Criminal Justice and Police Act 2001 (Powers of Seizure) Order 2018

Lord Stevenson of Balmacara Excerpts

Thursday 15th March 2018 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I congratulate the noble Lord, Lord Stevenson, who is still with us for the third item of business. I am grateful for the feedback from the Secondary Legislation Scrutiny Committee regarding the explanatory material accompanying this draft order. We always strive to provide sufficient information for noble Lords to gain a clear understanding of an instrument’s policy objective and intended implementation. Furthermore, my department will take account of the comments of noble Lords made in this Committee when preparing explanatory memoranda for future instruments.

Insider trading and price manipulation in the wholesale energy markets is a crime and ultimately consumers and businesses pay the price for such behaviour in the form of higher bills. It is therefore important that the energy regulator in Great Britain, Ofgem, has sufficient powers to investigate and punish those behaving in such a way and that that acts as a deterrent. Insider trading and market manipulation in the wholesale energy markets are prohibited by the wholesale energy market integrity and transparency regulation—REMIT —which has been in force since December 2011.

In June 2013, the Government made civil enforcement regulations for REMIT—the Electricity and Gas (Market Integrity and Transparency) (Enforcement etc.) Regulations 2013—which give Ofgem powers to impose unlimited financial penalties, access to information and the power to enter the premises of a regulated person under a warrant. In March 2015 the Government strengthened that regime by making further regulations to create criminal offences of intentionally or recklessly breaching the prohibitions on insider trading and market manipulation.

The 2013 regulations give the regulator the power, under warrant, to enter premises to search for, and seize, information and documents that appear to be relevant. However, there are cases where Ofgem may have difficulty exercising this power of seizure. Investigating officers may be presented with a large volume of documents. Identifying documents relating to suspicious transactions among many documents of a similar nature can be akin to finding a needle in a haystack. Ofgem currently has no power to take away an entire body of documents to sift them for relevance off premises. In some cases, this may mean that vital evidence is missed.

Section 50 of the Criminal Justice and Police Act 2001 addresses this problem. It enables a person exercising a power of seizure to remove material from the premises being searched to determine whether it is something which the person is entitled to seize if it would not be reasonably practicable to determine that on the premises. The power in Section 50 applies where a person is exercising a power of seizure listed in Schedule 1 to the Criminal Justice and Police Act. More than 60 such powers are already listed in the schedule. The effect of this order is to extend this power to Ofgem when it is searching premises to investigate breaches of REMIT. The Government believe this would be a measured and sensible extension of Ofgem’s powers, which will help to ensure it can take effective enforcement action.

The Government sought views in December 2015 through consultation on whether Ofgem’s powers should be strengthened to bring them into line with this provision. Industry stakeholders, perhaps not surprisingly, believed that the additional powers offered to Ofgem were disproportionate. Others, including consumer groups, were neutral or in favour of the provision. The Government believe that effective regulation in this area is essential and that sufficient safeguards will be in place to meet stakeholder concerns. The Government do not believe that costs will be unreasonable.

The power will apply only where a court has granted Ofgem a warrant to search premises. When Ofgem exercises this power it will be under a statutory duty to sift information as soon as reasonably practicable after seizing it and return anything which it was not entitled by the warrant to seize. Additionally, a person who is the owner of a document can apply to the court for the return of such material.

We believe that this additional power will aid Ofgem in its investigation of market abuse and that the safeguards should ensure that it is not used unnecessarily. I commend the order to the Committee. I beg to move.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I thank the Minister for his full introduction to this order. Again, we have no significant concerns about the order itself because it is an appropriate way forward. Indeed, it seems to be needed, based on the description we have had.

As the Minister has said, the Secondary Legislation Scrutiny Committee reported on the order in order to draw it to the attention of the House on the grounds of a policy likely to be of interest. The committee’s main concern seems to be about the rather extended time taken to go from the initial idea booted around in the consultation paper in December 2015 to the final decision to move forward on a part of what was consulted on—only a part—as late as earlier this year. The Minister said that the issues raised will be taken back with everything else, but he did not give us an explanation about that issue. The letter from the department that covered it is also rather vague. It is mainly to do with the fact that internal government processes got in the way of the smooth running of the overall proposal and that the decision was taken quite late simply to go ahead with these REMIT proposals. More information about that would be of interest.

My concern is slightly different. The consultation that was carried out was broader than the REMIT, but the Explanatory Memorandum focuses on those issues. I take it that the references in Article 8 of the Explanatory Memorandum are around that. It says in paragraph (8.2):

“Some energy companies expressed support for the initially proposed “seize and sift” powers, but the majority of companies and representative groups”—


so it is not quite as the noble Lord mentioned—

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway on which information to remove”.

In other words, they were about the powers. It seems to me that the majority of companies did not agree with the proposal. They felt that the existing powers would be sufficient and that seeing papers on sight, sifting through them there and taking information away in that form would be sufficient for their processes. In paragraph (8.3) however, the department’s response states:

“Having taken account of the consultation responses, BEIS considers that the aim of the policy … justifies the additional burdens identified by industry”.


They were complaining not about the burdens, but the powers. The Explanatory Memorandum is completely silent on whether these powers are appropriate. It seems that the Government have decided to ignore the consultation and go ahead. Will the Minister comment on that? He is not wrong in the sense that the ends may justify the means, but the process would have left a number of companies a bit bruised, given the very short time available and the lack of any individual consultation. They would be entitled to feel that they have not been taken account of properly.

Finally, I have to come back to the matter of the implementation date. This is a new group of civil servants and I can expand on my worries. Other noble Lords will realise that I have raised this matter before. This order may be cited from, and comes into force on, the “twenty-first day after the day on which it is made”. It will have a considerable impact on a small number of companies operating in the electricity and gas field. It is therefore not inappropriate to think that the order should start from the common commencement date: 6 April. If you do the maths, 21 days takes you just beyond 6 April. It would be not inappropriate if the Minister decided to suggest, even with the regulation in this form, that 6 April would have been a better date, and I appeal to his better judgment to make the necessary changes if he can.

[Lord Bradshaw]

In considering this order we should consider the enormous public dissatisfaction with some of the regulated industries that we have seen for a long time. I think I am correct that the regulators have often been caught out saying that prices should be allowed to rise by a certain amount, and immediately after the announcement, companies’ share prices have risen. To me, this means that the regulator has misjudged the situation. Bodies such as Ofgem are extremely powerful, and from the point of view of the consumer and the general public it is important that a very close watch is kept on their activities. I am happy to support what is in this paper because the balance of advantage between consumer and supplier is tilted very much one way, and this will tilt it back the other way.

[Lord Henley]

My Lords, I think that I am grateful to the noble Lord, Lord Bradshaw, for his comments. It is always difficult to get the balance right in these matters, which is what we are trying to do in a number of other pieces of legislation—as the noble Lord will be aware—that are before another place at the moment.

It is important that we ensure that Ofgem has the appropriate powers to look after the consumer interest. Obviously, we take very seriously the idea of any extension of powers that we might grant to Ofgem or any other body, and that is why, under the Police-and-whatever-it-is Act 2001, we have to make an order if we want to do that. They are affirmative orders and we have to come to the House to argue the case for them. That is what I am doing.

The noble Lord, Lord Stevenson, was slightly worried about the consultation and whether we listened to the consultees. What I said in my opening remarks was that the industry and stakeholders, perhaps not surprisingly, believed the additional powers were disproportionate, but I added that others, including consumer groups—this is the point that the noble Lord, Lord Bradshaw, picked up—were neutral or in favour of the provision. The Government have to consider these matters very carefully.

[Lord Stevenson of Balmacara]

Just to be clear, paragraph 8.2 of the Explanatory Memorandum does not say what the Minister just said. It may just be that the expression needs to be changed, but it states,

“the majority of companies and representative groups”.

