Employment Rights Bill (Eleventh sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
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The Chair
Welcome back. Will everyone please ensure that all electronic devices are turned off or switched to silent mode? We will continue line-by-line consideration of the Bill. The grouping and selection list for today’s sittings is available in the room and on the parliamentary website. I remind Members about the rules on declarations of interests as set out in the code of conduct.
Schedule 2
Right not to be unfairly dismissed: removal of qualifying period, etc
Greg Smith (Mid Buckinghamshire) (Con)
I beg to move amendment 156, in schedule 2, page 112, line 19, after (b) insert “, (c)”.
This amendment makes the reason that the employee was redundant a reason in relation to the dismissal of an employee during the initial period of employment.
The Chair
With this it will be convenient to discuss amendment 157, in schedule 2, page 112, leave out lines 32 to 34.
This amendment removes the provision that may be made by regulations that the dismissal of an employee is to be treated as fair only if the employer has taken any steps specified in the regulations.
Greg Smith
It is a pleasure to serve under your chairmanship, Ms Vaz. This pair of amendments on unfair dismissal stand in my name and those of my hon. Friends from the official Opposition.
Amendment 156 would make the fact that the employee was made redundant a reason in relation to the dismissal of an employee during the initial period of employment. The Bill stipulates that the modified protections against unfair dismissal in relation to the initial period of employment mean that an employee can be dismissed for the reasons listed in section 98(2) of the Employment Rights Act 1996, which include
“the capability or qualifications of the employee for performing work of the kind which he was employed by the employer to do…the conduct of the employee”
or
“that the employee could not continue to work in the position which he held without contravention (either on his part or on that of his employer) of a duty or restriction imposed by or under an enactment.”
The 1996 Act also includes a fourth reason,
“that the employee was redundant”,
which is not replicated in the Bill. This is a probing amendment—we do not intend to press it to a Division—to try to tease out from the Government a little more detail and to establish why that fourth reason is omitted from the Bill.
Amendment 157 is also a probing amendment. We want to understand what steps will be specified in regulations that an employer must follow in order for the dismissal of an employee to be treated as fair. That will come back to the test of subjective reasoning rather than specific guidelines or regulations in the Bill. It is only right that the Committee and businesses out there in the real world can fully understand the scope with which the Government are defining “fair” or “unfair”. Inherent to that is the question, why is it not in the Bill? Why is it not as clear as day in the words printed in this quite substantial tome? I know that the Government want to table more amendments, so perhaps those could be a little more specific. Critical to amendment 157 is the question how burdensome the Government intend this measure to be and how proportionate that burden will be on businesses in relation to the problem that the Minister thinks the Bill in its current form—its current vagueness—will solve.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
It is a pleasure to see you in the Chair, Ms Vaz. I refer to my entry in the Register of Members’ Financial Interests and my membership of the GMB and Unite trade unions.
The shadow Minister has posed some questions that underlie amendment 156, which seeks to include redundancy as one of the reasons for dismissal to which the lighter-touch standards will apply during the statutory probationary period. As he has rightly identified, the Bill sets out that the reasons for dismissal to which the lighter-touch standards may apply are the statutory grounds of capability, conduct, illegality and some other substantial reason.
It is important to note that those four areas relate to the individual employee, which is why redundancy is not included. Redundancy can affect entire workforces, whereas the other areas are included because of the overlap between the potentially fair reasons for dismissal in the legislation, particularly suitability for work, and the sorts of issues that might come up in a probationary period. A redundancy situation would not ordinarily come up within a probationary period, because it would be about the wider business condition rather than the individual employee’s performance or suitability for the job. I hope that explains why redundancy has not been included.
I turn to the shadow Minister’s more general points. We are trying to strike a fair balance between strengthening employee protections against unfair dismissal and maintaining businesses’ ability to hire, assess and dismiss new employees. The Government are committed to ensuring that businesses retain the confidence to do so. We do not wish the new procedures to undermine existing fair dismissal processes for redundancy, which already provide a robust, straightforward and fair process for employees facing redundancy.
We will work closely with ACAS, in consultation with businesses and trade unions, to ensure that there is clear, straightforward and easy-to-follow guidance on how to carry out a redundancy process under the new measures. It will be an easily accessible process. One of our concerns about including redundancy is that if an employer decided to make a significant number of their workforce redundant, it would be an additional administrative job for them to identify which employees they did not need to include within a redundancy process because they were part of a statutory probationary period, and which would be subject to the wider process. That would lead to unintended consequences and possibly risk of discrimination claims.
Sir Ashley Fox (Bridgwater) (Con)
Can the Minister give me an assurance on how microbusinesses will be affected by the change? A very small business might choose to take on one person, and there might be nothing wrong with that person, but within a couple of months the business might realise that it is not working from an economic point of view. The employee would then be effectively redundant, because that small business cannot sustain their employment. Can the Minister assure me that if that small business cannot dismiss that person for the reason of redundancy during the probationary period, there will not be a separate, complex redundancy process to follow?
Justin Madders
The hon. Member may be conflating two slightly different issues. I say to him very clearly that existing laws on redundancy will not be changed as a result of the Bill. We expect employers to follow the same processes, regardless of the length of service of the employee. In that situation, I do not imagine that there would be a particularly lengthy process if it involved only one individual and a small employer. There would not need to be a pool for selection, for example, or selection criteria. We would expect the employer to comply with the law in those circumstances.
Amendment 157 questions whether regulations should be able to set steps that an employer must follow for a dismissal to be considered fair when prescribing lighter-touch standards to apply during the statutory probationary period. We have set out clearly our intention to have a light-touch process, and we know that around 9 million employees will benefit from that. The intention behind setting out those steps in regulations is to ensure that we take account of further consultation, which we will undertake not just with employers but with trade unions and civil society, to ensure that we have the right balance of process and fairness in a statutory probationary period. We will be developing that in due course. As is often the case with the ACAS code of practice on disciplinary and grievance procedures, there are already lots of examples of really practical guidance out there, which we intend to replicate. I invite the shadow Minister to withdraw the amendment.
Greg Smith
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Greg Smith
I beg to move amendment 155, in schedule 2, page 112, line 23, after “period” insert
“of no less than six months”.
This amendment makes the initial period of employment at least six months in length.
The Chair
With this it will be convenient to discuss amendment 5, in schedule 2, page 112, line 23, leave out from “period” to the end of line 24 and insert
“of not less than 3 months and not more than 9 months from the day on which the employee starts work.”.
This amendment will ensure that the initial period of employment is between 3 and 9 months.
Greg Smith
Amendment 155 would make the initial period of employment six months, to align with a standard probationary period. The Government have admitted that they do not have robust data on instances of dismissal for those under two years of employment; in other words, we do not know if there is even a problem with unfair dismissal that the Bill is seeking to solve. Without knowing the problem, how can the Government identify a solution or even know that one is necessary? This is a flimsy basis for enacting a measure that the Government estimate will cost businesses in excess of £40 million a year overall.
Laurence Turner (Birmingham Northfield) (Lab)
It is a pleasure to serve under your chairship, Ms Vaz. I draw attention to my declarations in the Register of Members’ Financial Interests and to my membership of the GMB and Unite trade unions.
Before we move past the hon. Gentleman’s point about information, which we have talked about a lot, is the core problem not that there is a wider issue with UK labour market statistics? We heard during the evidence sessions from the Resolution Foundation, which said:
“The Office for National Statistics’ labour force survey is in the doldrums”.––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 119, Q125.]
This is not a party political point. The ONS’s collection methods, which broadly worked until the pandemic, have not worked subsequently. The statistics body is going through a period of transforming the labour force survey, but the criticisms that the hon. Gentleman makes of the information available to this Government would have held true for the Government between 2020 and 2024. This is a much wider issue. We could look at that problem and say, “We didn’t even really know what the UK unemployment rate was for some time,” and if that was an absolute barrier, all employment legislation would be on hold. It is important that those practical challenges are acknowledged.
Greg Smith
I do not disagree with what the hon. Gentleman says, but where we do disagree is on the conclusions that we draw from that. I would strongly argue that to introduce primary legislation without an adequate evidence base is foolish, whereas he seems to be arguing that it is fine to do that.
I fundamentally agree with the hon. Gentleman that there is often a problem with data collection, particularly on complex things such as overall employment numbers, the number of people in multiple jobs or whatever. He certainly hit the nail on the head about the post-pandemic understanding of the labour market. The pandemic brought about almost a fundamental reset in a lot of working patterns; nobody seems to work quite in the same way as they did before the pandemic. I acknowledge his point, but I suggest that this was actually the time to take a bit of a pause and a step back to think through new measures more carefully, rather than to rush ahead with a Bill in order to publish it within 100 days of the Government’s taking office.
I return to my questions to the Minister. What estimate has he made of the additional cost to business, including salary costs during performance management or disputes, retention costs from tribunal risk aversion, and increased settlements offered to avoid legal claims? Are those costs worth it for a problem that, as we have just discussed, nobody can actually prove exists in the UK market right now?
Sarah Gibson (Chippenham) (LD)
It is a pleasure to serve under your chairmanship, Ms Vaz. I will speak principally to our amendment 5, but Opposition amendment 155 is also relevant.
We broadly welcome the Government’s intention to clarify some issues around probation. However, we feel that these measures will make it too difficult for small businesses, which we all know are the backbone of our economy, to take staff on. If we are not careful, the Bill, albeit not by design, could be catastrophic for some small businesses.
I would like the Minister to assure me that small and medium-sized enterprises can be confident that they will not be unduly penalised if they need to give notice during a probation period. Our amendment would put a number on the period, albeit that it allows a range. Both amendments aim to find out whether the Government have an idea of the timescale for the probation period.
When I speak to some of my small innovative businesses, especially those in renewable energy, one thing that concerns me is that they are taking staff on who do not have experience in the field. There simply are not enough people with experience, so businesses are taking people on speculatively who they hope to encourage, teach and train on the job. If they realise early on that that is not possible and that the employee is not suitable for the sector, they need to be able to start again and try again without feeling penalised. There is no way they can do this over a 10-minute coffee, as one Government Member suggests, because these people have no experience in the field. They are on a learning curve as much as the employer is. This probation period is vital for both sides to understand whether the sector, which is new to many people, is appropriate.
I am very concerned that the period, which is the only thing we know about, is not defined as a set amount of time to give small businesses confidence that they can continue to take on staff about whom they are concerned. If the timescale cannot be set out in the Bill, I would like some idea from the Minister of when we might hear it.
Steve Darling (Torbay) (LD)
It is a privilege to serve under your chairmanship, Ms Vaz. I want to unpick another issue on which I would welcome some reassurances from the Minister.
I have spoken to a gentleman from the Torbay Business Forum who supports a charity that works across Devon, particularly by supporting people with learning disabilities into employment. One often finds that it can take a bit longer for people with learning disabilities to find the right place and get a firm contract. What safeguards are there for charitable organisations and not-for-profit companies working in that sector to prevent them from ending up in the difficult position of having people on their books who, sadly, over an extended period of time, they realise are not fit for purpose because of challenges in their lives? There will no longer be the opportunity to offer extended flexibility.
Like my hon. Friend the Member for Chippenham, I broadly welcome the Bill’s direction of travel, but I would like to see some of the rough edges knocked into shape for Torbay residents.
Justin Madders
I am grateful to Opposition Members for tabling their amendments and asking a series of questions.
The hon. Member for Chippenham seeks to set the boundaries for the statutory probation period at three and nine months. The hon. Member for Torbay seemed to argue for a lengthier period; I do not know whether he was asking for nine months or beyond, but I take his point. The hon. Member for Mid Buckinghamshire asked us to put six months on the face of the Bill, so there is quite a range of options. We have decided that the best thing to do is work with businesses and consult with them on the detail of the proposal as we move forward. We have expressed a preference for nine months as a result of the engagement that we have undertaken.
As the hon. Member for Mid Buckinghamshire indicated, businesses have said that generally six months is about the right period, but in some circumstances they may need a bit longer to ensure that the person is the right fit. That is why we alighted on the proposal for nine months, but we do not want to tie our hands by putting it on the face of the Bill; we want to continue to work with businesses and trade unions to understand whether that is the right figure. Putting a number in the Bill would be premature, because we will have further conversations. As we develop the light-touch process in our deliberations, that may help people to firm up their views about whether nine months is indeed the right amount of time.
The hon. Member for Mid Buckinghamshire questioned the evidence base. Of course there can be no evidence base for people being unfairly dismissed under two years’ employment, because there is no right protecting them from unfair dismissal before then, except for those who may seek to hang their hat on an automatically unfair dismissal. As we have discussed at length, people sometimes do that because they have a sense of grievance about the way they have been treated, and they may well have a legitimate claim.
Hon. Members generally accepted that the labour force survey statistics are not particularly helpful, but there is quite a lot of evidence about the impact of job insecurity more generally and the fact that the two-year qualification period creates uncertainty for individuals. Business in the Community surveyed 4,000 employees, of whom 66% say that their mental health and wellbeing is affected by their personal job insecurity. In written evidence to this Committee, the Union of Shop, Distributive and Allied Workers notes:
“Being dismissed on spurious conduct or capability grounds, without a fair investigation”—
as can happen at the moment under two years of employment—
“can have devastating consequences for an employee. It can destroy the individual’s morale and confidence and…living standards”.
This is happening to people already, and it is having an impact.
There is also evidence to suggest that there are further advantages for the wider economy. The Resolution Foundation has done some research on the cooling effect of people not moving jobs because they do not have job security. Someone who is considering moving from one job to another may be more likely to take the leap if they have that window of protection, so it is important for individuals as well.
Greg Smith
Where does the Minister think the cost to businesses will be borne? Will it mean lower wages for employees, no Christmas bonuses or perhaps pay rises that are not as great as employees might be expecting? Or will it ultimately get passed on to customers, consumers and purchasers of the services that those businesses provide? Where will the cost actually be borne?
Justin Madders
I thank the shadow Minister for his questions. Those are exactly the same arguments that we had about the minimum wage, and they did not bear examination in the end. Indeed, the Conservative party eventually decided to support the minimum wage too.
The shadow Minister quoted from the evidence of Jane Gratton of the British Chamber of Commerce. She has actually said that she would favour a nine-month probationary period being set out in regulations, which I think is reflective of comments that I have made. It seems a little odd for her evidence to be used in support of an amendment that seeks a six-month period.
We are committed to working with businesses and trade unions to finalise the period in regulations. Setting it out in the Bill would tie our hands somewhat. It would also go against the spirit of what we are trying to achieve, which is working in a tripartite manner. The shadow Minister has sometimes criticised me for rushing a little bit, so he will appreciate that we are taking our time with this measure because we want to get it right. I urge him and the Liberal Democrat spokesperson not to press their amendments.
Greg Smith
As I hope I made clear in my opening remarks, amendment 155 is a probing amendment. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Justin Madders
I beg to move amendment 55, in schedule 2, page 112, line 36, at end insert—
“3A In section 15 of the Enterprise and Regulatory Reform Act 2013 (power by order to increase or decrease limit of compensatory award), after subsection (5) insert—
‘(5A) The power conferred by subsection (1) includes power to provide that, in the case of the dismissal of an employee that meets the conditions in section 98ZZA(2) and (3) of the Employment Rights Act 1996 (dismissal during initial period of employment), the limit imposed for the time being by subsection (1) of section 124 of that Act is a different amount from that otherwise imposed by that subsection.
(5B) Subsections (3), (4)(a) and (5) do not apply for the purposes of specifying the amount of the limit in such a case.’”
This amendment would enable the Secretary of State to specify the maximum amount of the compensatory award available where an employment tribunal finds that an employee has been unfairly dismissed during the initial period of employment provided for by new section 98ZZA of the Employment Rights Act 1996.
Justin Madders
Amendment 55 will expand an existing delegated power to enable the Secretary of State to specify a different maximum compensatory award where an employment tribunal finds that an employee has been unfairly dismissed under the new light-touch standards during the statutory probation period. Amendments 56 and 57 will make consequential changes to the provisions for uprating maximum awards for inflation.
In the event of any successful unfair dismissal claim, an employment tribunal will consider compensation as a remedy. Compensation will usually consist of a basic award and a compensatory award. The tribunal will determine the compensatory award by considering what it thinks is just and equitable, having regard to the financial loss suffered by the claimant that has been caused by the employer’s actions. This will include reference to salary and benefits, including pension, until the claimant finds alternative employment. The maximum compensatory award is currently the lower of 52 weeks’ pay or £115,115.
The Government have listened to concerns that changes to unfair dismissal law could lead to an increase in unfair dismissal claims, even where there is no merit, and to an increased burden on businesses and tribunals in having to deal with those claims. We have heard that uncertainty of outcome makes it hard for businesses to judge how much to invest in either defending or settling a claim. The introduction of a lighter-touch standard for fair dismissal during the statutory probationary period aims to reduce burdens on businesses and to create certainty, but it will not apply to all dismissals during the statutory probation period.
Having listened to those concerns, the Government committed in our “Next Steps to Make Work Pay” document to consulting on what a compensation regime for successful unfair dismissal claims during the statutory probation period should be. Although we want employers to pause and make considered decisions about dismissing employees during probation, the Government do not think that employers should face the full potential liabilities of unfair dismissal remedies when dismissing an employee for reasons related to performance or suitability for the role during the statutory probation period.
To have the option of implementing reform once we have consulted, it is necessary to introduce this delegated power. The power is limited to making changes to the compensatory award for unfair dismissal claims during the statutory probation period only, and only where the new lighter-touch standards apply. The Government recognise the importance of employers being able to assess new hires. We are committed to introducing a statutory probationary period in which there will be lighter-touch standards for an employer to meet in order to dismiss an employee fairly if they are not suitable for the job.
The power will not enable the Secretary of State to make changes to the level of compensation for other day one unfair dismissal rights, such as automatically unfair reasons including maternity-related dismissals, or for “ordinary” unfair dismissals such as redundancy. The power will not enable the Secretary of State to make changes to reinstatement or re-engagement as a remedy available to tribunals for unfair dismissal during statutory probationary periods, nor will it allow changes to be made to the additional compensatory award where an employer does not comply with an order of reinstatement or re-engagement by the tribunal. There may be some concerns that the power could be used to undermine enforcement of the day one right to unfair dismissal, but I assure the Committee that this is not the intention.
The Government are making basic protections against unfair dismissal a day one right for employees. They will be able to enforce their rights and take a claim to the tribunal if they have been unfairly dismissed. It is important, however, that employers are able to assess new hires and see whether they are suitable for the job without facing the full potential liabilities of unfair dismissal remedies during this period.
Greg Smith
I have a straightforward question. We are back once more with our old friend of not having full clarity and having consultation after legislation. The Minister gave a figure, but it is not clear exactly what the Secretary of State might consider specifying as the maximum compensation that can be awarded under this measure.
I acknowledge that there is a consultation to come, but the reason that we need greater clarity relates to the point about business confidence in making new hires, putting new job adverts out, seeing who applies and trying to recruit. If there is a risk that the figure will be disproportionately high, it will make businesses more risk-averse about growing their businesses and thereby growing the economy and creating more jobs in our country. My only substantive question is “Where is the ceiling going to be?”
Sarah Gibson
I share some of the shadow Minister’s concerns. Consultation to find out what most concerns businesses is obviously commendable, but if a large amount of the Bill is left to secondary legislation, a lot of it will not come back before the whole House for scrutiny. Can we be assured that decisions that are not taken before the Bill is passed can at least be considered by a Committee when they are finally made?
Justin Madders
I take on board the comments that the Opposition spokespersons have made, but if we put something in the Bill now, we would be pre-empting the consultation. It is very important to get this right, acknowledging the balance that needs to be struck and the points that have been made. It is worth bearing in mind that this measure will not be implemented until autumn 2026 at the earliest, which is still a considerable time off. The reason we want to take the time between now and then to engage and consult with businesses is to ensure that we get that figure to a spot that gives justice to individuals and certainty to businesses about the potential liability they may face.
Greg Smith
I am grateful to the Minister for that clarification. I understand the point about autumn 2026, but would he acknowledge that the vast majority of businesses are probably already working on their 2026 business plans? They are not just planning for tomorrow, next week and January; they are making medium and long-term plans. Those decisions about creating a new role, filling a vacancy or whatever it might be will already be baked into business planning for 2026, 2027 and maybe through to 2030, so it is not good enough to say, “It’s not coming in until 2026, so don’t worry.” Businesses are already in that planning space.
Justin Madders
I take the shadow Minister’s point, but that presupposes that businesses bake into their business plans compensation for unfairly dismissing their staff, and I do not think any business would want to proceed on that basis. This is about a potential liability that might come in at a future point.
Of course, we all want employers to retain their staff and have a productive working relationship, but if they do not, we want them to comply with the law and dismiss employees fairly. There will be a small number of cases where that does not happen, but I would not expect a business to be able to anticipate what might happen in two or three years’ time with an individual employee and whether a process was followed or not. That is probably not on a business’s desk at this point.
Amendment 55 agreed to.
Amendments made: 56, in schedule 2, page 114, line 20, at beginning insert—
“(1) The Employment Relations Act 1999 is amended as follows.”
See the explanatory statement for amendment 57.
Amendment 57, in schedule 2, page 114, line 23, at end insert—
“(3) In section 34 (indexation of amounts, etc)—
(a) in subsection (1)(c), for “124(1)” substitute “124”;
(b) omit subsection (4);
(c) in subsection (4A), for “124(1)” substitute “124”;
(d) in subsection (4B)—
(i) for “124(1)” substitute “124”;
(ii) after “1996” insert “in relation to cases of any description”;
(iii) for the words from “such a sum” to “that date” substitute “, with effect from a day within 12 months before that date, a sum specified in that section in relation to cases of that description”.”—(Justin Madders.)
This amendment and amendment 56 are consequential on amendment 55.
Question proposed, That the schedule, as amended, be the Second schedule to the Bill.
The Chair
With this it will be convenient to discuss the following:
New clause 28—Unfair dismissal: impact assessment—
“(1) The Secretary of State must carry out an assessment of the likely impact of section 19 and Schedule 2 of this Act on—
(a) employers, and
(b) the economy.
(2) The assessment must –
(a) include labour market and broader macroeconomic analysis,
(b) examine the impact of the measures in section 19 and Schedule 2 of this Act on employment, wages and economic output,
(c) consider the likelihood the dismissal measures leading to lower employment, and greater use of temporary contracts, and
(d) examine the likely effect of section 19 and Schedule 2 of this Act on—
(i) productivity,
(ii) wage growth,
(iii) equality of opportunity,
(iv) job security,
(v) economic activity, and
(vi) employment.
(3) The Secretary of State must lay a report setting out the findings of the assessment before each House of Parliament.”
This new clause requires the Secretary of State to assess the impact of the provisions of Clause 19 and Schedule 2.
Amendment 134, in clause 118, page 105, line 20, at end insert—
“(3A) But no regulations under subsection (3) may be made to bring into force section 19 or Schedule 2 of this Act until the findings set out in the report under section [unfair dismissal: impact assessment] have been approved by a resolution of the House of Commons on a motion moved by a Minister of the Crown.”
This amendment is linked to NC28.
Justin Madders
Schedule 2 amends the Employment Rights Act 1996, including the introduction of a statutory probation period. It also removes the qualifying period for the right to written reasons, replacing it with a requirement for the dismissal to have occurred after the statutory probation period ends. By removing the qualifying period, schedule 2 makes basic protection against unfair dismissal a day one right for all employees, ensuring that employees receive a baseline of security and predictability.
By introducing a statutory probation period in legislation, the schedule ensures that employers can continue to assess new hires. It allows the duration of the statutory probation period to be set out in regulation by the Secretary of State, which will follow public consultation.
I will take Members briefly through the elements of schedule 2. Paragraph 1 repeals the two-year qualifying period. Paragraph 2 makes it clear that the right to be unfairly dismissed does not apply to those who have not yet started employment. Paragraph 3 makes provision about dismissal during the initial period of employment, which we have already discussed. It will ensure that the “potentially fair” reasons in section 98 of the Employment Rights Act 1996 will be subject to the light-touch regime where they relate to the employee with the exception of redundancy.
As we have already discussed, the Government intend to consult on the standards, and the schedule repeals the two-year qualifying period. A Government amendment has been made to schedule 2 to include a delegated power to change the maximum compensatory award available during the statutory probation period where the lighter-touch standards apply, as we have just discussed. We will consult on that.
Greg Smith
The Minister tempts me, but I will set out our rationale for new clause 28 and amendment 134. I acknowledge that he has published a series of impact assessments, but the Regulatory Policy Committee has not exactly given the Bill a glowing bill of health, and there are a significant number of red ratings in its assessment. I gently push back and suggest to the Minister that the impact assessments need to be looked at again across the piece, so that we can be absolutely certain that the Bill will do what the Government want it to do.
As the Minister rightly said, new clause 28 would require the Government to report on the impact of the Bill’s provisions on unfair dismissal on employers and the economy. That goes beyond the impact assessments that the Government have already conducted, in the sense that the assessment we are calling for must
“include labour market and broader macroeconomic analysis… examine the impact of the measures in section 19 and Schedule 2 …on employment, wages and economic output…consider the likelihood the dismissal measures leading to lower employment, and greater use of temporary contracts, and…examine the likely effect of section 19 and Schedule 2…on productivity…wage growth…equality of opportunity…job security…economic activity, and”—
last but not least—“employment.”
All that work should have been done before the Government proposed this legislation, so the Opposition think it is only right to try to ensure that the Government present the House with the necessary information before the changes to unfair dismissal come into effect. That is the bedrock of a democracy, and it is only right that all Members of this House and, indeed, the other place can see that information before they permit the Bill to complete its passage and gain Royal Assent.
We heard from several witnesses that the provisions will tip the balance of risk for employers, who will choose to not hire people, rather than take a chance on whether a new hire will work out. We also heard that people on the edge of the labour market represent a riskier proposition for employers and are most likely to be disadvantaged by the changes. I do not believe that any Member of this House—of whatever political party or none—wants to see people on the edge of our labour market denied a second or third chance. They deserve the ability to get on in life if, for whatever reason, they have not been able to get on the job ladder and into gainful employment.
All the evidence indicates that the Bill’s provisions on unfair dismissal will have a chilling effect on business growth. How will the Bill support the Government’s first mission of economic growth, when all the evidence—written and oral—and the reports in the press and from other bodies point to the contrary? Even the Government’s own impact assessment cannot provide reassurance that the measures in the Bill will lead to growth. The new clause would introduce safeguards and provide the clarity and detail that all Members no doubt want on whether clause 19 is even necessary for the intent of schedule 2.
Justin Madders
I will try to put the shadow Minister’s mind at ease. I point out that not just is there an overall impact assessment for the Bill, but there are 24 separate impact assessments for different measures. That shows the amount of work that has been put in. The RPC has approved two thirds of those assessments, and it was looking only at the evidence base, not the policies themselves.
The impact assessment for day one rights covers everything we would expect an impact assessment to look at: the business environment, the wider economic impact, trade implications, wages, labour mobility, productivity, and sectoral and regional impacts. As the evidence base is firmed up, we will continue to refine and develop it. It deals comprehensively with many of the shadow Minister’s concerns, and I invite him not to press his amendments to a vote.
Question put and agreed to.
Schedule 2, as amended, accordingly agreed to.
Clause 20
Dismissal during pregnancy
Question proposed, That the clause stand part of the Bill.
The Minister for Equalities (Dame Nia Griffith)
Clause 20 amends an existing power in section 49D of the Employment Rights Act 1996, which allows the Secretary of State to make regulations
“about redundancy during, or after, a protected period of pregnancy.”
Regulations made under that power took effect in April, bolstering the protections against redundancy for pregnant women. However, redundancy is just one of five reasons for which an employee can be fairly dismissed. The changes delivered by clause 20 are required so that regulations can be made in regard to dismissal more broadly beyond redundancy, both during and after pregnancy.
The existing provisions for redundancy allow regulations to set out three things. The first is how the protected period of pregnancy is to be calculated. The regulations can provide that the protected period begins after a pregnancy has ended, which means that protection can be extended to a woman who has miscarried but has not yet told her employer that she is pregnant. The second is that employers must offer alternative employment to pregnant women at risk of redundancy. The last is the consequences of a failure to comply with any protections, including stipulating that this will result in the dismissal being treated as unfair. Those provisions for redundancy will all be extended, and therefore made available for dismissals for reasons other than redundancy, through this clause. This approach is necessary to then deliver enhanced dismissal protections in the regulations for pregnant women.
A 2016 Equality and Human Rights Commission survey found that 1% of mothers were dismissed following their pregnancy each year. Analysis by the Department for Business and Trade estimates that that equates to around 4,100 mothers—that is how many women could benefit from the new dismissal protections annually. Using secondary legislation to set out the policy detail is a standard approach in this area of employment law and supports working with stakeholders to further shape the policy before confirming the final approach in the regulations.
Clause 21 amends existing powers that allow the Secretary of State to make regulations concerning dismissal during several kinds of family-related statutory leave. The amended powers will continue to allow for regulation of dismissal during the period when an employee is away from work on maternity leave, adoption leave, shared parental leave, neonatal care leave or bereaved partners paternity leave. The amended powers will also apply to a period after the employee has returned from one of those types of leave.
Additionally, clause 21(5)(b) clarifies that parents looking to take bereaved partners paternity leave who have adopted from overseas or had their children via a surrogacy arrangement can be included in regulations creating protections against redundancy, as well as the new protections against dismissal for other reasons. It also makes it clear that the cohort of parents taking bereaved partners paternity leave can be included in the regulations allowing access to keeping-in-touch days, which allow an employee on statutory leave to be able to do some work for their employer without that leave coming to an end.
Our primary focus with the enhanced dismissal protections is supporting pregnant women and new mothers during and after maternity leave. However, as is the case with clause 20, we want to consult and work closely with stakeholders on whether new parents more generally should be covered by the enhanced dismissal protections. The final policy design will then be reflected in the regulations, as is typical in this area of employment law.
Before I commend the clause to the Committee, I put on record my entry in the Register of Members’ Financial Interests, including my membership of USDAW and the National Education Union.
Greg Smith
I think this is one of the least contentious parts of the Bill, and we do not seek to oppose in any way the important protections for pregnant women and new mothers. I note that what the Government are really doing with these clauses is building on the regulations that, as the Minister rightly said, came into force in April off the back of legislation brought forward by the hon. Member for Barnsley North (Dan Jarvis) and my noble Friend Baroness Bertin in the other place.
Again, we have the challenge of consultation after legislation. It is important that the Government move quickly to ensure that the protections for pregnant women and new mothers are not left to drag out as part of that consultation. Although consultation is important, the objective that the Government are trying to meet is quite clear. The desire to build on existing legislation should make it less controversial, and it should make getting it right quickly less of an open-ended question. That will enable pregnant women and people who are trying to conceive and start a family—or to have a second, third or fourth child, or whatever it may be—to plan with the confidence that those protections will be in place. I am not in any way speaking in opposition to this measure; I am just urging the Government not to let the consultation drag on.
Alison Hume (Scarborough and Whitby) (Lab)
It is an honour to serve under your chairship again, Ms Vaz. I draw the Committee’s attention to my declaration of interests and my membership of Unison and the Writers’ Guild of Great Britain. I associate myself with the shadow Minister’s comments about the positive results that the legislation will have when it comes into force.
I will speak briefly about the importance of clauses 20 and 21, which will afford considerable extra protections to women who are pushed out of their jobs from the point at which they get pregnant, while they are pregnant, while they are taking maternity leave or just after they return. We heard at our evidence sessions that under the coalition Government, a report was done by the Equality and Human Rights Commission, which found that it was possible that 54,000 women a year lose their jobs in this way. That report was published in 2016. We also heard the Fawcett Society call for a new report because the data is so out of date. I refer to the comments made by my hon. Friend the Member for Birmingham Northfield and the shadow Minister about the lack of data.
Nobody can argue with the fact that so many women suffer maternity discrimination, however. From January to September 2023, 832 complaints were brought to employment tribunal for detriment or unfair dismissal as a result of pregnancy, and we know that that is the tip of the iceberg. Back in 2022, there was a high-profile example when Morrisons was told to pay a mother £60,000 for discriminating against her when she returned from maternity leave. Donna Patterson, who returned to work after having her second child, was asked to fulfil the responsibilities of a full-time job, despite only being contracted to work part-time hours.
Ms Patterson was supported by the charity Pregnant Then Screwed, the founder of which, Joeli Brearley, told us that
“the dial has not moved very much”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 84, Q79.]
in 10 years, so this Bill will mark a significant step forward. When women suffer maternity discrimination, not only does it take them a long time to recover personally, but it damages their careers and their mental health, and it is a big contributor to the gender pay gap. These clauses will tackle maternity and pregnancy discrimination, and it is necessary to do that to avoid having more women leave the workplace.
Dame Nia Griffith
Let me pick up on the point about the consultation. We very much recognise the urgency, so the consultation is expected to take place in 2025—this coming year—after which we will introduce secondary legislation. It has been noted that clauses 20 and 21 build on previous measures that received cross-party support, and I commend them to the Committee.
Question put and agreed to.
Clause 20 accordingly ordered to stand part of the Bill.
Clause 21 ordered to stand part of the Bill.
Clause 22
Dismissal for failing to agree to variation of contract, etc
Chris Law (Dundee Central) (SNP)
I beg to move amendment 160, in clause 22, page 33, leave out lines 11 to 2.
The Chair
With this it will be convenient to discuss amendment 161, in clause 22, page 33, leave out lines 22 to 40.
Chris Law
It is a pleasure to see you in the Chair, Ms Vaz. Fire and rehire is one of the most contentious issues that we have heard about over the last years, and I will speak to it in some depth.
First, I want to welcome the measures within this Bill, specifically those in clause 22, that tackle fire and rehire by considering a situation to be an unfair dismissal where an employee is dismissed for refusing to accept contractual variation, or where they have been dismissed to enable the employer to employ another employee, or to re-engage a dismissed employee on inferior terms. Over recent years, there have been several egregious examples of fire and rehire from large and very successful companies in the UK. In January 2021, the TUC found that
“nearly 1 in 10 workers…had been told to re-apply for their jobs on worse terms and conditions since the first lockdown in March”—
that is, March 2020. That is 10% of the working population. Notably, almost twice as many black workers faced fire and rehire as white workers.
