret to our success as well.
Baroness Neville-Jones (Con)
My Lords, I am lucky enough to be one of the Members of this House who is on the Science and Technology Committee. I very much welcome this debate and the excellent introduction that the noble Viscount, Lord Stansgate, gave it.
The excellent briefing that we received, among many others, from the Library, for which I thank it, rightly says that it is hard to measure the value of the contribution made by science and technology to the UK economy because of its all-pervasive nature and the fact that it is growing all the time. I also want to emphasise the general scene and the many problems we face, but one thing that is reassuring is the recognition across the Benches of this House, and indeed in Parliament generally, of the fundamental importance and quality of the scientific work and technological development that takes place in this country, and the opportunity we now have to make good on it to further benefit our own society and, more broadly, the population of the world.
I will make one point about something rather concerning that is connected to that. Science and technology, as a topic, is beginning to become a source of hostility and tension in international relations. One only has to think of the way in which the Chinese are exploiting it. Far from being a binder among nations, it can very easily become a source of real competition, hostility and seriously malign action. We should bear in mind that the liberal democracies do not have an agreed strategy on how to deal with this, but we need to develop one. We should not go on refraining from tackling the issue because it is difficult, even though that is the case. If we do not tackle it, we will find in due course that the extent to which science and technology can benefit society is greatly reduced by the potential problem of conflict.
Returning to the UK, something puzzling about our situation is that we are a society with a reputation for science and innovation, but we seem to lag behind in what we ought to be good at, which is greater productivity. How come we have this contradiction? Our universities are the bedrock of our capability; their graduates feed our independent laboratories and learned societies, and their geographical spread helps to keep our educational disparities under control. However, as has been rightly said, they are not going to survive the financial situation in which they now find themselves. I am very concerned that we are about to witness a drama if that situation is not gripped.
The public sector needs to intervene, but I do not believe that it can deal with the whole thing. What is notable is that private sector companies, which used to be great sources of R&D themselves, no longer—with some notable exceptions—play that role. It is very important that they begin to move closer to universities, so that they themselves become sources of innovation. Whacking up the tax on them does not help with the notion that they will engage in greater investment. The Chancellor said yesterday that the public spending outlined will crowd in private investment, but I worry that it might crowd it out.
The low skills base is another problem we need to tackle. As the noble Lord, Lord Mair, rightly said, it is a soluble problem, and other people have models that we ought to draw on. We are making heavy weather of that, and we ought to do better.
I will make just one last point. The difficulties British start-ups face when they want to scale up are well known. Our relatively small economy, openness and English language make us an attractive research destination, but they also make us vulnerable to poaching. We have to inculcate the habit of investing in our intellectual property and rewarding higher-risk, higher-reward propositions. If we do that, we will go a long way towards dealing with the issue of our lag in productivity.
Lord Leong (Lab)
My Lords, the advisory speaking time for this debate is four minutes. I gently urge all noble Lords to keep within this time limit so that the debate can finish at a reasonable time.
Lord Taylor of Warwick (Non-Afl)
My Lords, I too thank the noble Viscount, Lord Stansgate, for introducing this important debate today, and congratulate the noble Baroness, Lady Freeman of Steventon, on an excellent maiden speech. This is a wide-ranging topic, but since I am delighted to be an officer of the All-Party Group on Artificial Intelligence, most of my comments will be in the context of AI.
The Stone Age did not end because we ran out of stones. It is simply a fact that mankind has always found a new and improved way of doing things. The catalyst for this change is science and technology. Although this debate relates science and technology mainly to the economy, we must not forget the effect that it has on peoples’ personal lives. My mother was a fit and healthy 79 year-old, even swimming most days. Suddenly, a major heart attack reduced her to paralysis. She was unable to speak. Within a year, she was back at the same hospital, this time as a volunteer counsellor to some of the stroke patients. It was explained to me by the consultant leading her care that their pioneering heart valve AI technology had saved her life—which would probably have been lost had the attack happened just a few years earlier. Science and technology is about people as well as the pound.
However, every industrial revolution has been met with some who resist change. In relation to AI, some say that this is a new error, not a new era. One of the lessons of history is that we do not learn lessons from history. During my time as chancellor of Bournemouth University, I emphasised to the students that this AI revolution requires new skills. Yes, some jobs will be lost, but even more jobs will be created. Increasingly, it will be skills that pay the bills. Yet a number of commentators including, in June 2024, the Council on Geostrategy, highlighted that Britain’s current visa system is one of the barriers to attracting top international talent and risks making the country a less competitive environment. How do the Government intend to address the skills gap in science and technology?
There is also the issue of regulation. I was a barrister and judge for some years and am aware of the need for some regulatory framework for AI. A few years ago, I had the privilege of meeting Sir Tim Berners-Lee, the creator of the world wide web. It was just me and Sir Tim in the room—and 200 other people—but I had a tremendous conversation with him. He told me that he has been warning for years about too much power being accumulated by just a few giant social media platforms. I understand that too much regulation could stifle innovation, but what plans do the Government have concerning future regulation?
Science and technology, including AI, are driven by data. Data is an increasingly powerful source of information. In fact, data is so important that instead of a baby’s first word being “Dada”, one day it might be “data”. The need to protect personal data, especially that of children, the elderly and other vulnerable groups, is paramount. For 10 years, I was vice-president of the British Board of Film Classification. Our main remit was to protect vulnerable groups. What extra safeguards will there be to ensure the protection of, for example, patients’ records in the NHS?
I see science and technology as providing solutions to people’s everyday lives. It should be reducing the gap between the have-nots and the have-yachts, so let us embrace this industrial revolution with faith, not fear.