I think “representative groups” includes consumer groups. The Minister said there were others, but we do not have the detail. They,

“argued that these were disproportionate, unnecessary or gave Ofgem too much leeway”.

[Lord Henley]

It does not just include consumer groups. The point I was making was that consumer groups in particular were neutral or in favour. Having listened to the consultation, the Government came to their conclusions and decided what was necessary. We considered that the powers were very important and we considered bringing them in with appropriate safeguards. I think that is what we have done.

The noble Lord was concerned about the timing of the order. I am glad that it was not just me listening to him. As he said, there is a collection of officials listening behind me, and I hope this will suffuse through the department so that all of us—Ministers as well as officials—can be aware of his concern that as far as possible we stick to the appropriate dates. Obviously, there will be other occasions when we cannot. I have no power to make amendments now. The noble Lord probably guessed that, since he made the suggestion. Since I have general agreement that this order should go through, I repeat that the department could possibly do better in future. I will keep my beady eye on these matters and see to it that we do as well as possible. As I said at the beginning, we will continue to take the Committee’s views into account in future.

[Lord Stevenson of Balmacara]

I go back to my original point and ask the Minister, for my comfort and satisfaction, to write with a bit more explanation about the make-up of the responses that were received. May I also welcome the Minister to the small band of people who believe in common commencement dates?

[Lord Henley]

The noble Lord will get a reputation for having a bee in his bonnet about common commencement dates and will, no doubt, be teased by his colleagues as “Lord Common Commencement Dates” for ever. I will certainly write to him in greater detail on the other matter. I am grateful for the support from both noble Lords.

Public Services: Corporate Governance of Businesses

Lord Stevenson of Balmacara Excerpts

Tuesday 13th March 2018 Lords Chamber

[Lord Henley]

My Lords, we think it is very important that the voice of those working for companies should be heard on the board. In the Corporate Governance Reform Green Paper we made it clear that companies should have flexibility to choose how best to engage with their employees, and there are a number of different ways they can do that. They can have an independent director who represents employee views, an employee advisory council or a director directly from the workforce. There are a number of options. It is certainly something that should be looked at.

[Lord Stevenson of Balmacara (Lab)]

Does the Minister agree that one of the reasons we are now experiencing a bit of a run of scandals on outsourced public services is the lack of information available to public authorities which have to control them? Will the corporate governance changes which the Minister responded to give the Financial Reporting Council greater powers to regulate companies and to take action before things go badly wrong? It asked for those powers after the BHS collapse two years ago. When will we see the results of the lessons learned exercise on Carillion and the actions required by government, according to the Secretary of State, to strengthen,

“the oversight … of the public sector in terms of contractors”?—[Official Report, Commons, 30/1/18; col. 657.]

[Lord Henley]

The noble Lord is right to draw attention to the role of the Financial Reporting Council. We believe it has a range of powers that allow it to sanction, for example, individual auditors and accountants and to audit firms. In implementing our reforms, we certainly want to give further consideration to whether the FRC has the appropriate powers, resources and status to operate effectively.

Small Businesses: Retention

Lord Stevenson of Balmacara Excerpts

Wednesday 21st February 2018 Lords Chamber

[Lord Henley]

My Lords, I agree with some of the noble Lord’s analysis about problems related to retention, a practice that is common within the construction industry but which has negative impacts. That is why we had the consultation, as I think he knows. We obviously want to consider the results of that consultation and in doing so we will look, as he has suggested, at Peter Aldous’s Bill and see whether it is appropriate that we can take further steps. But the consultation having been completed, we need to consider it first.

[Lord Stevenson of Balmacara (Lab)]

My Lords, you have to wonder why this Government have it in for SMEs. We have a Small Business Commissioner who seems to have none of the powers necessary to do anything about the late payments scandal that they have to face; and on retention, as we have just heard, very good and well-argued proposals have been played into the long grass and will not see the light of day for some time, as the Minister seemed to suggest. Should this not be put immediately to the task force that the Secretary of State has put together to advise on how to mitigate the Carillion disaster?

[Lord Henley]

My Lords, as I said, we are considering these matters. The noble Lord quite rightly points out the task force that my right honourable friend has set up; I add that the Small Business Commissioner, Paul Uppal, will sit on that task force. We will consider all the options as a result of that but we will not rush into legislation; we are going to consider what is appropriate. Perhaps we can give some support to Peter Aldous’s Bill but these matters need to be considered and we will then deal with the problem.

Unified Patent Court (Immunities and Privileges) Order 2017

Lord Stevenson of Balmacara Excerpts

Wednesday 6th December 2017 Grand Committee

[Baroness Neville-Rolfe (Con)]

I congratulate my noble friend Lady Wilcox on her contribution to intellectual property. I was honoured to succeed her in an area where Britain is very strong. Obviously, that was a delight. I was intimately involved in the Unified Patent Court discussions in both Brussels and Luxembourg last year—after, as has been said, many, many years of discussion on its establishment and its location here in London, and the other centres. I want simply to welcome it and to congratulate the Minister and the Intellectual Property Office, which is headquartered in Newport. I wish them well in finding a sensible deal for patents in the Brexit negotiations. I have one point of clarification, which I think the Minister touched on: when does the patent court in London actually open its doors?

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Minister will be grateful to know that the shadow cast upon the previous debate does not extend this far. I will be a ray of sunlight in his life and he will emerge, if not hopping and skipping, possibly with a little spring in his step at the pleasure we express and the way in which this piece of legislation is coming forward.

In passing, it was unfortunate that the Minister caught what appeared to be a full blast from both barrels from my noble friend. He should have seen him in the earlier stages of that Bill, when the hapless victim was the noble Baroness, Lady Neville-Rolfe. The full wrath that my noble friend Lord Mendelsohn could express at the whole approach that the Government were daring to take to this important area was expressed in many amendments that we had to discuss. The Minister got off lightly; he may not feel that. We certainly look forward to his letter when it comes.

I am going to say absolutely nothing about the substance of the statutory instrument because we agree with it and are happy for it to go through. It shines a light on the way some people manage to live their lives—in tax-free environments, free of all exemptions and penalties; some people have all the luck—but nevertheless that is the way it is done. I am glad that it is coming forward.

Like the noble Baroness, Lady Neville-Rolfe, whose work on this I salute—as well as that of the noble Baroness, Lady Wilcox, who preceded her—I am interested to learn a little more about what is actually happening on the ground. There are rumours of premises having been secured and buildings having nameplates attached to them, and so on. It would be nice to know what exactly is going to happen and what the timing is, if it is possible for the Minister to tell us.

The other thing that might be interesting to find out is whether there is yet any feel for whether there will be a sufficient caseload to warrant other centres being opened. During the passage of the original Bill we talked about the possibility that the Court of Session’s responsibility for patent determinations in Scotland might be echoed by having a similar court based there, if there was sufficient casework, because there is expertise and knowledge in Edinburgh in this area, and it would be sad if those were not able to be expressed. But these are matters that the Minister may not yet have the detail on and I am happy to have that at a later stage.

As I said, I am a ray of sunlight. We support this statutory instrument.

[Lord Henley]

I am not sure that I will necessarily be able to help the noble Lord; I might have to write to him. I am grateful for that ray of sunlight on this issue, even though he took a slightly “It’s all right for some” attitude to the idea that some of those lawyers and others involved with the courts would not pay UK taxes. However, it is always open to him to requalify at this stage in his life and seek to become one of the judges working in that court. I understand that they think that there might be up to six part-time judges there; that is all I can say. I say to my noble friend Lady Neville-Rolfe that I do not know where the court will be and when the doors will open. But again, if there is further information, I will let them know in due course.

