Culture, Media and Sport committee

Debate between John Whittingdale and Paul Farrelly

Thursday 26th February 2015 Commons Chamber

[Mr Whittingdale]

I do not want to overstate the household levy because it is essentially the licence fee by a different name. The reason that it is attached to a household is in order to make it easier to collect than the existing rather draconian process, which suffers from an evasion rate that could increase with decriminalisation. On the setting of the level, the report makes it clear that we see a role for the new public service broadcasting commission in assessing the amount needed to provide the services that the BBC is there to produce, and I do not think there is a greater danger of political interference or Government involvement than there is already under the process of setting the licence fee.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

This is the first time, sadly, that I have voted against a report in my 10 years on the Committee, and that was only because I disagree strongly with the proposed replacement for the BBC Trust. The preference of the Chair and the majority in the report is for an Ofbeeb, less involved up front, more of an after-the-fact regulator, but does the Chair agree that another possible model could be a strong ex ante regulator, as proposed by Lord Burns and reflected in my amendments printed at the back of the report? In the words of David Liddiment, a founding member of the trust, the BBC is simply too big and important a beast for light-touch regulation.

[Mr Whittingdale]

I share the hon. Gentleman’s sadness that he was unable to support us. It was interesting that three of my colleagues felt unable to support the final conclusions in our report, but I think it fair to say that each of them did so for entirely different reasons—it was not necessarily a meeting of minds. On the point that the hon. Gentleman makes, there is going to be a lot of argument about the different models, and we saw considerable attraction in the original proposals made by Lord Burns. Most—I suspect all—of us thought it a pity that the previous Government did not adopt the Burns model, rather than create the rather unsatisfactory BBC Trust. The BBC Trust has failed and we do not want to create a body that is basically another BBC Trust. His idea of the ex ante regulator is in danger of falling into that trap; personally I think there needs to be a very clear responsibility for the oversight and running of the BBC, and a single unitary board is the best way of achieving that.

Gambling (Licensing and Advertising) Bill

Debate between John Whittingdale and Paul Farrelly

Tuesday 5th November 2013 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

May I begin by reminding the House of my entry in the register showing that I paid a visit to Gibraltar in September, at the invitation of the Gibraltar Betting and Gaming Association, to discuss the provisions of the Bill?

[Paul Farrelly]

Will the hon. Gentleman give way on that point?

[Mr Whittingdale]

I am not sure that there is anything on that point, but I am happy to give way.

[Paul Farrelly]

Following the hon. Gentleman’s discussions over the summer with the Gibraltar-based companies, can he tell the House whether they are still minded to launch a last-minute legal action in Europe against these provisions? When he was there, did he discourage them from doing so?

[Mr Whittingdale]

The hon. Gentleman will have to ask the Gibraltar gaming authorities whether they intend to launch legal action. They have certainly expressed concern as to whether the Bill’s provisions are legal, and it is obviously up to them whether they take legal action. I made it clear to the authorities and the gaming associations that I supported the Bill, and that therefore I would certainly discourage them from doing so. They did raise some concerns, which I shall discuss in the course of my remarks.

I wish to make it clear that my Select Committee supports the Bill’s general provisions, as do I. The Committee has spent some time examining gambling. We carried out post-legislative scrutiny in 2011-12 of the entire Gambling Act 2005. Although we examined online gaming, which is obviously the most rapidly increasing form of gambling, inevitably the main focus on the 2005 Act related to casinos, the previous Government’s abortive attempt to introduce regional casinos—super-casinos—in the UK and the provisions relating to fixed odds betting terminals in betting shops. I do not propose to explore the latter issue at great length today, although it remains one of some controversy.

Hon. Members may recall that when that Gambling Bill became an Act, the then Secretary of State declared that one of its purposes was to make the UK the world centre for online gaming and that that would be of great benefit to the UK economy. Unfortunately, the then Chancellor of the Exchequer holed the then Secretary of State amidships by setting the tax rate at a level that led to almost every operator moving offshore. There is a single exception, which I am sure the hon. Member for Newcastle-under-Lyme (Paul Farrelly), my friend from the Select Committee, will mention: bet365 remains the last operator headquartered in the UK. Almost all the others have moved to offshore jurisdictions such as Gibraltar, Alderney and some European Union member states.

The system that existed at that time of operating a white list to recognise the regulatory authorities of different jurisdictions appears, in the main, to have worked reasonably well. The Government, in putting forward the arguments for this Bill, have raised one or two concerns about how the current regime works. In particular, they have said that there is some confusion about the different regimes in different jurisdictions, and that consumers may sometimes be confused as to where responsibility lies and where they should go with their complaints.

There are undoubtedly some differences between the rules applied in different jurisdictions. I agree with the Remote Gambling Association that, in general, the industry is reasonably well regulated in the white list countries. As CARE—Christian Action Research and Education—has pointed out, one or two jurisdictions, particularly Gibraltar, operate slightly stronger regulatory conditions than those in the UK. In particular, the Gibraltar rules governing the reporting of suspicion that individuals might have a problem with their gambling habits are slightly stronger. The UK Gambling Commission might want to consider whether it can tighten its licensing conditions, particularly on problem gambling, which is rightly a great concern to everybody who considers gambling and the policies governing it.

[Mr Whittingdale]

My hon. Friend has made his view known during the course of our debates and I shall reach a conclusion on that point very shortly. As I say, however, the Government have advanced the argument that the Bill will result in major gains in consumer protection.

[Paul Farrelly]

Does the Chair of the Select Committee agree that the example of Full Tilt Poker, which was licensed by Alderney but not, as we understood it, by Malta, demonstrates the scope for greater regulatory co-operation, particularly in Europe?

[Mr Whittingdale]

The hon. Gentleman anticipates the next two words on my notes, which read “Full Tilt”. He is, of course, correct. Something went badly wrong with Full Tilt Poker, which was regulated by the Alderney gambling control commission. It is right that there should be a review of how that happened and I understand that lessons will be learned. There have certainly been concerns about some incidents in white list countries, and for that reason there might be some advantages to consumer protection of bringing the entire remote gambling industry under the licensing rules of the UK Gambling Commission.

The hon. Member for Eltham (Clive Efford) spent some time on match fixing and licence condition 15.1. He is quite right that the Select Committee received evidence on that and there is no doubt that all the major sporting bodies support the Bill, because they have expressed concern that some of the other regulatory authorities outside the UK have not always been particularly good at reporting suspicious activities. Indeed, if we consider the statistics, we can see that there have been far more reports of potential suspicious gaming activity from UK-licensed operators than from offshore operators. If licence condition 15.1 is applied to all those offering online gambling facilities to UK customers, I hope that that will result in more attention being given to the issue.

I was also interested to hear the hon. Gentleman’s suggestion about spread betting. As my hon. Friend the Member for Shipley (Philip Davies) points out, there is difficulty in drawing a line between where sports betting stops and financial transactions begin. If it were possible for the Financial Conduct Authority to require suspicious activity to be reported to the relevant regulatory body, that would seem to be a sensible move.

--- Later in debate ---

[Mr Whittingdale]

The hon. Gentleman is almost certainly right. Obviously, people go to high-street betting shops to bet, but they also do so for other reasons. They form friendships and it becomes a social environment. None of that exists in online gambling; it is being done in bedrooms by gamblers on their own, and they will look for the site where they can get the best odds. Therefore we need to look at measures to ensure that they do not go into the black market.

[Paul Farrelly]

Before the Chairman of the Select Committee perhaps over-eggs fears of the black market, will he explain why, in the last year, the gambling revenues of bet365—he was right that I would mention bet365, and I will do so again later—have risen from £12 billion to £20 billion, when it operates in the UK and pays tax on its sports betting activities at 15%, rather than the near 1% in Gibraltar?

[Mr Whittingdale]

I am delighted to hear of the success of the company based in the hon. Gentleman’s constituency, but he will remember that when witnesses from bet365 gave evidence to the Committee they said that it was becoming increasingly difficult for them to remain in the UK, and unless something was done soon, they might very reluctantly have to follow the exodus. Happily, I hope the Bill will address that, but as I said earlier, it all comes back to the rate of tax that is levied. We want a rate of tax that is attractive to online operators, so that they license themselves in the UK, and does not drive people into the black market.