Lord Lucas (Con)
My Lords, I am very grateful to the noble Viscount, Lord Stansgate, for giving the chance of this debate, and I really enjoyed the maiden speech of the noble Baroness, Lady Freeman. I totally agree with her on the need for trustworthiness and openness. I very much hope that the Government will give her the job of writing the story of the road to net zero, which is currently not displaying those characteristics.
There are three things that I want to urge on the Government. The first is that they really put money and effort into the international standards and regulations by sending really good people to the conferences which set the standards. By doing regulation really well in this country, we make this a really good place to do business. Look at the opposite; look at what happened to telecoms. When I was young, we were top of the tree and now we are nowhere. We started sending rubbish people to the standards conferences and we just became irrelevant.
The second point I wanted to make to the noble Lord is that science must challenge. We spend billions on string theory and dark matter: lots of scientists cuddled up in the comfort of an unfalsifiable consensus. It may be that this is right, and that the universe is as cold and uninteresting as those theories offer, but there are alternatives. Faced by consensus, our bias ought to be to challenge. We ought to be looking at things like quantised inertia, because of its explanatory power and the hope it offers for things such as motion and power. We ought not to be leaving that on the sideline, as we are doing now with its tiny bit of funding. This applies to lots of other interesting alternatives to the consensus and to many other bits of consensus which have established themselves around science.
We must be better at supporting challenge. We must help the Civil Service to be better at dealing with failure. We ought to reward good failure and to encourage the Civil Service to go for the kill factor. Do first what is really difficult and dangerous, and leave the easy things. If you fail early doing something difficult and dangerous, you learn from it and you do not spend a lot of money doing things that will only fail later, because you did not tackle the main subject.
To pick up on something that I think my noble friend Lord Markham was aiming towards, let us have more pull mechanisms—prizes for success and advance market commitments. Give Innovate UK a clear mandate to do those things, because that way will really crowd in private sector interest and investment and end up rewarding success, leaving the cost of failures to the private sector.
I know that the noble Lord is keen on resilience and fire drills. I hope that we have a serious fire drill in the course of this Government. To engage the country in understanding the vulnerabilities of, say, the electricity supply system will really help us to understand the need to have and benefit from having manufacturing in this country in a serious way, so that we can recover from a setback. To have a fire drill will give the public confidence that we will react well when something happens. Suppose we were to have a Carrington Event—a huge solar storm knocking out the transformers in the electricity network. There would be no power for a year or two, because we do not have the capacity to rebuild the transformers. Having a fire drill means that we do not make that mistake, because we will have the courage to turn off the transformers in time and the public will know that we will do it and do it well.
Lord Tarassenko (CB)
My Lords, I declare an interest as a director of Oxford University Innovation. I thank the noble Viscount, Lord Stansgate, for securing this debate and for his thorough review of UK science and technology.
I was surprised, however, that there was no mention of the 2024 Nobel Prizes for Chemistry and Physics. Earlier this month, we celebrated the award of the Nobel Prize for Physics to Professor Geoff Hinton. The next day, we celebrated the award of the Nobel Prize for Chemistry to Sir Demis Hassabis. Both are home PhD students from British universities— Edinburgh and UCL. Both ended up working for the same US big-tech company, a company currently valued at $2 trillion.
What would it take for a deep-tech company to emerge from one of our research-intensive universities and become the UK’s first $1 trillion company? First, it would need a good supply of home PhD students. Unfortunately, there is mounting evidence that an unintended consequence of the rise in the undergraduate tuition fee to £9,000 is a loss of home PhD students in STEM subjects.
For example, from 2019 to 2022, there has been a decrease of 39% in the number of UK-domiciled computer science graduates in doctoral study 15 months after graduation. We know that the least well-off students graduate with the most debt; now it looks as though many students from disadvantaged backgrounds will no longer consider PhD study as a financially viable option. This trend must be reversed.
Secondly, the spinout ecosystem that exists around our research-intensive universities must be nurtured further, not only with human capital but with finance to start new companies, scale them and grow them. The £40 million over five years of proof-of-concept funding to seed new spinouts announced in yesterday’s Budget is welcome, but it should be targeted where it is needed—outside the golden triangle.
Thirdly, a coherent industrial strategy makes it more likely that the UK’s first trillion-dollar company will emerge by 2035. The UK on its own is not able to invest in all possible areas of science and technology. Even in my area, described as “digital and technologies” in the industrial strategy Green Paper, further choices will have to be made.
The House of Lords Select Committee report on large language models called for a “sovereign LLM capability”, but it would be pointless, because of the prohibitive costs, to compete with US big tech companies in training hyperscale LLMs such as GPT-4 or Gemini—other LLMs are also available. Instead, and this chimes in with the excellent maiden speech of the noble Baroness, Lady Freeman, we should be backing UK companies developing trustworthy AI using medium-scale LLMs and proprietary datasets, giving them privileged access to our sovereign data assets.
The final piece of the jigsaw is the scale-up funding available to British tech firms, which is still mostly missing. The target set by the Mansion House compact to have 10 of the UK’s largest pension funds invest 5% of their assets in private ventures needs to be met by 2030. If progress is also made on sorting out the issues highlighted in the Harrington report on foreign direct investment into the UK, there is a fighting chance that a British tech company, with its roots in one of our universities, will reach a trillion-dollar valuation within the next decade.
Lord Drayson (Lab)
My Lords, I join noble Lords in thanking my noble friend Lord Stansgate for opening this debate in such style. I take this opportunity to pay tribute to the long-standing commitment and passion he has shown to science and the scientific community. It is a particular pleasure to follow a former colleague, the noble Lord, Lord Tarassenko, given his deep expertise in engineering and innovation and his skill as an academic entrepreneur, and to build on the argument that he made.