There is one further process after the order leaves here, which is that this matter has to go to the Privy Council. I think it has missed the next meeting, so it might not be until the new year. At that point, we will have a better idea as to when, as I said, the doors will open and where it will be. If I have any further knowledge about what the caseload is likely to be, I will write both to my noble friend and to the noble Lord.

I am grateful also to have the support of both my distinguished former colleagues in this role, both of whom dealt with intellectual property when they were in that department. I am obviously not considered bright enough to do that, and they have taken that bit away from me. For all I know, it might be a gender issue—one of those things that mere men cannot do. I simply do not know. However, both my noble friends brought great distinction to that office, I am grateful for what they did, and I thank them—in particular for their warm welcome for this order.

Designs (International Registration of Industrial Designs) Order 2017

Lord Stevenson of Balmacara Excerpts

Wednesday 6th December 2017 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, what I will say follows closely on what the noble Lord, Lord Clement-Jones, has said. He and I—if I dare also bring in the noble Baroness, Lady Neville-Rolfe—are part of a declining band who followed the paths of the intellectual property legislation that this House has looked at over the past six or seven years. His intervention brought back fond memories of the time when we were happily discussing some of the issues that are clearly still in mind and will be in play as Brexit negotiations go on.

I make a slightly different point—also one that the Minister may wish to take back—which is that a lot of the effort that went into the earlier Bills was around the question of registered and unregistered designs. We are still in the situation alluded to by the noble Lord, Lord Clement-Jones: a huge proportion of the designs generated in this country—for which we should be very proud—are unregistered. That is partly to do with the nature of the industries involved: where short-term designs, such as fashion designs, are being created, there is probably no incentive to register them, because they are copied and lose economic value so quickly. That design element would not necessarily qualify as a design. However—I made this point before to the noble Baroness; I am sure that she will recognise it and I do not need a response— the Government missed a trick on this. Government ought to be thinking very hard about what package of measures could be brought together to encourage people with design skills and knowledge, of whom we have so many talented examples, to register their designs, because the protections that they can get, as exemplified by this order, are significant, though they are not recognised as such. The point was well illustrated by the fact that so few responded to the consultation document; I was a bit shocked to hear how small a number it was.

Nevertheless, we are where we are. I am sure I will make myself slightly unpopular with the noble Lord, who will find a way of coming back to me—

[Baroness Neville-Rolfe (Con)]

Will the noble Lord give way on the subject of designs? Like him, I am very keen that design rights should be properly protected. It is such a growing part of the creative industries. The Intellectual Property Office has done some very good work. I know this because my daughter-in-law was looking to register a design and I discovered, first, that it was relatively inexpensive and, secondly, that the IPO had set up a very good IT option. The Minister may well be able to tell us more about what they were doing, but I thought that this was interesting consumer research.

[Lord Stevenson of Balmacara]

That is very good news indeed. If it is moving in that direction that picks up the point I am making. There is an unexplored case for more work here, which will bring benefits to UK plc in time.

As I was saying, I was going to grandstand a little on the instrument to ask a couple of questions that I am very confident the Minister will not be able to respond to directly. I am happy to have a letter on them. The first is specifically on the consultation exercise. The Minister touched on this in his opening speech. The comment is made that the UK does not need to keep its own register of registered design rights because after we accede to the Hague agreement, which is what we are doing today, it automatically confers protection on the UK because the UK signed up to the Designview database, operated by OHIM. However, what is the mechanism under which we will continue to have access to it after Brexit? If it is in any way tied to membership it will raise, as the noble Lord, Lord Clement-Jones, said, considerable difficulties in negotiating a fair price and the conditional arrangements. If there are to be cost barriers that will further diminish the pressure on people who wish to register designs. It is important and clearly a useful tool for protecting design rights, but if it is inaccessible it will obviously not be of any value. WIPO and the role it plays are very valuable. The IPO does not have much of a role in this. It again seems a slightly missed opportunity to beat the drum for registration, but if the connection is directly to WIPO and we are to be affected by Brexit, clearly that is a problem.

Secondly, the Minister may be aware of a Supreme Court decision in the Trunki case, PMS v Magmatic. It raised the interesting question of whether one could register or even protect shapes of articles. In this case, the well-known Trunki is a small ride-on suitcase that children use rather irritatingly, at speed, in airport lounges, which my ankles have felt over the years—not my children, I confess; there were third parties involved. The case raised the interesting issue that our systems do not allow anyone who has a visual representation or design representation to register it. As I understand it, the Hague agreement has some flexibility about what can or cannot be registered. It would be interesting to get a sense from the officials in due course about whether they think it would be possible to use the flexibilities in the Hague agreement to allow those talented members of our design profession who design representation to register those designs. I look forward to hearing from the Minister in due course.

[Lord Henley]

My Lords, I am grateful to the noble Lords, Lord Stevenson and Lord Clement-Jones, for their responses. As they said, it will be important that I write with a little more detail on this. I certainly promise to do so. The noble Lord, Lord Clement-Jones, was alarmed about the visibility of the Intellectual Property Office and of these matters more generally.

Productivity

Lord Stevenson of Balmacara Excerpts

Tuesday 7th November 2017 Lords Chamber

[Lord Henley]

My Lords, we, too, welcome the Industrial Strategy Commission’s report. It is an independent inquiry, a joint initiative by the University of Manchester and the Sheffield Political Economy Research Institute, and as my noble friend will be aware, my right honourable friend the Secretary of State spoke at its launch. As I made clear in my original Answer, we will be publishing the industrial strategy later this year—I hope it will be by the end of this month—and if my noble friend will be patient, I think that when we produce that strategy she will see much there. As she will be aware, we have already made some fairly considerable announcements about investment: I mentioned the £23 billion national productivity investment fund which is there to drive improved productivity across the country, an area we certainly want to address.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I welcome the noble Lord back to the Dispatch Box in what I think is his fifth role since 2010, which must be a record of some kind. I was glad to hear him welcome the final report of the Industrial Strategy Commission, which makes very interesting reading and covers very interesting areas. One of its key recommendations to the Government is that health and social care should be at the centre of the industrial strategy. That may sound counterintuitive, but it makes the point that using the Government’s purchasing power to promote innovation in that sector and to increase productivity would be a good thing. Does the noble Lord agree with that, and will it appear in the industrial strategy?

[Lord Henley]

Perhaps I may correct one of the noble Lord’s statistics: it is only my fourth department since 2010. It is important to get these things correct. I am glad that the noble Lord, like the Government, welcomes the report; we will certainly take note of it. As I said, we are waiting for the industrial strategy to come out later this month, and I am grateful that he makes it clear that there are matters other than government spending which are important here, particularly in dealing with questions of productivity. We want to make sure that all levers that are available to the Government can be made use of. He mentioned purchasing. We will certainly make that clear, and I hope that other departments will do their bit. He mentioned purchasing within the health service, but there are other things that the Government can do as well, in relation to deregulation and trade policy, as well as procurement, which he mentioned.

Small Businesses: Late Payments

Lord Stevenson of Balmacara Excerpts

Monday 11th September 2017 Lords Chamber

[Lord Prior of Brampton]

The noble Lord will be pleased to know that interviews have taken place for the Small Business Commissioner and an appointment will be made in the near term—“soon” is, I think, the right word. By the end of the year, when further secondary legislation comes through Parliament, the complaints handling system which the commissioner will operate will be in place as well.

[Lord Stevenson of Balmacara (Lab)]

My Lords, the Government have said that big businesses will begin mandatory reporting of their payment performance—a very important part of this new system—under new regulations from October 2017, via an online service. Yet we discovered, in response to a Written Question, that by the end of July only 208 businesses out of 15,000 had even been invited to join the system. That is 1% signed up so far. What is the current figure?