However, other measures are also required, and one or two of those who have made representations on the Bill have said that the Government must consider taking other measures to prevent illegal gambling online. There are several ways in which that could be done. They are not dissimilar to the measures that we have been looking at in order to tackle online piracy.

There are three potential ways forward. The first is to work with payment companies to ensure that unlicensed sites cannot use the payment facilities offered by credit card companies. The second is IP blocking—actually, URL blocking—preventing access via the internet to certain websites. That has technical difficulties but is certainly worth exploring. In the third, search engines have a role. I expect that my hon. Friend the Minister will be aware of the vigorous debates that have taken place with Google about the extent to which it is willing to take responsibility to ensure that illegal websites, or websites offering illegal products, do not appear at the top of their search engine results. That too is an area where more work could be done to make it harder for consumers to be tempted by illegal online operators once the new regime is in place. Those are genuine concerns, which I hope the Government will address in the course of debate.

I shall flag up one more issue. An anomaly was identified to the Select Committee, about which we had considerable sympathy. Casinos are among the safest places to gamble. They have strong measures in place to prevent money laundering, to identify those at risk of problem gambling and, if necessary, to exclude individuals and so on. They also have experienced, well trained staff on the premises. For all those reasons, a casino is one of the safer places to gamble—certainly considerably safer than in a bedroom alone, where people are able to gamble for lengthy periods without any controls and to lose a huge amount of money.

--- Later in debate ---

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

It is always a pleasure to follow the hon. Member for Shipley (Philip Davies), who is knowledgeable and free-thinking. I usually do so on the Culture, Media and Sport Committee in order to ensure that he does not have the final word.

I broadly welcome the Bill. As my Select Committee colleague has said at length, it is clearly at the regulatory end of the welcome moves towards a major reform of the taxation system—to a point-of-consumption basis—so that companies pay tax on profits made from bets placed in the UK. The Bill is not about the appropriate level of that taxation. It focuses on other crucial aspects of the regime, namely, as it says on the tin, licensing and advertising of gambling. It is a crucial part of reforms of an industry that has hugely relocated, not only online, but offshore, principally to Gibraltar for most UK operators, and largely for tax reasons. I use the word “most” pointedly, because there is one huge and important exception, which is particularly important to my local area.

[Mr Whittingdale]

Which one is that?

[Paul Farrelly]

It is bet365, which is the biggest UK operator and perhaps now the biggest operator worldwide. However, the Chair of the Select Committee will have to be patient, because I will speak about that company a little later.

Notwithstanding the delays to which my hon. Friend the Member for Eltham (Clive Efford) referred, I congratulate the Government on introducing the Bill and on sticking to the timetable that they set out in 2012 to bring the reforms into force, after careful consideration and consultation, by the close of next year.

A replication of that resolve would be welcome on the wider related issue of corporate tax avoidance by huge multinationals, both on and offline, which has gained a head of steam in these straitened times. Although gambling, both on and offline, is treated differently from general business because it has licensing regimes, the design of an effective point-of-contact consumption tax system holds lessons about what tax authorities can do for themselves, without passing the buck to the interminable renegotiation of international tax treaties, which may well take a lifetime.

The Bill and the issues to which it relates have been well scrutinised in this Parliament. The experience of the UK since the passing of the Gambling Act 2005 has been referred to at length. That was the subject of a DCMS consultation that started in 2009, before the last election, which recommended the current course. The Select Committee endorsed that approach in the report that we issued in July 2012. This April, the Committee published another report welcoming unanimously and on a cross-party basis—although perhaps for different reasons—the main thrust of the draft Bill following extensive pre-legislative scrutiny. In January, the House staged a precursor to this debate on the private Member’s Bill promoted by the hon. Member for West Suffolk (Matthew Hancock), which was introduced by the hon. Member for Thirsk and Malton (Miss McIntosh) following his move to the Government Front Bench. I recall that that Bill was intended as a parade ring for the gambling concerns of the Newmarket and Thirsk race courses, but it covered much of the same ground as this Bill.

I will be brief and will not run around the Select Committee circuit, as the hon. Member for Maldon (Mr Whittingdale) has done. Once again, he has proven himself to be Essex’s own latter day Seabreeze in the way that he has galloped around the track. However, it is worth re-emphasising the extent of the flight of most online gambling offshore and the resulting loss of tax to the Exchequer. The new regime should, if carefully designed, encourage a more level playing field for the online operators who have stayed and for the rest of the traditional sports gambling industry in the UK.

The Chair of the Select Committee has waited long enough. Chief among the online companies that continue to base their sports gaming operations in this country is bet365. It is, in many respects, a modest company with a great deal to be immodest about. It certainly does not seek the limelight, but I do my best for it.

Bet365 is based at Festival Park in Hanley in the constituency of my hon. Friend the Member for Stoke-on-Trent Central (Tristram Hunt). In 1986, Festival Park was the site of Britain’s second national garden festival. The first was in Liverpool and the successive ones were in Glasgow, Gateshead and Ebbw Vale. They were a sort of biennial Olympics, or biennale as Boris would describe them, for Britain’s most deprived areas during the pain of the Thatcher era. Stoke was chosen after the closure of Shelton Bar steelworks in a north Staffordshire that was ravaged by the loss of its coal mines and many of its pottery makers.

Bet365 is a world-beating break from that legacy. It is one of the most phenomenal success stories in British business in the new millennium, having been started in 2000. With more than 2,000 highly skilled staff, it is now the largest private sector employer in north Staffordshire. It has led the local regeneration without a hand up or a handout from Government. In the last year, in a highly competitive industry, it has increased its pre-tax profits from online gaming by more than 50% to about £180 million. It has done that in just 13 years. As I have said before, £20 billion was wagered with bet365 in 2012-13, which is a 57% rise. That has happened because it is one of the industry’s most innovative and trusted players.

Unlike its online competitors in the UK, bet365 paid £31 million in corporation tax to the Exchequer last year. With betting duties and VAT, over the years it has paid hundreds of millions of pounds more. It also pumps a fortune into the local premiership football team, Stoke City, which is another source of pride and a sign of its commitment to the local area. Charities and good causes benefit from the Bet365 Foundation, the Stoke City Foundation and the Coates family themselves.

The reason bet365 remains in this country is not just that it is privately owned. It is because the Coates family—Peter, the Stoke City chairman, his daughter Denise, who was the founding force of the company, and her brother John, the joint managing director—believe in creating employment where they come from and in paying their fair share of tax.

The firm is a leading member of the UK’s Remote Gambling Association, which John Coates has chaired and which does much to promote responsible gambling and the industry overseas. However, unlike other leading members, including household names such as Ladbrokes and William Hill, bet365 supports the changes in this Bill because it is mainly based here and not offshore. If it is so successful while paying taxation, why should its competitors not do so too? I do not think that the UK’s legislative framework should discriminate between a private company and a publicly quoted company, even if publicly quoted companies are motivated by profit maximisation.

I sympathise with some of the arguments that have been made by bet365’s competitors and by the RGA during the gestation of the Bill, which we have heard about today from the hon. Member for Shipley. I also welcome the change of tone from the RGA towards these reforms, which will surely happen. I hope that there is no challenge from the Gibraltar-based companies in Europe, because that would be a delaying tactic that is all about taxation.

In Committee and in the subsequent stages of the Bill’s passage, we must have the best possible scrutiny to get the legislation right. The success of the regime will depend on British consumers choosing to gamble with licensees who have chosen to go with the Gambling Commission. There will have to be effective enforcement to deter non-licensed companies from muddying the waters with a grey or black market. There are outstanding licensing issues on which the industry is being consulted. We must remember that this is an international industry in which operators hold licences overseas in reputable jurisdictions. As the RGA says, it is in everyone’s interests that the regulators work together.

As we have heard, it is crucial that we get the level of taxation right. It is also important to get the definition of what is to be taxed right. I hope that the Treasury is listening to the arguments from the industry for a gross profits tax, rather than a wider gross gaming revenue definition, which rather moves the goalposts from what the operators were expecting.