I will focus my contribution in this debate on artificial intelligence, given the accelerating impact that this technology is having on our society and economy. In doing so I draw the House’s attention to my registered interests, particularly regarding Appella and Arcturis—two companies engaged in the development and application of AI.
Over the past 38 years as a science entrepreneur, I have experienced first hand the challenges of creating wealth from UK science and technology. However, never have I witnessed the pace of change and the breadth of impact that I see now, as virtually every company, CEO and entrepreneur tries to understand and adopt AI technology, whatever sector they are in.
Unusually for a new technology, AI plays to the strengths of the large incumbent tech businesses and disadvantages the start-ups aiming to disrupt them. The key elements needed to develop and apply AI, such as access to large sets of training data and huge computing power, require massive capital investment. This puts the big US tech companies at a considerable advantage. Together with their ability to leverage their established customer bases to deploy AI via their existing product platforms, it presents a formidable barrier to competition. This has serious implications for the UK and for government policy.
How can we ensure that the value generated by the adoption of this transformative new technology, often based upon research undertaken here, fuels the UK economy? The answer is for the UK to adopt a proactive partnership strategy in AI with the United States and its leading technology companies. We know that many UK businesses are enticed to the US by access to its substantial market and large pool of capital. To ensure that AI businesses stay and grow here, we need to create joint UK-US initiatives that leverage our complementary strengths and enable those businesses to become transatlantic—for example, by establishing joint R&D grants; building on existing programmes to encourage US/UK talent exchange in AI; facilitating transatlantic university partnerships with common IP and data-sharing agreements; and building bilateral AI labs where we can work together to develop and scale the application of AI in health, defence and finance, sectors where the UK and the US have common interests and where the UK has deep expertise and competitive advantage.
As we look to regulate AI, let us align our policies with the US and attract American capital to fuel UK-based businesses and infrastructure by creating a common listing framework for the London Stock Exchange that is aligned with NASDAQ, rather than trying to sustain our own failing AIM. In summary, let us leverage our special relationship with America to ensure that British science remains at the forefront of AI research and is a major driver of a prosperous UK economy.
Lord Rees of Ludlow (CB)
My Lords, I add my thanks to the noble Viscount, Lord Stansgate, for his fine introduction to this debate and add a welcome to our very well qualified new Minister who will reply to the debate. I am sure he would agree that the prospect of a scientific career should remain attractive to enough of our young talent and that our research institutions should remain attractive to foreign talent. I shall comment briefly on these issues, especially in a global context.
Some people will become academics, come what may —the nerdish element, of which I am one—but UK science cannot survive just on them. It must attract a share of young people who are savvy about their options and ambitious to achieve something distinctive by their 30s. They increasingly associate academia with years of precarity and financial sacrifices, which is not what they want.
A further off-putting trend is the deployment of ever more detailed performance indicators to quantify outputs and the labour involved in preparing grant applications with diminishing chances of being funded. The so-called REF is very damaging in discouraging high-risk and long-term projects. Confidence and high morale drive creativity, innovation and risk-taking, whether in science or entrepreneurial activity. We need to support excellence. The difference in pay off between the very best research and the merely good is by any measure hundreds of per cent, so what is most crucial in giving taxpayers enhanced value for money is not the few per cent of savings that might be made by improving efficiency in the office management sense; it is maximising the chance of the big breakthroughs by attracting top talent, backing the judgment of those with the best credentials and supporting them appropriately.
We cannot confidently predict how, when or whether a specific research project will pay off intellectually, still less whether its applications will offer social or economic benefits. To ensure that we effectively exploit new discoveries, research institutions must be complemented by organisations in the public or private sector that can offer adequate development and manufacturing capability when it is needed. This fortunate concatenation certainly proved its worth in the recent pandemic. It is imperative, likewise, that nations should foster expertise in agriculture, energy, climate and the cybersphere.
We should also welcome the growing mobility among scientifically advanced countries in North America, Europe and Asia. One exemplification of this is that three of the greatest US-based companies—Microsoft, Google/Alphabet and IBM—now have Indian chief executives. But this mobility offers little consolation to the least developed countries. They face daunting challenges in retaining their all too few highly trained people and even more in attracting them back. We in the developed world should surely be uneasy and feel an obligation to redress this loss. Of course, Africa’s predicament is worse. About half its health workers want to leave and their departure can be ill afforded. It is doubly tragic if, after moving to a developed country, doctors find that they are not accredited and become cab drivers. It is just as bad in all the other specialities that African nations require if they are to develop their potential. The poorest nations need to engage their diaspora communities, encouraging those with expertise to at least make regular visits back home.
Wealthier nations should take some responsibility too. A cost-effective form of aid would be to establish in Africa and elsewhere centres of excellence, with strong international links, where ambitious scientists could work in less dispiriting conditions, perhaps via linkages with foreign experts. They could then fulfil their potential without emigrating and strengthen tertiary education in their home country as well as working with other countries on the challenges of health, clean energy, and intensive agriculture on which their future depends. Let us hope that as a way of providing aid in a cost-effective and distinctive way, the Foreign Office and the department can collaborate on this goal.
Viscount Hanworth (Lab)
My Lords, I concur in the praise that has been accorded to the proposer of this debate and to the maiden speech. I wish to discuss the failures of Britain to profit from its own technological innovations, which has been an enduring pathology.