[Lord Prior of Brampton]

My Lords, I do not have that figure. The noble Lord is absolutely right that there is now an obligation on big companies to be transparent in their reporting. That came in in April 2017 and is done on an annual basis, so we will not know until April 2018 how many companies are doing it.

Industrial Strategy

Lord Stevenson of Balmacara Excerpts

Wednesday 19th July 2017 Lords Chamber

[Lord Prior of Brampton]

I fear that I may be giving the noble Lord almost the same answer, but there are two critical elements of the industrial strategy. One is technical skills, an area where, if we are honest, we admit that we have been struggling since the 1950s, and the second is to build on the extraordinary comparative advantage that we have in our universities.

[Lord Stevenson of Balmacara (Lab)]

My Lords, the noble Lord will be aware of the independent Industrial Strategy Commission, which reported recently. It said that a key component of a successful and sustainable industrial strategy would be enhancing a state’s purchasing and regulating power. Does the Minister agree? Will he give some examples of where that might happen, including in such areas as diversity and apprenticeship training, which have been so lacking in recent years?

[Lord Prior of Brampton]

There is no doubt that government procurement is critical; for example, in the construction industry. For example, Crossrail has built into a number of its contracts requirements for apprenticeship training and for using new technologies and small businesses. There is no doubt that procurement can be extremely important.

Race in the Workplace: The McGregor-Smith Review

Lord Stevenson of Balmacara Excerpts

Monday 24th April 2017 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I congratulate the noble Baroness, Lady McGregor-Smith, on her report, which, as my noble friend Lady McDonagh said, is both practical and implementable, which make it a very welcome read. It is easy to see how she could arrive at that arrangement. I mean no disrespect to say this, and I hope the noble Baroness will not take it the wrong way, but the fact that it comes from the Conservative Benches and is written in a very level-headed and logical way makes its impact all the more powerful. We on these Benches, and other colleagues, have raised issues that she raises over a number of years but have not got the sort of response that I have heard today around the Chamber to the recommendations that have been made. I hope it bears also on the Minister when he comes to respond that this is a very well-considered report, which has come from a very interesting area in the political spectrum and has received support all round the House. As many people have picked up, it needs a lot more of a response from the Government than we have seen so far. I hope that when the Minister responds, he can fill in some of the gaps in the Government’s response to this excellent report.

We have had some very good responses from those who have spoken in the debate. I particularly liked the illustrations used by my noble friend—I can call her that, as she was once my Minister—Lady Bottomley and by my noble friend Lord Griffiths. I sympathise with his feeling that he was in the right place on all these matters because he was in an area that seemed to suggest that, as a jolly good chap, he could implement changes—but then discovered to his horror how difficult it was to actually make the transition. I have been there too. The noble Lord, Lord Kirkham, with his direct experience of trying to serve a wide and disparate consumer base, also picked up the point that there are some very obvious lessons to be learned by just looking around us at what we do. For example, looking at the Box to my right, it is very surprising to see a group so representative of the ethnicities in this country, and yet to not make that an issue at all. This is just how it is now in many parts of the Civil Service, and I congratulate it on what it has achieved in that.

It is worth reflecting on the key findings, because they are so startling. One in eight of the working-age population is from a BME background, but only 10% of the workforce and 6% of top management are. The employment rate for ethnic minorities is only 62.8%, compared with 75.6% for white workers. The gap is worse for some ethnic groups; for instance, for those of a Pakistani or Bangladeshi background, the rate drops to something like 54.9%. People from a BME background have an underemployment rate of 15.3%, compared with 11.5% for white workers, and many of them would like to work more hours than they currently do. I found this finding particularly interesting: all BME groups are more likely to be overqualified than white ethnic groups, but white employees are more likely to be promoted than those from all other groups. The potential benefit to the UK economy, which many noble Lords picked up on, from full representation of BME individuals is estimated to be an improvement to our GDP of £24 billion a year—1.3%. It does not take much to feel anger about that.

A lot of people have also suggested that that will lead to the agenda of change that one would like to see, but what we get from the Government is, I think, a very poor response indeed. As somebody has said, this is largely a voluntary arrangement: the report deals with the private sector and the Government can affect only the public sector. But this leaves completely untouched the areas in which the Government have both a stake and an opportunity to make real change. The points made by the noble Baroness, Lady Berridge, were very salient in this area: if it is true for health and safety, and for other aspects of public life, why is it not true for employment rights, for which the benefits are so clear and the attitude so obvious?

Looking in more detail at the government response, the response from the Minister, Margot James, is good in the sense that it picks up and reflects back to the report’s author the value that is in the report. We should all accept that it is indeed very valuable. The response says:

“It is clear from your report that you have examined the issues around race in the workplace … The findings are stark … it is clear that more has to be done”—


so the rhetoric is good so far. The recommendations are then dealt with, but it is quite clear that the Government have taken the strategic view that the only impact this can have is on employment in the Civil Service. They completely ignore the points made by my noble friend Lady Royall and others about the impact that the Government’s procurement system could have in changing the whole way in which people regard race, gender and other aspects relating to ethnic minority issues in relation to the world that we have to inhabit—and I suspect it will get worse after Brexit.

Under the heading “Supporting business”, the Government’s response is basically, “Not us, guv”:

“Businesses are best placed to know what support they need to improve diversity and inclusion and so we will work with them to ensure they have the resources they need to fully embed change within their organisations”.


I will be interested to hear what the Minister has to say about that. As far as I can see, that rather bombastic statement appears to apply only to,

“developing a guide on discussing race in the workplace as well as having a single portal where useful case studies and unconscious bias training packages can be sourced”.

That is pathetic, given the scale of the issue we are talking about. In any case, the Government do far more in making sure that training happens and ensuring that apprenticeships are going to be of a high standard—they will be specifying in future legislation and regulations all sorts of things to do with the quality and content of apprenticeships—so why do they not say in this report, “We will use the opportunities coming up with the Technical and Further Education Bill to ensure that these issues are taught properly and that people understand their responsibilities and the implications of what they do in the workplace”?

The next heading is “Improve transparency”. As people have said, daylight is often the best disinfectant, and we should never neglect that—it is often the first response and a good one—but it will never be sufficient to get to where I think the author of this report wishes to go. On this one, again, the Government seem to be incredibly limp, saying,

“we believe that in the first instance, the best method is a business-led, voluntary approach and not legislation as a way of bringing about lasting change”.

Ministers are always taught when they first step into their department that legislation is probably the last resort. I am sure the noble Lord, Lord Prior, will have had that lesson when he first stepped into the Department of Health, his first appointment when he appeared in front of this House. He will have been told, “You can do far more by changing culture and attitudes”. At the end of the day, though, legislation is necessary. I am sure that the noble Baroness, Lady Berridge, would be able to exemplify what she said about the way in which the courts deal with employment and other things have really changed how the culture operates because there is a standard to which employers will be judged.

I want to pick up issues relating to supply chains, which have also been picked up by other noble Lords. It is the case that organisations, particularly in the public sector but not only there, have been able to change attitudes and approaches all through their supply chains by specifying in contractual terms what they will and will not tolerate. Why is it so obvious in the Government’s response that they do not see this as an opportunity? We have found in other areas of government policy over the past few years examples of where the Government could use their power to effect change. I am thinking particularly of a debate that I had with the Minister only recently about how to improve payment practices for small businesses, where the exemplary, voluntary approach does not work, with something like £64 billion worth of outstanding cash sitting around in big companies’ pockets that should be paid over to small companies but no power that can get that to happen. This has a devastating effect on the economy, on small companies and on the whole process. The Government could do something to sort that out but have chosen not to do so, simply providing someone who will be a postbox for those who wish to complain about it.