In listening to the industry, we must recognise that other jurisdictions, notably in Europe, have successfully introduced similar licensing systems and taxation on a point-of-consumption basis. That is reaping revenue for their Exchequers. One of the most recent countries to do so was Denmark. The duty there is 20%, which is higher than the 15% gross profits tax in this country. None of the major operators—all responsible members of the RGA—have seriously suggested to the Select Committee or to anyone else that they would not apply for a licence under the new regime established by the Bill, but instead join an unlicensed or grey market. They have not done so in Denmark, Germany, Greece or Spain. Frankly, the UK is too important a market and their reputations are too important for them to do so here. I repeat: if bet365 can be so successful and supportive of these changes, that also shows what the competition is capable of doing.

To conclude, once we implement this new system—by the close of 2014, I hope, and following parallel moves by other European countries—UK operators, including bet365, will not only have a greater degree of certainty for their future investment and growth, but in co-operating with, rather than resisting, the new British system, all those who claim to be a reputable UK company will be better placed to argue, particularly at European level, for fairer access to other major markets such as France and Italy, and to ask the UK Government to help support the industry in Europe and worldwide.

Arts and Creative Industries

Debate between John Whittingdale and Paul Farrelly

Wednesday 19th June 2013 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

I very much welcome this opportunity to debate the arts and creative industries. Although I of course support the amendment in the name of my right hon. Friend the Prime Minister, in the spirit of consensus that the Select Committee on Culture, Media and Sport always tries to achieve, I have to say that I can find nothing in the motion tabled by the Leader of the Opposition that I disagree with.

As a believer in free markets, I am not normally a supporter of public subsidy. However, I am convinced of the benefits of public subsidy in the case of the arts—not just the economic benefits, which the Secretary of State quite rightly spelt out in her speech. The arts are hugely important to people’s quality of life in this country, as the right hon. and learned Member for Camberwell and Peckham (Ms Harman) said, and many other benefits flow from that in education, health, community cohesion and so much more.

Under the previous Government, the arts enjoyed years of plenty; under this Government, we are facing lean years for the arts. That is absolutely inevitable. This Government have the higher priority of trying to clear up the enormous mountain of borrowing and debt that we inherited, and it would be wrong to exclude the arts from having to play a part in that. However, when we on the Select Committee looked at funding of the arts immediately after the election, we said that it would result in some difficult decisions and that some institutions would probably close as a result. I am delighted to hear from the Secretary of State that she has done well in her debate with colleagues in the Treasury for this year’s spending settlement, but I understand from what I have read and what she has said that we can anticipate still further reductions. That means that more institutions will probably have to close, which will be a tragedy.

That means that we need to look at other means by which we can find funding for those institutions. The Government have already done a lot in trying to encourage philanthropy and, as has been mentioned, to increase the money going from the national lottery. In that respect, I would suggest that what the shadow Secretary of State described as the arts emergency might mean that we can consider—perhaps on only a temporary basis—the flexibility of national lottery funding. It has always been the principle that national lottery funding is there for capital investment projects and not for meeting ongoing costs, but if the consequence is that we can build new buildings while existing ones close, that would not necessarily seem to be a sensible use of resources. That is something that we might consider, if only for a limited period.

I was also interested to see what Dr Simon Thurley said recently about how it is hard to justify spending £35 million on a single painting by an Italian artist when so many buildings in Britain—5,000—are on the at-risk register. That, too, is something we might just look at.

I want to turn quickly to the creative industries, where one has to say that the picture is much brighter. The figures—in terms of employment and economic growth—for the huge contribution that the creative industries make in this country are well known. The success of the music industry and the film industry are well known, but it is also important to look at the others, such as electronic games, publishing, design and advertising.

[Paul Farrelly]

rose—

[Mr Whittingdale]

If the hon. Gentleman will forgive me, I have six minutes and I would like to continue.

One of the most striking things from the Select Committee’s recent visit to California—I will remember this for a long time—was the look on the face of the hon. Member for Paisley and Renfrewshire North (Jim Sheridan) when he saw thousands of zombies overcoming Philadelphia. He said, “That’s Glasgow.” Of course, it was Glasgow. Indeed, that film alone brought £90 million into this country. That could not have come without the tax break which the previous Government introduced but which this Government have maintained and extended to cover high-end TV drama, animation and electronic games.

The one note of warning I would sound is that the success of all those creative industries depends on one thing: a strong framework of intellectual property rights. We tinker with that at our peril. Yes, there may be a case for modernising it, but we must be very careful not to pursue questionable and illusory benefits at the price of putting at risk the huge economic benefit to this country from the success of all our creative industries. I ask the Secretary of State, and also Ministers in the Department for Business, Innovation and Skills, to think very carefully about introducing such things as private copying exception and some of the other Hargreaves proposals. I know that we shall be debating that, but the Secretary of State will be aware of the considerable alarm that is being expressed throughout the creative industries about the damage that could be done unless the matter is handled very carefully.

We also need to do more to tackle online piracy, which is still doing huge damage to the creative industries. The Digital Economy Act 2010 was an extremely good first step: it is not perfect, but it is nevertheless a matter of great regret that none of its provisions have yet been enacted. Things are being done—the City of London police are doing extremely good work, and I strongly support their new initiatives to pursue online intellectual property crime—but a very strong signal would be sent if letters could be written to serial file-sharers who are in breach of copyright law, telling them that what they are doing is not only wrong, but jeopardising the success of the creative industries on which we depend so much.

Royal Charter on Press Conduct

Debate between John Whittingdale and Paul Farrelly

Monday 18th March 2013 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

I join those who have already congratulated the leadership and members of all three parties on achieving at the eleventh hour an agreement on a way forward. It is now more than six years since Clive Goodman and Glenn Mulcaire were convicted of unlawful interception of communications. The reverberations from that are still continuing, but what we know for certain is that the initial claim that it was one rogue reporter was completely untrue. We now have evidence to suggest that the claim that it was one rogue newspaper was also untrue. We await further developments, but we are now on the point of getting what was needed for at least that six years or, arguably, for far longer—a tough independent regulator of the press with real powers, able to carry out investigations. That is necessary to avoid any repetition of the abuses we have seen.

[Paul Farrelly]

rose—

[Mr Whittingdale]

I give way to my fellow member of the Select Committee.

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[Paul Farrelly]

I thank the Chairman of the Committee on Culture, Media and Sport for giving way. After the journey we have all been through, does he agree that to command public confidence, what we need now for the new regulator is a new chairman and also a new chairman of the code committee so that we can have a clean break from the discredited past?

[Mr Whittingdale]

We do need a new tough regulator, and the appointments to it will be conducted under the processes now contained in the royal charter. There is a recognition body to be established that will make sure that those appointments are compliant with the requirements of the Leveson report.

I want to make sure that the House does not lose sight of the fact that although there have been terrible abuses committed by the press, we still need to recognise the vital role that the press play in a democratic society. The press have also been responsible for uncovering acts of corruption and abuse of power, and that does not apply only to the broadsheet newspapers: some tabloids have an equally honourable record in conducting such campaigns. As I think the Deputy Prime Minister said, we should recognise the vital importance of local newspapers, and ensure that whatever system we introduce does not add to the burden on them at a time when they are experiencing very difficult economic circumstances.

The majority of Lord Justice Leveson’s recommendations have always been the subject of agreement on all sides. Everyone agrees about the need for a tough, independent regulator. It may well be that the outside world will wonder why, in that case, it took until two, three or four in the morning for agreement to be achieved on what might appear to be a very small issue. However, I commend the Prime Minister for his recognition of the fact that even a small amount of legislation could—I repeat, could—be very dangerous. Certainly the suggestion of statutory underpinning caused real concern, and not just among people who were singing to the tune of the press. Organisations that are dedicated to fighting for civil liberties in this country and abroad also raised genuine concerns about the implications.