The SNP completely opposes fire and rehire, which is an appalling and abusive practice, and I am sure that most members of the Committee feel the very same. It must be outlawed. We have long campaigned to ban fire and rehire tactics and ensure that workers are not the victim of bosses looking to cut costs. I pay tribute to my former colleague, Gavin Newlands, who twice brought forward Bills in previous Parliaments to outlaw the practice, which had the support of over 100 MPs and the backing of all major trade unions, including Unite, the British Airline Pilots’ Association and GMB Scotland. I also commend the work of Chris Stephens who, on a regular basis, stood up for workers against the previous Tory Government and called for an immediate end to fire and rehire.
However, there appears to be a loophole, and amendments 160 and 161 seek to remove it. Amendment 160 would delete subsection (4) to proposed new section 104I, which provides an opportunity for fire and rehire to continue where
“the reason for the variation was to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business, and…in all the circumstances the employer could not reasonably have avoided the need to make the variation.”
Along with many others, I have reservations about that. If employers can point to their likelihood of financial difficulty, they will deploy fire and rehire tactics.
Let me ask some questions. Does the Minister agree with Martyn Gray, who gave evidence to this Committee just a couple of weeks ago? He is the director of organising at Nautilus International, and he made it clear to the Committee how high the bar should be set when he said:
“Quite simply, if directors can sign off the business as still remaining as a going concern, fire and rehire should not be an option…I would set a really high threshold and then allow for scrutiny from the relevant bodies.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 65, Q61.]
Employers’ unions have encountered those who have threatened or implemented fire and rehire to reduce workers’ pay and/or conditions, including companies such as British Airways, Heathrow Airport, Argos, Weetabix, Tesco, Asda and British Gas. All members of the Committee know all those names and are very familiar with them. In fact, more than half of those are in my constituency of Dundee and employ a large number of people.
I want to give an idea of the scale of the profits that those companies have made just this year. Asda made £1.1 billion—we are right in the middle of a cost of living crisis, and that is over £1 billion profit for a retail store. Tesco made £2.3 billion profit, and British Gas’s parent company has said that its profits have fallen to a humble £2.8 billion. Those are just three examples and the others—Heathrow Airport, Argos and Weetabix—are also all in profit. One simple cereal company made £368.8 million. Those are hardly companies in dire financial straits. Can the Minister explain how many of the high-profile fire and rehire cases known since 2010 would fall foul of the requirements within the Bill, and how many would be exempted under this loophole?
I think we all know that although the Bill is well-intended—and we fully support it—if it is not revised, it will fail under that loophole. As Andy Prendergast, the national secretary of GMB, explained in his evidence to this Committee:
“We have seen lots of financial engineering. We see inter-company debt. I think there is a concern long term that we may find cases where companies have engineered a financial position that allows them to do something they otherwise would not. That will have to be dealt with on a case-by-case basis.”––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 131, Q135.]
That is twice this Committee has heard evidence that should make us really think about the purpose of the Bill, which I totally agree with on fire and rehire, to ensure that it is watertight.
Can the Minister outline what changes the Government will make to the Bill and what regulatory regime will be put in place to prevent the provision from being exploited in the manner described? For example, will employers have to evidence the financial difficulties before making any decisions on firing and rehiring, or will they need to be evidenced only if an unfair dismissal claim is brought forward? We can clearly see now who holds all the cards. If it is the latter, and claims of financial difficulties are discovered at a tribunal to be unfounded, will employees who have been affected be reinstated on their original terms? These are important questions we need to ask.
In the absence of the detail and guarantees sought, the amendment seeks to remove the loophole altogether. We cannot allow this aspect of the Bill to pass without cast-iron protections against fire and rehire. We cannot wait and see how it plays out in reality, with people’s jobs and lives at stake.
If the provision is to remain—I can clearly see and many others so far have seen that it is a loophole—it is important that further amendments are proposed, not just to clarify definitions of financial difficulties and processes on establishing their veracity, but to ensure that there are further protections to strengthen an employee’s position in relation to any consultations and negotiations that take place when the employer is in financial difficulty. Does the Minister agree that the employer should take all reasonable steps prior to cutting workers’ wages and altering other terms and conditions? Does he agree that all material information should be provided to each union and that as much time as possible must be made available to consult? Does he agree that the employer must comply with any procedural requirements for varying contracts of employment or collective agreement?
Critically, does the Minister agree that the employer should have reduced the remuneration of partners, directors and managers at least to the extent equivalent to that which applies to the workers subject to variation of contract? After all, if an employer is struggling with his company, we cannot have the managerial class carrying on as if it is not affecting them while others have their contracts reduced and their terms and conditions worsened. Does he agree that the employer should have stopped paying dividends to shareholders, buying back shares, or making loans to partners, directors or shareholders, as soon as the financial difficulties became apparent, and renegotiated, to the greatest extent practicable, loans to third parties?
If the Minister does agree, will he give assurances that he will support such amendments being made to the Bill?
Greg Smith
I will speak briefly to amendments 160 and 161, standing in the name of the hon. Member for Dundee Central and the Scottish National party. These amendments seek to make the fire and rehire provisions more restrictive, saying that employers cannot vary contracts or re-engage staff on different contracts
“to eliminate, prevent or significantly reduce, or significantly mitigate the effect of, any financial difficulties which at the time of the dismissal were affecting, or were likely in the immediate future to affect, the employer’s ability to carry on the business as a going concern or otherwise to carry on the activities constituting the business,”
and remove the ability for the employer to do so if in the circumstances
“the employer could not reasonably have avoided the need to make the variation.”
I appreciate that it is quite a convoluted position, but it is clear to me that the SNP is siding with the trade union position that Martyn Gray set out, which is that
“if directors can sign off the business as still remaining as a going concern, fire and rehire should not be an option.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 65, Q61.]
But we heard from almost every witness—
Chris Law
I will re-declare that I have been an employer in the past, as well as an employee, and have employed staff; this is not just a union position. I have talked about companies. I can appreciate small businesses and even microbusinesses being really concerned about such issues, because they would impact them directly.
Typically, small businesses keep a very keen eye on where things are going in the future. If people want a good team in their employ, they make sure that their employees know very well what is going on with such issues. We had this debate earlier. I will list again, just to remind people, the relevant companies: Asda, Tesco, British Gas, Argos, Weetabix and Heathrow Airport. They are big companies, with billion-pound profits, that are taking advantage of the current situation. They have already taken advantage up until now—why will this loophole mean that they will not do it in the future?
Greg Smith
I understand the hon. Gentleman’s point. He likes to point to the profit lines of many of those businesses. Just because a business is making a substantial profit does not necessarily mean that it does not have to go through significant change in businesses practices in meeting market demands, manufacturing processes as technology moves on, or whatever it might be. I am really not seeking to advocate for anybody to be abused in the way he talks about. I am trying to acknowledge that things change in lots of businesses all the time. No one should be unfairly treated as part of that process, but sometimes, even for the very largest companies, significant change happens—as I say, to manufacturing processes or whatever—that requires a fundamental shift in job descriptions.
I am sure that most of those businesses want to keep their workforces on, but if the contract under which the employee was originally employed talks specifically about processes or ways of manufacturing, or uses of particular bits of equipment, that just do not exist anymore because technology has moved on, there is a requirement for contracts to change. Ideally, that will always be done in a consensual, negotiated manner, but the amendments put forward by the hon. Gentleman and the SNP go too far in shutting down that restriction. I agree with his point about small and microbusinesses, which really will struggle, in an ever-changing world with technological advancement and so on, to meet the conditions he is putting down.
Chris Law
We are not talking about technological changes, though, are we? We are not talking about advances that would mean changes to the structure of a business. We are talking about the language that is being used about the likeliness of financial difficulties. To any lawyer, the word “likely”—how long is a piece of string? Someone could argue the case that “likely” means this, while someone else could argue it means that. The language is lax, which is part of the issue.
In terms of financial difficulties, what is a financial difficulty? Does it mean, “We can’t afford the loo roll in the staff toilets so we will fire and rehire,” or something more structural? What I seek from the Minister is assurances that the purpose of the Bill on fire and rehire is very specific: we want to end fire and rehire. Given the current loophole, we have already heard not just from trade unions, by the way, but from businesses—
Greg Smith
Of course there will always be some who look for loopholes, but I gently suggest that the vast majority do not. They are good employers who care for their workforce, because, as we have discussed many times over, no business is anything at all without both parts—the workforce and those who risk their capital and so on to make those jobs happen, and to produce the products and sell the services in the first place.
The intervention from the hon. Member for Dundee Central neatly leads on to where I was going anyway. The Committee heard from almost every witness who was an employer or who represented employers that the dismissal and re-engagement provisions in the Bill were already too restrictive and would lead to staff being laid off. The SNP amendments make those even more restrictive, so it is not hard to work out where those witnesses would have gone on this front. Given that risk of lower employment and higher unemployment, I gently ask the hon. Gentleman to consider how the SNP would actually answer that challenge were the amendment to go through.
Michael Wheeler (Worsley and Eccles) (Lab)
As ever, it is an absolute pleasure to serve under your chairmanship, Ms Vaz. As usual, I draw the Committee’s attention to my declaration in the Register of Members’ Financial Interests, and particularly to my membership of the USDAW and GMB trade unions.
I am sure it will not surprise the hon. Member for Dundee Central to hear that I share some of his concerns about the practice of fire and rehire, and I welcome the significant steps taken in the Bill to outlaw the practice. However, I disagree with his amendment 160. What might be seen by some as a loophole is actually an important safeguard against the perverse potential for the law to mandate redundancy when there might have been other options on the table. I am sure that none of us would want to be party to including that in the Bill.
As I said, I share some of the hon. Gentleman’s concerns, and I hope the Minister will look closely at proposed new section 104I(4) of the 1996 Act, because the words
“likely in the immediate future”
are doing some precariously heavy lifting. However, if the amendment were accepted, the focus on a business being a going concern, which is the most important part of that subsection, would be removed completely. When we are passing legislation that protects jobs and promotes good employment, we absolutely cannot allow the unintended consequence of mandating redundancy when there are other options.
I look forward to the Minister’s comments. I understand the concerns of the hon. Member for Dundee Central, but this is a sledgehammer of an amendment to crack a nut of a possible loophole, with significant potential consequences.
Laurence Turner
Like my hon. Friend, I have intense sympathy with many of the arguments put forward by the hon. Member for Dundee Central, but the “Make Work Pay” document published earlier this year, which was subsequently endorsed in the Labour manifesto, stated:
“It is important that businesses can restructure to remain viable, to preserve their workforce and the company when there is genuinely no alternative, but this must follow a proper process based on dialogue and common understanding between employers and workers.”
We all want to see both parts of that carried through, and I look forward to the Minister’s comments on that. If amendment 160 were accepted, would it not have the effect of invalidating that part of the Government’s manifesto commitment?
Michael Wheeler
It will come as no surprise to my hon. Friend that I agree with him. It is important that we keep our focus on the reality of work and the need to provide workers with protections and good-quality employment. The Bill has been brought forward in the context of “Make Work Pay” and the “Next Steps” document, and I look forward to what I am sure will be illuminating comments from the Minister.
Sarah Gibson
I thank the hon. Member for Dundee Central for tabling the amendment, which has drawn out a potential loophole that I hope the Government will look at carefully. We so often see legislation introduced with good intentions, and then 90% of businesses—especially smaller businesses—comply with it to the letter, because they think that is the right thing to do, but the larger corporations find a way around it.
Justin Madders
I am grateful for the contributions in this debate, which deals with one of the central issues we have been grappling with. On this side of the Committee we certainly want to see fire and rehire consigned to the history books. Equally, we do not, as my hon. Friend the Member for Worsley and Eccles said, want to see businesses feel they have no option but to make people redundant because they do not feel they can take any other course of action. It is about trying to ensure that that is still available without opening a loophole, as it has been described, for abusive fire and rehire tactics to continue. There is an awful lot in the Bill as it stands that will make it a very high threshold indeed for any employer to want to take that step. There will, of course, be further guidance in regulations, where we will home in on the kinds of concerns that have been raised.
Chris Law
I appreciate that there is a lot in the Bill, and I appreciate that some Government Members on the Committee think this is a nut to crack. I have asked questions—I hope to hear some of the answers to them—and I want to add another. I raised the issue of “likely”, which is the language used. Will the Minister remark on whether the Department intends to advise on how the word “likely” should be determined? Will he consider whether that will reflect what was set out in the Trade Union and Labour Relations (Consolidation) Act 1992 and a subsequent tribunal judgment, which came to define “likely” as a need to show
“a significantly higher degree of likelihood than just more likely than not”?
Justin Madders
I am not familiar with the particular case law the hon. Gentleman refers to, but I will take that away.
It is fair to say that employment tribunals currently do not have the kind of inquiries into a business’s finances and general condition that we are trying to achieve with this legislation. At the moment, there is a fairly broadbrush approach, particularly in terms of redundancies, to inquiries about the business reasons. It is important to draw the hon. Member for Dundee Central’s attention to the words after “likely” in the Bill. It is about an
“employer’s ability to carry on the business as a going concern”.
That means the alternative is insolvency or redundancies, which is the eventuality that I am sure we all want to avoid. It will ultimately be a question of fact for an employment tribunal to determine whether it genuinely was the only option available to the employer, which is what the Bill will require the employer to demonstrate.
There are a legion of examples of trade unions working constructively with businesses to avoid those kinds of insolvency situations, as a result of which terms and conditions have changed. The hon. Member for Dundee Central quoted Andy Prendergast who, in respect of what happened in the 2008 financial crisis, said in an evidence session:
“It was heartbreaking, but we had to do it because it was the right thing to do.”––[Official Report, Employment Rights Public Bill Committee, 28 November 2024; c. 131, Q135.]
He was talking about changing terms and conditions in agreement with employers to avoid redundancies and potential insolvencies.
The hon. Gentleman’s amendment would take out all of subsection (5) of proposed new section 104I, which is the requirement for the employer to engage with trade unions and have the dialogue that we think is so important in industrial relations. It would say, “That does not matter any more.” The dialogue we are seeking to develop—the tripartite approach—and the move to make the arbitrary take-it-or-leave-it approach that some employers have adopted in fire and rehire a thing of the past, would not matter.
The hon. Gentleman has asked some important questions about what we would expect of employers; I think subsection (5) answers many of them. Further regulations and codes of practice will also deal with them, because we want to make sure we have a situation in which the bar for passing this test is extremely high, but in addition to that—in addition to there being no alternative but insolvency—the employer has to then demonstrate that they have carried out a full consultation with the trade union. That will involve a full explanation of the financial situation. As we develop the regulations and codes of practice, we will flesh that out in some more detail.
Chris Law
I am listening carefully to the words the Minister is using. When does the employer carry out that process? Ultimately, they have two options. They can carry it out well in advance to ensure that employees are kept up to speed early on. Some employees may wish to leave under those circumstances and find employment elsewhere. But often, in past cases of fire and rehire, employees have heard at a very late stage or not at all. There is currently no provision in the Bill to say what the timetable should be. I would like to get an indication of the Minister’s thoughts about potential future amendments relating to that subject.
Justin Madders
I hear what the hon. Gentleman is saying, but subsection (5) does set out the requirements on an employer to consult. It would be normal for further detail about consultation to be considered to be in good time when proposals are at a formative stage, as has traditionally always been the case. I see no reason why it would not also take the same form in that instance.
What we are really talking about is a situation in which there is a sudden change in a company’s financial circumstances and it has to act quickly. In that situation, we do not want to force it to go insolvent or make people redundant, if there is an opportunity to save jobs. That is why subsection (5) is so important: because it will encourage and compel the dialogue that we are seeking to achieve. I accept that there is more to be done in terms of honing some of the detail, but I urge the hon. Gentleman to withdraw his amendment because it would, I am afraid, have unintended consequences.
Chris Law
I thank the Minister for his comments. It is helpful to know that there will be further consultation and, potentially, amendments—which may even come from his own side—to tighten up this bit of the legislation. It is critical to the wider Bill and the SNP understands its importance; we just want to see it made tighter—not to put employers in impossible situations in which they cannot negotiate, but so that it is not exploited as a loophole. As it currently stands, employers are already discussing that.
I appreciate the Minister’s response. In that context, so long as it is something that can be further considered and, particularly, brought forward on Report, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Anna McMorrin.)
Armed Forces Commissioner Bill (Third sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
Public Bill CommitteesRead Full debate Armed Forces Commissioner Bill 2024-26 View all Armed Forces Commissioner Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 12 December 2024 - (12 Dec 2024)
The Chair
Before we begin, I have a few preliminary announcements. Members should send their speaking notes by email to hansardnotes@parliament.uk. Please switch all electronic devices to silent. Tea and coffee are not allowed during sittings.
Today we begin line-by-line consideration of the Bill. The selection and grouping list for today’s sitting is available in the room. It shows the clauses and selected amendments that have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue. Please note that decisions on amendments take place not in the order they are debated, but in the order they appear on the amendment paper.
The selection and grouping list shows the order of debates. Decisions on each amendment, and on whether each clause should stand part of the Bill, are taken when we come to the relevant clause. A Member who has put their name to a leading amendment in a group is called first; other Members are then free to catch my eye to speak on all or any of the amendments in the group. A Member may speak more than once in a single debate.
At the end of a debate on a group of amendments, I shall call the Member who moved the leading amendment again. Before they sit down, they must indicate whether they wish to withdraw the amendment or seek a decision. If any Member wishes to press any other amendment in the group to a vote, they will need to let me know in advance.
Clause 1
Armed Forces Commissioner
Helen Maguire (Epsom and Ewell) (LD)
I beg to move amendment 7, in clause 1, page 2, line 2, at end insert—
“(5A) The Commissioner must—
(a) uphold and give due regard to the principles and commitments of the Armed Forces Covenant when carrying out their functions;
(b) monitor and report on compliance with the principles and commitments of the Armed Forces Covenant in all areas of their responsibility.”
This amendment would require the Commissioner to uphold and abide by the principles of the Armed Forces Covenant when carrying out their functions.
The armed forces covenant is
“a promise that together we acknowledge and understand that those who serve or have served in the Armed Forces, and their families, including the bereaved, should be treated with fairness and respect in the communities, economy, and society they serve with their lives.”
I feel that it is important for the covenant to be incorporated into the Bill, and so far I do not see any reference to it. It is a binding commitment between the armed forces and the Government, and I would like to see it included in the Bill.
Mr Mark Francois (Rayleigh and Wickford) (Con)
It is a pleasure to serve under your chairmanship this morning, Mr Efford. I will make a brief contribution to say that we take it as axiomatic that the Armed Forces Commissioner will be mindful of the principles of the armed forces covenant throughout the performance of his or her duties. There may be an occasion later in the debate when there is some conflict between those principles and what the Government are currently proposing, but we will highlight that when we get to it, to remain in order.
In essence, it seems to us entirely logical that the commissioner should be mindful of the principles of the covenant, as they are important. The two key principles, for the record, are that armed forces personnel and their families should suffer no disadvantage relative to the civilian population by virtue of their service and that there should be special consideration for armed forces personnel and their families, especially the wounded and the bereaved, in certain circumstances. Having placed those on the record, I am sure the Minister will not demur; hopefully, we can deal with this amendment fairly promptly.
The Minister for the Armed Forces (Luke Pollard)
It is good to see Members from both sides on this Committee for an important piece of legislation. I thank the hon. Member for Epsom and Ewell for her amendment. I agree that it is important that we place prominence on the armed forces covenant. The amendment would require the commissioner to have due regard to the covenant principles as part of their general functions.
As the Committee will know, the armed forces covenant recognises the unique obligations and sacrifices made by those who serve in the armed forces, whether regular or reserve; those who have served in the armed forces; and their families. The Government are fully committed to the armed forces covenant; indeed, our election manifesto included a commitment to place the covenant fully into law. As the hon. Lady will be aware, we will bring that forward as a provision for consideration in the Armed Forces Bill, probably in roughly two years’ time.
An important aspect of the covenant is that it applies to both serving and former serving members of the armed forces. The Armed Forces Commissioner is very much focused on the serving community and their families. It will be perfectly proper for the commissioner to consider covenant issues where those relate to serving members of the armed forces and their families. I would imagine that those issues would be very much at the heart of what we mean by “general service welfare matters”, as outlined in the Bill. That will be within the remit of the commissioner, alongside the commissioner’s general function to promote the welfare of service persons and their families and to improve the public’s understanding of the issues.
Mr Francois
Much of the covenant is already enshrined in legislation, as the Minister probably knows; that was done under the previous Conservative Government. Since he mentioned it, will he explain to the Committee which elements of the covenant he believes are not already enshrined in law and therefore would have to be covered in the next Armed Forces Bill?
Luke Pollard
I am very happy to stray out of the lane of the legislation we are considering today towards legislation that we are not yet considering, if the right hon. Gentleman so wishes. As he will know, only part of the armed forces covenant is in law, with a special grip on local government. In our manifesto, we committed to put it fully into law. The Minister for Veterans and People is undertaking a cross-Government piece of work to identify precisely which clauses would need to be inserted into the Armed Forces Act to make that work.
Insertion into an Armed Forces Act is also relevant to the amendment of the hon. Member for Epsom and Ewell. As she will know, this Bill not a stand-alone piece of legislation: it seeks to amend parts of the Armed Forces Act 2006. Can I direct her attention to part 16A of the Armed Forces Act 2006? That is the part that deals with the armed forces covenant. She is right in the respect that the covenant is not explicitly mentioned in this Bill; that is because this Bill, when passed, will be inserted into that Armed Forces Act, which includes part 16A relating to the armed forces covenant. I hope that, on the basis of those reassurances, she will be able to withdraw the amendment.
Helen Maguire
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Francois
I beg to move amendment 8, in clause 1, page 2, line 2, at end insert—
“(5A) The Commissioner shall operate independently from –
(a) the Ministry of Defence;
(b) the armed forces; and
(c) any other government bodies
and shall be free from any influence or interference in the exercise of the Commissioner’s functions.”
This amendment would require the Commissioner to be independent from the Government and the armed forces and from any interference in the carrying out of their duties.
Amendment 8 has been tabled to facilitate a debate on how truly independent the proposed Armed Forces Commissioner will be from the Ministry of Defence. The Committee may recall that this topic cropped up a number of times during our public evidence sessions on Tuesday. A number of Committee members asked witnesses about the extent to which the new Armed Forces Commissioner, as envisaged in the Bill, would be at arm’s length from the Department and therefore able to exercise truly independent judgment.
The two generals, as opposed to the three tenors—Lieutenant General Sir Nick Pope, the chair of Cobseo, the Confederation of Service Charities, and Lieutenant General Sir Andrew Gregory, the controller of SSAFA, the Armed Forces Charity; I had the privilege of serving with both at the Ministry of Defence—both commented on this point. General Gregory in particular stressed that whoever takes up the commissioner’s job would have to work hard to earn the trust of members of the wider armed forces community. He suggested that one good way of doing that would be to get out and about—make visits to garrisons, naval bases and air fields to meet service personnel and their families and to hear their concerns face to face. There is an old infantry saying: “Time spent in reconnaissance is rarely wasted.” This would perhaps be another good example of that principle in action.
One reason for the concern is that the Armed Forces Commissioner and their office, including their staff, will be funded by the Ministry of Defence rather than by Parliament. I am mindful of the old saying: “He who pays the piper calls the tune.” To draw an analogy, members of the House of Commons Defence Committee, who are elected by this House to hold the Department to account, are paid for by the Independent Parliamentary Standards Authority on behalf of the taxpayer and not directly by the Government. I would also draw an analogy with what has happened to the Office for Veterans’ Affairs.
Under the previous Government, the OVA was deliberately set up as an entity outside of the Ministry of Defence, having its home in the Cabinet Office and with a very proactive Minister in the Cabinet in Johnny Mercer. He was able to not only hold the Ministry of Defence to account in Government but liaise with other Government Departments that had an important influence on veterans’ affairs. As an example, the Department of Health and Social Care is obviously very important to veterans. Once they leave the armed forces they are no longer reliant on the Defence Medical Services for their medical needs, and they transition to the NHS. The decision by the incoming Government to take that office and roll it back into the Ministry of Defence has led to some criticism, including from the veterans community themselves. If I am lucky enough to catch your eye, Mr Efford, I might return to that in more detail under new clause 2.
For now, I remind the Committee that on multiple occasions on Tuesday the word “trust” was used, both by witnesses and members of the Committee questioning them. I ask the Minister what he can do this morning to reassure the Committee that the Armed Forces Commissioner, who, we understand from Tuesday’s session, is not likely to be up and running until early 2026, is going to be able to win the trust of service personnel and their families. Will the commissioner truly be in a position to act independently on their behalf and in their best interests? I hope the Minister can understand the context in which these questions are being asked. I eagerly look forward to what he has to say.
Graeme Downie (Dunfermline and Dollar) (Lab)
It is a pleasure to serve under your chairmanship, Mr Efford. I want to make a couple of small points. I have worked with ombudsmen in the past; ultimately, as we heard in the evidence earlier this week, somebody has to pay for an ombudsman. Often that is funded in other ways. I have previously worked with the energy ombudsman, whose funding comes from the energy companies. It is important to put that on the record.
Furthermore, just because an amendment says that someone is independent, that does not make it so. As the right hon. Member for Rayleigh and Wickford said, building trust will be crucial for the person in this role. Later clauses make clear the independence the commissioner will have—whether that is their ability to enter premises without notice, should they see fit, or to consider a range of different requests. My feeling is that the intent of the amendment is already covered by the Bill. It is important that we make sure that the commissioner builds that trust, as was pointed out by several witnesses on Tuesday.
Pam Cox (Colchester) (Lab)
I want to make a point about the wording of the amendment, which reads:
“The Commissioner shall operate independently from”.
Reviews that I have conducted of the powers of other commissioners do not explicitly state that. There are many special interest commissioners these days, so this would be an unusual provision in that regard. Like my hon. Friend the Member for Dunfermline and Dollar, I think the building of trust is essential to the smooth operation of the commissioner’s work with the armed forces and their families, which we so badly need. But that will be done in so many ways through the office of the commissioner. I do not think it would depend on this particular amendment.
Luke Pollard
I genuinely welcome the principle of the amendment and the spirit in which it has been tabled. It seeks to reinforce, in the Hansard of this debate, the position of both the Opposition and the Government: that the role should be independent. The commissioner should be able to conduct their inquiries and work separate from the functions of Government. It is precisely for that reason that we have drawn up the legislation in this way, so that the commissioner is independent. It is always helpful to place that on the record again. Should any future generations need to look at the intent of the Government at the time when this legislation was originally proposed and at our cross-party agreement that the commissioner should be able to carry out their functions without direction from the Ministry of Defence, they will be able to refer to this part of the debate and see that very clearly.
Mr Francois
I welcome the Minister’s welcome for the amendment. I hope the Committee is doing the right thing here. We tabled it because the issue cropped up a lot in the public evidence session. By the way, I thought it was extremely useful to be able to have that. When I first came to the House, we did not have such sessions before our consideration of Bills. Perhaps this is teaching an old dog new tricks, but now, having seen that procedure in action, I can understand why it was introduced.
Trust and independence cropped up so often on Tuesday, so we thought it was important to table the amendment to get some of that on the record. I am grateful for the assurances that the Minister has given and for the spirit in which he has given them. I know that the hon. Member for Colchester is quite an expert in this subject, so I take the point about the drafting; however, it was a probing amendment from the outset and we thank the Minister for putting those assurances on the record. As he says, if ever the commissioner were challenged on the point of independence, he or she would be able to refer back to this debate in the Committee Hansard. With that, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Helen Maguire
I beg to move amendment 6, in clause 1, page 2, line 10, at end insert—
“(5) The Secretary of State will, within 6 months of the passing of this Act, publish an intended timeframe for—
(a) the appointment of the Commissioner;
(b) the abolishing of the office of the Service Complaints Ombudsman;
(c) the commencement of operations of the office of the Commissioner.”
This amendment would require the Secretary of State to state when they intend to appoint a Commissioner and get the office of the Commissioner operational.
We have tabled amendment 6 because currently no time frame is set out in the Bill. We believe it is important for a time frame to be set out and we feel that the Government should be held to account on that. Otherwise, the process could continue for several years. We feel it is important for both the armed forces and the MOD to know exactly when the Service Complaints Ombudsman will be abolished and the commissioner appointed, and when the powers of the commissioner will take effect. At least setting out a time frame would have some strength.
Mr Francois
I think the amendment speaks for itself. I seem to recall that on Tuesday the Minister laid out a timeframe for the establishment of the commissioner and their office; from memory, I think he said that the intention was to have it up and running in early 2026. Perhaps, in the spirit of the hon. Lady’s amendment, he could say a bit more in his reply about the timing, and particularly about the interview process. I have a particular reason for asking that question, which I will come back to later.
Luke Pollard
I thank the hon. Member for Epsom and Ewell for moving her amendment. This legislation is a priority for the Government. We want to do this prominently, to provide a clear signal to our people and their families that their welfare matters are important and should receive a greater focus from the Government and the Ministry of Defence and therefore from the single services. At the same time, it needs to be done correctly.
I share the hon. Lady’s eagerness to make sure that the commissioner’s role is properly established and brought forward. We have not detailed the implementation timetable in the Bill; that would not normally be necessary in primary legislation. As the Committee will be aware, there are several factors affecting the commissioner’s appointment. Notwithstanding the role of the Defence Committee in pre-appointment scrutiny, the commissioner will be appointed following the passage of the Bill. Their role will be subject to a full public appointments process regulated and overseen by the Office of the Commissioner for Public Appointments. In addition, the intended timeframe will need to factor in the passing of the necessary secondary legislation.
We expect this process to continue in 2025. In parallel, we will be undertaking the necessary implementation to ensure a smooth set-up and transition from the current Service Complaints Ombudsman to the new commissioner’s office. It is important to stress that the team in SCOAF are doing a good job, and we should ensure a smooth transition into the new function for all the people working hard to support our armed forces.
I can therefore confirm that we anticipate that the commissioner’s office will be stood up in 2026, but I would expect Opposition and perhaps Government Members to table parliamentary questions throughout to investigate the process that we are undertaking.
It is worth saying that the full public appointments process will also undertake the necessary vetting and security clearances required for this role. That will further build the trust among armed forces personnel not only that the person appointed to the role is experienced, necessary and appropriate, but that they have the necessary vetting and security clearance to undertake a role on military bases in particular. I hope that the hon. Lady will take that reassurance and withdraw her amendment.
Helen Maguire
I thank the Minister for his reassurances. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Luke Pollard
Last year, service morale fell to its lowest level on record, with only four in 10 of our armed forces personnel reporting being satisfied with service life. They reported that the impact on families and on personal life was the leading factor influencing the decision to leave our armed forces. This Bill is a deliberate and major step to strengthen support for our armed forces and the families who stand alongside them.
Clause 1 will establish and set out the functions of the Armed Forces Commissioner by inserting proposed new section 365AA into the Armed Forces Act 2006. It will also abolish the office of the Service Complaints Ombudsman. That is legislative language; the intent is to move it into the Armed Forces Commissioner’s office, but in parliamentary drafting terms the office is abolished. Other provisions of the Bill, which we will come to later, transfer the ombudsman’s functions to the new commissioner.
Subsection (2) of proposed new section 365AA will provide the commissioner with new functions to promote the welfare of service personnel and their families and to improve the public’s understanding of the welfare issues that they face; It will also provide the commissioner with the functions set out elsewhere in the Bill. Subsections (3) to (5) of proposed new section 365AA will give the commissioner the necessary freedoms to carry out their functions and meet their objectives, along with reference to any related restrictions. Subsection (6) introduces new schedule 14ZA, which sets out further detail on the establishment of the commissioner’s office.
Clause 1(2) will abolish the office of the Service Complaints Ombudsman. Clause 1(3) will repeal section 365B of the Armed Forces Act, which established the Service Complaints Ombudsman. Clause 1(4) introduces schedule 1, which will insert new schedule 14ZA into the Armed Forces Act, for those who want to follow it up in their bedtime reading.
Mr Francois
The Minister has summarised the clause very well. We understand the intent of the Bill. We said on Second Reading that we would be a critical friend to it, and hopefully that will play out today. Nevertheless, we support the principle of what the Government are doing, so there is no need to divide the Committee on clause 1.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Schedule 1
Armed Forces Commissioner
Helen Maguire
I beg to move amendment 5, in schedule 1, page 8, leave out lines 15 and 16 and insert—
“3 A relevant Parliamentary select committee will hold a pre-appointment hearing with the Secretary of State’s preferred candidate for Commissioner.
3A The select committee may hold a confirmatory vote on the Secretary of State’s preferred candidate for Commissioner.
3B Where a select committee has expressed a negative opinion on the appointment of the Secretary of State’s preferred candidate for Commissioner, the Secretary of State may not proceed with the appointment of that candidate without appearing before the select committee to address the concerns raised by the committee.
3C If the select committee maintains its negative opinion following the further appearance of the Secretary of State, the Secretary of State may not proceed with the appointment of that candidate.
3D Where a select committee has expressed a positive opinion on the appointment of the Secretary of State’s preferred candidate for Commissioner, including after a further appearance before the committee of the Secretary of State, the Secretary of State may recommend the appointment of the candidate to His Majesty.
3E The Commissioner is to be appointed by His Majesty on the recommendation of the Secretary of State.”
This amendment would mean that the Commissioner can only be appointed after appearing before a relevant select committee and obtaining its approval.
As numerous hon. Members have outlined, it is incredibly important that the role of the commissioner be completely independent and be scrutinised across the parties. We feel it is important for a parliamentary Select Committee to play a role in the commissioning process. It would allow cross-party consensus and would ensure that the commissioner, whoever they may be, is truly independent and can make the right decisions and examinations as appropriate.
Mr Francois
I declare an interest: I served on the Defence Committee for about seven years. Over the years, there has been a debate about the extent to which the Defence Committee and other Select Committees should have power over appointments in the relevant Department.
If I can draw a quick analogy, the United States Congress has a slightly different constitutional settlement from ours, but its Committees tend to be much more powerful than ours. They and their Appropriations Committee counterparts have what the Americans call line-item power, so they can increase or decrease the spending on a particular defence programme. Would that for one moment the Defence Committee had had that power. I see the Minister grinning quizzically at that.
Mr Francois
The Minister mentions Ajax. I did not, but as he did, we will read that into the record.