The previous Labour Government required that all major projects should make sure that they had a supply of apprenticeships in all the contracts that were signed. Crossrail, which this Government have used a lot as an exemplar of where they want to get to, employs apprenticeships at a high level, and has been very successful in doing so, because the contract specified that those who had benefited from the monies that were being paid for Crossrail should employ apprentices. It can work, and I do not understand why the Government do not do that.

I could go on, but I will not. I will end with some questions for the Minister. The review concluded, in a wonderful phrase:

“There is discrimination and bias at every stage of an individual’s career”.

The figures that I cited reinforced that. The noble Baroness, Lady McGregor-Smith, asked businesses and the Government to act on her recommendations, as the consequences of not doing so would be damaging to the economy and the aspirations of so many, but the Government have decided not to do so. Can they explain why they think a voluntary approach is the right way to do this? As I have tried to exemplify, there are so many ways in which action could be taken, but a simple one, picked up by others earlier in the debate, is that a duty to publish figures in relation to gender pay has been imposed by this Government on all companies of a significant size. Why not extend that to ensure that we get the information necessary for companies to publish data on BME staff?

During the review, as I think was mentioned in the opening address, only 74 FTSE 100 companies replied to the call for data, and only half of those were able to share any meaningful information. Does not more need to be done here? Can the Minister give us an example of how he will put pressure on companies to ensure that at least the information required by one of their own who asks for it should be available? Again, this should be published.

The review highlights the importance of work experience opportunities that companies provide and reiterates a view that we on this side of the House have expressed that unpaid internships can act as a barrier to those without financial support to undertake them. What is the Government’s response to that observation in the review, and what action will they be taking to address the barriers of unpaid internships?

One of the review’s key recommendations is for the Government to assess the extent to which its recommendations have been implemented and take necessary action when required. Will the Government commit to doing that within the suggested timetable of a year and, if so, can the Minister explain how that will happen?

Finally, the Government’s response indicated that they will be setting out to all companies and institutional investors the value of employing a diverse workforce. How do they plan to do that and when will we see it?

The noble Baroness, Lady Bottomley, said, picking up on a point made originally by the noble Baroness, Lady McGregor-Smith, that we have had enough reports in this area. We know what the problem is. It is time now for action. I do hope that the Government will get on with it.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Prior of Brampton) (Con)]

My Lords, it is one of the privileges of being in this House that one can sit through a debate such as this. We are talking about one of the big issues of our time—not just in this country. It is incredible to me that, 50 years after Martin Luther King gave his great speech, “I have a dream”, we still have a Black Lives Matter campaign running in America because young black men are being shot by policemen. This is not a British problem; this is a societal problem in pretty much every country in the world—not just in white-majority countries but in black-majority countries, Indian countries, African countries and the rest. Race is a huge, profound and difficult issue. There are no easy answers to it. If there were, we would have found a solution many years ago.

Let me start with a short extract from the excellent review by my noble friend Lady McGregor-Smith:

“Every person, regardless of their ethnicity or background, should be able to fulfil their potential at work. That is the business case as well as the moral case. Diverse organisations that attract and develop individuals from the widest pool of talent consistently perform better”.


My noble friend Lord Kirkham says that it is a no-brainer. I think that everyone who has contributed to this debate would say that: it is a no-brainer. That is the extraordinary thing about this subject: it is a no-brainer. The moral case is obvious. The economic case is a no-brainer. Yet, as my noble friend Lady Bottomley and the noble Lord, Lord Griffiths, asked: why has it taken so long? If it is a no-brainer, why is progress so slow? Why do young black people have lower aspirations? That is the conundrum that we face today.

The Government welcome my noble friend’s report and encourage businesses to take forward her recommendations. We will work with employers to support them in improving their diversity and inclusion. From a personal point of view, I believe that daylight is the best disinfectant. That is an easy catchphrase, I know, but it is absolutely true.

I want to talk a little bit if I can about my own experience in the NHS, where I was chairman of the workforce race equality standard advisory group before I went to the Department of Health. We have heard a lot about institutional racism over the years, especially in relation to the police following the Macpherson inquiry into the tragic murder of Stephen Lawrence. You would think sometimes, when reading about that, that it was only in the police and that it was only the police that were institutionally racist, but let me paint you a story about the NHS. It brings forward the contrast between words and actions, because the NHS constitution is clear that:

“All NHS staff have the right to be treated fairly, equally and to work in an environment that is free from discrimination”.


Those are almost the same words as in the constitution of the United States, which talked of liberty, equality and the pursuit of human happiness at a time of slavery and segregation. As we say in Norfolk, “Fine words butter no parsnips”. Again, this echoes the title of the McGregor-Smith review: The Time for Talking is Over. Now is the Time to Act. How many times and how many people have said that in the past—and here we are?

Some 20% of the NHS workforce are from a BME background, but only 5% of senior managers are from a BME background; 40% of hospital doctors are from a BME background, and only 3% of medical directors are from a BME background. Out of all the hundreds of NHS organisations, only three CEOs and four nursing directors are from BME backgrounds. People from BME backgrounds are twice as likely to enter a disciplinary process than white people. Even where there are very high levels of BME staff or very large BME communities served by a hospital, representation of BME people in senior leadership positions is far too low. I am sorry that the noble Lord, Lord Patel of Bradford, is not here, because for a short time he was chairman of the Bradford Teaching Hospitals NHS Foundation Trust, and he told me that there was no one from a Pakistani background in a senior position in that trust, despite the fact that the community that the hospital served was largely made up of people from that ethnic background.

These facts have been revealed only recently, in a paper called The “Snowy White Peaks” of the NHS, by Roger Kline. From that, we have developed nine standards—the workforce race equality standards, or WRES. My noble friend Lady McGregor-Smith talked about transparency; every trust has to produce nine standards, in public, going from board representation, training opportunities, promotion, levels of discrimination and the like. They will be published every year, and they have been incorporated not just into the NHS standard contract, which my noble friend Lady Bottomley mentioned, but into the regulatory system in the CQC’s well-led domain.

Research has been published by the King’s Fund’s Michael West, Mandip Kaur and Jeremy Dawson, in a paper called Making the Difference, which makes it absolutely clear that there is a very close correlation between hospital performance, whether it is measured in patient or clinical outcomes, or however you measure it, and diversity. That is supported by work done by McKinsey which shows very clearly that boards with a diverse membership get better corporate results.

We know that black and other minority ethnic people suffer in other ways, not just in the workforce. They die younger. Research done by Professor David Williams, now of Harvard University, estimates that 200 adult black people die prematurely each day in the USA because they are black not white. It is not just about poor housing or less healthcare, because it is true also of college-educated black people in the USA, but because they have to try that much harder and have to be overqualified and put up with all those subconscious slights of day-to-day living: a look of fear in the face of a single white woman; the look of surprise at a moment of success; not getting a good table or good service in a restaurant; and lack of courtesy from other people—all those small slights.

I can recommend to anyone who is interested Professor Williams’s TED talk called “How Racism Makes Us Sick”. In it, he reported on a very broad experiment and noted that black people were associated with words like “violent”, “poor”, “religious” and “lazy”. For whites it was words like “successful”, “wealthy”, “progressive”, “conventional” and “educated”. That is why there is subconscious bias—because there is this stereotype. The noble Lord, Lord Kirkham, said, “I am not a racist, but”. I suspect that applies to everybody. We have a deep, subconscious stereotype of what different people are like and I will come now to why I think that is.

This is my personal view—but it is not just mine. Despite what we have heard from other noble Lords, we have made more progress in removing discrimination against disabled people, women and people with a different sexual orientation. The crucial question is: why has race been so difficult? In part it may be because the roots of the issue are not just cultural but evolutionary. Xenophobia has deep evolutionary roots; suspicion or aggression to outsiders has been an effective strategy for human beings and, more importantly, our forebears for millions of years. Today, interview, selection and promotion processes in the workplace are the modern setting where intrinsic, subconscious bias now most evidently—but, as I have argued, by no means exclusively—plays out. We pick people “like us”; people who will “fit in”; people who will be part of our team: in other words, white, male and who want to play rugby at the weekends.