Football Governance

Debate between John Whittingdale and Paul Farrelly

Thursday 9th February 2012 Westminster Hall

[Mr John Whittingdale (Maldon) (Con)]

It is a pleasure to speak under your chairmanship, Mr Havard, and to have the opportunity to discuss the Select Committee’s report on football governance. This was a substantial inquiry by the Committee. It is worth remembering why the Committee decided that this was an important issue that deserved examination. There were two reasons, the first of which was the clear commitment given by both the parties that now form the coalition Government. It was clear that action needed to be taken, particularly to assist and encourage supporters to have greater involvement in the ownership and running of football clubs. That commitment appears plainly in the coalition agreement, although it was perhaps slightly less clear on precisely how it should be delivered. The Committee thought that it might be in a position to help the Government by taking evidence, examining that question and making recommendations.

However, this was not just about supporter involvement, although that is a very important element. It rapidly became apparent to us that there was quite significant concern among hon. Members on both sides of the House about the general state of our national game. A debate in this Chamber was extremely well attended by hon. Members, many of whom spoke up about the difficulties facing their local football clubs. There was widespread concern that something was wrong with the game. Perhaps that was best summed up by my hon. Friend the Minister, who famously described football as the “worst-governed sport” in England. I have to say that in the course of the Committee’s inquiry, we did not find much evidence to contradict what he said. However, we also found much to admire and praise about English football. There is no question but that it arouses huge passions up and down the country.

As I said, this was a substantial inquiry. We received more than 100 submissions of evidence. We held eight oral evidence sessions, to hear from every component part of the game. The Committee went on a number of visits. We went to Manchester City football club to see the huge investment that has taken place under its new owners. They have taken the club from the bottom levels to the top levels of the premier league. We went to Arsenal to see the Emirates stadium and to meet the management there. We held oral evidence sessions at Wembley stadium and Burnley football club. We also went to Germany. Looking at Germany’s model of licensing football clubs was a particularly influential part of our inquiry. It made quite an impact on the Committee.

I will not go through the whole report in detail, because many hon. Members are present and want to contribute and I hope that most of them have already read the report and are familiar with our findings.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

Will the hon. Gentleman give way before he goes into the report?

[Mr Whittingdale]

I will of course give way to my colleague on the Committee.

[Paul Farrelly]

I apologise that I cannot stay for the whole debate because of constituency engagements. Does the Chairman of the Select Committee agree that the centrepiece of the report is the recommendation that the Football Association reassert its role as the sport’s ultimate governing body—in particular, through a licensing system, which he has just mentioned, and a modern, effective form of governance that would not allow, for example, the FA to be bounced into a naive renegotiation of the England manager’s contract as it was?

[Mr Whittingdale]

The hon. Gentleman—he is really a friend on the Committee—encapsulates the report in a couple of sentences very well. I am almost tempted to say that he has done my job for me and finished my speech. Yes, there is no question but that we felt that at the heart of the reforms that were necessary was the game’s governance structure: ultimately, the FA. I will go on to talk about that in more detail. I did not intend to talk at great length about the management of the England football team, although that is obviously a matter of great interest and debate today. I heard the Minister’s remarks during Culture, Media and Sport questions a few hours ago, and I entirely agreed with him. I am sure that the matter will crop up again during the debate.

Before I move to the report’s main recommendations, I want to pay tribute to three people. The first two were our expert advisers: Christine Oughton and Rick Parry, who provided enormously helpful experience and wise advice to the Committee. We relied a lot on their input throughout our inquiry.

The third person to whom I should pay tribute, particularly in a debate on football governance, is our late colleague on the Committee, Alan Keen. [Hon. Members: “Hear, hear.”] Alan was the senior member of the Committee. He was a member of it before I became Chairman. Football was his passion. He chaired the all-party group on football. He was very—I am tempted to say keen—eager that we should embark on this inquiry. It was a great sadness to us that, because of his illness, he was not able to play as great a part in the inquiry as he would have liked. He is certainly greatly missed. It is only right in a debate on football that we pay tribute to him.

Some people asked why the Committee was looking at football at all, because it is a huge success in many respects. The Premier League is probably the most successful in the world. It has an average attendance of 350,000 people each weekend and about 92% occupancy. The second league—the Football League—gets average attendances of 375,000. Some £2 billion of revenue comes into the Premier League. There is no question but that the top English clubs are watched not just throughout this country, but in almost every country in the world. It is hard to go into a bar in any country and not see a screen in the corner showing the premier league. To that extent, it is hugely successful. There were those who said, “In that case, why are you bothering to spend this time looking at it? Why don’t you go off and look at other things?” But we found that there was widespread concern about the underlying state of the game. That was felt right across football and among followers of football.

Despite the huge revenues that come in, very few clubs trade profitably. The main reason for that is the extraordinary amount of money paid out on players’ salaries. The consequence is that debt has become an enormous problem throughout the game. Debt kept coming up as one of the principal issues causing concern. More than half of Football League clubs have gone into administration at some stage since 1992, and all operate on very narrow margins. The net debt of the Premier League clubs is £2.6 billion. Some people would say that that in itself may not be a problem. Indeed, there will be clubs that operate with quite significant debt, but as long as they can service that debt and trade, it is not necessarily something that need be addressed immediately. However, there is no question but that the debt is a major issue. We were told by the chairman of the Football League, for instance, that it was the issue that kept him awake at night.

There is also concern about ownership, which is not wholly dissociated from the question of debt. That, too, was something that we considered. As the hon. Member for Newcastle-under-Lyme (Paul Farrelly) suggested, we decided that if we were to address the problem, the most important thing that needed to be tackled was governance. Therefore, we wanted to establish, right from the start—this may seem self-evident, but it was not necessarily self-evident—that the FA is the ruling body of football. The FA therefore needs to be reformed if we are to get this right.

Some years ago, Lord Burns produced an extremely good report, which made a number of recommendations for reform. When we heard from him, some of his recommendations had been accepted. They included the incorporation of the FA chairman and chief executive on to the FA board, but they were still waiting to bring on the two independent non-executive directors. Progress, I believe, has been made since then.

Terry Burns told us that, if anything, he felt that he had been too timid and that he would have liked to have gone further in involving non-executive directors. Indeed, we heard from one former chief executive of the FA that he wanted an entirely independent, non-executive FA board. We felt that that was not wholly realistic. We were also clear that, as in most corporate structures, the board needed to be relatively streamlined to be effective.

After some debate, we decided to recommend that the right size for the FA board was 10, and that it should include the chairman and chief executive of the FA, the two non-executives and two more of the FA executive directors—in particular, the director of football development. Alongside them, we decided that there should be two representatives of the professional game—presumably one from the Premier League and one from the Football League—and two representatives of the national game. Although we understood the reasons why others, such as supporters, players and managers, wanted representations, we felt that that could make the board unwieldy. Therefore, we felt that we had come up with the right composition.

At the same time, we also felt that there needed to be reform of the FA council, which is an extraordinary and enormous body. It dates back many years to include representatives from Oxford and Cambridge, the three separate services and the public schools, but very few representatives of players and people who actually watch football. We therefore felt that that was something that needed to be addressed. We were also slightly concerned that the meetings started at 11 o’clock and finished at lunchtime and that some of the members of the FA council seemed to have been there for 50 years or more. We felt that there was a need to address the composition of the council, the tenure of its membership and the form of its meetings. We felt very strongly that the council should be a parliament and not an executive decision-making body.

Once those governance reforms are in place, we will be able to move forward to tackle some of the underlying difficulties affecting the game. I have talked about debt, so the next is financial management. We welcomed the introduction of UEFA’s new financial fair play rules, which will affect those clubs that have ambitions to play in European matches. We felt that the principles underlying the financial fair play rules were absolutely right; they commanded a lot of support and should be applied throughout football.

One aspect of the financial management of clubs that caused considerable concern to the Committee was the football creditors’ rule. I have absolutely no doubt that my hon. Friend the Member for Folkestone and Hythe (Damian Collins) may talk about that a little more, because he particularly pursued that issue during our discussions. Although we could see the reasons why that rule was in place, we felt that it was unfair on creditors, as they were often small firms in local communities that had supported the local team. If that team gets into difficulty and goes into administration, they have to go to the back of the queue after all the football creditors before having their debts paid. We felt that that was unfair, and I am sure that my hon. Friend will say more about that.