Long ago, the Civil Service developed a methodology of cancellation aimed at projects for which it could not envisage immediate and secure returns. To understand the development of that mindset, we may cast our minds back to the early post-war years, when Britain was at the forefront of a wide range of scientific and technological innovations. Britain was endowed with a large and vibrant aircraft industry, which had been sustained by the demands of the war. Under the aegis of the Ministry of Supply, it had been devoted to the mass production of a limited range of military aircraft. After the war, the constituent firms acquired their independence. Many of them had active design offices and there was a proliferation of military prototypes that sought and received government support.
However, the expense was exorbitant and in 1957 the Minister of Aviation, Duncan Sandys, called a halt to military aviation. It was decreed that henceforth military aircraft should be replaced by guided rocketry. Surface-to-air missiles were to replace interceptor aircraft and ballistic missiles were to replace bombers. The project was successful in staunching the expenditure and in curtailing the aircraft industry. Some projects for manned military aircraft did survive, only to face later cancellation, and we aimed to purchase American aircraft instead.
The Civil Service also turned its attention to other expensive technological endeavours, of which those of the nuclear industry were the most prominent. Britain had been a leader in civil nuclear development, beginning with the Magnox reactor, which was succeeded by the advanced gas-cooled reactor—AGR. The development of the AGR was protracted and problematic but eventually the design was perfected and such reactors remain in operation today, albeit they are approaching the end of their life. However, such a prejudice against the AGR had been derived during the process of its development that it was abandoned at precisely the time that it had reached perfection. The next reactor to be commissioned in the UK, of course, was the American pressurised water reactor, such as at Sizewell B.
Our nuclear industry is currently subject to a weak attempt at its revival, but this is also subject to the familiar pathology. We are seeking to restore our electricity generating capacity by harnessing wind and solar power and by using nuclear reactors to provide a baseload of generating capacity. This is to be provided mainly by small modular reactors. There are four contenders for the favoured design: three from American companies and one from a British company. The American contenders benefit from substantial subventions from the American Government and our Treasury is glad to have been relieved of the costs of developing these reactors.
All of the SMR reactors embody a tried and tested pressurised water technology that is fit to be replaced by the superior technologies of fast closed-cycle reactors, molten salt reactors and advanced high-temperature gas-cooled reactors. There have been projects within the UK aimed at developing these technologies, which threaten to go into abeyance or to be withdrawn to other countries through lack of government support. It is likely that Britain, which pioneered these technologies, will be depending on foreign suppliers for its future technology.
I would like to instance many other cases where we have failed to exploit British technological developments, but there is insufficient time to do so, as I have been strongly reminded. However, as a footnote, I will mention that I recently travelled on an Italian Pendolino tilting train on the west coast main line. This is a straightforward derivative of a cancelled APT—our advanced passenger train.
Baroness Bowles of Berkhamsted (LD)
My Lords, it gives me pleasure to commence the winding-up speeches on this debate. I congratulate the noble Viscount, Lord Stansgate, on bringing it to us and the noble Baroness, Lady Freeman, on an excellent maiden speech.
We have had a great debate, showing how important science and technology are today and the far greater economic contribution they could make, as the noble Lord, Lord St John of Bletso, said. My noble friend Lady Northover pointed out that it is all about interconnections. I was expecting to congratulate the noble Viscount, Lord Hanworth, on reminding us of the importance of mathematics in all these scientific projects and so forth, which I do agree with. I am sure that the Minister will not be surprised that I look forward to the Procurement Act and that it will be one of the topics I will speak about. If there is not a supportive environment for the procurement of new innovation for small enterprises, we will lose out, in AI and elsewhere, just as we did to the US super-corporations on internet technology when once we were ahead.
For 30 years, my career was in scientific research on semiconductors and then as a patent attorney. I was working with companies that were highly successful and some which struggled to make a breakthrough, despite great innovations. It is that which drove me into politics, where I have now spent 18 years looking at finance and the economy, including in industry. I come back to the same point: lack of procurement is preventing scale-up and better commercialisation of our technical innovation. It prevents a greater contribution to the economy, in particular for exports, and it prevents us closing the productivity gap.
I will focus on three linked things that are blocking innovative companies and scale-up: the treatment of start-up and growth companies, under which competitive tendering for round after round of piecemeal grants and loans sets them up for failure; the closed shop of government procurement, tied up with frameworks that ask discriminatory questions and favour incumbents; and the fact that the Government have become a systematic expropriator of early-stage intellectual property, killing instead of growing innovative companies.
Why is it that we have a trail of breadcrumb grants via our innovation agencies—including catapults, Innovate UK and small business research initiatives—with each grant expensively competed for at every stage in time consumption, but never leading to public procurement? In many instances where a lot of public money is spent on procurement, this is closing the door on making that expenditure bring multiple returns.
As various think tanks have highlighted, first public procurement is the ticket that enables growth companies to create exports—far better for our economy than those businesses relocating to the US or selling out equity in their innovation to other countries. That pattern has even hit Rolls-Royce and its small modular reactors, losing 20% equity to other countries.
In the US, they use a programme, From Innovation to Procurement. More entrants start than finish, but there is procurement at the end, which launches commercialisation. It is still competitive to enter, but the succeeding companies can progressively get on with the real job, instead of spending half their time applying for the next grant.
In our system, there is no promise of procurement: indeed, little chance, because of the procurement frameworks and the incumbency factor. An innovative growth company cannot positively answer the questions about previous alpha and beta delivery in the way incumbents can, so it falls at the first hurdle. How are innovators and emerging technology companies expected to grow to export level with that approach? Additionally, the incumbents essentially have a procurement fast track and get asked to support innovation programmes, which then allows them to learn from and ultimately undermine new market entrants.
Returning to the grant process, if you look at the contract clauses for the breadcrumb grants, for just a £50,000 early-stage development or proof of concept, there are clauses requiring the recipient of the grant to give to the relevant government body and its partners free, perpetual, irrevocable and royalty-free licences, together with the right for the Government to grant sublicences to anyone to use all the information, data, results and conclusions arising from the project. In other words, all the IP generated is as good as lost to competitors.