There were times when the Defence Committee would have dearly loved that power. Had we had it, certain programmes might have suffered a different fate. In parallel, there is another important difference between the American Committee system and ours.
Mr Francois
They are not directly comparable, but as I was coming on to say, the American Committees have a much stronger power over appointments. To illustrate my point, some debates in the American media are about whether the new Defence pick that Donald Trump is advocating may or may not come under some challenge during congressional appointment hearings. That issue only arises because the Committee has a stronger power. Here, there is an increasing trend that a Committee is allowed to interview people and express an opinion, but ultimately it cannot say no.
We all agree that the commissioner will be a very important appointment, for all the reasons that the Minister has outlined. Getting it right is really quite important. In extremis, if the Select Committee were to decide, for some good reason, that a particular candidate were not suitable for the role, would the Minister support the idea of its being allowed to veto the appointment? If not, how does the Minister envisage the Defence Committee playing a part in the appointment of this very important person?
Graeme Downie
Further to the intervention from my hon. Friend the Member for Colchester, I think the difference between the American system and the British system is stark, not least because of the level of parliamentary scrutiny in this place.
As the Minister has outlined, there is obviously a role for the Defence Committee to pass an opinion. That is our convention, and I think it works very well, in addition to the scrutiny we see from Members of all parties. If that became a problem, I am sure that both Opposition and Government Members would be tabling written questions, motions and whatever else. On Second Reading, the Chair of the Defence Committee, my hon. Friend the Member for Slough (Mr Dhesi), was clear that his Committee would look carefully at that. There is a strong difference between the American system and the British parliamentary system in that regard.
The full independent public process that will be followed for the appointment is another key difference. It is unlike the US system, which has a presidential appointment and under which there is no vetting; anyone can be appointed. We therefore have an additional stage of security, both for public and for parliamentary scrutiny. I feel that amendment 5, although well intentioned, is unnecessary.
Luke Pollard
I thank the hon. Member for Epsom and Ewell for her amendment 5. As with amendment 7, it is good to be able to place on the record our intention for how this process should work.
Amendment 5 would insert a requirement for the House of Commons Defence Committee to conduct pre-appointment hearings and to state a positive or negative opinion on the appointment of the Secretary of State’s preferred candidate for commissioner. The Secretary of State would be able to recommend their preferred candidate to His Majesty only following a positive opinion from the Committee.
I draw hon. Members’ attention to the Second Reading debate, during which the Secretary of State confirmed that the Government are keen for the Committee to exercise rigorous pre-appointment scrutiny of candidates to ensure that we appoint the best person to be the independent champion for the armed forces and service families. The hon. Lady’s amendment would certainly set a precedent for wider Government discussion. I suggest that her argument might best be directed in the first instance to the Cabinet Office, given its cross-Government leanings, rather than to the Ministry of Defence.
The Government have said that the pre-appointment scrutiny by the House of Commons Defence Committee should be vigorous and thorough. We expect it to go above and beyond the current process, precisely because the commissioner will report their recommendations to Parliament via the national security scrub in the MOD, so their role is somewhat different from the role of other commissioners who might receive pre-appointment scrutiny from other Select Committees. Their powers are designed to be greater, so a more prominent role will be given to Parliament. We are confident that the existing practices and arrangements in Parliament are robust, that they can address any concerns that the Select Committee may have about a candidate, and that we will be able to take the Committee’s views fully into account before making a recommendation to His Majesty.
David Reed (Exmouth and Exeter East) (Con)
The mechanics are different from those for a preferred candidate in other Departments, in so far as the candidate will have to go through top-level security clearance and presumably enhanced developed vetting. If they do not pass enhanced developed vetting, will they still be put forward as the preferred candidate? How will the mechanics work?
Luke Pollard
The hon. Member asks a fair question. We will not put forward anyone who does not pass security vetting; it is important that we place that on the record. This is a significant and prominent role. The commissioner will have access to our military bases. We do not expect, require or want them to look at anything beyond general service welfare matters, but there may be locations or people adjacent to those welfare matters that are sensitive to UK national security. That is why we have put national security powers in the Bill and why the Secretary of State has made assurances, which I am happy to repeat, that the commissioner will be security vetted. That is what service personnel and our colleagues across Government will expect. Someone who cannot pass security vetting should not be able to take up such a serious appointment in the Ministry of Defence. I am happy to give the hon. Member that assurance; I hope it reassures him.
In his short few months here, my hon. Friend the Member for Dunfermline and Dollar has established himself as formidable and forensic in his tabling of parliamentary questions to the Ministry of Defence.
Luke Pollard
I am aware that there are other people in the room who table questions to us. I will choose some adjectives carefully in due course.
The point that my hon. Friend the Member for Dunfermline and Dollar made is a fair one. The senior appointments process is well established across Government. We enjoy good scrutiny of the process ourselves, as part of its oversight by the structures around the Cabinet Office. We and the previous Government have both focused on that to ensure that the process produces the right people.
I hope that the additional pre-appointment scrutiny by the House of Commons Defence Committee, as well as the seriousness with which the Government and the Committee take the matter, will provide even more robust scrutiny. I would be very happy, where appropriate, to respond to parliamentary questions throughout the process to reassure Members that it is being conducted in a manner that is not only timely but thorough, ahead of any pre-appointment scrutiny by the HCDC.
The spirit of the Bill is to engage Parliament more in the role of this commissioner and to ensure that parliamentarians can have just as much confidence in the role as I hope our armed forces can. The whole process is designed with that in mind. On that basis, I ask the hon. Member for Epsom and Ewell to withdraw her amendment.
Helen Maguire
I thank the Minister for providing the reassurances that I think the Committee needs in order to ensure that there is absolute scrutiny. It is good to hear that there will be pre-appointment scrutiny by the Defence Committee. We hope that that will ensure that the commissioner who is appointed is truly independent. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr Francois
I beg to move amendment 9, in schedule 1, page 9, line 34, at end insert—
“(1A) The Commissioner’s staff must include a King’s Counsel, with responsibility for providing the Commissioner with advice on legal issues arising in the course of the Commissioner’s work of promoting and investigating general service welfare.”
This amendment would require the Commissioner’s staff to include a KC to provide legal advice to the Commissioner on legal issues arising in the course of their work.
The Chair
With this it will be convenient to discuss the following:
Amendment 10, in schedule 1, page 10, line 33, at end insert—
“(1A) Financial assistance provided to the Commissioner by the Secretary of State must increase annually by a measure determined by the increase in the Consumer Prices Index 12-month rate published by the Office for National Statistics.”
This amendment would require the financial assistance provided to the Commissioner to increase with inflation.
Amendment 3, in schedule 1, page 10, line 39, at end insert—
“(3) The Secretary of State must ensure that the financial and practical assistance provided to the Commissioner is appropriate and sufficient to allow the Commissioner to carry out their functions.”
This amendment would require the Secretary of State to provide adequate financial and practical assistance to the Commissioner to enable it to carry out their functions.
Mr Francois
For the convenience of the Committee, I will take amendments 9 and 10 in reverse order.
Essentially, amendment 10 is intended to ensure that the office of the commissioner is sufficiently well resourced to undertake its role effectively, independently of the Ministry of Defence. The explanatory notes to the Bill intimate that once the office is up and running, it will start off with a budget of approximately £5 million, as the Minister confirmed on Second Reading.
The Bill does not mandate a specific number of staff to assist the commissioner; it is not that prescriptive. Given that the role has a wider remit than that of the Service Complaints Ombudsman, it seems likely that more staff will be required to carry out the expanded function—not least because it will now include visits to service establishments, some of which the commissioner could be empowered to conduct on an unannounced basis, subject to certain safeguards, if they thought that the issues that they were examining merited it.
The purpose of amendment 10 is to reinforce the idea that the office should be adequately resourced by mandating the financial assistance provided by the Secretary of State, which is effectively the commissioner’s budget, should increase by at least real terms each year, defined using the consumer prices index measure of inflation, which is published by the Office for National Statistics. I hope that amendment 10 is relatively uncontroversial and that the Minister might even be tempted to accept it. We can but try.
Amendment 9 would mandate that at least one member of the commissioner’s staff be a King’s counsel.
Luke Akehurst (North Durham) (Lab)
It is an honour to serve under your chairmanship, Mr Efford. Would the right hon. Gentleman be able to give the Committee an idea of the annual cost of a King’s counsel, so that we can have an idea of what percentage of the proposed budget that would be? Why he is choosing to be prescriptive about the need for this particular element of staffing? That seems to contradict earlier pushes in amendments to safeguard the independence of the commissioner. If we are appointing a commissioner, surely we should trust them to determine the configuration of their staff.
Mr Francois
There are two questions there. On the first, the honest answer is that it depends on the KC. In my limited experience, different King’s counsels tend to charge different rates. One would hope that the commissioner would employ someone who was good at their job, so yes there would be a public expenditure cost.
If the hon. Gentleman will permit me, I am going to come in a moment to the exact rationale for why we have sought to mandate that at least one of the commissioner’s staff should be a qualified KC; he slightly pre-empts me. But I hope I can convince the Committee that there is a genuinely good reason for doing so and I am going to produce at least one real-world example. If that satisfies the hon. Gentleman, I will make some progress. Did the hon. Member for Portsmouth North, sitting next to him, also seek to intervene or have I inadvertently answered her question?
Mr Francois
Okay, thank you.
We live in an increasingly litigious world, including the wider prevalence of so-called lawfare issues on the modern battlefield. Therefore it seems important to us that the commissioner should have access to senior legal advice in carrying out their duties. We believe that could best be provided by a qualified King’s counsel, perhaps specialising in areas of employment law and other matters that would relate to the welfare of armed service personnel and their families.
There is a live issue in the armed forces community: if they take life, which sometimes they are required to do in the service of the country, what are the legal implications for them, maybe even decades later? The issue is generally referred to as lawfare. Let me give a specific example of why this matters, Mr Efford. I am going to refer to a case that has concluded; I reassure you and your Clerk that the sub judice rule does not apply, I believe, because the case is over.
On 10 December, the BBC reported, under the heading “Ex-lawyer spared jail over false Iraq War claims”, that
“Phil Shiner was given a two-year suspended sentence at Southwark Crown Court after pleading guilty to three counts of fraud relating to legal aid claims made in 2007.”
For background,
“The former boss of Public Interest Lawyers was struck off by the Solicitors Regulation Authority in 2017 for pursuing false torture and murder allegations against British troops.”
The article continues:
“A lengthy inquiry into wider allegations of abuse at the hands of British soldiers established ‘beyond doubt’ that all the most serious allegations had been found to be ‘wholly without foundation and entirely the product of deliberate lies’.”
According to the National Crime Agency, Mr Shiner received around £3 million towards the cost of legal aid for the cases in which he was involved.
Mr Francois
At this point, I give way—hopefully it will save the hon. Member for Dunfermline and Dollar the trouble of tabling multiple parliamentary questions.
Graeme Downie
I thank the right hon. Gentleman for giving way. Perhaps I can assist him by drawing his attention to schedule 1 on page 10 of the Bill. It specifically says:
“The Secretary of State may…provide staff in accordance with arrangements made with the Secretary of State by the Commissioner”.
My reading of that is that the commissioner, should they wish to, would be able to hire a King’s counsel for specific issues. At the same time, it would preserve the independence of the commissioner: we would not be putting anything into the Bill to make Parliament direct them, and we could make sure that independence was maintained.
Mr Francois
I commend the hon. Gentleman for his accurate reading of the legislation. On Second Reading, the Minister made the point that the legislation is drafted to be facilitative. For instance—we will come to this later—it does not necessarily define exactly what are and are not “general service welfare matters”. It provides a broad remit. But for the reasons that I hope I have been able to articulate, we believe that although the schedule that the hon. Gentleman mentioned would facilitate the Armed Forces Commissioner in seeking to appoint a legal adviser, that would have a spending implication. It could be—it is not inconceivable—that some in the Ministry of Defence would baulk at that. The intention of putting the provision into the Bill is to include beyond peradventure the right of the commissioner to seek to appoint a senior legal adviser. In a sense, it does not compel the commissioner to do that, but it gives them that power very clearly.
Amanda Martin
You say that your amendment does not tell the commissioner that they should make the appointment, but it states:
“The Commissioner’s staff must include a King’s Counsel”.
Since there is a “must”, what you just said is not correct. If we agree to this amendment, we are saying that the commissioner, who we want to be independent, will not have the choice of who they include in their staff, as my hon. Friend the Member for North Durham mentioned. Your amendment says “must include”.
The Chair
“You” refers to me in the Chair, not to the person opposite. Just a gentle reminder about that.
Mr Francois
The hon. Lady is right. The amendment says that the commissioner should make the appointment; I hope we have given the rationale for why we believe that is important. What sort of KC the commissioner employed, and how often they used them, would be a matter for the commissioner: they would still have some discretion and, as has been intimated, there are KCs and KCs.
But the principle of the amendment is that the commissioner should have access to senior legal advice because lawfare is becoming more and more of an issue for armed forces personnel. For the sake of brevity, I will not read into the record a very good article that appeared in The Spectator about why people are leaving the Special Air Service because of the issue. It is a problem for retention in the armed forces, particularly in certain units, and this is an attempt to acknowledge that.
Michelle Scrogham (Barrow and Furness) (Lab)
To refer back to what my hon. Friend the Member for Portsmouth North said, the amendment does say that the commissioner’s staff “must” include a King’s counsel. That would effectively tie the hands of the commissioner, firmly setting that budget. I would much rather that they had flexibility, so that they could choose who they wanted to serve within their staff; should they need a KC, they would be very welcome to get one. Including that they “must” would eat that budget, which could be used elsewhere if needed.
Mr Francois
I understand the hon. Lady’s question, and I do not want to get into an “angels on a pinhead” argument, but that member of staff could be part-time. It could be that on the staff of the commissioner is a qualified KC, but only brought into action when there is a specific legal aspect to be examined—they would not necessarily have to sit in their office five days a week waiting for a case to come in. If there was no work, then they would not necessarily be employed.
I accept that perhaps we should have put the words “part or full-time” into the amendment, but the key thing is that the commissioner would have access to a King’s counsel, even on a part-time basis, to deal with complaints that have a specific legal aspect, including aspects of lawfare. We did not mandate in the amendment that it had to be a full-time role.
Terry Jermy (South West Norfolk) (Lab)
I appreciate the point that the right hon. Gentleman is making about whether the role would be full-time, part-time or maybe just a few hours a week. But the fundamental issue for me is that the more restrictions or stipulations we mandate, the more we fundamentally influence the independence of the role, which was part of our open discussion on Tuesday. The more amendments, rules and procedures that we dictate, the more we weaken independence. Does he recognise that concern?
Mr Francois
I do, but I have a contrary concern. People are leaving the armed forces in greater numbers than are joining. The other day, the Minister said— he will correct me if I have this wrong—that for every 100 who join, 130 are leaving.
Mr Francois
The Minister is nodding. We have a problem: our armed forces are shrinking. That is not necessarily purely for budgetary reasons; we are not going to get into the 2.5% of GDP discussion—I would love to, but I do not think the Chair would thank me for it. More are leaving than are joining and there are a number of reasons why. As a former Armed Forces Minister, I was commissioned by a previous Prime Minister to write a report on why people leave. It was called “Stick or Twist?”, because that essentially encapsulated the dilemma that service personnel and their families face. By the way, the decision to leave is usually a family decision—it is a kind of kitchen table conversation.
The overwhelming reason why they leave, as we have said, is the pressure of service life on family life. One reason why quite a few personnel are leaving now, however, is that they are worried about the legal implications of the work that they do and, bluntly, whether the Government have their back. That is becoming a bigger and bigger issue. If the commissioner is there to ensure the welfare of service personnel and their families, along the lines that the Minister articulated very well in the debate on clause 1 stand part, they are going to need some kind of legal capability to investigate those sorts of issues.
I take the points made by Government Members, but we are seeking to ensure that, whether it be full time or part time, the commissioner has the necessary legal firepower, for want of a better word. This comes back to the whole debate about trust; the service personnel need to be convinced that, if they have a worry or issue about lawfare, the commissioner is equipped to deal with it effectively. That is the spirit of amendment 10. I hope that the Minister will acknowledge that the issue is becoming an increasing worry for service personnel. Again, for the sake of brevity do not get me going on Northern Ireland veterans this morning. But this is a problem, and that is why the amendment was drafted.
I do not want to try the Committee’s patience, so, to summarise, we believe there is a broader issue here about the whole effect of lawfare on modern warfare—the effect it is having on both the recruitment and the retention of His Majesty’s armed forces. Having tabled the amendment to provoke a debate on that issue, and how the commissioner might help, I am very interested to hear the Minister’s response to a genuinely well-meaning suggestion.
Helen Maguire
On amendment 3, we feel that the financial and practical assistance of the commissioner must be absolutely appropriate. It is crucial that there is this resource, and that the commissioner can carry out the dual role of both promoting the welfare of service personnel and their families and improving public awareness of these issues. If those ambitions are to be met, alongside the existing responsibilities of the ombudsman role that are to be assumed into the commissioner’s remit, the commissioner needs to be properly resourced. That is why we feel that amendment 3 needs to be included in the Bill.
Luke Pollard
I am grateful for the amendments as they give me the chance to speak about a number of issues. I first turn to amendment 9, tabled by the right hon. Member for Rayleigh and Wickford. He said that the purpose of the amendment was to require the commissioner’s staff to include a King’s counsel to provide legal advice to the commissioner. I agree that the provision of quality legal advice to the commissioner is essential, and having the facility in house may well be something that a commissioner will want to specify when setting up their own office. I think it is right, however, that the commissioner should be able to make their own judgment about what type and what level of legal support they may require.
It is worth reminding the right hon. Gentleman that the commissioner looks at general service welfare matters and not the conduct of military operations, which I realise he is familiar with. I will come on to the other points that he raised subsequently, but it is worth saying that welfare matters are the commissioner’s main remit.
Mr Francois
If you were one of the service personnel who was put through hell by Phil Shiner, that would be a welfare matter for you and your family. I could read into the record stories of stress, worry and angst that armed forces personnel have had to go through, sometimes for years, at the hands of Phil Shiner and his law firm, so let us not be over-semantic about it, Minister. For many personnel and their families, this was agonising. It jolly well is a matter of service welfare, because of the effect that it had on many people, many of whom subsequently left the armed forces, effectively in disgust. It really is a matter of welfare, and that is why we tabled the amendment.
Luke Pollard
I did say to the right hon. Gentleman that I would come back to those points, and I will do so, rather than responding immediately to his intervention.
A particular commissioner may wish to undertake an inquiry that involves many issues requiring regular and suitably senior legal input. In other circumstances, however, where a commissioner’s work is more routine in nature, it seema unnecessary to compel them to keep a costly KC on their books when other options may be more appropriate.
I should say to the right hon. Gentleman, as someone who is new to opposition—sadly, I was not new to opposition for some time—that making spending commitments is a dangerous sport. As a quick bit of maths, let us assume that the KC is full-time, that they are reasonably priced at £5,000 a day, and that they bill only for working days. Now, 260 working days a year at £5,000 a day is £1.3 million of billable time a year, or 24% of the estimated budget of the Armed Forces Commissioner, which, as we have set out in the explanatory notes, is £6.5 million, the commitment for an entire Parliament.
It is incumbent on us, in the spirit of creating an independent Armed Forces Commissioner’s office, to give the decisions on what staffing should look like to the commissioner so that they can undertake the staffing structure that is appropriate for what they have to say. However, I reassure the right hon. Gentleman that nothing in the Bill will prevent the commissioner from agreeing with the Secretary of State a policy for staffing the office that could include a legal adviser. Indeed, I suspect staffing policy would not necessarily need to go into that level of detail; it would be more about the overall numbers, costs and specific terms of service.
Agreement of staffing policy with the Secretary of State is essential to ensure that the commissioner does not set out a staffing requirement that is disproportionate to the nature of the work being undertaken. It is not a way of preventing the commissioner from accessing the advice that they need.
Lincoln Jopp (Spelthorne) (Con)
If the commissioner were to come to the Secretary of State and say that they would like members of the armed forces seconded permanently to their staff, what would the Secretary of State’s reaction be?
Luke Pollard
The hon. Gentleman raises a fair question. As part of establishing the Armed Forces Commissioner’s office, it may be appropriate for the commissioner to say that they would like a certain level of military expertise, be it serving or in a veteran capacity. The commissioner could have that conversation with the Secretary of State. I do not think that we would immediately volunteer or immediately deny—that would be based on the recommendations of the commissioner and the dialogue about where that sits—but I refer the hon. Gentleman to the amendment that we are making in the Bill to remove the requirement for an officer to make a decision. In one respect, we are seeking to remove military roles from the SCOAF function that can be done by a civilian. It is appropriate to ensure that if any military support is given to any part of the wider MOD family, we make the correct decision about whether it should be a military or civilian role, so we can ensure that we use the military in roles where they have the biggest impact in respect of our national security. However, I totally understand the hon. Gentleman’s point.
The right hon. Member for Rayleigh and Wickford raised the issue of lawfare. The Government recognise that the large proportion of allegations targeted at our service personnel in Iraq were without foundation, and we acknowledge the importance of protecting our people from improper and vexatious accusations of the type perpetrated by Phil Shiner. The judgment by the court shows that Phil Shiner spread falsehoods against our brave armed forces, and the Ministry of Defence submitted evidence of his abuse to the legal system, which contributed to his being struck off. The Government are renewing the contract with those who serve and have served, and that includes protecting our personnel from improper and vexatious accusations of the type perpetrated by Phil Shiner.
The right hon. Gentleman will also be aware of the ongoing inquiry in the High Court into matters that are either the ones related or near to the ones related. He will appreciate that I cannot comment on them now, but I entirely understand the right hon. Gentleman’s passion, which he knows I share, for ensuring we look after our people better than they have been looked after to date.
I turn to amendment 3, tabled by the hon. Member for Epsom and Ewell. I share her intention of ensuring adequate provision in the budget for the Armed Forces Commissioner. The Secretary of State will have an obligation under proposed new section 340IA(7) to
“co-operate with the Commissioner so far as is reasonable”
and to give them any “reasonable assistance” that they require. That will ensure that they have the necessary assistance from the Secretary of State to conduct their work effectively.
Should the commissioner feel that their funding is insufficient to carry out their functions effectively, they will have the opportunity to raise the matter in their annual reports, which are presented to Parliament. The Secretary of State is accountable to Parliament, and this mechanism will provide the ability to scrutinise and challenge any funding decisions. However, it will be for the commissioner to determine the shape and structure of any staffing or budget spend.
As the shadow Minister has confirmed, we estimate in the explanatory notes that the budget for the Armed Forces Commissioner, based on careful scrutiny of the work of our friends in the German armed forces commissioner’s office, will be approximately £4.5 million to £5.5 million a year. That is a significant increase on the funding for the Service Complaints Ombudsman, which at present is roughly £1.8 million a year.
While being wholly independent of the MOD, the commissioner will be required to abide by the financial rules, regulations and procedures laid down by both the Treasury and the MOD in the commitment to financial resources—something I think we would expect de minimis on a cross-party basis. We heard from the current Service Complaints Ombudsman on Tuesday that this is a common model and works well, so including a commitment to ensure sufficient funding and practical assistance, per amendment 3, or increasing it in line with inflation, per amendment 10, is not necessary. Amendment 3 in particular may introduce a level of subjectivity into the legislation that would be difficult to measure.
I welcome—I think—the right hon. Member for Rayleigh and Wickford’s rejection of austerity budgets and the commitment to increase public funding in line with inflation. I suspect that he has not quite thought through the full implications of that across all areas of Government spending. None the less, the slow process of rejecting the austerity politics that I so know him for is interesting. I welcome that movement.
What is certain is that the functions in the Bill provide a format for the Secretary of State and the commissioner to have a reasonable conversation about the budget. The budget that we are setting represents a considerable increase and is modelled to deliver a service that involves not only a continuation of the SCOAF functions, but the investigations and the wider visits portfolio that has been mentioned. We feel that that is sufficient, but I suspect that any Member of Parliament who feels that the budget is insufficient, based on the reports tabled by the Armed Forces Commissioner in their annual reports as opposed to thematic reports, will be able to ask suitably challenging questions of the Government of the day about ensuring that staffing levels and financial support are right, just as we would expect for access and the implementation of recommendations. On that basis, I ask the right hon. Gentleman to withdraw his amendment.
Mr Francois
I will respond in kind to what the Minister says. As he will recall, his calculation was that even if the KC that we have been debating conceptually were full-time—we can argue about the rate—it might cost about £1.3 million a year. We never stipulated that it would be a full-time post; I think the Committee has explored. The essence of amendment 9 is that the commissioner would have access to high-level legal advice. Even if it were £1.3 million, given that our policy going into the election was to increase defence spending to 2.5% of GDP by 2030, I think we could have found £1.3 million within that number. The Minister is the one with the challenge, because he does not have a date for 2.5%. If he ever gets one, we would all like to hear it. I think we could have afforded the post, even if it had been full-time—and we did not mandate that it had to be.
Amanda Martin
My understanding is that the last time that the defence budget was at 2.5% was under a Labour Government, and that in the 14 years under the Conservatives there was not a 2.5% budget.
Mr Francois
That is correct, and under the Tories in the mid-1990s it was well over 3%. The problem is that a lot happened in the 14 years, including a war in Ukraine. That is why we probably need to spend 2.5% as quickly as possible.
Even if the Minister’s calculation is correct, by the time a senior NCO in the British Army gets to the rank of WO2, the King—or the Queen, before him—will probably have spent the best part of £1 million on training them. If they then leave, perhaps because they have had a very bad experience at the hands of the likes of Mr Shiner, that is £1 million of investment that has just walked out the door.
To be fair, the Minister understands the pressure. According to some figures that I received in answer to a recent parliamentary question, the strength of the British Regular Army is 71,300. This was in October. The establishment strength—the book strength, or what it is meant to be on paper—is 73,000. It was 72,500, but then there was an add-back of another 500, partly for the two Rangers Battalions. The British Regular Army is now nearly 2,000 soldiers short of what it should be, even on paper. Unfortunately, the trend is that more people are leaving than joining.
I am not highlighting that point in order to say that the whole lawfare issue is the only reason that people are leaving the British armed forces. That is not my argument, but it is one reason, and it is likely to get worse unless the Government do something about it. That includes doing something about the so-called Northern Ireland legacy Act.
I hope I have made the point sufficiently this morning; I am grateful for the way in which the Minister has acknowledged it and dealt with it. As I think the point has been made, I will not press amendment 9 or 10. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the schedule be the First schedule to the Bill.
Luke Pollard
Schedule 1, by inserting proposed new schedule 14ZA into the Armed Forces Act 2006, primarily outlines the procedural aspects of the commissioner’s role and functions, including their legal status and terms of appointment, as well as disqualification and the delegation of functions. It encompasses the commissioner’s length of term, staffing arrangements and funding.
It is important that we set the parameters for the Armed Forces Commissioner while ensuring sufficient the impartiality and independence of their role. There are several provisions in place to ensure that this is the case, including paragraph 1 of proposed new schedule 14ZA, which establishes the commissioner as a corporation sole, setting them up to be legally separate from the MOD.
Although paragraph 3 of proposed new schedule 14ZA outlines that the commissioner is to be appointed by His Majesty on the recommendation of the Secretary of State, it should be noted that, as mentioned earlier, on Second Reading the Defence Secretary stated that he was keen for the House of Commons Defence Committee to exercise the toughest pre-appointment scrutiny as well, and I think he genuinely means that. We expect that to be robust, and I look forward to witnessing those sessions in due course. We need to appoint somebody who can do the job as a fearless, independent champion, and the Secretary of State will certainly take close note of the Select Committee’s views in any pre-appointment hearing.
Paragraph 4 of the proposed new schedule disqualifies a civil servant or member of the regular or reserve forces from being the commissioner. This is to ensure a fresh and independent perspective.
Under paragraph 5 of the proposed new schedule, to ensure both ministerial and parliamentary oversight, the commissioner must provide written notice to the Secretary of State should they wish to resign. Although the Secretary of State may dismiss the commissioner if specific criteria are fulfilled, they must specify their reasons for doing so via a statement to the relevant House of Parliament. For the benefit of new Members, that means that if the Defence Secretary is a Commons Minister, it would go to the Commons, and if they are a Lords Minister, it would go to the Lords. None the less, it would be accountable to Parliament.
David Reed
I seek clarification on one of the points the Minister made about clearances, as I have not heard it in what he has said. Which level of clearance will the Armed Forces Commissioner be required to hold, and will the role be contingent on them holding it? If they cannot maintain clearance, will they lose their job?
Luke Pollard
I am happy to write to the hon. Member with our expectation of which specific clearance type would be required, but on the second part of his question about what happens if someone loses their clearance, it will be a condition of the role that they would be subject to the Official Secrets Act 1989 and require the necessary clearance, and in such circumstances they would not be fulfilling the terms and conditions of their role. I hope that gives the hon. Member suitable assurance.
Question put and agreed to.
Schedule 1 accordingly agreed to.
Clause 2
Commissioner’s functions in relation to service complaints
Mr Mark Francois
I beg to move amendment 11, in clause 2, page 2, line 15, at end insert—
“(2) Once the functions of the Service Complaints Ombudsman become functions of the Commissioner, the Commissioner will investigate individual service complaints in the same manner as they were previously investigated by the Service Complaints Ombudsman.”
This amendment would clarify that the Commissioner will investigate individual service complaints, as the Service Complaints Ombudsman did, as well as investigating general issues and publishing thematic reports.
Mr Francois
The Committee will be pleased to know that I think we can deal with this fairly briefly. The amendment was tabled prior to the public evidence session on Tuesday, when I sought some clarity on something the Minister said on Second Reading regarding the extent to which the Armed Forces Commissioner will be prepared to take up individual complaints on behalf of service personnel or their families who have already exhausted the MOD’s complaints process. The Service Complaints Ombudsman currently has the ability to do this at their discretion.
Speaking to the amendment gives me the opportunity to commend the current Service Complaints Ombudsman, Mariette Hughes, for the very good job that she and her staff have accomplished in virtually clearing the considerable backlog of complaints that were sitting in her in-tray. She told us on Tuesday that they now have only— from memory—30 individual cases left, all of which are live and actively being looked into. Given the history, as the Minister will know—I see he is nodding— this is a remarkable achievement, which drew praise from the Committee at the time that should be briefly repeated here.
If I may slightly cheekily say so—I promise I have not spoken to Mariette about this—when asked on Tuesday she indicated that she might be minded to apply for the post when it is advertised. I would chance my arm as far as to say that, based on her track record to date as Service Complaints Ombudsman, at the very least I think she should deserve an interview. It strikes me that she would be a strong candidate for the new role, although that will ultimately be a matter for the interview panel and, as we have discussed, for the Defence Committee, at least in part.
When we questioned the Minister on whether the Armed Forces Commissioner would have the power to continue to deal with individual complaints that had exhausted the MOD’s own complaints process, in addition to conducting the wider thematic investigations envisaged in the Bill, he confirmed that indeed they would. That is reassuring, but I would like to give the Minister the opportunity, should he wish, to add anything more about how he sees the process of dealing with individual complaints working in practice under the Bill.
Luke Pollard
I echo the shadow Minister’s praise for the work of the Service Complaints Ombudsman in reducing the backlog. Can I go further and thank all her team as well? We have seen a whole-team approach, and she has been able to marshal and deliver a much-improved service that is a helpful building block for the Armed Forces Commissioner’s office. I will not be drawn on who the Armed Forces Commissioner should be, for obvious reasons, but we would expect someone senior, with an ability to deliver, to take on that role after a proper appointments process has taken place.
I am grateful to the right hon. Member for Rayleigh and Wickford for tabling the amendment on how the commissioner will investigate individual service complaints. I will address his amendment and clause 2 together. The Bill already makes provision for the existing functions of the Service Complaints Ombudsman, set out in part 14A of the Armed Forces Act 2006—including those that relate to the investigation of individual service complaints—to be transferred to the new commissioner. The amendment is therefore not necessary.
To reassure the Committee, the Service Complaints Ombudsman’s functions and workload will be absorbed by the new commissioner’s office, and implementation work will continue in parallel with the passage of the Bill to ensure the seamless transition of all cases—new, active and closed—to the commissioner. There will be no interruption to Service Complaints Ombudsman service users during this process, and the Bill makes provision for transitionary arrangements to be put in place if necessary. The Bill abolishes the office of the Service Complaints Ombudsman, so it is imperative that its functions be transferred properly to the new Armed Forces Commissioner. Furthermore, the new commissioner’s remit will be much broader than that of the ombudsman, and they will be able to proactively launch investigations into issues faced by service personnel and their families.
On the shadow Minister’s specific question, going a level below the detail I set out, it will be a matter for the commissioner as to how they choose to investigate. However, the broad understanding is that, as well as taking on the Service Complaints Ombudsman functions, the commissioner will seek to receive views from armed forces personnel and their families. They will then be able to make a decision or look at areas for deeper thematic reviews. I would expect there to be a certain level of correspondence on issues, but it will be up to the individual commissioner to decide how best to resource that and what procedures, policies and thresholds need to apply. That will be a matter for the commissioner rather than me as a Minister to set out. I hope on that basis that the right hon. Gentleman is reassured and will withdraw his amendment.
Mr Francois
I did assure the Committee that we would deal with this briefly. There has been a purpose to this brief debate, not least in placing on the record our praise and admiration for the current Service Complaints Ombudsman. That may or may not be a factor in any future interview. With that hopefully achieved, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.
Clause 3
Procedure for making service complaints
Question proposed, That the clause stand part of the Bill.
Luke Pollard
Clause 3 amends section 340B(2)(a) of the Armed Forces Act 2006 to specify that a specified person may decide whether a service complaint is admissible, rather than the function needing to be carried out by an officer. The clause will allow civilians, in addition to military personnel, to make assessments of whether a complaint made by a member of the armed forces is admissible in the service complaints system. Currently, specified officers exist in each of the services and are responsible for deciding whether a statement of complaint is admissible as a service complaint.
Let me explain the admissibility process: a statement of complaint is not admissible as a service complaint if, first, the same complaint has been made before; secondly, it is about an excluded matter as set out in legislation; thirdly, it has been submitted outside the required time limits; or fourthly, the complaint is not from a serving or former service person. The admissibility decision therefore does not require skills or experience specific to military officers, but the way the legislation is interpreted often precludes civilians from undertaking this task. This clause makes a small, technical amendment that will make the service complaints system more streamlined by allowing any competent person to deal with a complaint, rather than just a military officer.