One aspect that I have taken a long-standing interest in and that still creates significant potential difficulties is the ruling of the European Court on broadcasting rights and territorial sales, the full implications of which we are still waiting to see. It could have a very damaging effect and it is of concern not just to certain broadcasters, but to a large number of people involved in football.

As for how we enforce the financial fair play rules and the other necessary changes, we were impressed by what we saw in Germany. Germany has a licensing model and we saw how it was used to ensure that the clubs do not trade beyond their means for long periods. We saw how they were required to follow certain rules specified by the Bundesliga. We decided that if we were to achieve our changes, we needed a national licensing scheme. The best body to administer that is clearly the FA. Therefore, the other main thrust of our recommendations was that we should move to a licensing scheme under the FA, which should address issues such as the financial management of the game, the sale of stadiums, investment in youth development and all the other areas where, understandably, concerns have been raised. It could also address ownership.

Foreign ownership in the game is not necessarily a bad thing. After we saw what Sheikh Mansour had done in Manchester City, we could understand why the fans had great banners up saying, “Long live Sheikh Mansour”. However, there are others who are less committed to the development of clubs. We also felt that the fit and proper person test, which is necessary, had not always been as effective as it might have been. Indeed, we debated long and hard about what someone had to do to fail the fit and proper person test in English football.

[Mr Whittingdale]

The truth is there will be different regimes governing the ownership of football clubs. For this particular aspect, a slightly different regime should apply. I am not against the principle of foreign ownership. Just as I do not have a kneejerk response to foreign ownership in football, the same is true of the wider economy. To some extent, there are special factors, but I am not opposed to overseas ownership per se.

Let me pay one word of tribute. When the Committee visited Burnley FC, we were well entertained by the chairman of the club, Barry Kilby. In many ways, he represents all that is best about local ownership. He was a business man who had been successful in his community and had put back a huge amount into Burnley FC. His passion for the club was undoubted. Therefore, a strong local owner can bring great benefits.

[Paul Farrelly]

Will the Committee Chairman extend the same compliments to Peter Coates, who is chairman of Stoke City? The Chairman may be aware that I have been supporter of the club since I was five years old.

[Mr Whittingdale]

I am very happy to pay the same tribute to Peter Coates. As an aside, let me say that the rest of the Committee used to enjoy having a sweepstake on how long it would take the hon. Gentleman to mention Stoke City during our deliberations. I am glad that he has done so today.

The issue that I want to finish on is the one that we set out to address, which is that of supporter ownership and involvement. It is a crucial factor, and the Government are right to say that it should be encouraged. It is unrealistic to say that the top Premier League clubs are likely to be owned by their supporters, but there are some clubs lower down that are already supporter owned and more should be done to help supporters’ trusts that want to become owners. For example, there was some concern about the way the Financial Services and Markets Act 2000 operates. It causes difficulties for supporters, and we thought that the Government might address that. We thought that when supporters’ trusts have minority stakes, there might be some merit in giving them protection, so that if a club is acquired and the 90% threshold reached, they are not necessarily forced to give up their ownership to the new owner. There are several areas where we would like clubs if not formally to give a role to supporters, to involve them much more in decision making and with information.

One club that we visited, and whose supporters are extremely involved through the fanshare scheme, is Arsenal. When the Minister appeared before us, I raised the fact that Arsenal’s new owner had not then given a public commitment to support the fanshare scheme. My understanding is that he has still not done that, and I think the Minister said that he might encourage him to do so. That is an example of an active supporters’ organisation and how it can play a valuable role if the club ownership recognises it.

Public Confidence in the Media and Police

Debate between John Whittingdale and Paul Farrelly

Wednesday 20th July 2011 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

Today’s debate is part of a long saga that probably still has some way to go. That saga began, arguably, with the arrest of Clive Goodman, and before that, possibly with the Operation Motorman inquiries to the Information Commissioner, or before that, with the inquiry held by my predecessor as Chairman of the Select Committee on Culture, Media and Sport, the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman), in which Rebekah Brooks first spoke about payments to police officers.

The Select Committee spent a long time yesterday taking evidence from Rupert and James Murdoch, and from Rebekah Brooks—something like five hours in total. I apologise to the House for the fact that, unlike the right hon. Member for Leicester East (Keith Vaz)—my colleague who chairs the Home Affairs Committee—we have not yet managed to produce a report. We may well still do so.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

We have not produced a report, but we have had some success. Yesterday, as the hon. Gentleman will recall, the Murdochs admitted for the first time that News International was paying the legal fees of the private investigator, Glenn Mulcaire. It is now being reported that that has stopped. Does he agree that that is absolutely right and proper, because one cannot apologise to the Dowler family on the one hand and still pay the fees of the private investigator who hacked their phones on the other?

[Mr Whittingdale]

I agree with the hon. Gentleman, and I was going to deal with that matter. He is absolutely right to identify it. I thought it important that Rupert and James Murdoch and Rebekah Brooks came to Parliament. We were warned about legal difficulties and their inability to answer questions. I have to say that I think they genuinely tried to prove as helpful as they could be within those constraints, but the important thing is that they, the leaders of the company at the time, came to give an account of that company—in Parliament, in public. That could only have happened in this place, and that is one of the reasons why Select Committees have an important role. I was therefore particularly sad that their appearance was marred by the incident to which Mr Speaker has referred. It did not serve the interests of those who dislike Rupert and James Murdoch; it distracted attention from the very important matters about which we were attempting to probe them, and the fact that they were treated in that way reflected no credit on Parliament or the Committee. The inquiry that Mr Speaker has spoken about is extremely important.

We asked very detailed questions. There are three areas where there are still significant questions to be asked. One, which was raised by a number of my colleagues, is why the payments to Gordon Taylor and Max Clifford were so large, and why subsequent payments to other victims of phone hacking were considerably smaller. The second is on the issue that the hon. Member for Newcastle-under-Lyme (Paul Farrelly) raised: the continuing payment of Glenn Mulcaire’s legal fees. I am delighted to hear from the hon. Gentleman that that has now stopped.

The third issue—another one that the hon. Gentleman was very robust in pursuing—concerns the e-mails handed over to the solicitors Harbottle & Lewis for examination, which led to Harbottle & Lewis writing to News International to say that the e-mails contained no evidence that any other person was involved. This morning I received a letter from Harbottle & Lewis, which says that it

“asked News International’s solicitors at BCL Burton Copeland whether their client is prepared to waive the confidentiality and legal professional privilege which attaches to their Correspondence”.

That request has been refused. I understand that that refusal was made before Rupert and James Murdoch gave evidence to the Committee. I hope that in the light of the assurance that Rupert and James Murdoch gave us of their wish to co-operate as much as possible, the firm will review that decision and perhaps release Harbottle & Lewis from the arrangement, so that we can see the correspondence.

It is not just Harbottle & Lewis; an inquiry was also undertaken by Burton Copeland—we have not seen the outcome—and the inquiry that News International undertook, in which it said it looked at 2,500 e-mails and failed to find any evidence. It would be interesting to learn further details of the rigour of that particular investigation. At the end of the day, it all boils down to whether one believes the evidence given to us. The Select Committee does not have access to e-mails on servers, or to the papers that were seized from Glenn Mulcaire, Jonathan Rees and other people. All we have is the testimony given to us by the witnesses. We certainly tested them yesterday for five hours. I think that testimony is now on the record, and people can judge.

Phone Hacking

Debate between John Whittingdale and Paul Farrelly

Wednesday 6th July 2011 Commons Chamber

[Mr John Whittingdale (Maldon) (Con)]

I rise to speak in the debate with considerable sadness. I am a passionate believer in the freedom of the press, but like other freedoms, that freedom must be exercised within the rule of law. Many of us here were appalled when we discovered, in the course of the expenses scandal, what a small number of Members of the House had done. They were rightly prosecuted and several have now gone to prison, but that scandal tainted all of us. The hon. Member for Rhondda (Chris Bryant) referred to the fact that journalists throughout the country are equally appalled at the revelations that have come out about the activities of some members of their profession, and they too feel that they have been tainted by them.