I know some people think those clauses just mean reading and benefiting from the reports, but it is far more. It is licensing use and licensing performing the invention. It is undermining patents and IP and allowing the Government to license competitors at the procurement stage. I have shared the clauses with the Chartered Institute of Patent Attorneys and it concludes the same as me.
It is so unfair, on many levels. The breadcrumb grant has never been a commercial rate for the work performed and, due to the UK’s own, rather short-sighted, Subsidy Control Act, never covers the full cost. Why should a measly £50k that forces high-tech entrepreneurs to work for free or below minimum wage rates—I can provide figures that prove that—entitle use and sublicensing rights of IP that could be worth £1 million or more were they not undermined by such a clause and that may have been the bedrock of success for the innovative company had it not been expropriated to competitors.
Yes, real innovation can happen in a matter of months. But, like a jeux sans frontières competition, innovative companies face repeated grant application hurdles. In a game of chance, does your presentation fit a set of part-time assessors’ preferences, complete with marking down smaller businesses for factors such as not having the top and most costly accounting or risk-tracking software? I have seen it all.
Solving this is not rocket science. First, use a staged programme system, with end-stage procurement like in the US. Secondly, stop poaching early-stage IP to put in the hands of competitors and incumbents. There are fair licensing provisions that can cover large bills and contracts and prevent vendor lock-in. Thirdly, maybe look at treating innovative company IP and intangible assets as collateral for loans alongside grants. Fourthly, give those IP assets an export market opportunity weighting in assessments, instead of eliminating applicants out of fear of lock-in. Fifthly, recognise that value for money assessment must incorporate risk for growth, and that sometimes ends in failure.
Every project cannot be run like this, but even a relatively few smaller ones would make a big difference. If we do not make public procurement truly open to growth companies, great economic opportunities for getting more bang for your procurement buck are being missed. While I celebrate with other noble Lords the strength of science and technology in the country, I hope that the Minister can find ways that penetrate into procurement in the big spending departments to bring about the economic transformation that is there for the taking to bring money back to the Treasury.
Viscount Camrose (Con)
My Lords, it has been an absolutely brilliant debate, and I join others in thanking the noble Viscount, Lord Stansgate, for bringing it forward. I also join others in congratulating the noble Baroness, Lady Freeman. Many years from now, eventually “Walking with Dinosaurs” will be a fantastic title for her memoir, but we are not there yet. I have been asked to slightly curtail my remarks and I am very happy to do that. I hope noble Lords will forgive me if I do not reflect on everything that has been said in the debate, but rather offer, just to begin with, some of my personal highlights from what I heard.
As a theme, it is clear that we are as one in deeply recognising and valuing the contribution that science and technology can and will make to our economy. Sadly, and frustratingly, many different approaches have been advanced as to how we can best finance that. I hope that we can be on the path of constant improvement to get more investment into this crucial space. I noted a sense of ruefulness from my noble friend Lord Willetts as he said that the role of the Science Minister was to extract money from the Treasury; I am pleased to say that we have somewhat moved on from this position.
I was very struck by the noble Baroness, Lady Neville-Jones, reminding us of the growing importance of international rivalry in this space. I think that is going to play an increasing part in our deliberations here.
The noble Lords, Lord St John of Bletso, Lord Tarassenko and Lord Drayson, asked, one way or another: where are our Metas or Alphabets? It is a question that certainly bugs me. Let us hope that, between us, we can move towards more of an answer. The noble Baroness, Lady Bowles, spoke powerfully about the issue of IP retention in universities, and that is clearly something we need to continue to look at.
The noble Lord, Lord Lucas, raised the issue of standards and regulations. There are not many silver bullets in technology regulation, but standards will be one of them. International global standards, particularly for instance with the copyright issue in AI, are going to be a big part of that solution.
I absolutely share the wish of the right reverend Prelate the Bishop of Newcastle to foster a faster-growing tech community in the north-east of England. If I may, I commend to her the work of the brilliant organisation CyberNorth; she may know it already.
Innovation is not merely an advantage; it is the foundation of economic growth and global competitiveness. Science and tech are no longer confined to laboratories or research institutions; they are part of the fabric of almost all the work we are doing of any kind across this country.
As of last year, we are one of three countries in the world with a trillion-dollar tech sector. Today, that sector contributes £150 billion annually to the UK economy, a figure that reflects not only the sector’s rapid growth to this point but its remarkable potential for expansion. With emerging fields that have been mentioned many times—quantum AI, engineering biology, and so on—we have the opportunity to cement the UK’s status as a global leader in scientific and technological innovation.
Of course, the contributions of science and tech, as I enjoyed hearing from the noble Baroness, Lady Bennett of Manor Castle, are not limited to economic growth. They enhance our resilience in the face of global challenges. I frequently argue that for all the amazing scientific advances we have seen over recent years, perhaps the most impactful was the development of the Covid vaccine, which I think we can all agree underscored, among other things, the power of UK-led scientific innovation, saving lives and demonstrating the critical impact of robust scientific infrastructure.
Investment in science and technology is also an investment in the workforce of tomorrow. The noble Lord, Lord Mair, and others raised this point very powerfully, as did my noble friend Lord Willetts and the noble Lord, Lord Taylor of Warwick. By prioritising education in STEM fields and by fostering partnerships between industry and academia, we are equipping future generations with the skills and knowledge required to thrive in a rapidly evolving landscape. It is not only essential for individual opportunity but vital to our ongoing economic competitiveness.