Mr Francois
I have one question. We understand the reason for the clause and, as the Minister has made plain, the Bill amends the Armed Forces Act 2006, so the amendment is to that legislation. We understand why the Government have changed “officer” to “person”; will the Minister give an assurance that such persons could include the immediate family of a member of the armed forces? I ask because sometimes members of the armed forces are reluctant to complain, but their family feel very strongly that they should. Without wishing to start any rows within a household, will the Minister put it on the record that if the circumstances merited it, a civilian who is a member of the immediate family of a service person could go to the Armed Forces Commissioner if they were very worried about their loved one’s welfare? If he could give that assurance on the record, we need not detain the Committee much longer.
Luke Pollard
I thank the right hon. Gentleman for his point. It is important to distinguish between the different roles of the commissioner. The clause makes an amendment specifically in relation to the service complaints process, rather than the broader functions we are adding to the Service Complaints Ombudsman role to create the commissioner.
There are certain provisions, as set out in the Armed Forces Act, that mean that only a serving member of personnel or a veteran raising an issue from the time of their service can complain in the service complaints system. We are, however, expanding the provision outside that provision for welfare matters that sit outside the service complaints system. In that situation, family members will be able to raise an issue or a concern with the commissioner, but that is not a service complaint. I reassure the shadow Minister that that function will still be held by the current rules.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Kate Dearden.)
Employment Rights Bill (Twelfth sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
Public Bill CommitteesRead Full debate Employment Rights Bill 2024-26 View all Employment Rights Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 12 December 2024 - (12 Dec 2024)
Greg Smith (Mid Buckinghamshire) (Con)
I beg to move amendment 127, in clause 22, page 33, line 12, leave out from “that” to end of line 21 and insert—
“the reason for the variation was to provide for improved employment practices and to update and reform outdated working practices, in order to allow for the more effective running of a business or organisation.”
This amendment would provide an exemption to unfair dismissal for failure to agree to a variation of contract.
It is a pleasure to see you back in the Chair for the afternoon sitting, Ms Vaz. The amendment, in my name and those of my hon. Friends, is a probing one—I want to be clear about that from the outset—that would provide an exception to unfair dismissal for failure to agree a variation of contract.
The premise underpinning the Bill’s provisions on fire and rehire is that the only reason for an employer to want to re-engage employees on varied terms is to exploit them by giving them worse terms and conditions. I am in no way, shape or form suggesting that that does not occasionally happen, but I come at this debate from the other direction, presuming that most employers are good employers who care about their workforce and want to see a happy staff getting on, being productive and doing the things they do to make the business a success, be that making things, giving advice or providing a service.
The Bill basically says that a business needs to be going bust for the process of varying a contract to be justified. Again, I am not certain that that is the right starting point. What if there were a legitimate reason for wanting to vary certain terms and conditions? We touched on this in our debate on SNP amendments 160 and 161 before the break, and I gave some examples thinking about the pace of change in a business. Let us say a manufacturing business moves from a very manual process for putting a product together—be it a car, a piece of furniture or some smaller product—to invest in robotics or something.
I can think of a farm in my constituency that was a traditional dairy farm but, thanks to a not insubstantial grant from the previous Government, has built a robotic dairy. That means that the people who work on that farm are doing a fundamentally different job. They no longer have to get up at 4 am to manually hook the cows up to the milking machines; believe it or not, the cows now form an orderly queue for the milking robots. I am not joking, Ms Vaz. I invite anyone to come and see it with their own eyes. There is a vending machine where people can buy the milk direct. The point at which staff intervention is needed is if an alarm indicates that a machine has clogged or broken, the pasteurisation room has hit the wrong temperature, or whatever. It is a fundamentally different job. Sometimes, that happens in a workplace where the employer wants to keep the staff—they do not want to let anyone go and they do not want the robots to replace them—but it involves different terms, different conditions and a different physical thing to do on a daily basis. I offer that as a practical example of how businesses change.
Alex McIntyre (Gloucester) (Lab)
I refer the Committee to my membership of the GMB and Community unions. I have two short questions for the shadow Minister. First, if the changes are so positive for employees, can they not simply accept a change to their terms and conditions? Secondly, let us take the scenario that he describes, where there is a change in processes, and put that in a business-to-business context. Say a business moves from wooden cogs and to metal cogs, and it has a contract with the wooden cog supplier. Is he aware of any circumstances in which that business would be able simply to break that contract without any notice or legal recompense to the other business?
Greg Smith
I understand the point that the hon. Gentleman makes. He is right that the businesses in the situation he describes would have to go through a legal process, probably involving very expensive contract lawyers, to alter such a contract. I do not think it is helpful to directly compare those supply chain contracts with employment contracts, because on one level we are dealing with human beings and on the other we are dealing with the flow of parts, services or whatever.
The hon. Gentleman is also right that a change in terms and conditions can sometimes be very positive for the employee. Perhaps it involves fewer hours for more money—that sometimes happens—or longer holidays. Of course, if something better is being offered, employees should have the flexibility to accept that, having exercised due diligence and looked it over properly—dotted the i’s, crossed the t’s and all that. What I am trying to get at is where the business model, and the day-to-day operation of the job, has fundamentally changed, through robotics or whatever.
Laurence Turner (Birmingham Northfield) (Lab)
I want to continue on the shadow Minister’s theme of milk. It used to be common in factories where there were particulates in the air to include a clause in someone’s contract that said they were entitled to a glass of milk during the day, because it was believed at the time that a glass of milk would remove those particulates from someone’s airway. It was completely misguided, but those contracts still exist, and I have been in situations where I have looked over similar, very outdated terms and conditions. If it is raining on a site, someone might be entitled to a 2p payment, for example. Such contract conditions are very easy to remove; it can be done by agreement.
Does the shadow Minister accept that if a contract is worded appropriately, such variations can be made by an employer—the key factor is whether there has been genuine consultation—and that the circumstances that clause 22 will remedy are really quite separate? It is for those extreme examples that Grant Shapps, the Conservative Business Secretary at the time, spoke out against.
Greg Smith
I am grateful to the hon. Gentleman, although he was possibly milking it with the length of that intervention—[Hon. Members: “Oh!”] It is nearly Christmas.
I accept the hon. Gentleman’s points about some of those very outdated provisions. I really hope that my children do not find a job out there that involves free milk, because they might jump at it a little too quickly. This probing amendment seeks simply to understand a little further where the flexibilities lie, and to get underneath some of the detail around when a variation of contract might be a good thing on both sides, or when things have just changed and there needs to be a variation in order for the jobs to be saved. I would hope that Members on both sides of the Committee would come at this from the perspective of the real world and wanting to save jobs, create more jobs, grow the economy and grow employment.
There may be legitimate reasons for wanting to vary terms and conditions, such as to provide for improved employment practices, or to update and reform outdated working practices—as the hon. Member for Birmingham Northfield referenced—in order to allow for the more effective running of a business or organisation. The amendment seeks to understand the Government’s position should such a situation arise, and to understand why they are legislating to prevent businesses from acting in such a way.
Michael Wheeler (Worsley and Eccles) (Lab)
On a point of clarity, is it the purpose of the amendment or an unintended consequence of the drafting that it would completely delete the subsection, rather than adding to it? If the purpose is to completely delete the subsection it is amending, are Opposition Members trying to remove the protections for those going concerns?
Greg Smith
The hon. Gentleman asks a perfectly legitimate question. I repeat that this is a probing amendment: we are not going to press it to a vote or try to put it in the Bill. The purpose behind it is to get the evidence base, the justification and some clarity of thought from the Government about why the clause is necessary and proportionate. Sometimes we have to suggest getting rid of something to get a good example or a good justification for going there, doing it and putting it in primary legislation.
The Opposition certainly do not want to see exploitative fire and rehire in any workplace. From talking to businesses, and from the evidence we have heard, we know that there needs to be solid grounding and an evidence base to show that the wording in the Bill is justifiable and does not justify shutting down many businesses that are growing, adapting and changing—hopefully, for the better, so they are more successful. They should be able to keep and grow their staff, rather than go down the redundancy route or other scenarios whereby jobs are lost.
Matthew Percival from the CBI said:
“In the fire and rehire proposals, there is a risk that we might be making it easier to make people redundant than to change contracts”.––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 7, Q1.]
That is the absolute nub of the matter. It would be nothing short of a total disaster if the unintended consequence of the exact wording of the clause or the Bill perversely incentivises companies to make people redundant, so people lose their jobs and have to go home and have that difficult conversation with their loved ones and say that they need to find a new job, with the devastation that that brings to real people’s lives. I cannot imagine that the Government want that to happen. With this probing amendment, we are seeking to kick the tyres. We want an explanation, or at least to encourage the Minister and the wider Business and Trade team to find a better way that does not have that unintended consequence.
A recurring theme of our debates in recent days, and from the Bill Committee witnesses—other than trade union representatives—is that the measures in the Bill on dismissal and re-engagement will be too restrictive for employers. I gently ask the Minister to reflect on that and think about whether the measures will actually work and will not have unintended consequences, so that people’s jobs are protected and saved. We do not want people to be unintentionally forced down the route of job losses.
Michael Wheeler
I agree with the comments of my hon. Friend the Member for Gloucester. I appreciate that this is a probing amendment, but I want to talk to its specifics. It appears to me that there are plenty of consensual mechanisms for achieving most of what the shadow Minister is suggesting about the variation of contracts to reflect working practices. If anything, they are inherently better than anything that is imposed. Quite often, when working practices, organisations and business practices are modernised, communication between those doing the work and the managers and owners leads to a much better outcome.
I suggest that we need to remember that we are talking about fire and rehire, which is inherently quite extreme. The amendment seems to refer to the particulars of normal working practices, looking at updating mechanisms to account for modern technology and suchlike, that are much better handled by the existing consensual mechanisms. While I appreciate that it is a probing amendment, it seems entirely unnecessary and does not necessarily speak to the heart of what the clause is about: ending the extreme practice of fire and rehire.
Sir Ashley Fox (Bridgwater) (Con)
It is a pleasure to see you in the Chair again, Ms Vaz. My hon. Friend the Member for Mid Buckinghamshire has explained that this is a probing amendment to find out the Government’s intentions, but I put it to the Minister and Labour Members that each of the Government’s proposals seems to be based on the premise that we need to legislate against the worst possible outcome.
The hon. Member for Worsley and Eccles referred to P&O, and that was in fact a scandal. But the problem with this approach, of course, is that a regulatory burden is imposed on each and every other employer, and the labour market is made less flexible and employing people is made more expensive. Therefore, every time the Government see a problem with one employer and say, “We have to regulate for everyone,” the whole labour market is made more expensive and less attractive to foreign investors—less like Britain and more like France. As we look across the channel, we see a country with a similar-sized economy, but an unemployment rate approximately double our own.
Combine that, for example, with the proposal on unfair dismissal, and employers could be less likely to employ that marginal worker. In this case, as Matthew Percival from the CBI said, it becomes more attractive, perhaps, for employers to make their workers redundant than to try to renegotiate terms and conditions.
I ask the Minister to consider the cumulative effect of each and every one of his proposals. It is easy for him to stand up and say, “This proposal on its own is modest and reasonable and good,” but the whole Bill will add £5 billion of costs to industry, and the majority of that falls on small and medium-sized enterprises. My fear is that the Minister, through the very best of intentions, will end up with unemployment higher at the end of this Parliament than when he started.
The Parliamentary Under-Secretary of State for Business and Trade (Justin Madders)
It is a pleasure to see you in the Chair this afternoon, Ms Vaz. For the benefit of the Committee, I again refer to my entry in the Register of Members’ Financial Interests and my membership of the Unite and GMB trade unions.
It has been an interesting debate. I think we are on the opposite end of the spectrum from where we were in the earlier debate about where the balance lies with our measures to end fire and rehire. I think that the fact that we have two arguments from other ends of the spectrum suggests that we are in about the right place—but if the shadow Minister expects us to believe that cows queue up to be milked in the morning, I just say to him: pull the other one!
Justin Madders
Yes, they do get worse—it is Thursday afternoon.
The shadow Minister did raise some important points, though. He gave the example of a dairy and its changing practices. Of course, a change in job function does not necessarily mean that terms and conditions have to change or indeed become worse. History is full of examples where technology has come in and made jobs different. As we look forward to the advent of automation and AI in our economy, I hope that people find new jobs and new roles and that those jobs are more fulfilling as a result of technological development.
I will say a few words about the comments from the hon. Member for Bridgwater. We are talking about overall impacts in this Bill of 0.4% of employers’ total costs—a very small price to pay for a comprehensive set of reforms that really are needed for workers. It is about rooting out bad practices and making sure that those bad employers, who we all rightly condemn, are not able to exploit existing loopholes. It is about stopping the race to the bottom. It is about creating a level playing field. One reason why P&O said that it took the action that it did was that its competitors were undercutting it. We do not want to see that race to the bottom continue. We want to see good employers rewarded for respecting and rewarding their employees well by being able to compete on a level playing field.
The general thrust of the shadow Minister’s remarks was interesting. There is nothing to stop an employee agreeing to changes to terms and conditions. Indeed, proposed new section 104I(2)(b) of the Employment Rights Act 1996 makes it clear that these provisions will not apply if the employee agrees to the changes. Changes and discussions happen every day of the week in industry—that is called negotiation, and that is what good industrial relations looks like. That is the sort of thing that we want to encourage.
We are trying to stop a situation that we have seen far too often, where an employer might just say, “Well, here are your new terms and conditions. If you don’t like it, there’s the door.” That, I am afraid, has become far too prevalent in our country. We have heard plenty of evidence about how many employers have been doing that. It is about recognising that there is a loophole in the law. This may be a probing amendment, but it would certainly make this clause ineffective, and arguably, it would make the situation worse than the status quo, because it would effectively legitimise some of those actions by employers. They could point to this legislation and say, “Well, the law says that we are able to do it.”
The way the amendment worded is quite broad. There is a reference to “outdated” terms and conditions. My hon. Friend the Member for Birmingham Northfield gave a good example of where reasonable dialogue between the trade union and the employer would see that change. The shadow Minister’s old colleague, Jacob Rees-Mogg, might have a different view about what “outdated” means. He might think anything after 1874 could be considered modern—[Interruption.] He probably does, yes. There would be very broad latitude for an employer to say that something was outdated. That is why I am concerned that the amendment would make things worse than they are now.
The Bill as drafted makes it very clear what the obligations of a responsible employer are. They are the sort of things that responsible employers do already. We recognise that there will be unfortunate situations in which an employer has no alternative but to change terms and conditions, but the Bill makes sure that, if there is a positive for the employees—there often is from a change in terms of conditions; that is what negotiations often involve—there is a way for that to continue. We are not going to stop that. If employees consent to changes, they will be able to be made under this Bill. I urge the shadow Minister not to press the amendment to a vote.
Greg Smith
I understand the argument that the Minister has set out, and I appreciate that this particular probing amendment was at the extremer end of the spectrum in trying to probe that response from him. I accept that there are many mechanisms whereby employees can consensually work with their employer to change contracts, and that is clear. I am still a little nervous—the proof of the pudding will be in the eating, as the Bill progresses and no doubt becomes legislation—about the nightmare scenario of businesses simply saying, “Rather than trying to engage in this process, as we were warned by the CBI, we will just make everyone redundant instead.”
There needs to be a clear, previously set out mechanism from the Government so that, if that disaster-zone eventuality comes to pass—I hope I am wrong; I do not want to see people being made redundant—there is a quick snapback or sort of provision to allow secondary legislation to throttle those measures down, or to fix them in some other way that still stops the exploitative practices without tying businesses’ hands behind their backs, because the net result will be job losses. I would be incredibly disappointed and sad if these issues, which both the Opposition and businesses have warned about throughout the passage of the Bill so far, became a job killer. The Government need to be ready, if they have got it wrong, to have a process that will give businesses the confidence again to properly engage in negotiations, such as those good industrial relations that the Minister spoke of, and not just make people redundant. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Justin Madders
We are back on fire and rehire again; I should probably count up how many times I have spoken in debates on this issue in the last few years. It has taken a lot of parliamentary time, and rightly so. We all remember the obloquy directed towards P&O when it took those actions, several years ago, and I am afraid that fire and rehire has become far more prevalent in our economy than anyone would want to see.
Investigations by the Trades Union Congress found that around 38,000 employers were using fire and rehire as a tactic. Research from the Chartered Institute for Personnel and Development found that, between August 2021 and 2023, the proportion of firms that had used fire and rehire had almost doubled. The impact assessment estimates that there are around 178,000 workers facing the threat of fire and rehire at this very moment, so the problem is not going away—indeed, because of the way that P&O has been allowed to get away with it, employers see it as a golden opportunity to take a sword to hard-fought terms and conditions.
Other Members have spoken about the household names that have attempted to do that, and USDAW’s written evidence included some notable household names. Once upon a time, fire and rehire was a seldom-used part of the employment law and industrial relations landscape but, as part of the wider pattern of insecurity at work, it has become a much more common tool. I am afraid, as we have seen, it is far too often an act of first—rather than last—resort, and the Government are committed to ending that practice.
The solution to dealing with many of the concerns raised by the shadow Minister and others is to point to what good and bad industrial relations look like, and to say, “This is what bad employer practice looks like.” Good employers and industrial relations will take workers with them. Again I refer to USDAW’s written evidence, which noted occasions where negotiations had begun with fire and rehire on the table almost from the start. That is not a healthy place to have sometimes very difficult discussions about changes to terms and conditions. The impact assessment notes that the power asymmetry can provide incentives for the more powerful party, in this case the employer, to act in a strategic manner to suppress wages and conditions. Such tactics are why we have seen such a slump in wage growth over recent years.
Greg Smith
Most of my concerns have been outlined in the amendments to the clause, but I want to ensure that it is placed on the record that the Opposition want to see employers engage in good faith and believe that most employers do. I accept the Minister’s point about the scandal of P&O Ferries—I was on the Transport Committee at the time, so possibly looked into it in more detail than most colleagues from the previous Parliament.
Where we perhaps still have a difference is that taking that unacceptable, scandalous situation at P&O and legislating for everybody on the back of it is not necessarily the best starting place. As I said in the previous debate, working on the presumption that all businesses are trying to exploit their workforces is not healthy or, I would suggest, reflective of the real world. Although there have to be measures to shut down things like what happened at P&O so that it does not happen again, there must equally be flexibility and understanding so that, when employers have engaged in good faith and really are trying to save the business—to save the jobs in the first place—we do not find ourselves in that nightmare scenario of people saying, “It’s too difficult—we’ll just have to make everyone redundant.”
I fully accept that this clause will pass in a few moments, but perhaps the Minister could consider, before we come to Report, some additional safeguards on that so that we do not end up with job losses and employers slamming their heads down on the desk, unable to find another way to save the jobs and the workforce. That would keep giving people the living they need to get on and prosper as part of our country, part of the business they are engaged in and part of our vibrant UK economy.
Laurence Turner
I will not speak for long, because most of the points have been made in the debate, but I want to come back to the point made by the shadow Minister and the hon. Member for Bridgwater. There is perhaps a legitimate difference in principle between the two sides: when there are extreme examples, should there or should there not be legislation in response? It is important to respond to that, because we have seen extreme examples of abuse across different parts of the labour market. To go back to the example of blacklisting, I suggest that that was a failure of successive Parliaments to tackle a practice that had been thought to be relatively rare, but proved to have been carried out on an industrial scale. It was right for Parliament to enact the blacklisting regulations.
I go back, too, to the Grunwick dispute, the ancestor of the statutory recognition regime. At the time, it was thought that the abusive patterns of employment behaviour on full display in that particular employer would be unlikely to recur. The Government of the day commissioned a public inquiry under Lord Scarman in the belief that, if the inquiry concluded that there should be trade union recognition, it was inconceivable that any employer would not abide by that—but that is exactly what happened.
Where we see those extreme abuses, other employers—by no means the majority, or even a substantial minority, but enough to have a seriously deleterious effect on the lives of many workers—will follow. Since P&O, we have seen other examples; hon. Members have referred to particular employers and sectors, and I could add parts of the retail, utilities and even the public sector, where such tactics have become more common. The previous Government made strong statements—I could quote some—about the practice, but I suggest that the action that was subsequently taken, the code of practice, was not sufficiently strong. In the case of P&O, where the employer made it clear at the time that it intended to ignore the existing legislation, it did not prove sufficient remedy.
We do need stronger action. The measures in the Bill will only ever affect a tiny minority of employers. It is important to stress that, but it is necessary to put this action into the Bill. P&O will always loom large in discussions of this topic, but the practice is by no means confined to that particular employer, and it is right to take the action that was not taken in the previous Parliament.
Steve Darling (Torbay) (LD)
Fire and rehire is an absolute scourge to those people who are impacted by it. Whether in significant numbers or a minority, it is utterly shameful. My Liberal Democrat colleagues broadly welcome the amendments, and we look forward to supporting the clause.
Justin Madders
It is good to hear that we have the support of the Liberal Democrats. Most of the country supports this measure; fire and rehire is rightly seen as a practice that should see its end. I quote the former right hon. Member for Welwyn Hatfield, Grant Shapps, who said at the time, when P&O first started on that course, that
“we will not allow this to happen again: that where new laws are needed, we will create them, that where legal loopholes are cynically exploited, we will close them, and that where employment rights are too weak, we will strengthen them.”—[Official Report, 30 March 2022; Vol. 711, c. 840.]
I have news for the Committee: I am afraid that only this week several Members of this place have told me about fire and rehire tactics going on in their constituency. A fire and rehire situation is taking place right now in Wrexham. The loopholes have not been closed. That is why we need to act.
To put the shadow Minister’s mind at rest, I believe that proposed new subsection (5) gives employers a real guideline as to how they need to deal with this. Furthermore, as was common to much of the evidence we heard, responsible and good employers do all those things anyway, so they will not be penalised or face any additional burdens, but rather will be able to operate on a level playing field.
To refer to the evidence given by DFDS about this particular matter, or to someone working in an area very relevant to it, they said that they were pleased that fire and rehire was going to be dealt with, because as an operator, they are
“simply looking for a fair and level playing field.”––[Official Report, Employment Rights Public Bill Committee, 26 November 2024; c. 56, Q54.]
That is why we need to act today.
I also refer to the support of the Institute of Directors; approximately two thirds of its members who were polled supported this action, too. I think it will come to be seen as a watershed moment in industrial relations in this country, where we finally got rid of one of the most obnoxious and outdated practices that this country has ever seen.
Question put and agreed to.
Clause 22 accordingly ordered to stand part of the Bill.
Clause 23
Collective redundancy: extended application of requirements
Justin Madders
I beg to move amendment 58, in clause 23, page 34, line 27, at end insert—
“(3A) In section 197 (power to vary provisions), in subsection (1)—
(a) in paragraph (a), for “188(2)” substitute “188(1A)”;
(b) in the words after paragraph (b), for “188(2)” substitute “188(1A)”.”
This amendment would correct incorrect cross-references in section 197 of the Trade Union and Labour Relations (Consolidation) Act 1992.
This is a purely technical amendment to fix an incorrect cross-reference in section 197(1)(a) of the Trade Union and Labour Relations (Consolidation) Act 1992. Section 197(1)(a) provides that the Secretary of State may make secondary legislation to amend the minimum time period for collective consultations in section 188(2) of the same Act. However, as I am sure the shadow Minister had already noticed, that reference is incorrect: “section 188(2)” should read “section 188(1A)”. A consequential amendment was missed when section 188 was amended by the Collective Redundancies and Transfer of Undertakings (Protection of Employment) (Amendment) Regulations 1995. That instrument renumbered section 188(2) as section 188(1A). Of course, it should have also made a consequential amendment to section 197(1)(a), but did not.
The amendment will not change the law, which can already be interpreted to refer to the correct cross-reference by way of the Interpretation Act 1978. The 1978 Act provides that where an instrument repeals and re-enacts a provision then, unless the contrary intention appears, any reference in any other enactment to the repealed provision is to be read as a reference to the re-enacted provision. The amendment will improve the clarity and accessibility of the law, which I am sure we will all be relieved to hear.
Greg Smith
I can be very brief on this amendment, Ms Vaz; in fact, I will channel the questioning style of my right hon. Friend the Member for New Forest West (Sir Desmond Swayne). This is what happens when a Bill gets rushed to meet an arbitrary political deadline, is it not?
Justin Madders
The shadow Minister will be pleased to hear that we have picked the error up at this stage, so that when the Bill is enacted it will of course be absolutely correct.
Amendment 58 agreed to.
Question proposed, That the clause, as amended, stand part of the Bill.
Justin Madders
Employers are currently obliged to collectively consult when they propose to make 20 or more employees redundant at one establishment. Collective consultations are an important part of ensuring fairness and transparency between employers and employees.
In the year to November 2024, approximately 3,500 employers in Great Britain gave notification that they were initiating a collective redundancy process at a single establishment. The benefits of consultation are felt by both employees and employers. Consultation ensures that affected employees can input into the process with a view to avoiding or mitigating redundancies wherever possible, and it helps employers to retain skilled workers and reduce the risk of disputes.
That is why the Government intend to strengthen the collective redundancy framework. The clause will amend the framework to ensure that employers must fulfil collective consultation obligations whenever they are proposing 20 or more redundancies, regardless of whether the redundancies take place at one establishment or not. This will ensure that more employees—many of them in vulnerable positions—will now benefit from redundancy consultation, and that affected employees can participate meaningfully in the redundancy process, regardless of how they might be dispersed across an employer’s business. The clause will also make it easier for employers to understand when they have to comply with these obligations.
I know that businesses have raised some concerns about the practical implications of the clause and I will take this opportunity to clarify its scope. First, the clause does not mean that employers will need to consult with the entire workforce in their organisation whenever they propose 20 or more redundancies. As is currently the case, they must consult only the relevant trade union or employee representatives of employees being proposed to be made redundant, or those who may be affected by measures implemented as a result of the proposed redundancies, such as relevant line managers.
Secondly, when an employer is required to undertake collective consultation with employees across different establishments, they have the flexibility to tailor the process to suit each location. For example, they are not required to undertake a single, uniform consultation across affected locations, but can hold separate consultation activities with each group of affected employees to ensure that discussions are both localised and meaningful.
Greg Smith
I have a couple of brief questions. I am grateful for the Minister’s clarification that the clause does not provide for a consultation of the whole workforce. That was a legitimate concern for many as they looked at the drafting of the Bill. The clarification will be welcome.
My bigger question is about the practicalities where an organisation has in excess of 20 employees. For example, a small chain of five or six pubs could easily have that volume of employees across bar and kitchen staff—chefs—cleaners and perhaps security, but in that sort of setting it is very rare for staff to be unionised, or even organised among themselves. In that scenario, where a smaller business employs that number of people across multiple sites, how does the Minister expect the requirement for the involvement of a trade union or employee organisation that does not exist to be engaged with? What is the mechanism for that? I appreciate that many Government Members would quite like everybody to be in a trade union—
Greg Smith
Indeed, we know from their declarations of interest that they all are. I hope the Minister takes the question with the good intent with which it is asked. Not everybody is in a trade union and not everybody organises in that way, so how would the mechanics of the measure work in those circumstances?
That leads to the wider question, “Why 20?” Why not 19, 18 or 15? Why not 25? It seems like an arbitrary number. I accept that a number needs to be put down. In some ways, in specifying a number, this clause is more detailed than most in the Bill, and it gives certainty, but I would like to understand why it is 20. It seems like a number picked from thin air. It could negatively impact an organisation if it led the employer to decide, “Well, we’ll just get rid of 19 of them, and we won’t have to comply.” That seems at odds with the other provisions in the Bill, where the Government seem to want to move all rights back to day one, yet they do not seem to want to apply that to organisations where, for whatever reason, 20 people are, sadly, being consulted on being made redundant. I would like clarity on that point.
Michael Wheeler
I will keep my contribution relatively short, but I did not want to let the clause pass without warmly welcoming its inclusion in the Bill. In a previous life, I worked to represent shop and retail workers. While P&O and the scandal of fire and rehire entered the collective consciousness, the Woolworths redundancy situation was burned into the consciousness of the workers I represented at that time. That is exactly the loophole that this measure is trying to close. Thousands of workers affected by the Woolworths redundancy missed out on the compensation they deserved as part of the lack of consultation because they worked in individual establishments that were small and fell below the threshold. The interpretation of the law at that point meant they were isolated, divided and not included as part of what was clearly, to everyone—
Greg Smith
Perhaps I can test the hon. Gentleman a little bit on that. I remember many happy hours as a child in Woolworths in the town where I grew up. They were fantastic stores, and they are greatly missed. Given where he is coming from, is he content with the number being set at 20? While Woolworths was a substantial business, I can think of smaller businesses with separate sites, retail outlets, pubs, restaurants or whatever that might employ 19 or 15 people.
Michael Wheeler
The hon. Gentleman invites to me to say whether I am content. I draw his attention to the fact that the clause removes the single establishment loophole while leaving in place the thresholds that are already part of the law around consultation and the time period. I have not examined and, despite the invitation, I will not speculate on where those thresholds should be, but I warmly welcome the removal of the single establishment loophole, so that where the numbers in a redundancy cross those thresholds—legitimately and apparently to everyone looking at it—there are not legalistic mechanisms for those workers to be left out.
Having warmly welcomed the removal of the loophole, let me reassure the shadow Minister. In a previous, previous life I was in a different job—we have all had many jobs—where trade unions were not recognised. I speak for myself alone when I say that I would love for every worker in this country to have the benefit of trade union representation. I confirm for the shadow Minister that I would love to see that, because I think it has genuine benefits.
Michael Wheeler
I am sure it is not. I worked in a retail establishment that did not benefit from trade union representation and that went through consultation, not on redundancy but on a variation of contracts, so it is relevant to what we were talking about before. It was actually a relatively smooth and easy process for employee representatives to be appointed and elected from among our number, despite the lack of an existing structure, and to engage with the company in those consultation exercises. While I would love there to be a trade union fighting the corner for every worker, when it is absent it is not a burdensome process to have employee engagement in these processes.
Justin Madders
I recognise that the shadow Minister welcomed the clarification I provided. No doubt there will be debate to come, as is often the case with legal issues, but the Government are fairly clear and confident that the clause will not have the unintended consequences we heard raised in evidence.
The shadow Minister asked, “Why 20?” He will pleased to know that that was a product of EU regulation. It is in existing law as part of the Trade Union and Labour Relations (Consolidation) Act 1992, which has been amended many times, so I could not say exactly when it came into force, but—
Greg Smith
The Minister can of course look back in history at when these measures were put in, but the Bill seeks to change all sorts of things across all sorts of sectors. We are free from the European Union! He could change it if he wished.
Justin Madders
I will remember that next time the shadow Minister tells me that we are trying to do too much in this Bill. With the Retained EU Law (Revocation and Reform) Act 2023, the Bill Committee for which I had the great pleasure of serving on, his Government could have done something about this before they left office.
The figure of 20 is long established, and we have no current plans to change it, but we are keen to ensure that the scenario my hon. Friend the Member for Worsley and Eccles described cannot continue. As he said, Woolworths made 27,000 people redundant, and about 3,000 of those were completely exempt from collective redundancy consultations because of this issue. There has been a number of high-profile retail redundancies where people have missed out on collective redundancy obligations because of this law, which we are pleased to be able to change.
On the question of smaller employers where there may not be trade union representation readily available, the regulations already provide for employee representatives to be engaged and elected in those circumstances, so there is no change to the law in that respect. There is already provision to deal with that situation.
Question put and agreed to.
Clause 23, as amended, accordingly ordered to stand part of the Bill.
Clause 24
Collective redundancy notifications: ships’ crew
Question proposed, That the clause stand part of the Bill.
Justin Madders
The clause will address the loophole that allowed P&O Ferries to avoid prosecution when it dismissed 786 seafarers without notice in March 2022. It will require operators of frequent services to British ports to notify the UK Government when making 20 or more redundancies even if those affected work aboard ships registered in another state. The clause means that if an operator of frequent services to a British port chooses to copy P&O Ferries and make collective redundancies without providing notice to the Government, it could face prosecution under the Trade Union and Labour Relations (Consolidation) Act 1992 and ultimately be liable for an unlimited fine.
The clause will apply to services calling between Great Britain and another place in the UK. It will also apply to any services entering Great Britain from a place outside the UK on at least 120 occasions in a 12-month period before the redundancy notification, or to new services that have been operating for less than 12 months and have called 10 times or more per month while they have been operating. We estimate the number of operators in scope of the measure to be around 2,000. The cost to businesses will be minimal; it is estimated to be around £20 per notification. We hope that the prospect of an unlimited fine will deter operators from making mass redundancies without the appropriate notification.
While this measure may not prevent redundancies from being made, it will mean that the Government and any employee representatives must be notified before any dismissals take effect. It will prevent the sort of disruption seen following the P&O Ferries dismissals and will mean that the Government will be able to provide valuable support to seafarers facing redundancy. I therefore commend the clause to the Committee.
Greg Smith
I understand where the Minister is coming from, particularly on the expansion of the requirement to notify the flag state. I spoke earlier about my time on the Transport Committee watching the P&O scandal unfold; we held some pretty tough evidence sessions as part of that. I understand that the clause is very specifically to protect seafarers from that sort of engagement. I very much hope that it works to protect those seafarers, and we will not oppose it.
Justin Madders
I am pleased to see that we have support all round.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Public sector outsourcing: protection of workers
Justin Madders
I beg to move amendment 59, in clause 25, page 36, line 14, leave out subsection (2) and insert—
“(2) After Part 5 insert—
‘Part 5A
Outsourcing: protection of workers
83A Application of this Part
(1) This Part provides for a Minister of the Crown, the Scottish Ministers and the Welsh Ministers to make provision for the protection of workers in relation to relevant outsourcing contracts (see section 83B).
(2) Accordingly, in this Part, “appropriate authority”—
(a) means—
(i) a Minister of the Crown,
(ii) the Scottish Ministers, or
(iii) the Welsh Ministers, and
(b) does not include a Northern Ireland department.