The latest revelations mark a low point in the saga of phone hacking, but I fear they do not mark the end point. There are likely to be further revelations still to come. The matter was first looked at by the Culture, Media and Sport Committee in early 2007, following the conviction of Clive Goodman and Glenn Mulcaire. At that time I asked the chairman of News International, Les Hinton:

“You carried out a full, rigorous internal inquiry, and you are absolutely convinced that Clive Goodman was the only person who knew what was going on?”

Mr Hinton replied:

“Yes, we have and believe he was the only person, but that investigation, under the new editor, continues.”

The Committee produced a report which stated:

“We note the assurances of the Chairman of News International that Mr Goodman was acting wholly without authorisation and that Mr Coulson had no knowledge of what was going on.”

In July 2009 The Guardian reported that News International had paid Gordon Taylor and two others more than £1 million because their phones had been hacked, which led the Committee to believe that we might have been misled. We therefore decided to reopen our inquiry. Early in those inquiries The Guardian produced two pieces of evidence: one was the so-called “for Neville” e-mail, which contained the transcripts of 35 voicemail messages between Gordon Taylor and his legal adviser; the other was a contract between Glenn Mulcaire, under a false name, and Greg Miskiw, a senior executive at the News of the World. We felt strongly that both pieces of evidence suggested that Clive Goodman was not the rogue reporter that we had been told about.

The Committee took evidence from Tom Crone, the legal manager of News Group Newspapers, Colin Myler, the editor of the News of the World, Stuart Kuttner, the newspaper’s managing editor, and Andy Coulson, its former editor. We asked whether Rebekah Brooks would appear before us, but she said she had had no involvement with the News of the World when the phone hacking was taking place, which was the case, as she was editor of The Sun at the time. We asked Neville Thurlbeck to appear but were told that doing so would reveal what he looked like, and so compromise his position as an investigative reporter. We asked that Ross Hindley, the junior reporter who had transcribed the voicemail intercepts, should appear, but were told that he could not come because he was in Peru. We were told that there had been a thorough investigation by outside solicitors and that no evidence had been unearthed to suggest that phone hacking had been any more widespread.

[Paul Farrelly (Newcastle-under-Lyme) (Lab)]

Does the hon. Gentleman agree that one important issue that a public inquiry will have to navigate is the fact that no one so far has been cross-examined in either a criminal or a civil court, as settlements have been reached in all the civil cases? Indeed, in the Gordon Taylor case the court ordered the files to be sealed, and Sienna Miller is the latest victim of phone hacking to settle. As a result, we have not yet got to the bottom of this.

[Mr Whittingdale]

I entirely agree with the hon. Gentleman—indeed, I can call him my hon. Friend, as a fellow member of the Select Committee. I think that an inquiry should be able to investigate any documents that are relevant to this matter.

During the Committee’s inquiry I again spoke with Mr Crone, the legal manager, and asked:

“As far as you know, no information regarding those other individuals ever reached the News of the World?”

He replied:

“I have seen no evidence of that.”

Mr Coulson said in evidence that during his editorship he

“never condoned the use of ’phone hacking and nor do I have any recollection of incidences where ’phone hacking took place. My instructions to the staff were clear: we did not use subterfuge of any kind unless there was a clear public interest in doing so; they were to work within the PCC Code at all times.”

The Committee stated in its report:

“Evidence we have seen makes it inconceivable that no-one else at the News of the World, bar Clive Goodman, knew about the phone-hacking…The newspaper’s enquiries were far from ‘full’ or ‘rigorous’, as we—and the PCC—had been assured. Throughout our inquiry, too, we have been struck by the collective amnesia afflicting witnesses from the News of the World.”

Since that time there have been a stream of revelations, and it has become increasingly clear that phone hacking was widespread and involved a large number of people. Most of that evidence, certainly in the early stages, came from the material seized by the police from Glenn Mulcaire, which they were required to divulge only when the civil cases came to court and they were asked to do so by the solicitors acting on behalf of the people bringing civil cases. The key point is that almost every piece of evidence we are now learning about has been in the possession of the police since 2006. That raises very serious questions about why it was not pursued, and why we were told repeatedly that the evidence did not exist, and why the police assured us that there was no evidence to suggest that the investigation should go any further.

All phone hacking is wrong and illegal, but there is no question but that the revelations that the phone of Milly Dowler was hacked, if that was the case, represent a new low, as do the subsequent revelations about the victims of the 7 July bombings and their families, and other murdered children. The truth of these matters is still not wholly clear and there is an ongoing police investigation, which nothing must be allowed to impede. We need to know whether the allegations are true—and if they are, who commissioned those phone hacks and who else knew about it.

There is a swirl of rumour about who might or might not have had their phones hacked, and there are also rumours about other newspapers. I must say that I suspect that, just as Clive Goodman was not a rogue reporter, so the News of the World was not a rogue newspaper. We need to get to the full facts. There needs to be a full inquiry, and the police, the Press Complaints Commission and the press as a whole need to be held to account.

Defamation Law

Debate between John Whittingdale and Paul Farrelly

Thursday 15th July 2010 Westminster Hall

[Mr Whittingdale]

I entirely endorse the hon. Lady’s comments. That is exactly the value of Select Committees, and I am pleased to say that they are becoming more widely recognised. When we set off, we did not anticipate that the inquiry would be quite as long and detailed as it was. It was, however, one of the most fascinating and satisfying inquiries in which I have participated. At the same time as we were having the debate in the House, there was a substantial debate and a growing clamour outside the House. I should pay tribute, as my colleague from the Committee has already done, to the work of Index on Censorship, English PEN and Sense about Science. As part of their campaign they mounted a petition, which I think received 52,000 signatures, and I imagine that every Member of the House will have received e-mails from constituents expressing their concern about the operation of the libel laws. It is not an immediately obvious subject for generating great concern, but it is becoming such an important issue that a lot of people feel very strongly about it.

The two principal conclusions that we reached—I will go into a little detail in a minute as to why we reached them—were that, in this country, the way the libel laws are balanced and the costs attached to going to court in a libel action are having a seriously damaging effect on investigative journalism, standards within the press and legitimate scientific debate. As a passionate believer in freedom of speech and in the essential role that a free press must play in a healthy democracy, I believe that that matter should be of concern to every Member of the House.

However, as if that were not enough, the Committee also discovered that Britain is now cited alongside authoritarian countries as a place where the press is being suppressed because of the actions of the state—in this case, the libel laws. Committees are sometimes criticised for going on foreign trips, but, in this example, it was immensely valuable that we were able to go to America and talk to some of the people who were directly affected, including authors and journalists. We also discussed with the American judiciary how they viewed our system, and we spoke to legislators at state and federal levels. I shall deal later with libel tourism, which is very important.

A host of different issues affect the operation of our libel laws. Some of them are being dealt with, or at least addressed, in Lord Lester’s Defamation Bill, and I was pleased to hear my hon. Friend the Minister speak about the Government’s intention to examine all the issues and, in due course, to produce a draft Bill that we can debate at length. It is reassuring that they have taken on board the necessity of addressing the matter urgently. However, as the hon. Gentleman said, probably the biggest issue affecting the whole libel system in the UK—how much it costs for somebody to defend a libel action—is not covered by Lord Lester’s Bill. None of us imagines that lawyers are ever cheap, but, in the case of libel, trials are often very long, no legal aid is available, and solicitors and barristers charge, frankly, eye-watering sums.

We had a slightly surreal debate in the Committee between various lawyers as to whether the average was £400, £500 or even £600 an hour. To most people, any of those three figures is extraordinary, and, given the time that can be taken, it is easy to see how the clock ticks quickly and the amount of money increases rapidly, to the extent that it is now said that the cost of a libel case in the UK is some 140 times the European average.

[Paul Farrelly]

Does the hon. Gentleman agree that the hourly rates actually double in many of the cases that are brought under conditional fee arrangements? The record shows that the so-called no win, no fee scenario is, as one would expect, nearly always a case of always win, double the fee.