I want to address some pressing concerns raised by yesterday’s Budget. The Chancellor announced a significant allocation of £20.4 billion for research and development, including £6.1 billion aimed specifically at protecting core research funding. There is no doubt that this funding is crucial for advancing the core of our scientific curriculum. However, the research community has expressed some apprehensions regarding the implications of this. The Budget allocates an increased £2.7 billion for association with EU research programmes and covers the cost of the old Horizon Europe guarantee scheme. This means we are committing with this money not only to new funding but to managing the cost of past obligations. I would welcome some clarity from the Minister on how this is going to break down.
Further, as raised by my noble friend Lord Waldegrave, the abruptness of the decision over the summer to cancel the exascale computing investment—which was, by the way, fully funded through DSIT’s budget, contrary, I am afraid, to statements from the Government that I have heard from time to time—must stand as a significant red flag to AI investors, if only for its unexpectedness and suddenness. When we take this together with the additional costs and risks of hiring staff, the reduction of incentives to invest in technology and the—in my view, rather aggressive—treatment of non-domiciled investors, I think we have grounds for concern. I wonder whether, when the Minister rises, he could tell us to what he attributes our leadership today in science and tech. Is he concerned that these decisions may diminish that leadership and, if so, what do the Government propose to do about it?
That said, I am keen to close on a note of excitement and positivity. Ray Kurzweil, of “singularity” fame, argues that the time between major advances in science and technology diminishes exponentially. If he is right, the technologies available to us at the end of this Parliament will be truly staggering. So let us all be working together to make sure that as many of those breakthroughs as possible are delivered and safely exploited in this science and tech superpower, the United Kingdom.
The Minister of State, Department for Science, Innovation and Technology (Lord Vallance of Balham) (Lab)
My Lords, I am sure noble Lords will agree that we have heard many thoughtful and insightful comments from all sides of this House. Like everyone else, I thank my noble friend Lord Stansgate for organising such an engaging and important debate this afternoon. I also thank him for introducing me to the concept of the POBA and for mentioning the Science and Innovation Network, known as SIN. It gives me an opportunity to apologise for the fact that I introduced the right reverend Prelate the Bishop of Oxford to SIN, which does not feel entirely right. I congratulate the noble Baroness, Lady Freeman, on her terrific maiden speech and thank her for the reminder of the ubiquitous value of applying the scientific method in all sorts of ways.
Science, technology and engineering are fundamental to every aspect of modern government, from healthcare and education to housing, planning, green energy and climate. Indeed, I cannot think of a single area of government policy or operations where science, technology or engineering would not make a difference, and none of the national missions are achievable without investment in innovation. Science and technology are essential for national security; they are the bedrock of our shared prosperity in an era of global instability—as the noble Baroness, Lady Neville-Jones, rightly pointed out—when relationships and partnerships will be important. I agree with my noble friend Lord Stansgate that science and technology are not just for DSIT but for all of government, and that there needs to be an all-of-government approach to this. That is why there is a Cabinet Science and Technology Committee, chaired by the Prime Minister.
Our discussion today is focused on growth. Growth is the first mission of this Government but it is also the first mission of my department, because the economic importance of science and technology is hard to overstate. In historical terms, to state the obvious, the impact of innovation is so profound that standard metrics cannot really grasp it. I do not know how you measure the effect of electricity on growth, or how you really look at the impact of the invention of engines, whether that is James Watt’s steam engine, the combustion engine or the jet engine.
Science and technology remain essential for economic growth today. Seven out of the world’s top 10 companies are science and tech companies, and, in the UK, engineering businesses such as Airbus, BAE Systems and Rolls-Royce employ tens of thousands in communities right across the country—whether they are designing the defence technologies needed to keep us safe or developing small modular reactors to drive forward clean energy. My noble friend Lord Hanworth rightly identified the importance of both SMRs and advanced modular reactors. Pharmaceutical giants such as GSK and AstraZeneca, now Britain’s most valuable company, have transformed healthcare for billions, here and around the world.
Today, a new generation of UK-founded—I emphasise that—companies are putting us at the forefront of the global race for tomorrow’s technologies. Our thriving start-up scene means that the UK receives two times more venture capital investment than anywhere else in Europe. Companies such as DeepMind and Darktrace are harnessing the power of artificial intelligence to tackle some of the toughest challenges, whether that is accelerating the discovery of life-saving drugs or protecting us against increasingly sophisticated cyberattacks.
As the noble Lord, Lord Tarassenko, pointed out, Demis Hassabis and Geoffrey Hinton this month became Britain’s latest Nobel Prize winners for their contributions to artificial intelligence. I know that noble Lords will want to join me in congratulating them on their extraordinary achievement. The noble Lord, Lord Tarassenko, rightly asked what it would take for these companies to grow to be major stable companies in the UK. That is a key question.
I hope noble Lords will join me in welcoming the soon to be Baroness Gustafsson to the Government and to this House. We will all benefit immeasurably from her experience and expertise, and I look forward to working closely with her in the Department for Business and Trade.
As several speakers touched on, investment in science and tech is about not just today’s economy but the economy for decades to come. The rather sudden success of large language models is the result of 70 and more years of research. The outcome of that research was never inevitable, and nor can we possibly predict the path that certain technological progress might take in the century ahead. The scientists and engineers who launched the initial spacecrafts could hardly have imagined the impact of GPS technologies, and the post-war pioneers of quantum theory could not have known how British businesses would one day start using quantum science to devise new scanners, transform the way we monitor climate change or, in the future, enhance rapid financial analysis.