(3) In addition to the restrictions in section 113, a Minister of the Crown—
(a) may exercise a power under this Part for the purpose of regulating devolved Scottish authorities only in relation to joint or centralised procurement under a reserved procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating joint or centralised procurement under a devolved Scottish procurement arrangement.
(4) The Scottish Ministers—
(a) may only exercise a power under this Part for the purpose of regulating—
(i) devolved Scottish authorities, or
(ii) procurement under a devolved Scottish procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating—
(i) joint or centralised procurement under a reserved procurement arrangement, or
(ii) joint or centralised procurement under a devolved Welsh procurement arrangement.
(5) In addition to the restrictions in section 111, the Welsh Ministers—
(a) may exercise a power under this Part for the purpose of regulating devolved Scottish authorities only in relation to joint or centralised procurement under a devolved Welsh procurement arrangement;
(b) may not exercise a power under this Part for the purpose of regulating joint or centralised procurement under a devolved Scottish procurement arrangement.
(6) This Part does not apply in relation to—
(a) a private utility;
(b) a person referred to in regulation 4(1)(b) of the Utilities Contracts (Scotland) Regulations 2016 (S.S.I. 2016/49);
(c) a devolved Welsh authority listed in Schedule 1 of the Social Partnership and Public Procurement (Wales) Act 2023 (asc 1);
(d) procurement under a transferred Northern Ireland procurement arrangement, except to the extent that the procurement—
(i) is carried out by a devolved Scottish authority, and
(ii) is not joint or centralised;
(e) a transferred Northern Ireland authority, except in relation to—
(i) procurement under a reserved procurement arrangement,
(ii) procurement under a devolved Scottish procurement arrangement, or
(iii) procurement under a devolved Welsh procurement arrangement.
(7) For the purposes of this section, procurement under a procurement arrangement is “joint or centralised” if as part of that procurement arrangement a contract is to be awarded following a procedure or other selection process carried out—
(a) jointly by a devolved Scottish authority and another contracting authority which is not a devolved Scottish authority, or
(b) by a centralised procurement authority or equivalent body.
83B Relevant outsourcing contracts
(1) In this Part, “relevant outsourcing contract” means a contract in relation to which conditions A to C are met.
(2) Condition A is met where the contract—
(a) is a public contract under this Act, or
(b) is a contract regulated by Scottish procurement legislation.
(3) Condition B is met where the contract—
(a) is a contract for the supply of services that include the performance of functions that are or have previously been performed by the contracting authority, or
(b) is—
(i) in the case of a public contract, a framework for the future award of a contract referred to in paragraph (a), or
(ii) in the case of a contract regulated by Scottish procurement legislation, a framework agreement the purpose of which is to establish the terms governing a contract referred to in paragraph (a).
(4) Condition C is met where the functions referred to in subsection (3)(a) are, or are expected to be, performed by individuals (“transferring workers”) who—
(a) in performing the functions, are employed by the supplier or a sub-contractor under a worker’s contract, and
(b) were employed by the contracting authority under a worker’s contract in performing functions of the same kind.
(5) For the purposes of this Part—
(a) “contract regulated by Scottish procurement legislation” means a contract the procurement of which by a devolved Scottish authority is regulated by Scottish procurement legislation;
(b) in relation to a contract regulated by Scottish procurement legislation—
(i) “contracting authority” means a devolved Scottish authority that is a contracting authority within the meaning of the relevant Scottish procurement legislation;
(ii) “framework agreement” has the same meaning as in the relevant Scottish procurement legislation;
(iii) “supplier” means an economic operator within the meaning of the relevant Scottish procurement legislation;
(iv) “the relevant Scottish procurement legislation” means the Scottish procurement legislation regulating the procurement of the contract.
83C Power to specify provision for inclusion in relevant outsourcing contracts
(1) An appropriate authority may by regulations specify provision to be included in a relevant outsourcing contract for the purpose of ensuring that—
(a) transferring workers of a specified description are treated no less favourably as workers of the supplier or a sub-contractor than they were as workers of the contracting authority, and
(b) workers of the supplier or a sub-contractor who are not transferring workers and are of a specified description are treated no less favourably than those transferring workers.
(2) In carrying out the procurement of a relevant outsourcing contract, the contracting authority must—
(a) take all reasonable steps to ensure that provision specified under subsection (1) is included in the contract;
(b) where provision specified under subsection (1) is included in the contract, take all reasonable steps to secure that such provision is complied with.
(3) Subsection (2) does not apply—
(a) where the contracting authority or the relevant outsourcing contract is of a specified description, or
(b) in specified circumstances.
(4) In this section, “specified” means specified in regulations made by an appropriate authority.
83D Code of practice on relevant outsourcing contracts
(1) An appropriate authority must prepare and publish a code of practice containing guidance to contracting authorities for the purpose of ensuring that, where a contracting authority carries out the procurement of a relevant outsourcing contract—
(a) transferring workers of a description specified in the code are treated no less favourably as workers of the supplier or a sub-contractor than they were as workers of the contracting authority, and
(b) workers of the supplier or a sub-contractor who are not transferring workers and are of a description specified in the code are treated no less favourably than those transferring workers.
(2) An appropriate authority—
(a) may amend or replace a code published by it under subsection (1), and
(b) must publish any amended or replacement code.
(3) A code published under subsection (1) or (2) must—
(a) in the case of a code published by a Minister of the Crown, be laid before Parliament;
(b) in the case of a code published by the Scottish Ministers, be laid before the Scottish Parliament;
(c) in the case of a code published by the Welsh Ministers, be laid before Senedd Cymru.
(4) In carrying out the procurement of a relevant outsourcing contract, the contracting authority must have regard to the code of practice for the time being published under subsection (1) or (2).
(5) This section does not require an appropriate authority to do anything which the authority does not have power to do (see section 83A and Part 11).
83E Interpretation of this Part
(1) In this Part—
“appropriate authority” has the meaning given in section 83A(2);
“contract regulated by Scottish procurement legislation” has the meaning given in section 83B(5)(a);
“relevant outsourcing contract” has the meaning given in section 83B;
“transferring worker”, in relation to a relevant outsourcing contract, has the meaning given in section 83B(4);
“worker” and “worker’s contract” have the same meaning as in the Employment Rights Act 1996 (see section 230 of that Act).
(2) For the purposes of this Part, in relation to a contract regulated by Scottish procurement legislation, “contracting authority”, “framework agreement”, “supplier” and “the relevant Scottish procurement legislation” have the meaning given in section 83B(5)(b).
83F Power of Scottish Ministers to amend this Part
The Scottish Ministers may by regulations modify section 83A, 83B or 83E in consequence of a modification of Scottish procurement legislation.’”
This amendment would restructure the new provisions to be inserted into the Procurement Act 2023 so that the powers and duties extend to the Scottish Ministers and Welsh Ministers and devolved Scottish and Welsh authorities. The amendment also clarifies that the duty to publish a code of practice does not depend on the making of the regulations.
Justin Madders
Amendment 59 will expand and restructure the provisions in clause 25, which amends the Procurement Act 2023, to reinstate and strengthen the two-tier code for relevant outsourced contracts for public services so that the powers and duties in clause 25 extend to Scottish and Welsh Ministers. Amendments 60 to 64 make changes that are consequential on those made by amendment 59, including by updating various definitions in the Procurement Act 2023 and by providing that regulations made by Scottish and Welsh Ministers must be made using the affirmative procedure of the Scottish Parliament and the Senedd.
We are making the amendments at the request of the Scottish and Welsh Governments. They are necessary because to get the benefits of a consistent approach to fair and equitable employment terms and conditions on relevant outsourced contracts, it is essential that a reinstated two-tier code applies throughout the UK.
We continue to engage with our counterparts in Northern Ireland about whether the powers should also extend to Ministers there. The regulations and code of practice created in our provisions will apply to reserved Northern Irish authorities. I commend the amendments to the Committee.
Greg Smith
I am reminded of the old chestnut about rushing out a Bill in 100 days and forgetting about the devolved settlements as part of the process. Given that devolution was largely the product of the previous Labour Government, I am slightly surprised that the current one would forget about Holyrood and Cardiff Bay. However, it is good that we now have clarity. We will of course want to test how things are actually going to work. Indeed, the question of Northern Ireland—which is just as important a part of our country as England, Scotland and Wales—really should be resolved sooner rather than later, so that there can be clarity that the Government are seeking to legislate for the whole of our United Kingdom of Great Britain and Northern Ireland, and not doing it in a piecemeal fashion.
Justin Madders
I gently correct the shadow Minister: we did not forget to engage with the Scottish and Welsh Governments. We were making sure that we had agreement before we tabled amendments, which is why they have appeared as they have today.
Chris Murray (Edinburgh East and Musselburgh) (Lab)
Does the Minister agree that this is actually an example of the Government keeping not only their manifesto promise to deliver a new deal for working people, but the manifesto promise that I certainly made many times during the election campaign, which was that the new Government would show the utmost respect for the Scottish Parliament and Government, and for all the devolved institutions? I reassure the Minister that the Scottish Parliament was not forgotten during the drafting of the Bill, because there was extensive engagement with the Scottish Government, some of which I saw myself.
Justin Madders
I could not agree more with my hon. Friend. On that note, I commend the amendments to the Committee. “appropriate authority (except in Part 5A) section 123 appropriate authority (in Part 5A) section 83A”
Amendment 59 agreed to.
Amendments made: 60, in clause 25, page 37, line 33, at end insert—
“(2A) In section 2 (contracting authorities), after subsection (1) insert—
‘(1A) But see also section 83B(5)(b)(i) (which provides for “contracting authority” to have an extended meaning in relation to certain contracts regulated under Part 5A (outsourcing: protection of workers)).’”
See the explanatory statement to amendment 59.
Amendment 61, in clause 25, page 37, line 34, leave out subsection (3).
See the explanatory statement to amendment 59 - because the new provisions are now being inserted as a new Part of the Procurement Act 2023, there is no longer any need to amend section 100 of that Act.
Amendment 62, in clause 25, page 38, line 3, leave out subsection (4) and insert—
“(4) In section 122 (regulations)—
(a) in subsection (4) (regulations by Ministers of the Crown subject to affirmative procedure), after paragraph (i) insert—
‘(ia) section 83C (provision for inclusion in relevant outsourcing contracts);’
(b) in subsection (10) (regulations by Welsh Ministers subject to affirmative procedure), after paragraph (g) insert—
‘(ga) section 83C (provision for inclusion in relevant outsourcing contracts);’
(c) in subsection (14) (regulations by Scottish Ministers subject to affirmative procedure), before paragraph (a) insert—
‘(za) section 83C (provision to be included in relevant outsourcing contracts);
(zb) section 83F (power to amend section 83A, 83B or 83E);’”.
See the explanatory statement to amendment 59.
Amendment 63, in clause 25, page 38, line 6, at end insert—
“(4A) In section 123 (interpretation), in subsection (1), in the definition of ‘appropriate authority’, at the end insert—
‘(but see section 83A(2) for a different meaning of “appropriate authority” in Part 5A (outsourcing: protection of workers));’.
(4B) In section 124 (index of defined expressions), for the entry for ‘appropriate authority’ substitute—
See the explanatory statement to amendment 59.
Amendment 64, in clause 25, page 38, leave out lines 9 to 11 and insert—
“Part 5A (outsourcing: protection of workers)”.—(Justin Madders.)
See the explanatory statement to amendment 59.
Ordered, That further consideration be now adjourned. —(Anna McMorrin.)
Armed Forces Commissioner Bill (Fourth sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
Public Bill CommitteesRead Full debate Armed Forces Commissioner Bill 2024-26 View all Armed Forces Commissioner Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 12 December 2024 - (12 Dec 2024)
The Committee divided: - Ayes: 4 / Noes: 11 - Question accordingly negatived.
The Chair
I welcome Committee members to this afternoon’s sitting. I will not tell you at the beginning what train I am hoping to catch.
Clause 4
Commissioner’s functions in relation to general service welfare
Mr Mark Francois (Rayleigh and Wickford) (Con)
I beg to move amendment 12, in clause 4, page 2, line 35, at end insert—
“(2A) A ‘general service welfare matter’ may include issues relating to the provision of pensions and other related benefits to serving and former members of the armed forces.”
This amendment would enable the Commissioner to include matters relating to pensions and other such benefits in their investigations of general service welfare matters.
It is a pleasure to serve under your chairmanship, Mr Betts. I hope we shall not inconvenience you too much with regard to your journey back.
The purpose of amendment 12 is to confirm in the Bill that pensions would be among the topics that the commissioner can investigate under the heading of “general service welfare matters”. This is obviously a matter of keen interest to service personnel and their families, and having good pension provision for serving in the armed forces has always been an aid to both recruitment and particularly retention, especially for non-commissioned officers and officers as they progress in their careers.
I have often felt—and I include the time when I served as a Minister in the Ministry of Defence—that we have not really done enough to successfully market the value of military pensions as part of the wider service offer in order to convince people to join and then remain in the armed forces. In my experience, even many armed forces personnel did not appreciate that they had one of the few pension schemes across the entire public sector that was effectively non-contributory. In other words, their employer paid a contribution into their pensions, but they did not. In comparison, the last time I checked, most serving police officers pay something like 14% of their salary into their pension, whereas serving personnel still do not have to pay anything. Historically, the pension has always been—certainly as people become more experienced, get older and think more about their pension provision, much like the rest of the population—a vital tool in keeping people in.
I would like to raise with the Minister one particularly pressing pensions matter, which provides a classic example of the sort of issue that the Armed Forces Commissioner should be empowered to investigate. In essence, it relates to the potential liability for inheritance tax, relating to death in service lump sum payments. This follows on, unfortunately, from the IHT changes announced in the Budget.
I will refer to a briefing that was recently provided to me by Major General Neil Marshall OBE, the chief executive of the Forces Pension Society, which, I hope the Minister and Committee will accept, is the absolute gold standard expert on any matter relating to forces pensions—the sort of Office for Budget Responsibility of armed forces pensions. The AFP note summarises the issue as follows:
“Death in service benefits affect those who die prematurely. While benefits pay to spouses or civil partners will be unaffected by IHT, we understand that under the Government’s proposals, death in service lump sum payments for service personnel who die in the service and are not married or in a civil partnership would be liable to IHT. This would lead to military personnel being disadvantaged compared with their civilian counterparts”,
not least because their civilian counterparts would be
“able to place such benefits in trust and therefore outside of the deceased’s estate.”
The note continues to say that the introduction of the armed forces pension scheme 2005 and subsequently the armed forces pension scheme 2015—AFPS 05 and AFPS 15, as they are colloquially known—
“saw eligible partners recognised as dependents and therefore eligible for benefits.”
Under AFPS 05 and AFPS 15, personnel do not need to be married; they need to have an established partner. The note continues:
“This was in addition to married couples and those in civil partnerships. This was a welcome reflection of societal changes over the past 30 years or so; introducing a potential inheritance tax charge on death in service benefits for those military people who are not married or in a civil partnership is at odds with the extant policy.”
To put in this in layman’s English, because in my experience anything to do with pensions does tend to be quite complicated: if Corporal Thomas Atkins of the 1st Battalion the Lone Shire Regiment were walking down his high street tomorrow—not on active service—and unfortunately dropped dead of a heart attack, even if he had a long-term partner and perhaps three children but was not married or in a civil partnership with that partner, then his family would be liable for a potential inheritance tax charge on his death in service benefit. Not only is there the risk of the financial penalty—I will come on to a case study in a moment to illustrate the dilemma—but the bureaucracy could result in payouts from the estate being delayed while the liability for IHT is being calculated. The Forces Pension Society summarise the issue in its very good briefing note as follows:
“At a time of extreme vulnerability, these lump sums need to be paid promptly, as they currently are. If death in service benefits become subject to IHT there will be a delay to the benefit being paid both while the estate is assessed for IHT and while the amount of IHT attributable to the DIS [death in service] benefit is assessed and the scheme administrator (Veterans UK) pays the tax charge.”
As the briefing note then goes on to explain:
“Many who would not previously have been caught with an IHT liability will find themselves in a very bureaucratic process that will slow down the already lengthy process of sorting out the financial affairs of an individual at what is a very difficult time.”
The Forces Pension Society gave several examples of how this could affect personnel in practice. For the sake of brevity, I will just give one, which I hope is sufficient to illustrate the point. Take the case of an OR-9 equivalent—a senior warrant officer at the top of the non-commissioned rank structure. This individual has a partner to whom they are unmarried, and on death leaves an estate worth £400,000 and death in service benefits of £248,292—four times their salary of £62,000. They would pay 40% inheritance tax on the non-pension assets, resulting in an IHT liability of £30,000, but after April 2027, if the DIS benefits were included in the estate, that would increase the estate’s value to £648,292. The IHT liability will therefore increase accordingly to £129,316. That represents an increase of around 330%.
In fairness, we on the Conservative Benches suspect that this is an example of the law of unintended consequences in action. We do not believe that the Government deliberately brought in these changes with the specific intention of targeting armed forces personnel. There is a debate about farmers and other groups in society, but I am focusing today on armed forces personnel and their families. To be clear, we are not saying that the Government did this deliberately in order to damage those people’s interests. Nevertheless, the default position is that they would suffer in the ways I have just outlined, unless something is done. Indeed, the Forces Pension Society summed up the problem as follows:
“We believe the Government has made an error and would not knowingly implement a policy that runs counter to the spirit of the armed forces covenant. The situation is recoverable should they act now.”
We on the Conservative Benches support that plea.
I hope that when the Minister replies, he will assure us that, following the consultation on these proposals—which will be overseen by His Majesty’s Treasury, not by the MOD, because it is a consultation on the IHT changes in general—he is confident that armed forces personnel and their families will be exempted from any potential inheritance tax liabilities on death in service payments, whether or not those armed forces personnel die in active service. I hope that I have managed to explain that in terms that the Committee can follow.
Mr Francois
I will in a moment.
I hope that, as an act of good will, the Minister will be minded to accept the amendment to remove any doubt about the ability of the Armed Forces Commissioner—who, as we heard this morning, will end up being appointed in early 2026, a year before these proposed changes are due to come into effect—to look in detail at this issue. Given the rightful concerns of the Forces Pension Society, I must tell the Minister that I am minded to press the amendment to a Division if he does not do the right thing.
Having hopefully explained what is admittedly a slightly complex issue, I very much look forward to the Minister’s response, but before I sit down, I will gladly take the hon. Lady’s intervention.
Juliet Campbell
In addressing welfare and support for families, the shadow Minister has focused on pensions, but what are his thoughts on wider issues such as childcare and education, which we should also be thinking about?
Mr Francois
I entirely take the hon. Lady’s point, for which I thank her. There are a number of wider issues—one of them is education, and particularly special educational needs—and I will touch on those in the clause stand part debate, if it pleases the Chair. The hon. Lady may recall that I gave the Minister a pretty fair heads-up about that on Tuesday. I tabled the amendment so that we could raise the specific issue of pensions, which is a concern for armed forces personnel, rather than discussing it under clause stand part.
To drive that point home before I conclude my remarks, Larisa Brown, the excellent defence editor of The Times, has just published an article online entitled, “Call to spare troops’ loved ones from inheritance tax trap.” Its subheading is: “Death in service payments for unmarried members of the armed forces who die off-duty will be subjected to the levy under plans announced in the budget”. In answer to the hon. Lady’s question, this is very much a live issue as of about 14 minutes ago.
Amanda Martin (Portsmouth North) (Lab)
Will the right hon. Gentleman give way?
Mr Francois
In a moment. Having raised this issue with the Minister, who has a look on his face that says, “This wasn’t in my folder,” I very much hope that he will, being an artful chap, seek some inspiration and extemporise by saying something encouraging so that we do not feel it necessary to press the amendment. I was going to conclude my remarks there, but I do not want to be accused of curtailing the debate, so I will give way first to the hon. Lady and then to the hon. Gentleman.
Amanda Martin
Although we—and, I think, service personnel—recognise the right hon. Gentleman’s concerns about pensions in relation to those specific incidents, I will make three points if I may. First, the amendment states that
“A ‘general service welfare matter’ may include issues relating to the provision of pensions”.
That would give a rather larger weighting to the direction of the commissioner, potentially over the direction of service personnel and their families. I talk to service personnel in my city of Portsmouth, which is the home of the Royal Navy, and they might prefer for it to state that a general service welfare matter may include issues relating to housing, postings, their professional careers, their rules of engagement and access to local services.
Including that single provision would direct the commissioner and would not allow for issues to come up from personnel and the grassroots—from our people on the ground. Should a matter come forward as an issue they want to raise, obviously it is in the gift of the commissioner to do so, but actually the amendment would limit things. From the conversations I have had with personnel in my area, this is not at the top of their list. They would not like to be directed on what they can bring forward to the commissioner.
The Chair
Order. I remind the Committee that interventions are supposed to be just that: reasonably brief and to the point. If Members want to make a longer contribution, they should indicate that they would like to contribute in the general debate.
Mr Francois
I will try to be brief. This amendment in no way precludes the raising of any of the other issues that the hon. Lady mentioned. It does not say, for instance, that the commissioner can look only at pensions—not at all. However, it does specifically make it clear that the commissioner is empowered to look at pensions, because they kick in, by definition, when armed forces personnel leave the service. Some people might try to argue that pensions are not a general service welfare issue because personnel are no longer serving, but they very much are—not least because, as the Minister will know, they very much affect retention. They might also affect recruitment slightly, but pensions are certainly very important in retention. Sometimes they are the overwhelming reason that people stay in the service, depending on their personal financial circumstances.
I see the hon. Lady’s point, but all this is doing is making it very clear, beyond peradventure, that the Armed Forces Commissioner’s remit would extend to pensions. I admit that it also gave us an opportunity to raise this very important issue, which the Forces Pension Society raised with me a little while ago. When I met its representatives, they were genuinely worried about this, and my amendment was an opportunity to put the issue on the table and on the Government’s radar, as it were. That is what I was seeking to achieve.
Luke Akehurst
On one level, I congratulate the right hon. Gentleman for finding an opportunity to raise this issue in the context of the Bill Committee. It is one for which I have a huge amount of sympathy, as I represent a constituency with a large number of retired service personnel. On the other hand, it is a little cheeky to use a Bill Committee to raise a substantive policy issue that could have been raised on the Floor of the House—perhaps in Defence questions.
Luke Akehurst
I am sorry—I will be as brief as I can. I am getting used to being brief. What led the right hon. Gentleman to suspect that this issue might be in any way excluded? I hope the Minister will clarify that the Bill is designed to be permissive and broad, and to allow the commissioner to define what a general welfare issue might be. I do not think there is any attempt to exclude—
Mr Francois
I thank the hon. Gentleman for his very pithy intervention. He pays me a back-handed compliment. How outrageous that His Majesty’s Opposition should try to raise a difficult issue in the middle of a Bill Committee; if I were to go back through the annals of Hansard down the centuries, I am sure there would be some precedent for that.
This was a timely opportunity, if I can put it like that, to table the issue. There is a consultation coming up, and I suspect, looking at his face, that the Minister was not really au fait with this issue—I am not being rude to him—but he is now, and I will be very interested to hear what he has to say.
The key point here is that death in service benefits have traditionally been payable if someone dies while in the armed forces or in the service of the Crown, whether or not they were on active service. A person who died back at home with their family would still qualify for the money. Under the armed forces pension scheme, they would still qualify if they had a regular partner. Under the Bill, however, because we are now dealing with the inheritance tax rules, unless the individual is married or in a civil partnership the exemptions do not apply. That is the critical point. I suspect the Ministry of Defence had not picked up on it. The Forces Pension Society, which exists for exactly this kind of eventuality, has done what it says on the tin and raised an issue that could materially affect armed forces pensions. In some ways, I am acting as their factotum this afternoon in tabling the issue.
Lincoln Jopp (Spelthorne) (Con)
I do not think it is, actually. This is important, because as written—without the amendment—the provision refers to a matter that
“arises in connection with ongoing service of persons subject to service law”.
As soon as someone is killed, therefore, they are not within the purview of the Armed Forces Commissioner and nor are their families, because there is no more ongoing service. Is that not the point?
Mr Francois
I think it is. Those who have left the service, are by definition no longer subject to service law; they are subject to the laws of the country like any other civilians, as that is what they have become, albeit they are civilians with the special status of being a veteran, which we should respect. But they are no longer serving in His Majesty’s armed forces. The amendment would allow the commissioner to expand their remit little bit in order to look at pension-related issues, which are something that armed forces personnel regard as part of their general service welfare. When they are taking that stick or twist decision, weighing up the pluses and minuses of whether to stay or leave—particularly if they have been in the service for some years and have accumulated a reasonable pension pot—that is definitely something that they will take into account.
Mr Francois
In a moment. My hon. Friend the Member for Spelthorne is a former commanding officer of the Scots Guards, and he knows the challenge that all commanding officers face in retaining personnel, particularly experienced personnel. It is part of that stick or twist decision, which is why we believe that the Armed Forces Commissioner should be able to look at it. The amendment would remove any doubt that they had the ability to do that, while—to come back to the point made by hon. Member for Broxtowe—in no way precluding their being able to look at anything else.
Luke Akehurst
I thank the right hon. Gentleman for giving way. I will try to be more pithy this time. I thought there was a separate proposal for a veterans’ commissioner. Should not matters that affect former service personnel after the point when technically they have ceased to serve, or their families if they are deceased, sit in the purview of a veterans’ commissioner, not the Armed Forces Commissioner?
Mr Francois
The hon. Gentleman anticipates me, because if he looks down the list of amendments, he will see that new clause 2 talks specifically about veterans’ commissioners. Perhaps at that point he might want to intervene on me again, as long as it does not mean Mr Betts misses his train.
I hope that I have made my point. I shall be interested to hear what other Members in the Committee think, and particularly what the Minister’s view is.
The Minister for the Armed Forces (Luke Pollard)
I have four quick responses. First, it is good to know that there is a journalist watching or listening to these proceedings. I wish her all the best with the article she will no doubt follow this debate with. Secondly, being artful and cheeky are compliments on both sides of this divide, so I think we can take those as benefits.
Turning to the substantive points, the first is on placing a specific category of general welfare matter on the face of the Bill. It will not surprise the right hon. Member for Rayleigh and Wickford that I say it should be for the commissioner to decide which matters they consider to be a general service welfare matter. As my hon. Friend the Member for Broxtowe mentioned, it is quite possible that there will be people who feel strongly about childcare, others about the state of their housing, and others still about a range of service matters. It is for the Government to set up the powers of the commissioner so they can make a decision free from the influence of Ministers on what that should be.
The right hon. Gentleman will understand if I resist the temptation to specify one measure in the Bill and not others. The danger of trying to have an exhaustive list is that there will always be matters excluded from it, no matter how declaratory or helpful is the intention of putting certain measures on the face of the Bill. I assure the shadow Minister that pensions, which are of course extremely important, are not excluded from the scope of the commissioner. If they are considered to be a general service welfare issue, pensions can already be investigated without having to specify them on the face of the Bill. I hope he understands that his amendment is unnecessary to achieve that.
On the second issue the shadow Minister raised, he is, I hope, familiar with the answer to his written question given by my hon. Friend the Minister for Veterans and People, who replied:
“Inheritance tax on pensions is subject to a technical consultation which runs between 30 October 2024 and 22 January 2025. The Ministry of Defence will follow legislation as per Government proposals.”
I commend the shadow Minister for raising an issue like this, but he will understand that a proper consultation by the Treasury and His Majesty’s Revenue and Customs is under way, and it is for them to undertake that. He has placed the issue on record here and separately, in his written question to my ministerial colleague. I encourage him to share the experiences he has raised with my ministerial colleague who looks after armed forces pensions, so he can look further into that. I entirely commend him for his artful cheekiness in raising it in this Committee.
These are precisely the issues that the commissioner should have the power to investigate and, based on the Bill in front of us, will have the power to investigate, but I do not think it is for any one of us to specify which issues, because that constrains the independence of the commissioner. We spent this morning talking about the importance of reinforcing the independence of the commissioner. This afternoon, we should continue that argument and not seek to direct the commissioner through a declaratory addition to the Bill about one area. The commissioner will be able to look at pensions as a general service welfare matter, as they see fit. I suspect, given the shadow Minister’s energy, that he will seek to raise the issue further.
Regarding pensions, there is already a set procedure that allows current service personnel veterans to raise complaints through a process called the internal disputes resolution procedure. These cases are assessed by discretionary decision makers within the Defence Business Services authority, and if people are unhappy, they can appeal these decisions to the Pensions Ombudsman. I recognise the shadow Minister’s strength of feeling on this. Notwithstanding his specific issue, which is worthy of being raised on the Floor of the House, I hope he will understand why I resist the idea of having a declaratory point about one particular area, as in his amendment. As such, I ask him to withdraw his amendment, but also to keep in contact with my ministerial colleague, who will be able to look into this matter in further detail.
Mr Francois
I thank the Minister for his compliment about my “artful cheekiness”. I am rather hoping that the Whip will have written that down. Again, quoting from Larisa Brown’s article,
“It is understood that inheritance tax would apply to service personnel who are killed while off duty, for example if they are driving to and from work.”
She also includes a comment from a spokesman from the Forces Pension Society, who said they believed it was an “unintended consequence”— we are trying to be fair to the Government—but added,
“For the military, death is an occupational risk, so we also believe this is a breach of the armed forces covenant, which says that service personnel should not be disadvantaged by virtue of their service.”
I understand what the Minister has said, and I know there is a technical consultation, but this is important not just to us and to the Forces Pension Society; it will genuinely concern armed forces personnel and their families.
Luke Pollard
I neglected to respond to the point made by the hon. Member for Spelthorne. If a member of the armed services dies, they are no longer able to access the commissioner because of their death. However, we are deliberately introducing secondary legislation that will define bereaved families to enable them to access the commissioner. I hope the hon. Gentleman is reassured that, in the circumstances that the right hon. Member for Rayleigh and Wickford is talking about, the families of those affected will still be able to raise an issue with the commissioner. The wording of that secondary legislation is being prepared by the Ministry of Defence and will be published in draft form as the Bill progresses through Parliament.
Mr Francois
My hon. Friend and I are grateful for that clarification. None the less, we need to put down a marker. We need to make very plain to the Government—not just the MOD, but the Treasury, because it will be a Treasury consultation and it is a Treasury tax—that we regard this point as very important and that we hope and believe that the Government should reverse this measure.
Terry Jermy (South West Norfolk) (Lab)
Will the right hon. Gentleman give way?
Mr Francois
No. On that basis, I intend to press the amendment to a vote.
Question put, That the amendment be made.
Mr Francois
On a point of order, Mr Betts. If I could record for posterity that neither of the two Liberal Democrats assigned to the Committee are here at the moment. In fairness, one has a conflicting obligation in the Chamber; the other has a reason we do not know—it could be a family reason. For the record, the Liberal Democrats were not here to vote on this.
The Chair
I do not think that is a point for the Chair, but it has obviously been put on the record.
Question proposed, That the clause stand part of the Bill.
Luke Pollard
Clause 4 inserts proposed new sections 340IA, 340IB and 340LA into the Armed Forces Act 2006. Taken in order, these new sections enable the commissioner to investigate a general service welfare matter, to have powers of entry to certain Ministry of Defence sites, and to report and make recommendations in relation to their general service welfare investigations.
The commissioner will be in a unique position to take a holistic view of the range of issues faced by service personnel and their families. Their position as an independent champion for our armed forces will allow them to bring to the attention of Parliament and therefore the public a range of issues faced by service personnel—whether that is accommodation or retention, pensions, as we have just debated, or childcare—and provide holistic recommendations. That can only be positive for service people and will provide greater transparency and accountability in defence.
Proposed new section 340IA, when inserted into the 2006 Act, will enable the commissioner to investigate a general service welfare matter. The intent of this section is to ensure a scope broad enough to capture issues that may have been brought to the commissioner’s attention through oversight of the service complaints system, but also issues that can be raised directly by service personnel and their families, provided it relates in some way to the serviceperson in question and their service.
Subsection (2) states that a general service welfare matter is any matter which might, in the opinion of the commissioner, materially affect the welfare of service personnel and their families where those issues have arisen as a result of the relevant service person’s ongoing service. Members of the Committee will be able to see that that gives a very broad interpretation power to the commissioner to be able to make a decision about what falls as a general service welfare matter. As such, specifying particular issues in the Bill is unnecessary. “Materially affect” is not defined, but its inclusion ensures that a matter must be sufficiently serious to warrant an investigation.
Subsection (3) requires the commissioner to consider a request from any person subject to service law, or a relevant family member, to carry out an investigation into a general service welfare matter. However, that does not preclude the commissioner from considering a request made by someone else if they wished to, provided it falls into the scope of a general service welfare matter.
Subsections (4) and (5) exclude certain matters that cannot be investigated under this section, but still allow the commissioner to investigate general service welfare issues that may have been brought to their attention in connection with a particular service complaint, service inquiry, criminal investigation or proceedings, or public inquiry. Additionally, any “specified” matter can be excluded from investigation by the commissioner. These matters can be set out in secondary legislation, but must relate to national security or the safety of any person.
Subsection (7) places a requirement on the Secretary of State to reasonably co-operate with, and give reasonable assistance to, the commissioner in relation to an investigation under this section. I touched on that earlier in relation to the concerns of the Liberal Democrat spokesperson, the hon. Member for Epsom and Ewell. The Secretary of State must also consider any findings or recommendations made by the commissioner in connection with an investigation under this section.
Subsection (8) sets out the definitions for this section, including that the definition of a “relevant family member” is to be set out in regulations. As I mentioned in response to questions from the hon. Member for Spelthorne, I would expect that to be set out during the course of the passage of the Bill. It would then go through the usual scrutiny process should Members wish to interrogate the provision further.
Proposed new section 340IB, “Power of Entry to Service Premises” will, when inserted into the Act, confer powers on the commissioner enabling them to enter certain Ministry of Defence sites in the United Kingdom. Subsection (1) specifies that the power of entry includes certain actions, including the ability to observe activities at those sites and to inspect and take copies of documentation. I direct the attention of the Committee to the important power the commissioner has of requesting information from the Secretary of State, so their ability to interrogate, scrutinise and understand general service welfare matters is not restricted only to what they can observe on a visit; they also have the information they can request from the MOD. It is worth restating at this point that the commissioner’s investigations must relate to a general service welfare matter. They cannot use the power of entry to access sites or information purely on a whim, or for their own interest.