[Mr Whittingdale]

The hon. Gentleman pithily encapsulates the situation, which I shall come on to later. He is absolutely right, and that makes the situation even more damaging for any defendant facing a libel action.

My hon. Friend the Minister referred to the work of Lord Justice Jackson, who gave evidence to the Committee alongside the Master of the Rolls and addressed the broader question of costs in all civil litigation. I know that the Government have listened to his advice, which was that we should not pick out one particular branch of civil law and address that, but address the whole thing together. As my hon. Friend said, that was not the view of the previous Government, and I have some sympathy with their position. The matter is urgent, which is why the then Justice Secretary, the right hon. Member for Blackburn (Mr Straw), decided to move on defamation cases ahead of the rest of civil litigation. I hear what the Minister says, but I hope that there will not be further delay—we must address the matter quickly. By all means, let us address it in the round and look at all the costs involved in civil litigation, but let us not spend a long time doing so.

Various solutions have been advocated, and we probably need to adopt a combination of them. The first thing the Committee considered was the suggestion simply to cap costs—to set a limit beyond which one should not be able to go. We accepted the evidence we received that that is a blunt instrument. It is difficult to predict the direction of a case, so capping is probably not a realistic solution. However, various solutions undoubtedly could be introduced: greater cost budgeting and case management, and a pause every now and again to see how costs are progressing. Those are sensible options, but the real problem, as the hon. Gentleman said, is conditional fee arrangements, which were introduced with wholly good intent. I absolutely accept that the wish to make the legal process available to people who would otherwise struggle to afford it is an entirely worthy objective. The intention was that a legal practice would be allowed to charge a success fee if it won a case, in recognition of its risk in taking on a CFA. If it lost the case, it would not get any money, so the fee was a return for the risk.

The problem we discovered fairly rapidly was that the practices that specialise in CFAs are very thorough and do not actually take any risks. They go through the cases that are put to them for potential CFAs and accept them only if they are almost certain that they will win. We struggled to get the exact figures for the proportion of CFA cases that were won and lost, but it was clear that, overwhelmingly, cases taken on a CFA were a pretty safe bet. On that basis, we found it difficult to understand why firms needed a 100% success fee on top of their costs. As I said, the costs are astronomical to begin with; they then double them, as the hon. Gentleman indicated, by imposing a success fee.

That is not the end of the story. An additional cost is after-the-event insurance, which is a premium taken out by the claimant in case they do not win, and which is chargeable to the defendant in the event that they lose. Such insurance can cost anything up to £65,000 plus tax for every £100,000 worth of cover, so we are now talking about almost 270% of the costs that can be awarded against a defendant in a libel action. The extraordinary thing about after-the-event insurance is that if the defendant loses, obviously he will have to pay the claimant’s premium, but if the claimant does not succeed, he does not have to pay the premium. The insurance is marketed on the basis that one can take it out but not have to pay for it at all. It is simply another cost imposed on the defendant, and, because there is really no incentive for a claimant to keep costs down, it is a licence for companies to set their own sums and print money.

The effect of those three things taken together is that now many newspapers will not seek to defend a libel action, even if they are convinced that they have a strong case. They will regard it as quicker and cheaper to settle out of court. Perhaps even more worrying is that often they will not print the story in the first place, simply because of the danger that they might get sued. That chilling effect on press freedom and journalism causes great concern.

[Paul Farrelly]

The hon. Gentleman mentioned cost-capping and the importance of speedy reform. Does he agree that costs have become so surreal that when capping is mentioned as a measure to try to reduce them, a great number of the legal fraternity argue that it could increase costs because of the cost of cost-capping meetings, and that, as a consequence, nothing happens?

[Mr Whittingdale]

I entirely agree with my hon. Friend—I call him my hon. Friend in the spirit of the Select Committee. What he describes introduces another legal argument, which is, of course, billable. I will not say that this is a racket, but the lawyers do very well out of the process.

The Committee came up with a couple of recommendations to address these problems. The previous Government suggested that a 10% cap be set on success fees, but as my hon. Friend the Minister rightly said, the proposal did not find favour in the House when it was introduced before the election. The Committee’s solution was not quite to introduce a straight 10% cap, but to say that the success fee that could be recovered from a defendant should be set at 10%. We did not feel it right to interfere with the arrangement between the claimant and their legal representatives; if the claimant wishes to pay a proportion of their damages in the form of a success fee, that is a matter for them. However, we said that the legal entitlement to recover from the defendant could be capped at 10%. Furthermore, for the reasons that I have set out, I view after-the-event insurance with some scepticism, and the Committee said that it should be made irrecoverable in its totality. I remain of the view that those two measures are sensible and would go a long way to removing the sting in conditional fee arrangements. Obviously, that will be a matter of great debate over the coming months, and I leave it to the Minister to ponder those issues.

The issue is not just costs; there is a whole variety of other issues, many of which Lord Lester’s Bill addresses. One issue is the multiple publication rule. Libel laws were written when the internet did not really exist, and its advent has changed everything. That is true of the permanence of articles and statements, which can now be found on Google at the press of a button. The old Duke of Brunswick case also becomes much more serious in the age of the internet. Clearly, it is widely recognised that that should be addressed.

There are a couple of defences that must, on the face of it, make sense, but which are slightly unclear in legal terms at the moment. One is the defence of fair comment, and I want to say a quick word about the impact of libel law on proper scientific debate, an issue on which Sense About Science has done a lot of work. I pay particular tribute to Simon Singh, who is a very brave man for deciding not take lying down the legal action brought against him by the British Chiropratic Association after he suggested that there might be some debate about the medical effectiveness of chiropracy in treating certain conditions. He was willing to put up a great deal of money from his own account to appeal the judgment. Several scientific journals now say that they hesitate before carrying perfectly legitimate scientific papers that contribute to debate, because of the potential for organisations, and particularly big corporations, to bring libel actions. Libel is about whether someone is defamed; it should not be used to interfere with scientific discourse, which is important if scientific knowledge is to advance. The fact that Simon Singh was willing to defend himself and proved triumphant in the end was important and drew attention to the fact that the issue needs to be addressed.

The other defence that the Committee looked at, and which the hon. Gentleman mentioned, is the Reynolds defence of responsible journalism. The two landmark cases of Reynolds and then Jameel set out the hurdles that a defendant must demonstrate they have got over before they can use the defence of responsible journalism. There is some debate about the difficulty of meeting each of those tests, with the result that few defendants have used this defence, which has been a cause of concern to us.

It was drawn to my attention not more than two hours ago that the outcome of the Flood v. Times Newspapers case has been published. This is the first occasion on which the Court of Appeal has overturned a Reynolds defence. Times Newspapers used a Reynolds defence in an action brought against it by a Metropolitan police sergeant. It said that what it had published was in the public interest and that it had met the relevant tests, but the Court of Appeal overturned the initial judgment on appeal. I do not want to say anything about the merits of the individual case, but I imagine that the fact that there is a further constraint on using the Reynolds defence will mean that adopting it becomes even less attractive to serious newspapers. I share the view of the hon. Gentleman that putting these things into statute carries a risk as well and that it might not be the most sensible way of strengthening them. However, it is important that it should be a legitimate defence for journalists investigating stories that are plainly in the public interest—we are talking not about muck-raking, but about serious investigative journalism—to show that they have used their best endeavours to meet all the various tests. We may need to look at that again in the light of certain developments.

[Paul Farrelly]

Does the hon. Gentleman agree that the conclusions of the libel working group also highlighted the danger that a codification in law could become a rigid checklist in itself? It would also be very costly to mount a defence. However, the group was more sympathetic to statutory backing for the principles that underlie a defence of responsible journalism, which have already been developed in common law. That might be a fruitful way of proceeding.

[Mr Whittingdale]

The flexibility that that might provide is clearly better than having a very detailed set of boxes, each of which has to be ticked. The hon. Gentleman’s suggestion is probably a sensible way to develop things.

Taken together, all these issues would go some way towards not weakening our libel laws, but restoring people’s absolute right to defend their character and reputation. The other side of that coin, however, is the right of the press to investigate and to expose, and the right of scientific journals to carry out legitimate debate. I hope that all those things will feature in the Government’s draft Bill.