I have just read a fascinating book called East West Street by Philippe Sands, who writes about the origins of two strands of international criminal law originating from the Nuremberg trials after the war: genocide and crimes against humanity. In the epilogue he concludes powerfully that, for all the disadvantages and unintended consequences of the former law—which focuses on groups rather than individuals—it is necessary because:

“I am bound to accept that the sense of group identity is a fact”.


As long ago as 1883, the sociologist Louis Gumplowicz, in his book on the struggle between the races, noted that,

“the individual when he comes into the world is a member of a group”.

This view persists. A century later, the biologist Edward O Wilson wrote that:

“Our bloody nature … is ingrained because group-versus-group was a principal driving force that made us what we are”.


It seems to him that a basic element of human nature is that,

“people feel compelled to belong to groups and, having joined, consider them superior to competing groups”.

Yvonne Coghill is the co-director of the workforce race equality standard programme in the NHS. She is a black woman from the Caribbean who has been a nurse in the NHS for 30 years. Knowing that I was taking part in this debate, she wrote to me last week, saying: “Beliefs about what good looks like, what constitutes beauty and brains, are deeply ingrained in our society … the problem of race is a systemic and structural one … we are fearful and anxious about differences”.

Of course things have got much better. The six race relations and equality Acts between 1965 and 2010 have had an impact. Overt racism is rarely seen. The civil rights legislation in the USA came in from the 1960s onwards, together with affirmative action programmes. Interestingly, Professor Williams, to whom I referred, got his first break with a minority scholarship to the University of Michigan. I believe very much in giving people an extra hand. You have to look at people’s potential rather than their actual achievements. However, subconscious discrimination is still a major factor in the USA.

What is the conclusion from this? I think it is that there are no quick, easy answers. There is no one piece of legislation that we can pass which will solve these problems. The case for greater urgency is made in this review. As the EY case study in the review states:

“We believe that culture change takes time—and we are therefore patient and at the same time impatient”,


to change the status quo.

We are impatient to tackle this issue because it is a moral and economic imperative. However, we will have to be both patient and impatient—patient because we are trying to change deep-rooted behaviour and impatient because racial discrimination is both a moral outrage and a huge economic opportunity. This very important review from my noble friend Lady McGregor-Smith has the full support of the Government. We will not resort to legislation straightaway but will see how things go. If legislation is needed at some time in the future, we will, of course, consider it at that time.

I conclude by again thanking my noble friend for this report. I hope that in two, three, four or five years’ time, we can look back at this as a moment when things started to accelerate. However, I fear that we need some patience.

[Lord Stevenson of Balmacara]

I congratulate the noble Lord on his interesting speech, which I will read in Hansard and reflect on. He was asked a number of serious questions about policy from not just me and my noble friends but by noble Lords on the other side of the House as well. I would be grateful if he could confirm that he will write to us about these issues.

[Lord Prior of Brampton]

I should have said that a number of questions were raised that I could not address—for example, on different issues connected with disability and other issues, including one raised by the noble Baroness, Lady McDonagh. I will read Hansard tomorrow and write to noble Lords on those issues.

Higher Education and Research Bill

Lord Stevenson of Balmacara Excerpts

Report: 4th sitting (Hansard): House of Lords
Wednesday 15th March 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

162: Schedule 9, page 105, line 2, leave out from “least” to end of line 4 and insert “—
(a) one person with relevant experience of Scotland;(b) one person with relevant experience of Wales;(c) one person with relevant experience of Northern Ireland;with the respective agreement of the Scottish Government, Welsh Government and Northern Ireland Executive.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, Amendment 162 is taken from Amendment 476, moved in Committee by the noble Lord, Lord Patel. While there is no dissatisfaction with the way the Government responded at that stage, it is more that, particularly in relation to the changes wrought by the decision reached a few days ago for the Scottish Government to try to move forward on a second independence referendum, a certain piquancy has been added to the debate and discussion. It might be time to reflect a little further on some of the issues that were raised on that occasion.

When the noble Lord, Lord Patel, moved his amendment in Committee, he was clear that he did not expect this to be a surrogate for a change in the way in which UKRI is set up. It is not a representative body and I do not think that either he or I in this amendment are trying to make that change. However, as the noble Lord pointed out, there are significant differences in the customs, practice, legal systems and operational practices of the Scottish university sector and research community to suggest that at least there, and I believe also in Wales and Northern Ireland, it would be sensible for UKRI to have regard to—more than just once in a few returns around the membership cycle— having someone with experience and practical knowledge of how things operate in those parts of the United Kingdom. In Committee we also talked about other parts of England requiring certain attention, but I do not think the difference between what happens in the regions of England in any sense mirrors the differences present in the legal and other structures that operate in Scotland and will over time also accrue in Wales and Northern Ireland.

--- Later in debate ---

[Lord Prior of Brampton]

My Lords, I thank all noble Lords who have spoken in favour of the amendments. I think we all share the sentiments that lie behind them.

Perhaps I may first deal with the interesting, rather technical point raised by the noble and learned Lord, Lord Wallace, about the scope of the matters in the Science and Technology Act 1965 that are reserved under the Scotland Act 1998. He raised it with me earlier in the week and I agreed to write to him on it if I can, as it is of a fairly technical, legal nature, and to put the letter in the Library for others to see if they are interested.

I acknowledge that I and the Government appreciate the sentiment of the amendments and the underlying concerns from those working in the devolved nations. It is essential that we continue to work together to secure for the long term the UK’s global reputation for excellence in research and innovation. This joint working happens on a number of levels, from regular informal discussions to formal partnership arrangements. Where appropriate, it can include the development of an MoU between the bodies, the devolved Administrations and their agencies and institutions.

There are many such arrangements at present, from ESRC’s MoU with the Scottish Government on the What Works programme to the MoU between HEFCE and the devolved funding bodies, which ensures the operation of the UK Research Partnership Investment Fund across the whole UK. There is even an MoU between BBSRC and the Scottish Government for the horticulture and potato initiative. These arrangements will continue and I can commit to new MoUs being put in place where appropriate. I know from my own experience that MoUs can be window dressing, but they can be of great substance—it varies, entirely depending on the intent behind them of both parties. I sometimes think that we are beguiled by an MoU, when it is the informal relationships that lie behind them which are often much more important.

As we have debated at length and agreed on a number of occasions, it is vital that UKRI, a body which will operate UK-wide, is empowered to work for the whole of the UK. Noble Lords do not need to take my word for this. Duties for it are built into the Bill—hardwired, if you like—in multiple clauses.

Let me make it clear that these reforms will not affect current funding access for institutions in Wales, Scotland or Northern Ireland. As part of UKRI, the research councils and Innovate UK will continue to operate across the UK, funding projects through open competition on the basis of excellence wherever it is found.

On the UKRI board, the Bill as amended in the other place recognises that the Secretary of State has a duty to consider appointing at least one person with relevant experience of the devolved nations. This change means that the Bill already goes further than the current legislation, which makes no such requirement. Of course, this should not be taken to mean just one person. The search for UKRI board members now under way actively seeks suitable applicants with experience from across all nations of the UK. We want and are actively working to recruit a board that will have this broad experience. However, requiring experience of all four countries at all times could have potentially unintended consequences. If a member of UKRI’s board were to step down from their position, we would not want only to be able to recruit a like-for-like successor with the same background as their predecessor. Equally, we would not want to limit experience of each nation to just one individual on the board if the quality of applications is high. Such flexibility is essential to ensuring that the diversity and quality needed to deliver the best outcomes for research and innovation across the UK is present on the UKRI board at all times.