Subsection (2) provides that copies of electronic documentation provided to the commissioner must be legible and in a form that can be taken away. Subsections (3) and (4) require that, prior to relying on their powers of entry, the commissioner should provide such notice to the Secretary of State as they consider appropriate. Where they consider that to provide such notice would defeat the object of their powers of entry, they may provide no notice at all, but only where their visit relates to services premises within the UK. For service premises outside the UK, the commissioner must give notice of the proposal to visit within such a period as the commissioner considers appropriate.
Subsection (5) permits the commissioner to be accompanied on visits by a person or bring anything of their choosing if required for the purposes of their investigation and obliges the commissioner to provide evidence of their identity should that be requested. Subsection (6) enables the Secretary of State to prevent or restrict the commissioner’s powers of entry where they consider it necessary in the interests of national security or for the safety of any person. I believe the hon. Member for Spelthorne raised a concern on Second Reading in relation to frontline operations. In that situation, just to reassure him, the Secretary of State would have the ability to prevent a visit to a frontline position. That would probably relate to the safety of any person, notwithstanding national security implications. To reassure him, that is something that would be taken into account when any overseas visits were made.
Subsection (7) sets out the instances when the commissioner may not exercise their powers. That includes where the commissioner has reasonable grounds to assume an item is subject to legal privilege. In addition, subsection (7) sets out that the commissioner cannot require an individual to do anything they could not be compelled to do by a civil court. Subsection (8) provides relevant definitions.
Proposed new section 340LA, on reports and recommendations into general service welfare investigations, will, when inserted into the Armed Forces Act, enable the commissioner to prepare reports setting out their findings and recommendations resulting from one of their general service welfare investigations. Subsection (2)(b) sets out that where a report is prepared, the commissioner must give it to the Secretary of State as soon as is practicable. Subsection (3) sets out that the Secretary of State must, on receiving the report, lay it before Parliament promptly, and in any event within 30 sitting days. Subsection (4) enables the Secretary of State to exclude from any report any material where they consider that its publication would be against the interests of national security might jeopardise someone’s safety. Taken together, the powers and reports will provide Parliament with a much greater level of scrutiny of the issues facing our service personnel and their families.
Mr Francois
During the public evidence session, several of our witnesses—including those from the three service families federations—raised the question of special educational needs provision for the children of armed forces personnel. That provoked a number of questions to witnesses from members of the Committee, including some from me. I gave the Minister and the then Chair notice that I would seek to provoke at least a brief debate on education, and on special educational needs in particular. Having taken advice, I seek to do so under clause 4 stand part.
I will try to summarise the issue succinctly. Because of the nature of service life, service families often have to move locations, for example from one Army garrison to another or from one RAF airbase to a different one. Not only are their partners encouraged to “follow the flag”, as the old saying has it, but their children are expected to do so as well. As the witnesses highlighted, including the two generals, as I like to call them—Lieutenant General Sir Nick Pope and Lieutenant General Sir Andrew Gregory—that often presents a number of challenges, not least for spousal employment. Partners of armed forces personnel sometimes find it challenging to pursue careers of their own if they are asked to move frequently. It can present other issues as well, such as access to medical and dental services, with people having to register and re-register as they move from one military patch to another. Here I hope I am keeping my word to the hon. Member for Broxtowe and raising a number of issues aside from pensions. [Interruption.] She smiles benevolently at me in return, and I thank her.
However, there is a particular issue regarding children’s education. It is not my purpose this afternoon to provoke a major debate on VAT on school fees and the continuity of education allowance, although I note in passing that some witnesses raised that on Tuesday. Having seen the uplift in CEA rates, which I think was published on Tuesday, I fear that it will not be enough to compensate for the 20% increase in school fees. That may have a detrimental effect on armed forces retention, not just for officers but for senior NCOs in particular. I cite one brief example. When I was doing the “Stick or Twist?” study about five years ago, I spoke to one RAF senior warrant officer who said to me: “If you screw around with CEA, Sir, I am off, and so is my husband, who is in the service too. It is really the one thing that keeps us both in—we are doing it for the education of our children.” I wanted to highlight to the Minister and the Committee the potential effect on retention of not fully compensating armed forces personnel for the increase.
Having done that, I move on to SEN. As many Committee members know from their constituency casework, in the civilian world, if a child is diagnosed with special educational needs, it can take up to two years to achieve an education, health and care plan—what was in old money a statement of special educational needs—from the relevant local education authority. For the avoidance of doubt, that can be the case under Conservative, Labour and other administrations. The issue is not particularly confined to local councils of one party colour or another; the process is just very complex and time-consuming.
Amanda Martin
As a teacher who worked in Portsmouth North, where we have a large number of naval families, I absolutely agree with you that SEND is in crisis. For families who need to move, the concerns are amplified. I sit on the Education Committee, and SEND is one of the top priorities that we are looking at with this Government.
Mr Francois
I am grateful to the hon. Lady. She will know, not least from her service on that important Committee, of what is called the statutory override. In a nutshell, local authorities must produce a balanced budget each year, but, because of the very great pressure on local authorities that are also LEAs, they have been allowed to overspend on SEN for several years because it is such a big pressure. Bluntly, it would have bankrupted some of them otherwise. She may be able to update us, but I understand that the default position is that the statutory override is due to expire in March 2026. In other words, when local authorities are planning their new budgets for the ’26-’27 financial year, those budgets will have to balance.
I served on the Public Accounts Committee for a couple of years in the previous Parliament. About a month ago, the National Audit Office produced a report, which I am sure the Education Committee will look at, basically saying that the current system is unsustainable. This will be a challenge for the new Government. I am not trying to make a partisan point here, but it was a challenge for the previous Government and it will be a challenge for the new Labour Government, too. I mention that just to drive home the scale of the SEN challenge. There is no evidence that armed forces personnel are proportionately more or less likely to have a special needs child than members of civilian communities, so statistically it is a big problem for them, too.
Mr Francois
I am trying to wind up, but I will give way if the hon. Gentleman wishes to make a point. This is an important topic.
Terry Jermy
In a surgery just two weeks ago, I had a serving member of the armed forces who is no longer deployable because he has to homeschool his child as a result of failure in relation to SEND. Does the shadow Minister agree that one of the big challenges is that this is widespread across the whole country? It is not just a problem for us in Norfolk. If my constituent were to be deployed elsewhere, there would be exactly the same challenges, because the issue is widespread across the whole country.
Mr Francois
The hon. Gentleman makes a good point. I do not have the NAO report in front of me, and that is my fault—forgive me—but from memory, it made the point that this was a nationwide problem. The scale of the problem was such that it did not just affect region or another; it touched pretty much everywhere. I think the NAO focused mainly on England and Wales, but certainly in those two nations this was a big problem, and I have nothing to lead me to believe that it is not a problem in Scotland or Northern Ireland.
On childcare, I should add that one result of “Stick or Twist?” was that the then Defence Secretary, Ben Wallace, managed to use the report as ammunition to persuade the Treasury to invest quite a lot of money in childcare facilities for armed forces personnel. The Minister will know how difficult that can be. It included improving childcare facilities at a number of military installations around the country and, in some cases, extending the hours to something more akin to wraparound childcare. For the record, if only for that, the report was worth writing.
I think we have given this issue a good go, and I know my hon. Friend the Member for Spelthorne wants to raise another, so I will leave it there. I am sure the Minister understands the spirit of this clause stand part debate, and I very much hope that he can give us some good news in this area. I am sure that the whole Committee, as well as the armed forces and their families, would welcome that.
Lincoln Jopp
Members of the Committee will be aware that line 35 on page 2 defines a general welfare matter using its own terms; it says that a general welfare matter is a matter to do with welfare. Thinking back to when we all did English GCSE—or O-level, in the case of some of us—we know that using terms to define themselves is a bit self-defeating, because they do not really define anything. I assume that is deliberate, and maybe the Minister will tell us so. The provision is incredibly broadly drawn and gives the commissioner very free reign as to what they consider a welfare matter to be, with one or two exclusions that the Minister mentioned earlier.
I think that is important, because I keep being told, and I have read in the explanatory notes, that this is all inspired by the German model. When I ask what is so great about the German model, I read that it is because German members of the armed forces are really happy with it. On Tuesday, General Gregory said that to do their job effectively, the armed forces commissioner needs a clear and deep view of defence outputs. People being happy with a part of the bureaucracy is not a defence output. The only one that trumps everything else is the ability to deliver legal, lethal force. In summary, the armed forces need to be able to kill lots of people.
Luke Akehurst
Would the hon. Gentleman not concede that morale is important to being able to deliver lethal force, and that this kind of system, which enables welfare issues to be addressed, might contribute to higher morale? In the event of combat, such morale could mean that troops perform better.
Lincoln Jopp
I thank the hon. Member for his intervention—it is almost as if he read my speech. I was going to stay on my German theme and say that one person who interpreted that general definition of welfare was another German: General Erwin Rommel. He said that the best form of welfare is better training, because more training means fewer widows.
Although the Bill and the Minister attempt to draw the line between operations abroad and welfare at home, those things rub up against each other. For example, the Ministry of Defence has targets for nights out of bed. How much time can personnel be expected to spend away without their service becoming too detrimental to their family life? Equally, it has these things that sound wonderful—I thought it was to do with hairspray—called harmony guidelines. In fact, they are to do with how long the armed forces can send people away for without a specified dwell time in between for them to recuperate.
From a welfare point of view, it is perfectly possible that the Armed Forces Commissioner could focus solely on whether a commanding officer, a unit, a brigade, a ship’s captain or whatever was meeting the nights out of bed guidelines or the harmony guidelines. But the captain of that ship or the commanding officer of that unit might well think, as Rommel did, that more training was better in the long run for the welfare of their personnel. I would be grateful for a response from the Minister on that point.
My other concern is much more strategic: by having an Armed Forces Commissioner with these extended powers and the ability to report to Parliament, we put a spotlight on one aspect of militarism, potentially to the detriment of other aspects of it, such as the defence output of killing lots of people. That is important because the Minister for the Armed Forces, as well as the defence board, will be making strategic balance-of-investment decisions between things such as buying a lot more jets and getting damp-proof courses for quarters.
Look at the figures in the House of Commons Defence Committee report into service accommodation, which was published yesterday. If the Minister and the Secretary of State for Defence were minded to rectify the parlous state of some parts of the defence estate, that alone would use up every single penny of the, I think, £2.6 billion extra that the Chancellor has found to increase the defence budget.
I alert the Minister to the fact that over time, the instigation of this parliamentary-level scrutiny of one aspect of the make-up of defence may well strategically shift us away from the defence output of lethality. It is a reductio argument, but we could have a fully manned armed forces with everyone giving 100% scores on the continuous attitude survey, great pensions and fantastic pay, but they cannot win a war. Clearly, that is not where we want to get to. We have to put in place measures and judgments that mean that the Armed Forces Commissioner, and the instigation and extension of their powers, does not undermine the military chain of command or the capacity to fight.
Luke Pollard
I thank right hon. and hon. Members for their contributions to this important part of the Bill. If I may, I will respond quickly to a number of the points that have been raised. The shadow Minister mentioned the continuity of education allowance. It is important, and that is why the Secretary of State has uplifted it to include the VAT, where it has been charged additionally by a school—not all schools will charge the additional VAT, as that is a decision for them—and it will continue to be paid at 90% of the fees. We have addressed the concern raised with us by service personnel to continue that 90% level for CEA.
Mr Francois
I am grateful to the Minister for what he has said; it is very gracious of him. I do not think it is to betray a confidence to say that he and I have threatened to sit down and have a cup of coffee several times to talk about the accommodation issue, in particular. I thought I would take this opportunity to remind him of that—perhaps we can do that early in the new year.
Luke Pollard
I will check with my husband whether I am allowed a cheeky coffee date with the right hon. Gentleman.
Luke Pollard
I will resist the temptation to comment. [Laughter.] The right hon. Gentleman and I share a common view that the defence accommodation for our armed forces is not good enough. I raised the matter consistently in opposition, and he has done so as well. We need to get on top of it. My ministerial colleagues—the Minister for Defence Procurement and Industry and the Minister for Veterans and People—are leading the work. Although a coffee would, of course, be lovely, I suspect that the right hon. Gentleman would be better having it with my ministerial colleagues, so that they can look at the detail of what he is saying.
It is important that we deal with those retention and recruitment issues, but I do not quite agree with the hon. Member for Spelthorne, who spoke about operations abroad and welfare at home being separate. The whole point of a general service welfare matter and the broad powers we are giving the commissioner is that the commissioner is able to investigate such matters in all circumstances. The only distinction is whether an unannounced visit can be delivered. I think all members of the Committee will understand that there is a difference between turning up to a UK facility and turning up to one abroad, especially with a number of defence facilities abroad being in locations where there are greater concerns around security. I think we all understand the distinction that we make there, and that is why welfare is a priority.
If I may correct the hon. Member for Spelthorne on one point, the Chancellor gave Defence an extra £2.9 billion in the recent Budget, not the £2.6 billion he mentioned. It is good to have a Government increase defence spending in their first Budget. If we roll back to 2010, the new Conservative Government cut defence spending in their first Budget, so we are going in the right direction.
On the substantive issue that the right hon. Member for Rayleigh and Wickford raised about SEND, I say to him that that is precisely the type of issue that I would expect a commissioner, in due course, to look at as part of their thematic reviews, because we know it affects the welfare of our people and their families. The sequence in which issues are dealt with will be a matter for the commissioner, but I entirely support the right hon. Gentleman raising that as an issue, because it is important, just as housing, childcare and other issues raised by hon. Friends are important for our service personnel. Indeed, as in the case of a constituent raised by my hon. Friend the Member for South West Norfolk, we know that welfare matters directly affect our deployability. If our people are not able to fulfil all their duties in service life because of the impact of their home life, that reduces our warfighting capabilities. That is why we are putting so much effort into general service welfare matters as a new Government.
I commend the right hon. Member for Rayleigh and Wickford for raising this issue. He is absolutely right that the state of SEND support across the country is not good enough. The Department for Education and the Education Secretary herself have made it very clear that it is a priority for the Government. We have made it a priority precisely because in every single community across the country, including the one I represent in Plymouth, people are unable to access SEND support for their children or to get an education, health and care plan in a timely manner. That is especially difficult for our armed forces personnel, where there is a movement between areas.
The right hon. Member for Rayleigh and Wickford will know that there has been a development in relation to education, health and care plans where a young person leaves England. An agreement has been made between the Ministry of Defence and the Department for Education that clarifies the powers and flexibilities to, importantly, maintain EHCPs in scenarios where children are temporarily absent from England—this is a devolved matter across the UK—but that does not get to the whole heart of what he is saying. That is why DFE is taking such important steps. It is also why the Ministry of Defence now has an armed forces family fund, which has been provided with £1.2 million to support service children with additional needs.
Let me say very clearly that all of us across Government need to do more to support families with SEND children and young people. That is why we have made the issue a priority, and I expect it to be one the commissioner will want to look at. If they do, I am certain the Ministry of Defence will be able to fully furnish them with information and provision, because we want them to shine a spotlight on issues where things are not right, so that we can improve them for our servicepeople.
Mr Francois
The Minister mentioned the devolved Administrations point, and that is encouraging. I gave an example of someone who moved from Tidworth garrison to Catterick garrison. Is it now the case that they could port their EHCP from Wiltshire to Yorkshire, as if they had got it from Yorkshire in the first place? Have we got to that stage yet or not?
Luke Pollard
I think the right hon. Gentleman and I have slightly different recollections of Tuesday’s discussion on this. I would like us to get to a point where armed forces families that move around the country are better able to be supported. The DFE is leading on a piece of work on education, health and care plans, and we know that the Ministry of Housing, Communities and Local Government is involved in that.
We need to make sure that the development of digital EHCPs and the requirement for common formats between English local authorities will assist in that direction of travel. That will reduce the time taken to convert plans between different local authority formats for mobile families, including those in defence. Additionally, live access plans will offer armed forces families greater empowerment and agency in the planning and management of their EHCPs.
The Ministry of Defence’s local authority partnership outlines a set of voluntary principles adopted by 19 local authorities, predominantly in strong defence areas. The principles enhance the existing provision for armed forces children in the SEND code of practice. This is an issue that we as a new Government are looking at on a cross-departmental basis. I expect us to make further announcements in due course about the details and changes we want to put in place. We recognise that EHCP provision and SEND provision across the country are not what they should be. We have inherited a really poor and concerning picture from the previous Administration, and we are seeking to get to the bottom of it and improve it.
Mr Francois
I take no umbrage at all at what the Minister said about Tuesday—Her late Majesty herself famously said that recollections may vary. I think the point has been made. Could he give the Committee one last commitment before we end the clause stand part debate? Could he assure us that when he gets back to the Department, he or one of his fellow Ministers will chase this up in a timely manner with his colleagues at the DFE, in the hope that we can secure the kind of progress he was intimating at, including on the IT front? It would be a shame if this very pressing issue was held up because of a software glitch between computer A and computer B in two different local authorities. Could he give us his word of honour, which we would take, that he will go back to the Department and press on this to try to get some good news in the new year?
Luke Pollard
Certainly, strides are being made right across Government to improve SEND provision. It is absolutely true that SEND provision is a shame on our nation. We have inherited a situation from the previous Government that is unacceptable for our young people and children. It is unacceptable for civilians and people in service life, and it is something that we seek to change.
I am happy to continue the conversations that the MOD is having with the DFE, in particular, to look at how we can support these provisions. However, in relation to the Bill, I would expect this to be an area that the commissioner could look at. When they are inviting representations—when their office is stood up—I suspect that service families and service personnel will be wanting and able to share their experiences of a system that is not working the way it should be. We are trying to put change in place, and I know that that position is shared on a cross-party basis. We have to do a lot better than the situation we have inherited, in order to support people, and young people with SEND.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5
Consequential amendments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Schedule 2.
Clauses 6 to 8 stand part.
Luke Pollard
I turn first to clause 5 and schedule 2. Clause 5 sets out that the consequential amendments are contained in schedule 2. The schedule amends existing legislation to ensure that the abolition of the role of Service Complaints Ombudsman and the creation of the role of Armed Forces Commissioner are reflected across a range of provisions on the statute book. Members will be able to see those edits in the Bill, and most of them simply replace references to the Service Complaints Ombudsman with references to the Armed Forces Commissioner, with no practical policy change.
The changes to part 14A of the Armed Forces Act 2006, which covers service complaints, also serve to ensure that there is a clear distinction between references to existing investigations relating to service complaints and references to the new general service welfare investigations, which we spoke about earlier.
I draw the Committee’s attention to paragraph 17 of schedule 2, which amends the powers currently afforded to the Service Complaints Ombudsman to require information, documents and evidence necessary to conduct their service complaints investigations. The change ensures that the powers to request information also apply to the commissioner’s new powers of investigation into general service welfare matters. It is an important change, allowing the commissioner fully to investigate those issues. Similarly, the change in paragraph 18 ensures that, in respect of their new functions, the commissioner has the same enforcement mechanisms as are currently afforded to the ombudsman.
Clause 6 sets out the extent of the Bill. It does that through subsections (1) and (2), extending the Bill to England and Wales and Northern Ireland, and to Scotland, except for the concept of the commissioner being a corporation sole, because Scots law does not have the concept of a corporation sole. Subsections (4) and (5) include a permissive extent provision, which enables the Bill’s provisions to be extended by Order in Council to the Channel Islands, the British overseas territories—except Gibraltar—and the Isle of Man. The Bill does not contain a permissive extent provision for Gibraltar, as Gibraltar legislates for itself on the Armed Forces Act via the Armed Forces (Gibraltar) Act 2018, so it is not appropriate to include it in the Bill.
I have spoken to the Chief Minister of Gibraltar, who has been very welcoming of the Bill and has confirmed that he is content to continue to legislate in the Gibraltar Parliament on armed forces matters. In this case, UK and Gibraltar officials will now take steps to mirror the UK legislation in Gibraltar law, thereby continuing to demonstrate the close co-operation and collaboration between the UK and Gibraltar on all defence matters. I thank the Chief Minister and his Government for that co-operation.
It is important that clause 6 be agreed to, as it sets out the legal jurisdictions in which the Armed Forces Commissioner Bill will have legal effect. Clause 7 outlines the provisions that will come into force once the Bill receives Royal Assent. Except for the extent, commencement and short title clauses, the main provisions of the Bill will come into force on a day specified by the Secretary of State in regulations. The clause also enables the Secretary of State to make in regulations transitional, transitory or saving provision in connection with the coming into force of any of the Bill’s provisions.
David Reed (Exmouth and Exeter East) (Con)
Would it be possible for the Minister to provide clarification on how sensitive information will be handled? I imagine that, with these extra powers, the new commissioner will be able to take both physical and digital sensitive information. Does that indicate that there will be a need for a new secure physical facility to allow those documents to be stored and a new digital network to allow those digital files to be handled?
Luke Pollard
I commend the hon. Gentleman, who is clearly using his previous experience in the military to carefully scrutinise how this provision will work in practice. I am very happy to write to him about that. It would be set out in the implementation work that the Ministry of Defence is doing at the moment. However, we have a foundation in the work of the Service Complaints Ombudsman for the Armed Forces, which already handles much of that sensitive information, especially in cases relating to personnel and their issues, and I imagine that that work will carry on. The Armed Forces Commissioner is also subject to the Official Secrets Act, the Data Protection Act 2018 and a whole array of other legislation that seeks to ensure the proper security of information. I am happy to follow up with the hon. Gentleman on the detail of all that.
Helen Maguire (Epsom and Ewell) (LD)
I beg to move, That the clause be read a Second time.
I apologise for not being here at the start of the sitting; I was in the Etherton review debate in the main Chamber, contributing on important LGBTQ+ issues. I see that my amendments fell in my absence, and I hope that nothing detrimental was said about my absence, considering the importance of the Etherton review for LGBT veterans.
Moving on to recruits, it is essential that the commissioner can also investigate issues facing recruits, who sometimes have to stay on bases overnight. Upon reading the Bill, I saw that there is an absence of consideration of recruits, which is why I tabled the new clause—to make sure that they are also considered in the Bill.
Mr Francois
I only have two points to make. First, if it reassures the hon. Lady, I did read into the record that she had a conflicting appointment downstairs in the main Chamber and that that was why she was not here. I am not so sure about her colleague, the hon. Member for Tunbridge Wells (Mike Martin), but I did place it on the record that she had to be downstairs.
As I understand it, recruits would be subject to service law once they have taken the oath and joined the armed forces. If one takes that as one’s handrail, they should already be covered by the Bill. None the less, I understand the point the hon. Lady is making, so perhaps the Minister could kindly clarify whether my understanding is correct.
Lincoln Jopp
It occurs to me that, prior to taking the oath, there is a body of people who are prospective recruits. They have a material impact on morale, because if they take months and months to get through the pipeline to become recruits, the wastage rate increases and fewer people turn up in training, which means that the armed forces are undermanned. I would have thought that that was something the Armed Forces Commissioner might want to do a thematic investigation into. It is tricky, because these people are not subject to military service, but maybe the Secretary of State could nevertheless consider the issue in defining the role with the new commissioner.
Luke Pollard
I thank the hon. Member for Epsom and Ewell for her new clause and her concerns about potential recruits. First, it is absolutely vital that we fix the recruitment crisis that the armed forces have experienced for much of the last decade. As the shadow Minister confirmed, our armed forces lose more people than they gain, which is an unsustainable position. That is a dire inheritance, which fundamentally shines a light on the failure of the last Government to give our armed forces not only the people they need, but the systems and the support that people need to join and to stay in service.
I recognise that many of the people applying to join the armed forces wait for far too long, as the hon. Member for Spelthorne said. It is for precisely that reason that the Secretary for State gave a commitment in his Labour conference speech on the “10-30 provision”: within 10 days from application we will give a provisional offer to join the armed forces, and 30 days from the point of application we will give a provisional start date. That is being rolled out at the moment. It will take some time to deliver across all three services, but that is an important step towards providing more clarity. When people understand how long the recruitment process will take, they are better able to make decisions about travel, work or their own life in that period.
Lincoln Jopp
If that strategy does not work or if it is seen to be failing, will the Minister make it clear whether that is something that the Armed Forces Commissioner could look at? As the Bill is currently drafted, they would not be allowed to do that.
Luke Pollard
I was coming to that point. At any one time, there are roughly 150,000 applicants in the military joining process, all of whom are still civilians and who would be brought under the scope of the commissioner by this amendment, were it to pass. That could vastly increase the workload of the commissioner and mean that service personnel and their families would not get the attention they need.
Mr Francois
On the point about recruitment, I hope the Minister, who is fair-minded, would be prepared to attest that in the previous Government, when I was on the Back Benches, there was no fiercer critic of Capita than me. I wish the previous Government had done something about their poor record and I invite the new Government to do something about that—the sooner the better.
Luke Pollard
I believe the right hon. Gentleman has not been on Capita’s Christmas card list for quite some time. Speaking as the Minister responsible for recruitment, we have set out some policies in relation to improving our recruitment process, in particular the time of flight issue that I mentioned to the hon. Member for Spelthorne. We will be making further announcements in the new year on how we seek to improve that, but there is work under way in all the single services and across the Ministry of Defence. The right hon. Gentleman invites me to say something now, but I ask him to hold his nerve; there will be further announcements in due course.
On the concern about recruits, potential civilian recruits are unlikely to have encountered general service welfare issues in the same way as those people who are in service, who will be the principal remit of the Armed Forces Commissioner. The experience of potential recruits is very important and we have set a new ambition for the armed forces to make a conditional offer in 10 days and provide a provisional start date in 30 days. On their first day of basic training, candidates complete an attestation that makes them a member of the armed forces, subject to service law and therefore within the scope of the commissioner from that first moment.
To reassure the Committee, the new Government’s work in improving retention and recruitment is part of a package of measures aiming to renew the contract between the nation and those who serve. We are modernising and refining our policies and processes to attract and retain the best possible talents, highlighting that Defence is a modern forward-facing employer that offers a valuable and rewarding career.
There will be further announcements about how we seek to build on recruitment in the new year, but let me put firmly on the record that there are a lot of people who want to join the armed forces, especially young people looking to establish a good career in our military. We and all those with responsibility for supporting our armed forces need to improve the recruitment process to enable them to join, and that will improve the warfighting capability—the lethality—of our armed forces and thus the deterrent effect.
The issues that the hon. Members for Epsom and Ewell and for Spelthorne raised are very important. We do not believe recruits should be within the scope of the commissioner because they are outside the scope of service law, but I entirely recognise that there may be issues that recruits may wish to raise with the Armed Forces Commissioner about the recruitment process subsequent to their joining the armed forces. The commissioner would therefore need to make a decision on whether to take up those issues, based on whether they fall within the definition of a general service welfare matter. On that basis, I hope the hon. Member for Epsom and Ewell will withdraw the new clause.
Helen Maguire
I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 2
Commissioner’s interaction with Veterans Commissioners
“Within one year of the passing of this Act, the Secretary of State must publish details of –
(a) how the Commissioner will work with the National Veterans Commissioner, the Scottish Veterans Commissioner, the Veterans Commissioner for Wales and the Northern Ireland Veterans Commissioner;
(b) how the Commissioner and the Secretary of State will each ensure that veterans receive appropriate and necessary support.”—(Mr Francois.)
This new clause would require the Secretary of State to make clear how the Commissioner will work with the Veterans Commissioners.
Brought up, and read the First time.
Mr Francois
I beg to move, That the clause be read a Second time.
As we come round the final bend, hopefully the Committee will recall something that cropped up quite a lot in Tuesday’s public evidence session. A number of witnesses mentioned veterans, and there were quite a few questions, so we thought it appropriate to table a new clause to facilitate a debate on this subject, and specifically on how the Armed Forces Commissioner might, if at all, be able to engage on issues of veterans’ welfare, including with the existing veterans commissioners.
There is concern within the veterans’ community about the incoming Government’s decision, first, to remove the Veterans Minister from Cabinet and, secondly, to roll the Office for Veterans’ Affairs into the MOD, whereas previously it was at least independent from that Department, if not wholly independent from the Government, when the OVA lived in the Cabinet Office.
I am not imagining that this is a matter of concern. I have a letter here that was written to the Minister for Veterans and People, dated 30 July 2024, co-signed by the Scottish Veterans Commissioner, the Veterans Commissioner for Wales and the then Northern Ireland Veterans Commissioner. The letter highlights very well the issue of genuine independence from the MOD. For the avoidance of doubt, the letter’s tone is in no way personally critical of the Veterans Minister, whose military service we fully acknowledge and salute this afternoon; the nub of the issue is the fact that the OVA has been moved. The letter says:
“Firstly, as a junior minister you have no seat in Cabinet. We understand that SofS will represent veterans at this level but his responsibilities are broad and he is not focusing daily on veterans’ affairs; nor will you, with your entire MoD people portfolio… Secondly, the subordination of the OVA under your control”—
that is, the MOD’s control—
“whilst tidying-up the government wiring diagram, also concerns us. The major factors that impact on veterans, such as health, housing, employment, education and social care are not MoD controlled. As such, locating the OVA in the Cabinet Office made sense, to best coordinate and cajole other departments into taking veterans’ needs into account.”
I have now kept my word to the hon. Member for North Durham, who challenged me to talk about this—I have done my best.
The letter from the three veterans commissioners goes on to say:
“Veterans have little faith in the MoD leading on veteran policy and delivery. This attitude has been entrenched through the perception of adversity and neglect that many veterans have experienced in their dealings with the MoD. It is a tough message, but one that we are duty bound to deliver.”
The previous Government cannot be blamed for this one, because we created the Office for Veterans’ Affairs and deliberately gave birth to it, as it were, in the Cabinet Office and not the MOD. Much of today’s debate has been about the independence, or otherwise, of the Armed Forces Commissioner. Well, here are three veterans commissioners collectively expressing their “concern” about the Government’s decision to take the OVA and roll it back into the MOD, where the risk is that the Department will end up marking its own homework. Veterans clearly preferred it when the OVA was at least semi-independent under the Cabinet Office, and when Johnny Mercer was an extremely proactive member of the Cabinet pushing very hard on a range of these issues.
Andrew Ranger (Wrexham) (Lab)
As an MP who represents a constituency with an active barracks and many veterans, I totally agree that this is a serious matter, but what does it have to do with the Bill, and is the wording of the new clause not in danger of affecting the independence of the Armed Forces Commissioner, and their right to set how they work independently, by putting what may be artificial timescales on decisions?
Mr Francois
I understand the thrust of the hon. Gentleman’s question. What it has to do with the Bill is that this issue cropped up quite a lot in the public evidence session. I respectfully refer him to the Hansard report of Tuesday’s proceedings. A number of witnesses raised the veterans issue, and I believe a number of members of the Committee followed up with questions. We had tabled the new clause by Monday night because we knew that there was concern within the veterans’ community about the independence of the OVA and therefore the independence of the Armed Forces Commissioner, which to be fair is a theme that we have discussed repeatedly today. That is the context in which the new clause was tabled on Monday evening, but it is worrying that one of the three veterans commissioners apparently felt compelled to resign because some in Government were seeking to crimp what they were trying to do on behalf of the veterans they were appointed to serve.
Now that the OVA is back within the MOD, and given that the decision was taken on the Government’s watch, I would like some reassurance from the Minister—we have a MOD Minister here, not a Cabinet Office Minister—that there will be no further attempts to impinge on the independence of any veterans commissioner by anyone in Government, any more than we would want them to impinge on the independence of the Armed Forces Commissioner. I have three very specific questions to that effect; then I will allow the Minister to reply.
First, where is the veterans commissioner for England? We were told, when I raised this issue on Second Reading, that the Department was working on it. At one point, there was going to be a UK-wide veterans commissioner, which then seemingly morphed into a veterans commissioner for England. We have one for Scotland and one for Wales—we had one for Northern Ireland too, but he resigned—so where are we on the veterans commissioner for England? Why should English veterans be at any disadvantage compared with their counterparts from the other three nations of the awesome foursome? Those English veterans served the Crown too. Where is their commissioner?
Secondly, what is the timetable for replacing the Northern Ireland Veterans Commissioner? Presumably the Government do not want that post to remain vacant for long, particularly with all the utter chaos over the Northern Ireland Troubles (Legacy and Reconciliation) Act 2023. Thirdly, what formal assurances can the Minister give on the record that this will not happen again? Those are my three questions.
Amanda Martin
Sorry. The right hon. Gentleman states that the Veterans Minister is vital and the fact that they do not sit in Cabinet now is a concern. Can he tell me which Tory MP sits in the shadow Cabinet to represent veterans?
Mr Francois
The clue is in the name: the shadow Cabinet is there to shadow the actual Cabinet. If there is not a Veterans Minister in the actual Cabinet, it is not necessarily axiomatic that there would be one in the shadow Cabinet.
To be clear, the decision to take the Veterans Minister out of the Cabinet and the Cabinet Office, and roll them in under the Ministry of Defence as—no disrespect—a junior Minister, was a decision taken by the Labour Government—[Interruption.] Excuse me—one at a time! I hear my hon. Friend the Member for Hamble Valley to my left—dare I put it that way—saying that the Prime Minister promised he would not do that. It was a decision taken by the Labour Government. I have read out the comments from the commissioners, who are there to represent the interests of the veterans’ community; I am not imagining it. The community are clearly very concerned, so perhaps we could hear the Minister’s reply.
Luke Pollard
I thank the shadow Minister for his views on engagement with veterans commissioners. To reiterate, the purpose of the Armed Forces Commissioner is to shine a spotlight on and be an independent advocate for serving personnel and their families.
Notwithstanding the really important contribution that veterans make to our communities—and our armed forces community—we are seeking to address the particular deficit of scrutiny on the issues affecting armed forces personnel because they are not allowed to take up the same channels to raise a concern as civilians are. There are preventions on them speaking to Members of Parliament and the media in the way that a civilian can. That is why we are addressing those particular concerns with an Armed Forces Commissioner, who will look at those personnel and their issues alone.
In setting out clearly where we are, however, I turn to some of the issues mentioned by the right hon. Member for Rayleigh and Wickford. First, I put on the record the importance of the contribution made by the hon. Member for Epsom and Ewell in the main Chamber just now—she was addressing the Etherton report. All the members of the Committee who were not in the Chamber—because we were here—will have missed the announcement made by the Secretary of State: we have adopted 42 of the 49 recommendations in the Etherton report and implemented them; we will have implemented all 49 by the end of the next year; and, for the shame brought on our society by how LGBT veterans were treated, we are increasing the amount payable to them recommended in the report by 50%, from a fund of £50 million to one of £75 million.