I turn now to the way Britain’s libel laws are viewed overseas, because that should be of huge concern to the Government. The issue is encapsulated in the case of Rachel Ehrenfeld, whom the Committee met when it went to the States. She wrote a book in which she suggested that a Saudi Arabian business man, who has Irish citizenship, was in some way providing financial support to al-Qaeda and terrorism. An action was brought against her in the UK on the basis that 23 copies of the book had been sold here. Obviously, it was also accessible on the internet, so there was publication in that sense as well. However, the book was not widely available in the UK, and it is fairly clear that the case was brought here not because this was where the damage was done, or because Rachel Ehrenfeld or the Saudi Arabian had British citizenship, which they did not, but because the libel laws here were seen to favour claimants. On the back of that, we discovered that there are now widely shared fears in the United States. The Association of American Publishers submitted a statement to the Committee on the Judiciary of the US House of Representatives, which described libel tourism as

“the cynical exploitation of plaintiff-friendly foreign libel laws as a weapon to intimidate and silence U.S. authors and publishers.”

There is no doubt about which foreign libel jurisdiction it had in mind.

--- Later in debate ---

[Paul Farrelly]

I do not want this to become a conversation between members of the Select Committee, but does the hon. Gentleman agree that in the internet age matters go rather further than that? We received evidence that aggressive firms in the field of so-called reputation management—the two names that came up most frequently were Schillings and Peter Carter-Ruck and Partners—were finding so-called defamatory articles on the internet and scouring the world for potential plaintiffs on whose behalf they could act, simply because the article was accessible from the UK. They could point out to such people the fact that they might well win under Britain’s libel laws and say, “So bring an action.”

[Mr Whittingdale]

I think that there is evidence of that. I hesitate before accusing the two firms that the hon. Gentleman named, although they happened to crop up time and again in evidence. Concerns have been expressed about the way CFAs are used in ambulance-chasing cases—with ads on television saying, “Have you fallen over? Ring up this lawyer, because you can win thousands of pounds.” This is basically the same thing, so there is a legitimate concern.

I think that what should really make the Government concerned, in relation to attitudes towards the British system, is the fact that it is not only publishers and newspapers that are making such comments. The UN Committee on Human Rights, members of which we met, has been very critical of the UK system. In addition, the US Government, at state and federal level, is taking action in response. We went to Albany, where New York state has passed what is called the Libel Terrorism Protection Act. The title is intended to suggest that we have been giving active succour to terrorism through our libel laws. The Ehrenfeld case was the cause of it; indeed, Rachel Ehrenfeld went to the New York state legislature to press for action to be taken.

The Act allows a judgment against an American citizen to be ignored or overturned in America if it is shown to be a breach of his or her first amendment rights. However, that has happened not only in New York state; such legislation is appearing in other states and has also passed into Congress. I have the report of 13 July—two days ago—stating that the Senate Judiciary Committee unanimously passed bipartisan legislation aimed at protecting authors and journalists from libel law suits filed abroad. Essentially, the New York Bill has now been taken up, and it looks as though it will pass into federal law.

When the previous Lord Chancellor, the right hon. Member for Blackburn, gave evidence to the Select Committee, he said first that he was not convinced that the situation was a great problem. Secondly, he did not seem terribly fussed even if foreign Governments were taking the attitude I have described. He said that we had learned that there had been no representations from the British embassy to defend our system; those concerned had sat by and let these things go on. I find it profoundly worrying that Britain’s closest ally—the country that, whatever one thinks of America, is regarded as a bastion of free speech—should regard us as so restrictive and hostile to the principle of free speech that it feels it necessary to pass an Act such as I have outlined. Although that Act does not specifically refer to the UK, it is perfectly clear that it is directed at this country. I hope that, given that the Bill is now actively passing through the Senate and Congress, the Minister will start to talk to American legislators as a matter of urgency, and perhaps reassure them that the Government intend to deal with the issue.

[Paul Farrelly]

Does the hon. Gentleman agree that, very soon after making those statements to the Select Committee, the previous Lord Chancellor was open-minded enough to change his mind completely? He added the issue of libel tourism firmly to the remit of the libel working group, and one of the four main areas on which it reported at the end of March was libel tourism and reforms to court procedures to stop abuse of process and abuse of forum.

[Mr Whittingdale]

Indeed, that is right, and the hon. Gentleman is correct to draw attention to it. I am delighted that the right hon. Gentleman came round to our view that the matter was a serious one, that needed to be addressed.

One or two other matters occurred to the Committee, one of which was referred to in passing by the hon. Member for Newcastle-under-Lyme, although, perhaps out of modesty, he did not devote as much time to it as it deserves. That is the issue of this place and the reporting of our proceedings. It is well known that the hon. Gentleman uncovered the existence of a super-injunction taken out on behalf of Trafigura and tabled parliamentary questions about it, which led to a spat between Carter-Ruck and The Guardian about whether it was legitimate to report the fact that those questions had been tabled. There is no question about where parliamentary privilege lies: the hon. Gentleman is completely protected under parliamentary privilege in tabling those questions.

The situation becomes a lot less clear—this was news to me—in respect of a newspaper’s right to report the fact that the hon. Gentleman had tabled the questions. Previously, I had the impression that the reporting of responsible activity was allowed, under the Parliamentary Papers Act 1840, but Carter-Ruck argued vigorously with The Guardian that the super-injunction prevented the newspaper from reporting the questions. The Guardian’s in-house lawyer confirmed that that was her view as well. It later became apparent that the House authorities probably shared Carter-Ruck’s view. In my view, that is a profound threat to this place.

In a way, there is no point in our being able to say things in Parliament or table questions if nobody is allowed to report them. In the Select Committee’s view, any uncertainty about reporting parliamentary proceedings and the extent to which privilege allows Members of Parliament to raise matters with a degree of protection against libel action needs to be addressed quickly and removed. Lord Lester has included this in his Bill.

The two last things that I will mention are not principally about libel, but touch on it. We Committee members spent a lot of time considering privacy, and the balance between articles 8 and 10 of the European convention on human rights, which has been used to bring in a privacy law in this country. That matter touches on libel because some people now choose to use privacy legislation rather than libel legislation. Those two kinds of legislation are not separate. Under privacy legislation, people do not necessarily have to say whether the story is even true—they can just use such legislation to prevent it from being published. That needs to be borne in mind if we are going to have the thorough overhaul that I hope the Minister intends.

The last area that I should like to mention, which is complementary to libel law, is the self-regulatory mechanism adopted by the press—the Press Complaints Commission—which the Committee supports. There is a lot of debate about the effectiveness of the PCC, but it offers an alternative. If people choose to go to court and mount a libel action, it can take a long time and cost a lot of money, but at the end they might get a definitive statement that they have been defamed—and they may get a lot of money as a result. The PCC can take action quickly and is free, but people do not get any money: the most that they can hope for is a judgment by the PCC that the newspaper was wrong to carry a story. Each option has alternative attractions; each mechanism is useful, and one cannot substitute for the other.

The Committee was concerned about the most serious serial libel that has taken place in the past 50 years—perhaps within memory—which is that suffered by the McCanns, who were subjected to libel not once, but day after day, and not just in one newspaper, but in newspapers across Fleet street. That was eventually recognised and a lot of apologies were made, and payments were also made, but it cannot have made up for what they suffered at what was already a terribly distressing time for them. We were concerned that the self-regulatory mechanism of the press appeared to have failed in that instance, and we made a number of recommendations about how it should be strengthened. The role of the PCC needs to be borne in mind when looking at libel, because it and the courts deal with similar problems, but perhaps from different ends.

I think that I have spoken for long enough, but I have spoken for so long because we in the Committee spent a great deal of time on this serious issue. I am pleased that statements in the manifestos of all three parties, and in the programme of the coalition Government, are now being progressed and that the Government have made it clear that they are determined to take action in this area. I hope that we, as a Committee, have helped that process and that we will continue to do so in the debate on the draft Bill when it appears.