Amendments 193 and 194 ask that UKRI and the Secretary of State have regard to the promotion of research and innovation in Scotland, Wales and Northern Ireland. I agree wholeheartedly with the sentiment of these amendments. In fact, we already provided for UKRI to undertake this in its functions, described in Clause 89(1)(h), which says that UKRI may,

“promote awareness and understanding of its activities”.

However, the proposed drafting of these amendments limits the scope of this additional duty to Scotland, Wales and Northern Ireland. I understand noble Lords’ admirable desire to ensure that the interests of Scotland, Wales and Northern Ireland are suitably protected, but this should not be done at the expense of English institutions. Ministers’ responsibilities are to the whole UK, and the Secretary of State, and UKRI, should be held to account by Parliament on that basis.

I also share noble Lords’ desire that UKRI’s strategy should work for the whole of the UK. The strategy will be the product of consultation and engagement with research and innovation institutions and bodies from across the UK. Let me also assure noble Lords that this consultation will of course incorporate the views of the devolved Governments. However, the development of a full research and innovation strategy for the UK may be an infrequent affair. I have spoken to Sir John Kingman, chairman-designate of UKRI, and he agrees that regular consultation with the devolved Administrations on UKRI’s priorities would be a more appropriate way of ensuring their views are captured and taken account of regularly. This would be consistent with the MoU between the UK Government and the devolved Administrations, in which the principle of good communication with each other is key. The primary aim is not to constrain the discretion of any Administration but to allow them to make representations to each other in sufficient time for those to be fully considered. I commit today to putting this intention regularly to consult on strategy with devolved Administration colleagues into guidance from the department to UKRI.

I have been clear today that there are many areas where we expect UKRI to work with the devolved Administrations, and many areas where we have a common goal. I have committed to capturing this in guidance to UKRI. Therefore, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

My Lords, I thank all those who spoke in this debate. We learned a great deal from the contribution of the noble and learned Lord, Lord Wallace, whose experience is of course unparalleled in seeing things from the perspective of the devolved Administrations. The noble Earl, Lord Lindsay, has real experience of trying to operate in an institution that is largely based in Scotland but that draws from the strength of UK science and UK contributions to its work. He therefore understands the mechanics of what we are about.

It seems that Goldilocks has been ignored in this process. I agree that “not just one” does not exclude “more than one”, but I think that Goldilocks would have wanted a little more in her porridge than just the promise that over a period of time there would be not one bowl but three bowls and that she could sup from all of them—I think my metaphor is about to run out, but noble Lords get my point. I hear what the Minister said, and he is an honest and good man. I am sure that he is trying to set up an arrangement under which we will achieve what is set out in Amendment 162. I will not press that to a vote on this occasion. We will take his assurances, but I hope he recognises that we are in difficult circumstances here.

Hardwiring may be too hard an approach to this. Underwiring, with support from below, may not be sufficient. I just hope that in some way, in the gap between memoranda of understanding and letters of guidance, we can get to a more settled arrangement over a period of time. I agree that it is difficult and I am not trying to constrain the Minister in any way. However, it is a bit defensive to say that one reason you do not wish to go down this route is so as not to disincentivise or in other ways constrain English institutions. That is exactly the sort of poison that will be used by those north of the border and in Wales and Northern Ireland to complain they are not getting fair treatment. The sensibility is probably right, but the wording must be looked at carefully. I hope that that message will get across.

We seem to be permanently in difficult times in terms of constitutional issues. This is not the time to let any chink through. If we all agree around the House, as I think we do, that this matter cannot be ignored and must be brought forward and foregrounded, then we can make progress together. Our commitment will not be doubted. I beg leave to withdraw the amendment.

Amendment 162 withdrawn.

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[Lord Bilimoria (CB)]

My Lords, in relation to Amendment 166, I want to emphasise again the importance of having individuals from a business background because, all too often with these initiatives, the Government have the best of intentions but there are people involved who do not have experience in business and have not run businesses, and it is when you run businesses that you realise that innovation and creativity are at the heart of it. I would go further and say that they must come from science-related business backgrounds. Any good business has to be innovative. In my industry—food and drink—you have to be innovative. But the key issue here is having people with business backgrounds at the top table.

[Lord Stevenson of Balmacara]

My Lords, I confirm that we are signed up to Amendment 166 and support the comments made by the noble Baroness, Lady Brown. It is important to get the balance right. There is probably another Goldilocks pun there but I am sure the Minister will pick it up and we will get a response to that.

We have also signed up to government Amendments 173 and 183, which are at the heart of the debate we had earlier. Again, this plays to the argument made by the Minister that there are ways of improving the Bill. We have been able to explore them in Committee and now on Report, and it is good to see that there are movements here that have support right round the House, which we are pleased to be part of.

We also feel that more constraints may emerge from the business consideration than have perhaps been allowed to emerge so far. As my noble friend Lord Bhattacharyya pointed out, given the genesis of all this through the Technology Strategy Board, and now through Innovate UK, it is important that institutions learn from their history and gain from their experience over time. The formation of UKRI and the involvement of Innovate UK in that was not recommended by Sir Paul Nurse, who just felt that the issue should be looked at. But the Government decided to move forward and it is therefore their responsibility to make sure that we get the most out of it.

My noble friend Lord Bhattacharyya was also at pains to point out that we are talking about the creation not of a bank here but of a ginger group. It is an opportunity to create incentives and a ginger group that moves forward with the support of industry will be much better than one which tries to do it on its own. I look forward to hearing what the Minister has to say about that.

[Lord Prior of Brampton]

My Lords, I find myself in complete agreement with the noble Baronesses, Lady Brown and Lady Young, my noble friend Lord Selborne, and the noble Lords, Lord Bhattacharyya, Lord Bilimoria and Lord Stevenson. All our sentiments are the same. To pick up on a phrase from the noble Lord, Lord Bhattacharyya, about the purpose of Innovate UK, if we were to sum it up in three words, which he did, they would be “productivity from research”.

When we discussed the first amendment today, the noble Lord, Lord Krebs, talked about the serendipitous fruits that can sometimes spring from blue-sky basic research. The point of Innovate UK is to ensure that more of those fruits take root in the UK, rather than ending up in Silicon Valley or Israel, or in other countries which are frankly more innovative than we are. The whole purpose of UKRI in bringing together Innovate UK with the research councils is to create more fertile soil for some of the great ideas, technologies and research that come out of our universities.

In creating UKRI we are making something new, greater than the sum of its constituent parts. We are not merely bolting together nine separate bodies. To make this work the governance structures need to change, so we are introducing an overarching board in UKRI and a high-profile chair and chief executive. It is appropriate that the governance of the councils changes too to reflect this. We have been listening to debate on this for some time now, particularly the contributions on the role of the council chairs from the noble Baroness, Lady Brown, the noble Lord, Lord Mair—I know that he cannot be here today for other reasons—the noble Lord, Lord Broers, and my noble friend Lord Selborne. However, introducing a non-executive chair for the councils into these new lines of accountability would risk confusing accountabilities within UKRI and undermine its key strategic role. This would apply just as much to Innovate UK as to the other councils.

Although I can of course see the attraction of having a well-known leading industrialist as a non-executive chair of Innovate UK, it would not sit well within the governance structure of UKRI. I think it would fatally undermine the whole concept of UKRI. However, we acknowledge that chairs can play valuable roles outside direct lines of accountability, for example in giving support to the chief executive and acting as a route for high-level communication. We have already discussed the sensible suggestion by the noble Lord, Lord Broers, that we give one member of each council the role of a senior independent member. We have given assurances that that will be done and we hope that it is adequate to address his concerns. The noble Lord, Lord Mendelsohn, gave a good description of the important role that a senior independent member can play in these circumstances, without undermining the integrity of the governance structure of UKRI.