That means a standard payment of £50,000 for those LGBT veterans who were dismissed or discharged because of their sexuality or gender identity, with a further £20,000 for an LGBT impact payment, which depends on their experience of the ban. From the harrowing testimony of many LGBT veterans, we know how they were treated because of their sexuality or gender identity—disgusting medical interventions and imprisonment. Furthermore, we will provide additional support for restoration of rank, if lowering of rank was involved at the point of dismissal, and for correcting their service record. Today’s announcement was a substantial one, and I commend the Secretary of State for it. I thank Lord Etherton for his work and the Minister for Veterans and People for championing it so clearly from day one in office.
In responding to the points made by the right hon. Member for Rayleigh and Wickford, I do not wish to belittle or disregard any of the veterans’ concerns he has mentioned or those in the wider community. The focus on armed forces personnel is really important. As such, his questions sit outside the broad brush of where we are for this Bill, but I entirely understand his passion. I am happy to take those questions back to the Department and ask the Minister for Veterans and People to write to him with further details, which is probably the appropriate way of getting the ideas that he requires.
I gently point out that there is no shadow veterans Minister in the shadow Cabinet, a choice that could have been taken by the leader of the right hon. Gentleman’s party. I would like to—I think—welcome him as the shadow veterans Minister, because he shadows nearly every other Commons Minister, which is quite a lot of work for him. When we were in opposition, having a dedicated shadow veterans Minister—one was my hon. Friend the Member for Luton South and South Bedfordshire, who is now sitting behind me as the Defence Parliamentary Private Secretary—was important, because it gives due regard to the experience of the veterans. I hope that his party will be able to follow Labour when we were in opposition, and appoint a dedicated shadow veterans Minister, in whatever form that may be, in due course.
I agree with the right hon. Member for Rayleigh and Wickford that this matter is important. The Defence Secretary sits around the Cabinet table representing veterans, and he does so very well. We have seen from the Etherton announcement today that that voice around the Cabinet table delivers real benefits for veterans in increasing the support available to them, but we need to ensure that this Bill is tightly drawn around the general service welfare needs of our armed forces and the people who serve in them.
Having said that, let me show a little bit of parliamentary leg to the right hon. Member for Rayleigh and Wickford, in terms of where the Haythornthwaite review of armed forces incentivisation reforms could come into play. It is another policy of this Government to create a new area where, instead of people having the binary status of being in the armed forces or not—and we recognise that many veterans face a real cliff edge in terms of their lived experience and career trajectories when they leave service—they can rejoin the armed forces, removing some of the current barriers that prevent them from being able to do so.
That is an important part of being able to address the skills need, but we also recognise that in the modern world people may have careers, in uniform and out of uniform, that could be of benefit to defence. There could be an area of service where people serve, leave, serve outside in a civilian role, rejoin and do so likewise. In such circumstances, the general service welfare matters of the Armed Forces Commissioner would pertain to their experience subject to service law, but the Armed Forces Commissioner may wish to look at the rejoining aspect in due course, as part of a general service welfare matter for them as re-joiners.
Lincoln Jopp
There is something of a twilight zone. We heard from Colonel Darren Doherty on Tuesday that he had done his 38 years’ service and was now entering a period of regular reserved service, which, as the Minister knows, is a residual requirement to answer the call to arms. I have checked with the hon. Member for Epsom and Ewell, and I believe her period has finished. I think mine is finished, but I am always waiting for that knock at the door. I am pretty sure my hon. Friend the Member for Exmouth and Exeter East is still well within his window.
When examining the secondary legislation, it might be worth examining this issue. If that cohort of people felt that they wanted to report an issue, would they report it to the Armed Forces Commissioner because they were still liable to call-up, or would they report it to the veterans commissioner whenever that role is introduced? I believe that those on the regular reserve list are not subject to military law, but I think they are subject to criminal law in terms of their requirement. I am genuinely not clear on the matter, and if I am not clear, then each commissioner would not necessarily be clear as to which one is responsible.
Luke Pollard
I am grateful for that. The hon. Gentleman is inviting me to use the call-up powers that I have as Minister for the Armed Forces to pick and choose, which is certainly not how I would reflect those powers in a day-to-day operation. However, he raises a really important point, which speaks to the broader challenge of where we are with reserve forces.
At the moment, there are a number of different categories of reserve forces to which a large chunk of legislation pertains, some of which may be relevant and some of which may need updating in order to deliver it. The Minister for Veterans and People is undertaking a piece of work at the moment to look at how we can do so. That is part of the work to renew the contract between the nation and those who have served, but also to make sure that we have available to us as a nation not only a reserve force made up of those people who are subject to service law, but a strategic reserve made up of those people who have left but who—as the hon. Member for Spelthorne says—still await a knock at the door if required. That piece of work is ongoing.
The legislation in relation to the Armed Forces Commissioner clearly deals with people affected by service law, not necessarily by a residual commitment. However, it would be up to the Armed Forces Commissioner, depending on the issue of the thematic investigation, whether he or she wished to invite the opinions of people who may sit outside of uniformed service, as well as of families. That would be a matter for the Armed Forces Commissioner, and the hon. Gentleman will have spotted that there is a clause in the Bill allowing the commissioner to invite views from whoever they see fit in the exercise of their duties. That may be something that the House of Commons Defence Committee wishes to interrogate further, or something that we should pick up once the commissioner’s office has been stood up.
Mr Francois
To begin on a light-hearted note, I thank the hon. Member for Portsmouth North for pointing out that I do not sit in the shadow Cabinet. If she wants to drop my leader a note recommending that, I promise not to stand in her way. Bless you—have a good weekend!
On a more serious note, there is concern, which I hope I have managed to evidence, about the decision to move the Office for Veterans’ Affairs into the MOD. I think that point has been made, but now that it is the MOD’s responsibility departmentally it would be very helpful if, when the Minister writes to me—obviously, he will write to every member of the Committee; it is copy one, copy all for anything that relates to a Committee proceeding, as you will recall, Mr Betts—he gives some detail in reply to the questions I have asked. Where is this English and/or UK veterans commissioner? We raised that question on Second Reading, so when the Minister replies, perhaps we could be updated and given a date for when that is actually going to happen. If it is not going to happen, perhaps we could be told why. Perhaps we could also have some response to what has clearly happened in Northern Ireland, which is obviously undesirable.
Perhaps in his note, the Minister could also explain the Government’s conception of how the Armed Forces Commissioner will relate to these three, possibly four—hopefully four—veterans commissioners. When somebody makes the transition from being a serviceperson to being a veteran, that is a big thing in their life, particularly if they have served for quite a number of years. When they hand back their MOD 90 ID card—which as the Minister knows, servicepeople are supposed to do, but some forget—and get their veteran’s ID card in return, that is a big thing in their life, particularly if they have served for 22 years, say. That is a massive transition, so if the Armed Forces Commissioner is going to do their job effectively, remembering what armed forces personnel go on to do and the changed status they have is something that should legitimately be at the forefront of their mind. There should be some mechanism whereby they can interact with the veterans commissioners around the United Kingdom, so I do not think it is an unreasonable ask.
Luke Pollard
At the risk of repeating myself, it would be for the Armed Forces Commissioner to determine interactions, but I would expect the commissioner to establish procedures for consulting and engaging with a whole range of armed forces communities’ representatives, including those who represent veterans’ communities. As we know, many veterans’ organisations have interests similar to those of the serving population, so I suspect that the commissioner themselves would establish those procedures. None the less, I am happy to include that in the note.
Mr Francois
I take the point. We have made the case, and I hope the Minister will reply promptly—let us say January, please, not March or June. Perhaps the Minister could write to me and the other members of the Committee in January, when we come back from our Christmas break, specifically about what is going to happen to those veterans commissioners, because they are now under the purview of his Department.
With that said, Mr Betts, we do not want you to miss your train. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Mr Francois
If I may, Mr Betts, that was clearly the voice of experience.
Question proposed, That the Chair do report the Bill to the House.
Question put and agreed to.
Bill accordingly to be reported, without amendment.
Non-Domestic Rating (Multipliers and Private Schools) Bill (Third sitting)
Thursday 12th December 2024
(6 days, 10 hours ago)
Public Bill CommitteesRead Full debate Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 View all Non-Domestic Rating (Multipliers and Private Schools) Bill 2024-26 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 12 December 2024 - (12 Dec 2024)
The Chair
Will everyone ensure that all electronic devices are turned off or switched to silent mode? Members should send their speaking notes by email to hansardnotes@parliament.uk.
We now begin line-by-line consideration of the Bill. The selection list for today’s sittings is available in the room and on the Parliament website. It shows how the clauses, schedules and selected amendments have been grouped for debate. A Member who has put their name to the lead amendment in a group is called first or, in the case of a clause stand part debate, the Minister will be called to speak first. Other Members are then free to indicate that they wish to speak in the debate by bobbing. At the end of a debate on a group of amendments, new clauses and schedules, I shall call the Member who moved the lead amendment or new clause again. Before they sit down, they will need to indicate whether they wish to withdraw or to seek a decision on the amendment or new clause. If any Member wishes to press another amendment, new clause or schedule in a group to a vote, they need to let me know. I hope that explanation is helpful. It was to me, at least. If any Member wishes to make a declaration of interest, they can do so now.
Clause 1
Determination of additional multipliers
David Simmonds (Ruislip, Northwood and Pinner) (Con)
I beg to move amendment 13, in clause 1, page 2, line 5, at end insert—
“(1A) Regulations under sub-paragraph (1)(a) must provide discretion for billing authorities with regard to the application of the higher multiplier.”
David Simmonds
It is a pleasure, as always, to serve under your chairmanship, Dame Siobhain. We have tabled a number of amendments to this legislation, but I want to be clear from the outset that we are not proposing to press them to a vote. We hope to have a response from the Minister; in many cases, that will follow up on the evidence that we heard in yesterday’s evidence sessions.
The purpose of amendment 13 is to introduce an element of discretion for billing authorities in the application of the higher multiplier; the significance of local flexibility and discretion in that was highlighted in yesterday’s oral evidence and in written evidence to the Committee. The amendment would ensure that a billing authority, which is the local authority for the area, has discretion to apply a different figure, where the authority considers that it would benefit the local economy or its residents by doing so. That flexibility has been reflected in the business rate system that has been in operation in England since the 1990s.
As we heard yesterday in evidence, the impact of the Bill is considered by most sectors and by most of the witnesses to be moderate. Therefore, the level of flexibility in the Bill does not allow for a hugely different figure from one type of business rate payer to another. However, local authorities are sometimes keen, for example, to support a local business for the purposes of sustaining employment for a period of time or because the local authority believes that the business provides an important local facility. In such an instance, the local authority may see it to be in the interests of local taxpayers to vary the application of the higher multiplier.
The Minister for Local Government and English Devolution (Jim McMahon)
Amendment 13 seeks to give local authorities discretion over where the higher multiplier enabled by the Bill should apply. In England, there are currently two non-domestic rating multipliers: the non-domestic rating multiplier for properties with a rateable value of £51,000 and above, and the small business non-domestic rating multiplier for lower value properties. The Bill will enable the Treasury, through regulations, to introduce permanently lower multipliers for qualifying retail, hospitality and leisure properties, and to fund this by introducing higher multipliers for properties with a rateable value of £500,000 or more.
Narrowing the scope of the higher multiplier would inevitably reduce the funding available to support the lower rates for qualifying retail, hospitality and leisure properties. Ratepayers in England may, however, be eligible for a range of different reliefs from business rates. Some reliefs are mandatory and provided for in legislation, whereas others are given at the discretion of the billing authority.
The Bill will not affect the very wide powers local authorities have to award this discretionary rate relief, as set out in section 47 of the Local Government Finance Act 1988. Those powers already allow local authorities to devise and deliver their own relief schemes without the intervention of central Government, where the authority is satisfied that that would be in the interest of its council tax payers. Once the Bill has come into force, local authorities will be able to use their discretionary powers to provide relief, should they so choose, to offset any impact of the new, higher multiplier. I hope that gives enough assurance to the shadow Minister to withdraw his amendment. Local authorities will still have the powers they have always had, with the flexibility to respond to local concern.
Clause 1 adds into the business rate system new additional multipliers, or tax rates. Currently, there are two multipliers, as I set out before: the non-domestic rating multiplier and the small business non-domestic rating multiplier. The legislation for those is found in part A1 of schedule 7 to the Local Government Finance Act 1988. Clause 1 adds a new chapter 3A to part A1 for the new additional multipliers.
As set out by the Exchequer Secretary on Second Reading last month, the introduction of the new additional multipliers that this clause enables is the Government’s first step towards creating a fairer business rate system. The intention of these new multipliers is to first, once set at autumn Budget 2025, provide a permanent tax cut to qualifying retail, hospitality and leisure businesses, ending the uncertainty of annual retail, hospitality and leisure relief. Secondly, it will ensure that the tax cut is funded sustainably through the introduction of higher multipliers levied on the most valuable properties. The new chapter 3A gives the Treasury new powers to set these additional multipliers.
I understand the concerns of hon. Members that we are providing for new taxation through powers in a Bill, but we face a challenge in business rates in setting the multipliers, because demand notices are issued by individual local authorities, and these must be ready to go out several weeks before the start of the financial year. We must confirm and give notice of the multipliers to local authorities before they prepare those demand notices, and that simply does not allow time for us to return to Parliament with a Bill each time we want to change the multipliers.
In recognition of hon. Members’ concerns about providing new taxation through powers in a Bill, clause 1 includes some important safeguards over the use of the powers. First, paragraph A6A(1)(a) of the new chapter 3A ensures that the Treasury cannot set a multiplier that is more than 0.1 higher than the non-domestic rating multiplier. We often, in practice, refer to multipliers as being so many pence in the pound. For example, the current non-domestic rating multiplier is 54.6 pence in the pound. In those terms, this clause ensures that the multiplier cannot be more than 10p higher than the non-domestic rating multiplier.
Secondly, paragraph A6A(1)(b) of the new chapter 3A ensures, in a similar way, that the Treasury cannot set the lower multipliers more than 0.2—20p in the pound—below the small business non-domestic rating multiplier. Thirdly, clause 1(5) ensures that where the Treasury is using those powers to set a higher multiplier, it will need to bring a statutory instrument before the House of Commons in draft for approval before that multiplier can be confirmed. To be clear, those values are the maximum parameters at which the new additional multipliers may be set. They do not represent the changes that the Government intend to implement. The parameters are guardrails that offer sensible limits with proportionate flexibility.
The decision on the level at which the new multipliers will be set will be taken at the autumn Budget 2025, factoring in the impacts of the 2026 revaluation on the tax base, as well as the broader economic and fiscal context. The clause also ensures, in new paragraph A6A(2)(a), that the Treasury cannot set more than two lower multipliers. That reflects our intention to have two multipliers for retail, hospitality and leisure: one for properties below £51,000 rateable value, and one for properties between £51,000 and less than £500,000. However, the new paragraph A6A(2)(b) ensures that we can still make adjustments to those two new multipliers if the hereditament is unoccupied or on the central rating list—although our current intention is for the same multipliers to apply across all occupied, unoccupied and central list properties.
Finally, clause 1(4) ensures that the existing arrangements in chapter 4 of part 1A of schedule 7, which concern the making and giving of notices of the multipliers, will also apply to the new multipliers. It will ensure, for example, that we must give notice of the multipliers as soon as reasonably practicable after they have been calculated, and that they are rounded to three decimal places.
David Simmonds
The Minister and I had the joy of parallel careers in local government for many years. I cannot imagine he spent a great deal of that time looking forward to the opportunity to explain non-domestic business rate multipliers in a Bill Committee. However, as he acknowledged, it is important to ensure that there is a sufficient degree of local scrutiny and flexibility so that those local authorities that are billing authorities are able to exercise their discretion in order to support their local economy. I am grateful to the Minister for outlining the Government’s intentions in that respect. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 ordered to stand part of the Bill.
Clause 2
Special authority multipliers
Question proposed, That the clause stand part of the Bill.
Jim McMahon
Clause 2 concerns additional multipliers in special authorities. The meaning of a special authority is already defined in section 144(6) of the Local Government Finance Act 1988 as one which on 1 April 1986 had a population of less than 10,000 and a total rateable value per population number of more than £10,000. The City of London Corporation is the only authority that meets that test. The City of London has powers to set its own non-domestic rating multipliers. For example, for the current year the non-domestic rating multiplier in the City of London is 56.4p, compared to the same multiplier in the rest of England of 54.6p. Those existing powers are in part 2 of schedule 7 of the 1988 Act.
Clause 2 inserts new paragraph 9B into part 2 of schedule 7, giving the Treasury powers to make provision for the additional multipliers in the City of London. The Treasury may only do that where it has exercised those equivalent powers in clause 1 for the rest of England. The unique powers of The City of London reflect its special circumstances, notably its very small resident population. The clause reflects the Government’s intention for the new multipliers to apply across England. In clause 2, we have replicated the same safeguards for setting the additional multipliers as apply in clause 1.
Proposed new paragraph 9B(1)(a)(i) of schedule 7 to the Local Government Finance Act 1988 will ensure the higher multipliers in the City of London cannot be more than 0.1, or 10p in the pound, higher than the City’s non-domestic rating multiplier, and proposed new paragraph 9B(1)(a)(ii) will ensure the lower multipliers in the City of London cannot be more than 0.2, or 20p in the pound, lower than the City’s small business non-domestic rating multiplier.
David Simmonds
I have no objection to these measures. Could the Minister confirm, in writing if that is more convenient, that there has been a degree of consultation with the corporation to establish what, if any, impact it would expect on its budget?
Jim McMahon
I can confirm in writing the exact consultation that has taken place. Conversations will certainly take place. I return to the point that, if we do not take these measures to include the City of London, there will be many high-value properties that we can use to support retail, hospitality and leisure in the rest of England to which these measures would not be applied. It is an important measure. I will certainly confirm in writing via my officials the consultation that has taken place.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Application of multipliers
David Simmonds
I beg to move amendment 14, in clause 3, page 3, line 25, after “more,” insert—
“and is not a retail premises which is open to customers for more than 18 hours a day”.
This amendment would exempt retail premises which are open to customers for more than 18 hours a day from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 15 and 16.
The Chair
With this it will be convenient to discuss the following:
Amendment 17, in clause 3, page 3, line 25, after “more,” insert—
“and is not a premises which is shared with a Post Office”.
This amendment would exempt premises which are shared with a Post Office from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 18 and 19.
Amendment 20, in clause 3, page 3, line 25, after “more,” insert—
“and is not a premises which is shared with a banking hub”.
This amendment would exempt premises which are shared with a banking hub from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 22 and 24.
Amendment 21, in clause 3, page 3, line 34, leave out “has such meaning” and insert
“and ‘banking hub’ have such meanings”.
This amendment is consequential on Amendment 20.
Amendment 15, in clause 3, page 4, line 5, after “more” insert—
“and is not a retail premises which is open to customers for more than 18 hours a day”.
This amendment would exempt retail premises which are open to customers for more than 18 hours a day from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 14 and 16.
Amendment 18, in clause 3, page 4, line 5, after “more” insert—
“and is not a premises which is shared with a Post Office”.
This amendment would exempt retail premises which are shared with a Post Office from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 17 and 19.
Amendment 22, in clause 3, page 4, line 5, after “more” insert—
“and is not a premises which is shared with a banking hub”.
This amendment would exempt retail premises which are shared with a banking hub from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 20 and 24.
Amendment 23, in clause 3, page 4, line 14, leave out “has such meaning” and insert
“and ‘banking hub’ have such meanings”.
This amendment is consequential on Amendment 22.
Amendment 16, in clause 3, page 4, line 27, after “more” insert—
“and is not a retail premises which is open to customers for more than 18 hours a day”.
This amendment would exempt retail premises which are open to customers for more than 18 hours a day from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 14 and 15.
Amendment 19, in clause 3, page 4, line 27, after “more” insert—
“and is not a premises which is shared with a Post Office”.
This amendment would exempt retail premises which are shared with a Post Office from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 17 and 18.
Amendment 24, in clause 3, page 4, line 27, after “more” insert—
“and is not a premises which is shared with a banking hub”.
This amendment would exempt retail premises which are shared with a banking hub from having the higher multiplier used to calculate their non-domestic rates. It is linked to Amendments 20 and 22.
Amendment 25, in clause 3, page 4, line 36, leave out “has such meaning” and insert
“and ‘banking hub’ have such meanings”.
This amendment is consequential on Amendment 22.
David Simmonds
This group revolves around amendments 14, 17 and 20 and includes consequential amendments on relevant language in further paragraphs. They aim to address an issue that has been raised extensively in public evidence sessions, written evidence submitted to the Committee and the wider debate about measures in the Bill. That is, the circumstances of certain types of businesses, for example those that are unusual in that they are open for very long hours because they may be the only retailer in a location and are therefore of particular significance to that community, or those that are host to a post office. We all hear examples of local post offices co-locating with shops. We are very keen to ensure that those businesses are sustainable for the wider benefit of that community and access, particularly for vulnerable residents, to those services is maintained.
Progress has been made in developing banking hubs, often in premises that are co-located, sometimes with post offices. We know that has been important in ensuring access to cash in communities where it might otherwise be lost, as well as access to more general banking services, for both small businesses and vulnerable residents. These types of business can be absolutely critical, especially in rural locations, but sometimes also in suburban areas where elderly residents in particular may struggle to access those types of shops and services if we do not ensure their continued support.
The purpose of the amendments is to introduce specific exemptions or provisions to ensure that the measures are enacted in a way that continues to support retailers with long opening hours that provide services that might otherwise not be available, access to a post office or access to a banking hub.
Jim McMahon
Amendments 14 to 25, tabled by the shadow Minister, would exclude certain properties from the higher multiplier. Properties that are open to customers for more than 18 hours a day, properties that are shared with a post office and properties that are shared with a banking hub would be excluded from the higher multiplier.
These are very important sectors. The Post Office delivers essential services that are hugely valuable to both individuals and small or medium-sized enterprises in urban and rural areas across the country. Those services include mail, parcels, cash, basic banking, utility bill payments and Government and public services. That is why post offices are eligible for the existing retail, hospitality and leisure relief, which gives eligible retail, hospitality and leisure properties 40% relief on their business rates bills, up to a cash cap of £110,000 per person, in the 2024-25 financial year.
With regard to banking hubs, the Government understand the importance of face-to-face banking to communities and high streets, and we are committed to championing sufficient access across the country as a priority. That is why the Government are working closely with banks to roll out 350 banking hubs across the UK. The UK banking sector has committed to deliver those hubs by the end of the Parliament. Over 90 banking hubs are open to the public, and the Government continue to work closely with high street banks to ensure communities and local businesses have access to the banking services they need.
To provide certainty and permanent support for the retail sector and the high street, through the Bill we are introducing permanently lower tax rates for retail, hospitality and leisure properties with a rateable value under £500,000. The existing RHL relief has been repeatedly extended year on year as a temporary stopgap, creating cliff edges for businesses and significant financial pressures. The Government are currently developing with the sector the definition of “qualifying RHL properties”, which will be introduced through secondary legislation in 2025. The sector definitions will broadly follow those already defined in the current retail, hospitality and leisure relief system.
To ensure that this tax cut is sustainably funded, we intend also to introduce a higher rate on the most valuable properties—those with a rateable values of more than £500,000. To be clear, that only applies to the highest value properties, and less than 1% of all non-domestic properties across England. I understand that the hon. Member for Ruislip, Northwood and Pinner wants to exclude some properties from the higher charge. However, the Government want to take a fair approach, which is why we intend to ask all properties with rateable values of £500,000 and above to contribute more to support the high street. The Government do not intend to exclude any properties with a higher value, applying the approach in the fairest possible way.
There are practical implications that make it difficult to apply different multipliers to retailers based on their opening hours. Local authorities require certainty about which multiplier will be applied to which property ahead of the billing year. That cannot be determined based on opening hours, which businesses can rightly change at their own discretion, subject to legal requirements. For the reasons I have set out, the Government cannot accept the amendment, which would carve out certain premises from the higher tax rate. However, I hope the Committee is reassured of the Government’s commitment to post offices, banking hubs and the retail sector.
David Simmonds
I am grateful to the Minister for talking us through the complex set of reliefs that are available. It is an issue that colleagues who represent rural areas have been concerned about, because there are often multi-use sites in those areas—a petrol station and a post office, or a banking hub and a small supermarket. Those are potentially larger premises that are critical to the operation of the local community. I am grateful that the Minister has set out how existing reliefs may operate. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
In the absence of the hon. Member for Mid Dorset and North Poole, I call Martin Wrigley.
Martin Wrigley (Newton Abbot) (LD)
I beg to move amendment 1, in clause 3, page 3, line 29, after “hospitality” insert “, manufacturing”.
This amendment would add manufacturing businesses to the types of business that could qualify for use of the lower multiplier.
The Chair
With this it will be convenient to discuss the following:
Amendment 2, in clause 3, page 3, line 33, after “hospitality” insert “, manufacturing”.
This amendment is consequential on Amendment 1.
Amendment 3, in clause 3, page 4, line 9, after “hospitality” insert “, manufacturing”.
This amendment is consequential on Amendment 1.
Amendment 4, in clause 3, page 4, line 13, after “hospitality” insert “, manufacturing”.
This amendment is consequential on Amendment 1.
Amendment 5, in clause 3, page 4, line 31, after “hospitality” insert “, manufacturing”.
This amendment is consequential on Amendment 1.
Amendment 6, in clause 3, page 4, line 35, after “hospitality” insert “, manufacturing”.
This amendment is consequential on Amendment 1.
Martin Wrigley
We have tabled this amendment to explore the possibility of including manufacturing businesses. Manufacturing is important, and we know that it is struggling. By adding manufacturing businesses, we might be able to help them in the same way as we intend to help hospitality, retail and leisure. Manufacturing is a vital area that we have lost too much of in the past however many years. This relief would be a small help to enable manufacturing businesses to recover. That is why we would like to add the category of manufacturing to the provision.
Jim McMahon
Amendments 1 to 6 deal with eligibility for the new lower multipliers. Under the amendments qualifying manufacturing properties would be eligible for the two new lower multipliers the Bill introduces for qualifying retail, hospitality and leisure properties from 2026-27.
Let me start by highlighting that the Government recognise the importance of the manufacturing sector, and we have identified advanced manufacturing as one of the eight growth-driving sectors as part of our industrial strategy, recognising the contribution it makes to our economy. However, the provisions in the Bill are about delivering our manifesto pledge to protect the high street. To that end, we aim to introduce permanently lower tax rates for retail, hospitality and leisure properties from 2026-27. To ensure that this tax cut is sustainably funded, we intend also to introduce a higher rate on the most valuable properties—those with rateable values of £500,000 and above. As I said before, this represents just 1% of the ratings system; the context is important here.
The measures in the Bill will provide certainty and support for RHL businesses, which are the backbone of the high street. The existing RHL relief has been repeatedly extended year on year as a temporary stopgap. It has created a cliff edge for businesses, and those sectors have repeatedly demanded clarity and certainty. We have been clear that the eligibility for the new lower RHL multipliers will broadly follow those already defined in the current retail, hospitality and leisure relief system. On Second Reading, the hon. Member for Mid Dorset and North Poole spoke about her experience of owning a café and the need for Government support for such businesses. That is precisely why we are enabling the introduction of these new multipliers for those types of property through the Bill.
The amendments in the hon. Lady’s name would expand the scope of this support to include manufacturing properties, but that does not match our intended goal of supporting the high street in a targeted way through the Bill. Against the current fiscal backdrop, extending eligibility to other sectors may dilute the support that the Government can offer to retail, hospitality and leisure properties. It may even require a higher rate on properties with rateable values of £500,000 or more to fund the new lower multipliers sustainably.
I reiterate that the Government are committed to supporting the manufacturing sector. At the Budget, the Government announced £975 million for the aerospace sector over five years, over £2 billion for the automotive sector over the same period, and £520 million for a new life sciences innovative manufacturing fund. For the reasons I have outlined, we cannot accept the amendments, but I hope that the Committee is assured of the Government’s continued commitment to the manufacturing sector.
Martin Wrigley
I am a little reassured by the Government’s intentions to support the manufacturing industry and look forward to their efforts to do so. I am certainly reassured by the support for the high street, which is very important to all. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 10, in clause 6, page 6, line 20, at end insert
“, provided that the condition in section [Requirement for the Government to commission an independent review on the impact of the higher multiplier] is met.”
This amendment provides that the provisions of Clauses 1 to 4 of the Bill would only come into effect when the Government has held an independent review that will consider the impact the new higher multiplier will have on businesses with a rateable value of over £500,000.
New clause 2—Requirement for the Government to commission an independent review on the impact of the higher multiplier—
“(1) The condition in this section is that the actions set out in subsections (2) to (5) have been completed.
(2) The Secretary of State must appoint an independent person to carry out a review assessing the impact that the new higher multiplier will have on businesses with a rateable value of over £500,000.
(3) After the review, the independent person must—
(a) prepare a report of the review, and
(b) submit the report to the Secretary of State.
(4) A report prepared under subsection (3)(a) must be submitted to the Secretary of State within twelve months of the appointment of the independent person under subsection (2).
(5) On receiving the report, the Secretary of State must, as soon as is reasonably practicable, lay a copy of the report before Parliament.
(6) In this section, references to an ‘independent person’ are to a person who appears to the Secretary of State to be independent of the Government.”
This new clause requires the Government to hold an independent review on the impact of the higher multiplier on businesses with a rateable value of over £500,000.
New clause 4—Review of impact of new multipliers—
“(1) Within eighteen months of the day on which sections (1) to (4) of this Act are commenced, the Secretary of State must conduct a review of the impact of those sections.
(2) The review must consider —
(a) the impact of the introduction of the lower multiplier on qualifying retail, hospitality and leisure hereditaments,
(b) the impact of the introduction of higher multipliers in relation to a hereditament for which the value is £500,000 or more.
(3) The Secretary of State must, as soon as is reasonably practicable, publish the review and lay a copy of that review before Parliament.
(4) As part of the review the Secretary of State must consult with such parties as they see fit including—
(a) businesses,
(b) the Valuation Office Agency; and
(c) Billing Authorities.”
This new clause would require the Secretary of State, within 18 months of sections 1 to 4 of the Act being commenced, to review and consult on the impact of new multipliers.
Jim McMahon
For this grouping, I will first speak to clause 3, then return, after other contributions, to amendment 10 and new clauses 2 and 4.
We have previously discussed clause 1, which allows the Treasury to introduce new additional multipliers. Clause 3 deals with how we will determine which properties those multipliers should apply to. The clause is split into three main parts, dealing with occupied hereditaments in subsection (2), unoccupied hereditaments in subsection (3), and hereditaments on the central list in subsection (4). Properties on the central list are typically utility networks spanning many local authority areas, such as gas, electricity and water networks. Each of those subsections is essentially identical, so, to save the Committee from much repetition, I will explain the provisions on occupied hereditaments in clause 3(2) only.
The most important part of subsection (2) is the small amendment made by paragraph (a) to existing powers in the Local Government Finance Act 1988. Under those powers, the Treasury already has the ability to determine in regulations which multiplier applies to which property. Those powers, in respect of occupied properties, are in paragraphs 10(9) and 10(10) of schedule 42A to the 1988 Act. Clause 3(2)(a) amends that part of the 1988 Act to extend those powers to cover all the additional multipliers. This means that the Treasury will be able to determine, by regulations, which properties pay on which multiplier. Actually, Dame Siobhain, may I just correct the record? I think that I referred to “schedule 42A”, but it is actually schedule 4ZA.
As in clause 1, we have included in clause 3 safeguards on to how the Treasury may use these powers. First, clause 3(2)(b) amends paragraph 10 of schedule 4ZA to ensure, through proposed new sub-paragraph (9B)(b), that the Treasury cannot apply the higher multipliers to any hereditaments with a rateable value of less than £500,000. This will ensure, based on the current rating list, that 99% of hereditaments are unaffected by the higher multiplier.
Secondly, proposed new sub-paragraph (9B)(c) will ensure that the Treasury, when setting new lower multipliers, can apply them only to qualifying retail, hospitality and leisure hereditaments. The precise meaning of qualifying RHL properties will be set out in regulations, but we have been clear that we intend to broadly follow the existing definition that applies to the current relief scheme for those sectors.
Thirdly, the Treasury, when using the existing powers to determine who pays on which multiplier, will need to bring that statutory instrument in draft to both Houses of Parliament for approval before that can be confirmed. This requirement is not on the face of the Bill because the powers already exist, but if hon. Members wish to be reassured on this point, it can be found in section 143(7B) of the Local Government Finance Act 1988.
The power to define qualifying RHL properties—in proposed new paragraph 10(9C) of schedule 4ZA to the 1998 Act—follows the negative resolution procedure, given that this power only allows us to reduce the rates for certain ratepayers.
Finally on clause 3, the existing powers for determining the application of the multiplier allows the Treasury to do that by reference to a list of factors found in paragraph 10(10) of schedule 4ZA to the 1988 Act. This is a non-exhaustive list that includes factors such as its rateable value, its location or its use.
For the introduction of the lower multipliers in 2026, we intend to replicate the process and the broad eligibility in the current RHL relief. As with the current system, local authorities will determine eligibility, but rather than that being against guidance, we will lay down criteria in regulations. Clause 3(2)(c) gives the Treasury the scope also to determine the application of the multipliers by reference to the description that the Valuation Office Agency will put in the rating list.
As I have said, the remaining parts of clause 3 make the same provisions that I have described, but in relation to unoccupied properties and those on the central rating list. It is usual for powers applying multipliers across occupied, unoccupied and central rating list properties to align.
David Simmonds
I will speak to amendment 10 and new clauses 2 and 4, which stand in my name. They are designed to address concerns raised in evidence which there was some debate about yesterday: the objective of setting out, as far as we can in advance, the impact these measures would have on affected businesses; providing for a review and scrutiny process to follow up to confirm that the assessment had been correct or otherwise; and seeing what lessons can be learned from it. I appreciate that the Government are very keen to press ahead on this and will be reluctant to accept amendments that have that effect.