While we cannot always know where innovation will take us, nor predict all of the challenges we will face, we can be certain that science and technology will be fundamental in overcoming them and therefore an absolutely core requirement for any modern Government. Countries that invest in science and technology for the long term will perform better than those that do not. The rapid rise of Singapore or South Korea—now two of the most innovative economies on earth—reflects sustained, strategic R&D co-operation between government, industry and academia to invest in the high-value sectors that hold the key to long-term economic growth.
In this context, I am of course pleased to note that, in the Budget, the overall public R&D spending will rise to a record level of £20.4 billion. Of course, as the noble Lord, Lord Stevens, pointed out, we have a multi-year settlement coming up in March, and it will be crucial to make sure that this future-looking approach and the points raised in this debate are taken into account as we think about what needs to happen then. The noble Lord, Lord Waldegrave, rightly pointed out that long-term funding is essential, and we have recently seen the seven-plus-seven years funding for new MRC centres, which I will come back to, and we have a plan for 10-year funding for certain types of science activity.
The UK’s historical success in science and technology is testament to the strength of our research base, with four of the top 10 universities in the world. This simple point was not just noted by academics but raised repeatedly by investors at the recent investment summit. ARIA is a new part of our important funding landscape, adding different ways of thinking and contributing to this vibrant system. The right reverend Prelate the Bishop of Newcastle is absolutely correct to point out that this is right around the UK—the strength of the north-east and the Helix project she referred to is an important part of this.
In the years ahead, researchers and businesses will, of course, continue to push the limits of the possible. Their innovations will provide security, opportunity and prosperity for future generations: better jobs, better public services and longer, happier and healthier lives. However, they will only do so if we protect basic, curiosity-driven research—as several speakers have said—and if we invest in the skills and the infrastructure that research and development need. That includes the development that is not always about economic growth, but has other purposes, as has been pointed out by the noble Baroness, Lady Freeman.
Moreover, as many people have mentioned, including my noble friend Lord Hanworth and the noble Lord, Lord Mair, we must support the formation and growth of companies through strong partnership with the private sector. This is why the industrial strategy will have R&D running through its core. I will say a little more about that in a minute. If we wish to lay the foundations for long-term growth, we must support the businesses that are taking ideas out of the lab and into lives. We know that £1 of every Innovate UK grant creates £3 of benefits for businesses, and we know that businesses that have Innovate UK funding do better than those that do not.
My noble friend Lord Liddle asked about spin-outs. In yesterday’s Budget, the Chancellor announced £40 million to support researchers spinning out from UK cutting-edge research into the firms of the future, right the way across the UK. That money will go to the sorts of things that take place before the private sector is prepared to come in but will catalyse private sector investment. As the Science & Technology Framework makes clear, however, this has to be about more than just public sector research funding and start-ups. The noble Lord, Lord Tarassenko, listed several of the things that need to be done if we are to be successful at growing companies. We need to unlock private sector capital for scaling; we need to have a supportive regulatory environment; and—a point made very eloquently by the noble Baroness, Lady Bowles—we need clear procurement signals and processes.
The recently announced regulatory innovation office will streamline the regulatory journey for high-tech firms to ensure that the process is easier and simpler and that people and public services can benefit from early access to transformative technologies, whether that is AI for healthcare, pest-resistant crops or cultivated meat that could provide food security—all these are in scope. The noble Lord, Lord Taylor, asked about AI in healthcare, and it is one of the topics that will be covered by the regulatory innovation office.
The noble Lord, Lord Lucas, spoke quite rightly about standards and their importance. This will be looked at as part of what the regulatory innovation office does. He also made a point about the poor quality of people sent to standards meetings—I went to two of those in Edinburgh two weeks ago, so I apologise if that was not satisfactory.
The Government will seek to use procurement to be an early customer of high-tech businesses, learning from models such as the National Security Strategic Investment Fund. This will not only help grow our domestic companies but enhance public service delivery. The missions of course provide a very clear opportunity to link procurement through to R&D. The industrial strategy will have R&D running through every sector. It identifies “life sciences” and “digital and technologies” as two of the key growth-driving industries in the decade to come. In yesterday’s Budget, the Chancellor announced the first £70 million—as has been pointed out—for the new Life Sciences Innovative Manufacturing Fund, which is up to £520 million.
The noble Baroness, Lady Greenfield, rightly pointed out—this point was also raised by the noble Lord, Lord St John—that there is something about join-up that becomes very important here. It is about not looking at each of these things individually, but having a package that can work. That package includes everything, including of course the tax environment, which is important for those companies.
My noble friend Lady Donaghy and the right reverend Prelate the Bishop of Newcastle both raised the importance of the space sector. It is an increasingly significant commercial sector for the UK that now employs over 50,000 people. It is one of four areas in the initial wave of work for the regulatory innovation office and, over the current spending period, UKSA will have spent something like £1.9 billion. We will continue to look at ways to support and grow this sector, including through the catapult network and through some of the sectors identified in the industrial strategy, including advanced manufacturing and defence.
We must harness science and technology for public good and for public services. To achieve sustainable, equitable economic growth, it will be necessary to champion the adoption and diffusion of technologies to ensure that everyone can access the benefits that they bring. Today, the UK’s AI sector is the third-largest in the world. At the international investment summit a fortnight ago, over £24 billion in inward investment was directed specifically to AI. However, without the right infrastructure and the right skills, too few British people stand to benefit from the enormous opportunities.
My noble friend Lord Stansgate and the noble Lords, Lord Mair, Lord Rees and Lord Willetts, all raised questions about skills and education. We remain strongly committed to the idea of supporting teachers in their ability to teach these subjects through the subject knowledge enhancement training programme. I also draw to noble Lords’ attention the £300 million for FE. I would like to reassure the noble Baroness, Lady Bowles, and my noble friend Lord Hanworth that, in terms of mathematics, I have recently met both the Royal Society and the Academy for the Mathematical Sciences—which has just got started—on the topic of maths teaching and education. The noble Baroness, Lady Greenfield, rightly raised the question of diversity. I can assure her that we will be very focused on that question of diversity, both in grants and in terms of training. It is crucial if we are to be successful.