None the less, I am sure Members will recognise that when making decisions it is important to have a sense of what the impact is likely to be, in particular when we know that the impact of some of the measures will affect businesses that may be marginal. In many communities the loss of a large supermarket or warehouse or logistics centre that may be affected will have a major impact on the availability of services and local employment. That is the thinking behind bringing these measures forward. With your leave, Dame Siobhan, I will move them for debate.
The Chair
We will come on to whether you wish to withdraw those amendments later.
Question put and agreed to.
Clause 3 accordingly ordered to stand part of the Bill.
Clause 4
Consequential amendments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 1—Review of impact on businesses, high streets and economic growth—
“(1) The Secretary of State must review the impact of sections 1 to 4 of this Act on—
(a) businesses,
(b) high streets, and
(c) economic growth.
(2) The review must consider—
(a) the impact on different types of business, including small businesses,
(b) the impact on businesses operating mainly or solely on high streets,
(c) whether the provisions have had a measurable impact on economic growth, and if so what that impact has been.
(3) The Secretary of State must lay a report of the review before Parliament within six months of those sections coming into effect.”
This new clause would require a review of the impact of clauses 1 to 4 of the Act on businesses (including small businesses), high streets and economic growth.
Jim McMahon
Chair, can I just confirm that we are discussing amendment 10 and new clauses 2 and 4? Or have we moved on to clause 4?
The Chair
If you wished to speak to those amendments, it should have been in the previous debate.
Jim McMahon
I thought I was going to come back at the end of that debate, but it is fine.
David Simmonds
On a point of order, Dame Siobhan, having moved those amendments, I did indicate that subsequent to the debate I would be minded to withdraw them. I have moved them, but I am not aware that we have made a decision on withdrawal.
The Chair
It has been suggested that the decisions on those amendments come later, and there is no further point to debate them. Is that okay?
David Simmonds
Further to that point of order, Dame Siobhan. I will not press the amendments to a vote.
Jim McMahon
New clause 1 would require the Secretary of State to review and report on the impact of the introduction of new multipliers. Let me first set out that I understand full well why the hon. Member for Ruislip, Northwood and Pinner has been pressing this point, and I agree with it in principle. Chair, can I just check that I am speaking to the right provisions?
Jim McMahon
I will speak to both now. Clause 4 makes two small consequential amendments to the existing legislation to reflect the addition of the new multipliers. There are other amendments we will need to make to regulations to reflect the changes in the Bill, but we will do that using existing powers once the Bill has passed. We have not taken any further powers to make consequential changes.
As hon. Members will know, the Bill provides the basis for how the two new retail multipliers and the higher multiplier will be set. In doing so we are deliberately constraining the maximum levels of the new tax rates by reference to the existing business rate multipliers. Those guard rails prescribed in the legislation provide that the basis for how the new rates will be set will be at the next Budget. For the two retail, hospitality and leisure multipliers, the Bill ensures that the rate may not be more than 20p in the pound lower than the small business rate multiplier. For the higher multiplier, it cannot be more than 10p above the standard multiplier.
I have outlined how the new multipliers will be set at the next Budget, but I trust that hon. Members will also be reassured that when the new multipliers are set, the Treasury intends to publish analysis of the effects of the new multiplier arrangements, taking into account the effects of other changes in the 2026 Budget. The impact assessment that has been referred to in this debate and in the evidence session will be picked up later on in the process. That work will not stop with the next revaluation. As with all taxes, the Government will keep the policy and its effects under review. It is therefore not necessary to impose that requirement in legislation.
With that explanation of the Bill provisions, the process for setting the tax rates, and HMT’s intention to provide analysis of the effects of the new multiplier arrangements, I hope I have provided the necessary assurances for new clause 1 to be withdrawn.
Martin Wrigley
I rise to speak to new clause 1. I thank the Minister for his words. It is, as we are discovering, an incredibly complex and arcane way of creating taxes that will have an impact on many high street businesses. While the Treasury analysis will tell us how the multipliers have hit, and the numbers that are done from a taxation point of view, it will not answer whether the Bill has achieved what it set out to do, which is to provide the necessary relief.
New clause 1 looks more at the impact on the businesses and whether the provisions had a measurable impact on economic growth. That is not the same as an analysis from the Treasury of the changes in the bills that are being presented to people; it is looking at the effect and impact, to see whether the Bill is achieving the desired outcome. That is why we would like to see the measurement included.
As an engineer and a scientist, I believe in a feedback mechanism: something that measures what has been achieved against what has been required. We believe that was missing in the Bill, and we would like to see it, which is why we have asked for new clause 1 to be considered. The work is there and will be beneficial to one and all. I do not see it as a significant barrier to the Bill progressing, but as a positive feedback mechanism that will enable us to determine the effectiveness of the support on the desired areas and businesses, including high streets, which are so important.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
David Simmonds
I beg to move amendment 26, in clause 5, page 5, line 37, leave out from “persons” to the end of line 38 and insert
“who have special educational needs.
(5A) In subsection (5) ‘special educational needs’ has the same meaning as in section 20 (when a child or young person has special educational needs) of the Children and Families Act 2014.”
This amendment would mean that a school that is wholly or mainly concerned with providing education to persons with special educational needs would not be a private school for the purposes of the Act, and as a result would retain charitable relief from non-domestic rates.
We are moving on to a different area. This amendment is designed to address concerns raised in evidence, and by many across the House in debates, about the impact on children with special educational needs and disabilities. We recognise that the Government have introduced measures to address some of those concerns, but there have been many changes to the SEND system over the years. In particular, the provision about wholly or mainly providing education to children who are in receipt of an education, health and care plan specifically addresses those at the most significant end of special educational needs and disabilities.
The previous Labour Government introduced a system, in the days of statementing, that included measures called school action and school action plus. If a child had a form of special educational needs that was not so severe that they required the statementing process, but needed additional resources in the classroom, that classification triggered additional resources for the school. In the 2014 reforms, that was morphed into SEN support. Beneath the education, health and care plan, for the most significant levels of need, there is an SEN support set-up whereby local authorities direct additional funding towards schools because children are classified at those levels.
One of our concerns is that some children who have found their way to an independent school—for example, because it has a reputation for providing a good level of support to children with SEN—have not been through a process whereby they have been formally categorised. Gesher in my constituency is an independent special educational needs and disability school that charges fees. A proportion of its students are there because their parents have made the choice, and have not been through a local authority process. Others are there because they have an education, health and care plan and it is the named school paid for by the local authority. All children attending that school have some form of special educational need or disability and are therefore attending private school.
The rationale behind this amendment is that we do not want independent schools that provide education to large numbers of children with SEND but are below the education, health and care plan threshold to be put in a very difficult financial position. Potentially, the Government do not intend to go down that route. Most of us are aware that the extent of SEND provision in the independent sector is very large. Indeed, the amount of money that local authorities have to pay in fees to place significant numbers of children in sometimes very specialist provision is a major concern to them. We also hear from constituents who have identified that a moderate level of special educational needs may be met in the independent sector without the child’s having gone through the process of an education, health and care plan.
We are seeking to ensure that schools that educate children with special educational needs, in a broader sense, are not missed. For those reasons, I commend the amendment to the Committee. I am sure the Minister will have more comments to make, further to what he said in the evidence sessions.
Jim McMahon
Amendment 26 would result in the exemption of fee-paying schools from the measure if they wholly or mainly cater to pupils with special educational needs, whether or not those pupils also have an education, health and care plan, as defined in section 20 of the Children and Families Act 2014.
The Government are aware of the concerns raised about pupils with special educational needs in private schools that may lose their charitable relief because they are not wholly or mainly composed of pupils with EHCPs. We have carefully considered our approach to minimise the impact on pupils with the most acute needs. The Bill provides that schools that are charities that wholly or mainly provide education for pupils with EHCPs will remain eligible for charitable rates relief. For business rates, “wholly or mainly” generally means more than 50%. In practice, that will ensure that most special schools are not affected by the measure. We expect any special schools losing charitable rates relief to be the exception; the number may even be in the single figures.
Private schools that benefit from the existing rates exemption for properties that are wholly used for the training or welfare of disabled people will continue to do so. Most children with EHCPs already have their needs met in mainstream, state-funded schools. If an EHCP assessment concludes that a child can be supported only in a private school, the local authority funds that child’s place. Any changes to fees as a result of this measure will not impact on the parents or families of those pupils.
In private schools, just 5.7% of pupils have an EHCP, and they are predominantly in private special schools. Some 97% of pupils with an EHCP in private schools already have their place funded by a local authority. Where an EHCP has not named a private school in its assessment of the child, the parent or carers may choose to place the child in a private school. That is a choice made by the parent, and does not detract from an assessment that a pupil’s needs can be catered for in a mainstream, state-funded school. There may be instances where a child’s parent disagrees with the local authority’s assessment that their child’s needs can be met in the state sector, and the EHCP system is the most appropriate channel for resolving such disagreements. Amendment 26, which would amend the basis on which fee-paying schools can retain charitable rates relief, would undermine the Government’s intention of removing tax breaks from private schools in order to raise funds to support the more than 90% of pupils who attend state schools.
The approach chosen in the Bill is targeted to ensure that the impact on pupils with the most acute needs is limited. That is ensured by exempting schools that wholly or mainly cater to pupils with EHCPs from the measure. As the Committee will know, the majority of children in England who have special educational needs, with or without an EHCP, already have their needs catered for in the state-funded sector. The Government support local authorities to ensure that every local area has sufficient places for all children of compulsory school age who need one, and work to provide additional appropriate support for pupils with SEN requirements at state-funded schools.
David Simmonds
I am grateful to the Minister for acknowledging that the vast majority of the children that we are talking about will have their needs provided for in the state sector. I think we are all very much aware of that, and generally consider it something of which we can be proud. However, a significant number of children find their way into the independent sector because their parents did not pursue the process of statementing, or of seeking SEN support with an attached budget. Conservative Members are concerned that there is a risk that a significant proportion of those children will find themselves displaced into the state sector by a range of measures that the Government have taken—a sector that is not especially well geared to cope with their needs at the moment. In particular, the restriction of the relief solely to those who have an education, health and care plan will mean it is available solely to those with needs that are at the most significant end of the range, so a large number of children will be at risk of losing out. However, I recognise that the Government have the numbers, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
David Simmonds
I beg to move amendment 7, in clause 5, page 5, line 38, at end insert
“, or
(b) a local authority makes a determination that they wish to apply discretion to the application of rate relief for the institution within the meaning of section 47 (Discretionary relief) of the Local Government Finance Act 1988.”
This amendment would provide that a school is not a private school for the purposes of exempting it from charitable rate relief if a determination is made to that effect by the billing authority.
The amendment is on a related subject to one that we have already debated, so I will not speak about it at great length. We are very much aware that the independent sector is critical to our catering for special education needs and disability. Its coverage across the UK is variable, especially when it comes to provision for children with very significant special needs that a wide range of SEND provision cannot easily address. A local authority that hosts a small school providing for a very small number of children may wish to exercise discretion.
There are charities of many types that are service providers that charge people fees for the provision of such services. That can include anything from adoption placement to fostering and safeguarding in the children’s sector. A large variety of charities charge to provide services such as home care, and care for adults with disabilities. The point was made yesterday in evidence that there is a risk of creating a two-tier charity sector; a school that charges for providing for children with significant needs might not be considered a charity for the purposes of business rates relief, whereas a charity providing, for a fee, residential care for adults with a learning disability would be eligible for relief. That remains a concern for Opposition Members. We need to make sure that we sustain our network of provision—particularly provision at the complex end of need—in the UK. I look forward to hearing what the Minister has to say on the amendment.
Jim McMahon
Amendment 7 seeks to preserve the discretion of local authorities to award relief to private schools. Currently, any charity that uses its property wholly or mainly for charitable purposes is entitled to a mandatory 80% relief. The local authority must award that 80% relief when the conditions are met. The Bill will remove private schools’ entitlement to that mandatory 80% relief. However, it will not disturb the very wide power that local authorities have to award discretionary rate relief above and beyond that.
That power is found in section 47 of the Local Government Finance Act 1988. It already allows local authorities to top up the mandatory 80% charity relief with a further 20% discretionary relief. When the Bill is in force, local authorities can still use section 47 to grant discretionary relief to private schools, if they wish. They can grant relief of 80%, or any other level of relief that they consider to be appropriate. That is a matter for local discretion, and for local authorities to decide. With the assurance that that will still be in place, I hope that the hon. Gentleman will be content to withdraw his amendment.
David Simmonds
I am pleased to hear the Minister once again championing the value of local discretion in decision making; I think we mutually acknowledge that it is incredibly important. I am aware that concern remains, particularly in the SEND sector and especially for residential special schools, about how the change will play out. Local authorities may face a Hobson’s choice between being expected to raise a certain amount of revenue by applying the maximum possible business rate to a setting, and doing what they need to do to support the needs and interests of children in their community—and of schools that may be the only centre nationally that can provide for very special needs. However, again, I recognise that the Government have the numbers, so with the leave of the Committee, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
David Simmonds
I beg to move amendment 8, in clause 5, page 5, line 38, at end insert
“, or
(b) has a religious character or other special character and there is no maintained school or academy of the same character within the specified distance from that school.
(5A) In sub-paragraph (5)(b)—
(a) ‘religious character’ has the meaning given under section 69 (Duty to secure provision of religious education) of the School Standards and Framework Act 1998,
(b) ‘other special character’ has the meaning as defined by the Secretary of State by regulation,
(c) ‘specified distance’ is the distance specified under section 445(5) (Offence: failure to secure regular attendance at school of registered pupil) of the Education Act 1996.
(5B) Regulations under this section (5B) are to be made by statutory instrument.
(5C) A statutory instrument containing regulations under this section may not be made unless a draft instrument has been laid before and approved by resolution of each House of Parliament.”
This amendment would provide that charitable rate relief would continue to apply to a school with a religious or other special character, if no maintained school or academy with the same character was within the statutory walking distances (as set in the Education Act 1996) from that school.
On Second Reading, we heard representations from a number of Members about access to faith schools, but those are not the only schools with a special character; there are a number of types of education of a special character. Some schools offer particular sporting opportunities. Organisations such as Montessori provide a particular method of education, and parents may wish to exercise their discretion to access that for their children. The objective of the amendment is to ensure that where the only school that has a particular special or religious character in a given location is an independent school, it is not subject to the measures in the Bill. That will support access to those schools of special character for mums and dads, and for the children who need those schools, across the country.
The amendment relates to legislation on the distance travelled to school. There are regulations designed to ensure, in the interests of health, the environment and the community, that children can access sustainable transport—can walk, cycle, or use public transport where possible. We are very conscious, however, that in many parts of the country there is limited access to certain types of faith school and schools of special character. Clearly, it would therefore inhibit parental choice if those schools could not be accessed, if that were the only way for those families to access the type of education that they wished to access.
Jim McMahon
Amendment 8 would require a private faith school to maintain its eligibility for charitable relief if there is no maintained or academy school of the same faith within the statutory walking distance, as set out in the Education Act 1996. The amendment would also provide that schools with a currently undefined special character be exempted from the Bill measure when defined in regulations. The Government value parental choice and recognise that some parents want their children to be educated in schools of a particular faith, but all children of compulsory school age are entitled to a state-funded school place if they need one. State education is suitable for children of all faiths, and all schools are required to follow the Equality Act 2010, which means fostering and promoting an environment that encourages respect and tolerance of children and families of all faiths and none.
We have already made provision to ensure that private schools “wholly or mainly” concerned with providing full-time education to pupils with an education, health and care plan remain eligible for business rate relief. The Government are not considering any further exemptions to the policy, so there is no need to give the Secretary of State the power to establish and define new designations of school character to then exempt schools of that character from the measure in future, as the amendment would provide for.
The Government have listened carefully to arguments on this matter, and have decided that a carve-out for faith schools or similar schools cannot be justified. It is the Government’s position that state-funded education is suitable for all children of compulsory school age. For that reason, we are unable to accept the amendment.
David Simmonds
I need to be clear that I am not here to act as an advocate for faith education; I am not personally a fan of it. I recognise the Minister’s point, but we need to acknowledge that many Members on both sides of the House, and many of our constituents, believe very strongly that they should be able to access a school of a particular character.
There will be some children in the state sector who may be able to access, for example, a specialist sports academy with particular facilities to develop and nurture their talent, but such a school may not be available in all parts of the country. An independent school may be the only one able to foster and nurture that talent, and we would not wish to see any measures taken that would deprive anybody of that opportunity. Once again, however, I recognise that the Government have the numbers, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
David Simmonds
I beg to move amendment 9, in clause 5, page 5, line 38, at end insert—
“(5A) Where a private school offers nursery provision, that school must be considered to be comprised of two separate hereditaments, one of which would be a nursery school.”
The question of hereditaments is certainly not one that I remember from English classes when I was at school, but it is quite significant in the context of business rates. The way in which business rate legislation operates is that it designates a given property, which clearly makes it easier to tax, because the ownership or possession of a property is very hard to move or disguise.
In respect of schools where, for example, there is a nursery on site as part of the overall premises that are considered to be the hereditament for the purposes of business rate legislation, the Opposition are concerned that such premises that would be exempt from business rates or eligible for relief if they were physically separate from the school to which they are connected will not be eligible for that relief because they are on the same site. We know that the Government are very keen, as we were in government, to see an expansion of access to high-quality childcare, a very large proportion of which is in the private sector. The Government—commendably, in my view—have set out a policy of expecting maintained state schools that have nurseries on site to significantly increase the childcare offer to support local parents, which is a very good thing.
In many locations, a nursery connected to a private school may be chosen by parents using tax-free childcare, and there are measures in legislation to support all parents, but primarily lower-income parents, to access that provision. If business rates apply to such premises, however, that would load an extra cost on to them because they are, in effect, co-located and part of a single hereditament.
The purpose of the amendment is to separate those premises out. Where there are premises on a site that become subject to business rates as a result of the Bill, but would not otherwise be subject to them because of their purpose, use and location, they should be considered as separate institutions, so we do not apply the measures to those institutions that we seek through other parts of legislation to support and encourage.
Jim McMahon
I am grateful to the hon. Member for tabling the amendment. It may assist the Committee if I briefly explain how the Bill will apply to nurseries and nursery classes within the setting of private schools.
The Bill will ensure that nursery schools, where they have their own hereditament and therefore their own rates bill, will be excluded from the provisions and, where they are charities, will retain their charitable rate relief. That is the effect of proposed new sub-paragraph (4)(a)(iii) to schedule 4ZA of the Local Government Finance Act 1988, at line 23 of page 5, in clause 5.
A nursery school is likely to have its own hereditament and therefore its own rates bill when it is run and occupied by a separate body from the private school. An example would be where a separate charity from the private school runs the nursery. A nursery school may also have its own hereditament if it has its own dedicated buildings site that is located away from the rest of the school. Where the same charity runs the private school with some nursery provision, however, and does so from the same site, it is likely to have one hereditament and one rates bill.
I want to make it clear that private schools that include some nursery classes in the way I have described will still be considered as private schools and will lose their relief entirely. The Government have decided that where private schools that mainly provide education for pupils of compulsory school age also have nursery classes within the school, the presence of a minority of nursery-age children should not remove the whole school from the business rate measure. That approach best ensures consistency with the underlying policy intent.
For that reason, we are unable to accept the amendment. It would not be appropriate to attempt, as the amendment would do, to create new artificial hereditaments for nursery classes at private schools merely to preserve some of the charity relief for that private school. I hope the Committee will recognise the steps we have taken to protect nurseries with their own hereditaments, and it will, of course, continue to be the case that nurseries that are run and occupied by separate charities with their own hereditaments will continue to receive relief.
David Simmonds
Once again, I recognise that the Government have the numbers to do as they wish, but I am concerned by what the Minister has outlined. This is not simply an amendment about nursery schools, which are a specific thing. It is about nurseries, which provide childcare. For younger children we have the early years foundation stage, which is not compulsory but is provided and followed by the vast majority of childcare settings, and which aims to ensure a level of educational progression that can be measured from the very youngest children to those who are ready to start school. That is provided in a different way from what is provided by nursery schools, which are specific institutions of which there are several hundred in the country.
In London constituencies such as the one that I represent, it is quite common to find nursery providers that are run as part of private school institutions in the same location, but that are used by parents who have no intention of sending their child on to that private school. Because the fees charged are in line with the local childcare market, and those fees are significantly supported by measures such as tax-free childcare, those nurseries are an affordable means of securing good-quality childcare. Those children will go on to a range of local provision.
I remain concerned about the Bill insisting that a nursery located on a premises shared by a private school within the scope of these measures should be subject to a significantly higher rates bill than if it were located in a physically separate building just down the road. I suspect that that will remain an issue of contention during the passage of the Bill. Clearly, although an impact assessment or a review will not be specifically proposed in the legislation, there will be an opportunity to see its impact in due course. For those reasons, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Jim McMahon
Clause 5 removes charitable rate relief from private schools. Under the current law, all charities are entitled to 80% charitable relief on any properties that they occupy and use wholly or mainly for charitable purposes. That rule is found in paragraph 2 of schedule 4ZA to the Local Government Finance Act 1988, and clause 5(2) amends it to exclude private schools from that rule. Proposed new sub-paragraph (3) removes from charitable relief hereditaments wholly or mainly used to carry on a private school. That will ensure that ancillary and support buildings, such as offices, will also lose their relief—for example, classrooms and sports fields wholly or mainly used for the purposes of a private school.
The policy to remove the eligibility of private schools that are charities from charitable rate relief is a tough but necessary decision that will secure additional funding to help to deliver the Government’s commitment to education and to young people.
Mr Mark Sewards (Leeds South West and Morley) (Lab)
It is a pleasure to serve under your chairship, Dame Siobhain. Yesterday, we heard plenty of evidence from lots of witnesses, specifically about private schools. We also heard from Professor Francis Green, who stated that the measure would have a negligible impact on private schools. At the same time, as the Minister stated, it will raise much-needed funds to support the policies that we promised in the build-up to the general election. Does he agree that although this is a tough choice, since the Bill’s impact on private schools is relatively negligible, it is a necessary measure to raise the funds that we need to deliver our policies?
Jim McMahon
That is an important point. There is political intent behind this measure: to deliver on the manifesto commitment. At a time when, let us be honest, trust in politics is tested, delivering on an election manifesto is important. More than that, the vast majority of young people attend state schools.
In every community across the country over the past decade, all of us have seen the impact of reduced support, with many schools struggling. In some cases, that has created demand for private schools, because parents with children who have SEND or other conditions, who do not believe that their needs are being met by the state sector, feel that they have no choice but to look to the private sector. We are determined to rebuild the state sector so that every parent can have confidence that children who need additional support will get it in a mainstream setting.
David Simmonds
Clearly, the Government have set out their direction of travel and they are determined to proceed. It is important to acknowledge, given the rationale around diverting funds to the state sector, that our state schools, by all significant measures, are now the highest performing that they have ever been. Although I would be the last to claim that everything in the state sector is perfect—there are significant issues that need to be addressed, as there always are—there has been enormous progress in the last decade or so both in the educational outcomes for children in our state schools and in the opportunities for those young people. That is reflected in that fact that youth unemployment today is half what it was in 2010.
I suspect that there will be a degree of disappointment among many state school heads who heard that a tidal wave of money was coming in their direction, because it must be acknowledged that even if all the funds raised by the changes to business rates, VAT and so on were diverted to them, it would amount to less than one third of the cost of a single classroom teacher. We have already seen announcements, however, that that money will also fund a wide range of other activities.
Clearly, the purpose to which the Government seek to put the funds is outside the scope of the Bill, but many people will look at the clause and recognise that the significant harm that it does to part of our education sector is simply not justified by the benefit to anybody else. For that reason, I am sure that we will oppose the measure when it finally comes back to the House. I recognise that the Government have the numbers in Committee, however, so I look to them to proceed.
Question put and agreed to.
Clause 5 accordingly ordered to stand part of the Bill.
Clause 6
Commencement
David Simmonds
I beg to move amendment 11, in clause 6, page 6, line 20, at end insert
“, provided that the condition in section [Requirement for the Government to commission an independent review on the impact of the 2026 revaluation of hereditaments on provisions of this Act] is met.”
This amendment provides that the provisions of Clauses 1 to 4 of the Bill would only come into effect when the Government has held an independent review that will consider the impact the effect of the 2026 revaluation on those provisions.
The Chair
With this it will be convenient to discuss the following:
Amendment 12, in clause 6, page 6, line 22, at end insert
“, provided that the condition in section [Requirement for the Government to commission an independent review on the impact of the 2026 revaluation of hereditaments on provisions of this Act] is met.”
This amendment provides that the provisions of Clause 5 of the Bill would only come into effect when the Government has held an independent review that will consider the impact the effect of the 2026 revaluation on those provisions.
Clause stand part.
New clause 3—Requirement for the Government to commission an independent review on the impact of the 2026 revaluation of hereditaments—
“(1) The condition in this section is that the actions set out in subsections (2) to (5) have been completed.
(2) The Secretary of State must appoint an independent person to carry out a review assessing the potential impact of the 2026 revaluation of hereditaments for the purposes of non-domestic rates on the operation of the amendments made to the Local Government Finance Act 1988 by this Act.
(3) After the review, the independent person must—
(a) prepare a report of the review, and
(b) submit the report to the Secretary of State.
(4) A report prepared under subsection (3)(a) must be submitted to the Secretary of State within twelve months of the appointment of the independent person under subsection (2).
(5) On receiving the Report, the Secretary of State must, as soon as is reasonably practicable, lay a copy of the Report before Parliament.
(6) In this section, references to an ‘independent person’ are to a person who appears to the Secretary of State to be independent of the Government.”
This new clause requires the Government to hold an independent review that will consider the effect of the 2026 revaluation on the provisions of the Bill.
David Simmonds
I will be brief, because we touched on this matter in the evidence sessions yesterday. The amendment and new clause both seek to ensure that the measures contained in the Bill have a review mechanism and impact assessments. The Minister said earlier that he was minded to proceed, regardless of the outcome, but there will no doubt be an opportunity for Parliament to scrutinise the impacts in due course. It is my intention, subject to the Minister’s response, to withdraw the amendment and new clause.
Jim McMahon
Clause 6 provides for when the provisions in the Bill will commence. The provisions in clauses 1 to 4 provide for the new additional multipliers to take effect from 1 April 2026. As hon. Members will have heard, the Chancellor will set out the new multipliers at the Budget in autumn 2025, and those multipliers will take effect from 1 April 2026. Clause 5, which removes charitable relief from private schools, will take effect from 1 April 2025.
As hon. Members will be aware, this Government are determined to fulfil the aspiration of every parent to get the best possible education for their child. It is right that, in pursuing that aim, we focus on the more than 90% of school-age children who attend state schools. The clause will raise approximately £140 million per year by 2029-30. By introducing the clause and the policy to apply VAT to private school fees, the Government will raise around £1.8 billion by 2029-30, which will help to deliver our commitments to education and young people.
Ahead of 1 April 2025, my Department will work with local government to explain the Bill’s provisions so that private schools that should not receive relief can be identified. As we have shown in the impact note published alongside the Bill, we expect around 1,000 private schools across England to be affected by the measures, so we are confident that the relief can be removed from 1 April 2025.
David Simmonds
I am sure that most mums and dads will be glad that excellent education is already available in England’s schools, given the transformation that has taken place in standards. However, we are here to concentrate on finances. For that reason, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 6 ordered to stand part of the Bill.
Clause 7
Short title
Question proposed, That the clause stand part of the Bill.
Jim McMahon
Clause 7 merely states the short title of the Bill.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
New Clause 1
Review of impact on businesses, high streets and economic growth
“(1) The Secretary of State must review the impact of sections 1 to 4 of this Act on—
(a) businesses,
(b) high streets, and
(c) economic growth.
(2) The review must consider—
(a) the impact on different types of business, including small businesses,
(b) the impact on businesses operating mainly or solely on high streets,
(c) whether the provisions have had a measurable impact on economic growth, and if so what that impact has been.
(3) The Secretary of State must lay a report of the review before Parliament within six months of those sections coming into effect.”—(Martin Wrigley.)
This new clause would require a review of the impact of clauses 1 to 4 of the Act on businesses (including small businesses), high streets and economic growth.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Question accordingly negatived.
New Clause 5
Local retention of additional receipts
“(1) The Local Government Finance Act 1988 is amended as follows.
(2) In Schedule 7B (Local Retention of Non-Domestic Rates), after subsection (4) insert—
‘(4A) In the case of any billing authority to which 100% local retention does not apply, as far as practicable, the local and central shares are set so that any additional receipts arising from changes made to this Act by the Non-Domestic Rating (Multipliers and Private Schools) Act 2024 are locally retained.’”—(David Simmonds.)
This new clause would provide that local authorities could retain any additional funds raised by the provisions of the Bill.
Brought up, and read the First time.
David Simmonds
I beg to move, That the clause be read a Second time.
You will be relieved, Dame Siobhain, to hear that these are the last of the amendments and new clauses that I will move for debate.
The purpose of the new clause is to bring in a measure to support the local retention of additional receipts that come from the measures in the Bill. We know that we have been on a journey with local government finance over many years to ensure a greater degree of local retention of business rate proceeds, something that has had cross-party support. It has been done for a variety of reasons, and partly to encourage local authorities to promote growth in their local business community by growing their business rate base and retaining a greater share of the proceeds.
On this specific Bill, the aim is to ensure that the additional revenue derived from the measures is retained by the billing authority, rather than going to another pool elsewhere. The rationale for that is manifold. In respect of the additional proceeds that may come from private schools that are subject to the measures, we know that local authorities may find it challenging, particularly given the timing of the introduction of this legislation, to ensure that there is a place available for any child who is displaced from the independent sector into the state sector—particularly so if that child has significant special educational needs or disabilities. Therefore, ensuring that those resources are retained locally will give some additional element of resource to local authorities seeking to meet that challenge.
We know that one particular dynamic is that the areas where the private schools are fullest are often also the areas where the state schools are fullest; although there is overall a declining population of children in our state schools in England as a whole—I know that my own constituency and local boroughs are a particular example of that, having seen a very large drop and a significant vacancy rate—that is not the case at all phases of education or in all year groups. Therefore, there is already a significant challenge for those parents who have to seek an alternative place for their child, where the retention of the resource locally would give some additional support.
Further, in respect of the additional revenue that may be raised from a variety of different types of businesses, the retention of that support locally would further enable the local authority to use that money to support its local economy, for example to invest in measures to support employment or the development of new businesses. That would be in line with the agenda being set out by the Government, who wish to see growth as a major priority, and it would create a direct link between the local decisions of the billing authority and the financial outcomes that would follow. For all those reasons, I commend the new clause to the Committee.
Jim McMahon
I thank the hon. Gentleman for tabling his new clause. As we have explained, where, as a result of the introduction of additional multipliers from 2026-27, local authorities collect additional business rate income, new clause 5 would allow them to keep that income in its entirety. It would do so by requiring the Government to alter the percentage share of business rates to be retained by local government and the share to be sent to central Government.
In practice, of course, any additional income from the new multipliers introduced by clauses 1 to 4 will vary from local authority to local authority and change from year to year. Those local authorities with fewer large properties may well collect less income as a result of the new multipliers and will therefore be worse off as a result of this amendment. Furthermore, accurate data on that will not be available until some time after the end of the year, whereas the central and local percentage shares need to be set before the start of the year. In practice, we do not think this new clause would effectively achieve the intended outcome. Instead, the Government will work to ensure, as far as is practicable, that local government income from business rates is unaffected by the introduction of new multipliers. That will result in a much fairer and more stable outcome for local government than the one suggested by the new clause.
More generally, the Government have announced their commitment to reform the way in which local government is funded, to return the sector to a sustainable position. That includes the already announced reset to the business rate retention system, as intended when the previous Government established the system. We will use the reset to restore the balance between aligning funding with need and rewarding business rate growth, and we will work in partnership with local government to ensure that the new local government finance system takes into account the impact of the new multipliers on the business rates collected by local government.
I hope I have given the Committee some assurances about how local government income will be protected from the changes in the Bill. In the light of that, I hope that the hon. Gentleman will feel able to withdraw the new clause.
David Simmonds
I know that the Minister is a localist at heart and will generally support measures that increase autonomy and decision making at local level. I recognise that the Government have the numbers to reject the measure. I think the point that it is hard to model the outcome was addressed in previous amendments that the Government chose not to accept, and undertaking a forward-looking impact assessment would enable us to understand better the impact of some of the measures. Given the Minister’s observations and the numbers in Committee, however, I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Question put, That the Chair do report the Bill to the House.
The Chair
I understand that at this point, you all have to be nice to each other. Does anybody want to do that, or are you ready to get on with it?
Jim McMahon
I was going to go on an errand to Tesco to buy some mince pies. This process has been a very useful one. The time that both Opposition parties have given to the preparation of the amendments has really helped the scrutiny of the Bill. That has helped the Government to ensure that the Bill does what is intended, and to provide safeguards to ensure that it does nothing unintended. We have set out our position on the Bill clearly. The spirit in which the Opposition have approached the amendments, by withdrawing them and not pressing them to a vote, and the constructive nature of our exchanges today are to the credit of the Committee.
David Simmonds
As always, it has been a pleasure to serve with you in the Chair, Dame Siobhain. In that Christmas spirit, I thank the Minister for his constructive engagement. It is characteristic of several of the Ministers in the Department, and it has been enormously helpful. I put on record my thanks to the Whips; I appreciate that the scheduling of this relatively short piece of legislation meant that it could have taken up a great deal of time. We have recognised the point, which was made impactfully yesterday, that its overall impact is limited and moderate, so we have sought to approach it in the light of that.
We may have a fairly significant disagreement with the Government about the intent behind the Bill, in the way that it approaches both local government funding and the situation with independent schooling, but we have to recognise the numbers. I thank the Minister and his colleagues very much for the way in which they have addressed this.
Martin Wrigley
This has been my first Bill Committee experience, and it has been interesting and delightfully short. I am delighted to see it executed so effectively and efficiently. I thank the Minister for all his thoughtful and thorough explanations of the different bits and pieces, and I really hope that the legislation will provide good support to our high streets, which desperately need surety about their situation. I thank everybody involved, and I particularly thank the Clerks for their help in explaining to me how the process would work and helping us through it.
The Chair
I think the niceness is complete.
Question put and agreed to.
Bill accordingly to be reported, without amendment.