We will shortly publish the AI opportunities plan—work done by Matt Clifford—to set out how we will drive up the research, development and adoption of AI across our economy and how we will ensure that the public sector is well positioned to harness its power to improve the quality and efficiency of the services it provides.
We will also, as part of that, look at the question of compute power, which was raised by noble Lord, Lord Waldegrave, and the noble Viscount, Lord Camrose. It is an important area for the UK where we need significant compute infrastructure. The Exascale project in Edinburgh—I visited Edinburgh very recently—was not funded at the time we took over. It is important that we get the AI and the Exascale process sorted out, so that we have proper compute infrastructure right the way across the UK academic and business communities.
I am very pleased to say that the Government Chief Scientific Adviser and the National Technology Adviser will undertake a review to advise on how to promote adoption of technologies more broadly, which is very important. In answer to the specific question asked by the noble Lord, Lord Markham, about the med tech pathway, I can tell him that the innovative devices access pathway has been launched, eight technologies are under review and, in addition, the NICE process has undertaken a review to see what could be done to improve uptake and adoption. I can certainly provide more detail if the noble Lord would like.
Finally, I would like to say something about the national data library, to unlock the full value of public data assets. This is going to be important and will address the questions that were quite rightly raised by the noble Lord, Lord Markham, about the real value and opportunity in life sciences data. We have huge resources, including UK Biobank. Bringing these together and getting them properly interoperable and accessible will be important.
I turn now to some specific points that have been raised by individual noble Lords. The noble Lord, Lord Willetts, rightly identified cell and gene therapy as a crucial and transformative industry, and he raised important points about the complexity of VAT being applied to something that is both a service and a product. I will certainly raise these issues with both the Department of Health and the Treasury, and I will also point out that the Dutch system has found an answer to this, so there may be a model to look at.
Coming back to the question of procurement, I agree with the noble Baroness, Lady Bowles. It is crucial; we have to get this right. It is a big part of what will drive innovation. In terms of the points on IP, I will not go into details, but the IP requirements for Innovate UK are not for any IP. There is a specific requirement in one part of the process, called “Contracts for Innovation”, which concerns departments looking for grant-giving for companies. Because of the Subsidy Control Act, there is a nuance which means that it is quite difficult for them not to have some IP taken—but I want to look at that and see if we can get to an answer.
International work was raised, and it is so important that we are back in Horizon and that we have an uptake both from academia and industry, which should be everywhere across the country. The noble Lord, Lord Drayson, asked about the links to the US. I point him to the interest that has come up as a result of the AI Safety Institute, where there is now a very strong link with the US and, indeed, with US companies. His point about where we align regulation is a critical one.
Europe also came up in relation to FB10. I have commented on this previously; we are keen to be part of future European programmes, provided they are based on excellence and create value, and we have already issued a statement on FB10 in a paper.
The noble Lords, Lord St John and Lord Taylor, talked about skills, visas and talent, and it is important that we get that right. We know that the ability to retain skills in this country will be crucially important, and we know that we have always relied on significant overseas skills to be at the forefront of what we do in science and technology. I completely agree with the noble Lords, Lord Mair, Lord Waldegrave and Lord Stevens, that universities are key and I am working very closely with the Department for Education to make sure that we get the right support for them.
In reply to the noble Baroness, Lady Bennett, I am afraid I do not have the answer on agro-ecological approaches and the per cent spend, but I will find the answer and get it to her. I will also come back to the noble Lord, Lord Winston, on the MRC centres, which are important—I gave quite an extensive answer on that earlier this week, but I will come back to the noble Lord with more details.
Finally, I will pick up on the point about failure and the acceptance of it, raised by several noble Lords, including the noble Lord, Lord Lucas. It is crucial that we have a system that allows failure to occur; you cannot innovate without failure. I have talked to the National Audit Office about this and, as we look at UKRI and Innovate UK, it will be part of trying to get this into a much better position.
In the Budget yesterday, the Chancellor set out an ambitious plan to fix the foundations of our economy and to rebuild Britain by mending public services and delivering sustained economic growth. None of that is possible without science and technology. Without science, technology and innovation, we will not be able to transform the quality and efficiency of our hospitals and schools. Without championing science and technology in start-ups and scale-ups, we will not create the good jobs that are needed. It is a crucial part of what we need to do for today and tomorrow, it will reap benefits for years to come, and it is important for national resilience. I end by saying that I completely agree with the fire drill point.
Viscount Stansgate (Lab)
My Lords, in making a few closing comments, I wish it was rather like those old red phone boxes, where you could press button B and speak for as long as you like. Sadly, I have only 60 seconds in which to thank everyone for taking part. The wealth of expertise in this House is amazing, and today’s debate is an example of the House at its best. There has been a good bipartisan spirit; there may have been a few comments about the Budget but, as somebody once said, recollections may vary. On the whole, the debate has been conducted in a good spirit.
I particularly thank my noble friend Lady Freeman, if I may call her that, for her excellent maiden speech—look at the impact it has had on all of us here today. I was rather pleased to convene a sub-committee of the “former Science Ministers’ club” as part of today’s debate. I very much hope that the Minister will feel that he has the support of the House as he undertakes his role. I, for one, am going to send a copy of today’s Hansard to members of the Cabinet committee, as it is worth them reading the debate and having this on their agenda.