Amendment 166 also seeks to determine the background of a majority of Innovate UK’s council members. As was discussed in respect of UKRI board members in an earlier group, prescribing the background of members of councils in legislation would encroach on the freedom of UKRI and its councils to manage their own affairs and could be unhelpful in achieving the best possible mix of individuals at any one time. However, we agree with the sentiments expressed. In the case of Innovate UK, government would have a strong expectation, set through guidance, that a substantial proportion of members should have a science-related business background. Indeed, Innovate UK’s current board membership speaks for itself, with most of the council members having science and technology-related business backgrounds. In addition, the board contains much complementary experience of universities, finance, economics, consulting and government.

--- Later in debate ---

[Lord Sharkey]

My Lords, I will speak to Amendments 177A and 178A. Amendment 177A in my name and that of my noble friend Lord Willis of Knaresborough returns to the subject of the ability of research councils to enter into funding partnerships. We discussed this extensively in Committee. We had two key questions. The first was, under UKRI, would there be any additional requirements above those already existing for research councils in forming these partnerships? The second question was, are there circumstances in which such partnerships would require explicit prior approval from UKRI?

The Minister addressed the partnership issue in his letter to us all of 8 February. He acknowledged that the councils currently engage in many partnerships, nationally and internationally, to significant effect. He quoted from a letter that Sir John Kingman had written to me in which he had said:

“The individual councils of UKRI will of course have delegated autonomy and authority to agree these arrangements within their areas of expertise”.


This was helpful but did not quite seem to answer our two questions explicitly.

I explored this further in a subsequent meeting with the Minister and his officials. The essence of our discussion was over the meaning in practice of “delegated autonomy and authority”. In particular, I was anxious to have an explicit answer to the two questions. I thought that it would be helpful for everyone involved, especially the councils, to have maximum clarity. What differences, if any, would the councils see under the new regime when it came to forming partnerships? Amendment 177A allows the Government to answer these questions and to put the matter beyond doubt.

Amendment 178A is in my name and that of my noble friend Lord Willis of Knaresborough, who regrets that he cannot be present today, having urgent family business to attend to. As with Amendment 177A, this amendment looks for clarity and confirmation from the Minister. The context is set out in the letter of 8 February that the noble Lord, Lord Prior, sent to us all. On the penultimate page, the Minister addresses the concerns of the noble and learned Lord, Lord Mackay of Clashfern, over the employment by UKRI of the “relevant specialist employees” to which Clause 9 refers. Government Amendment 178 deals with that matter.

However, in his letter to us, the Minister also referred to the research councils’ role in appointing some relevant specialist staff in line with the principles of autonomy. As he reminded us:

“A package of flexibilities for research council institutes was approved by Her Majesty’s Treasury at the 2015 Budget”.


There were five flexibilities. Two of them are of concern to my noble friend Lord Willis, who is a member of the NERC, and to the CEO of the NERC. These are the exemptions concerning pay and the rollover of commercial income.

The CEO of the NERC has pointed out that neither of these exemptions is in practice available to research councils. They do not form part of the councils’ agreed delegations and there is no mechanism within BEIS for their approval, so they do not happen. For example, to address the 20% pay gap that now exists between NERC institutes and the HEIs requires a multiyear strategy. NERC as an employer must have confidence that this can be adopted without being placed in annual jeopardy by being subject to annual BEIS approval. There is no real sense in which the councils have the freedom to manage payroll within existing budgets as agreed at the 2015 Budget. Neither does the rollover flexibility work. In practice, an offer is made to HMT to consider a rollover of commercial income in January. NERC did this but had received no reply by the second week in March. If no answer is received, the money will be lost. Accordingly, NERC has now committed the relevant expenditure in this year. That means that in reality the rollover flexibility does not work either.

Our amendment addresses this problem. It seeks to impose an obligation to have regard to the agreed package of flexibilities and it seeks to give the Minister an opportunity to explain if the freedoms granted to the research councils in the 2015 Budget will in fact be available after the introduction of UKRI and the reorganisation of the councils.

I acknowledge that we are raising these rather complex matters at a late stage. I apologise for that. I should entirely understand it if the Minister preferred to write to us in response.

[Lord Stevenson of Balmacara]

My Lords, it has been a good debate on a wide range of issues broadly around the work of the research councils. It includes the Government’s important and welcome commitment to uphold the Haldane principle—or Willetts principle—and indeed to enshrine it in the Bill and throughout the instructions that will be given to the various bodies that are to subscribe to it.

We are delighted to be able to sign up to a number of government amendments in this group. We are pleased to see the concession made to the point argued strongly in Committee by the noble and learned Lord, Lord Mackay, about including under specialist employees all technical staff where they are involved in research. That contrasts with the attitude taken in Committee and earlier stages of the Bill, when we attempted to broaden the representational elements relating to the Office for Students—or office for higher education, as it should be called. In particular, we raised the lack of engagement with students, which seems perverse given the Government’s willingness at this stage to include others involved in their discussions.

I shall speak briefly to Amendment 177—the one amendment to which no one has spoken—and seek the Government’s response. We all accept that the strength of our higher education and research institutions will be central to the health of our economy and vitality of our society. As we look towards a post-Brexit world, the role of research in driving innovation, investment and well-being will surely assume greater significance. The capacity of research institutions to act with autonomy and independence will be key to their success.

The Government’s amendments, as I have already said, rightly respond to concerns raised about the need to embed the principle of institutional autonomy more firmly within the Bill. Why, therefore, have the Government not accepted Amendment 177 or brought forward their own version of it?

The Government did respond to arguments about autonomy in relation to the OfS. We welcomed their amendments and signed up to them—they are now in the Bill—such as that on,

“the institutional autonomy of English higher education providers”.

Yet as it stands, UKRI has no such duty, despite the extensive influence and engagement—indirect and direct—that it will have with higher education providers under the new system. We accept that UKRI is not a regulator, but its role is instrumental. It is bound to be engaged in discussions with institutions and bodies that are in a different sector from the institutional autonomy provided by the Secretary of State and the OfS.

That is an asymmetry that I regret. Could the noble Lord, when he comes to respond, at least give us some solace by accepting that, although it may be too late to amend the Bill at this stage, the institutional autonomy issue percolates through to research, is important to the institutions that will be working with the research councils and UKRI post-implementation of the Bill, and is something which the Government should address at some point, whether through memorandums of understanding or by guidance?

[Lord Prior of Brampton]

My Lords, first, I echo the words of the noble Lord, Lord Judd, about excellence. I subscribe to the views he expressed on excellence absolutely, 110%. I am pleased as well that my noble and learned friend Lord Mackay is happy with our Amendment 178. I also thank the noble Lord, Lord Krebs, for his comments about the incorporation of the Haldane principle into the Bill. I think he almost called it the Willetts, rather than the Haldane, principle, but in any event, we will amend the Explanatory Notes to the Bill to make clear reference to my noble friend Lord Willetts’s Written Statement, so there is complete clarity about what we mean by the Haldane principle.

I turn to the amendment in the name of the noble Lord, Lord Mendelsohn, introduced today by the noble Lord, Lord Stevenson, regarding institutional autonomy. I agree that this is also a very important principle and I think we are all glad to see it so clearly articulated in Part 1 of the Bill. I assure the noble Lord that UKRI has the necessary protections already built in through existing provisions in the Bill, much enhanced by the Government’s Haldane principle amendments.

Clauses 97 and 98 already protect institutional autonomy, as they mirror the language used in the definition of institutional autonomy that noble Lords have agreed should be added to this Bill, specifically with respect to courses of study, the appointment of staff and the admission of students. In fact, they already go beyond this and extend this protection to cover universities’ research activities, as supported by Research England. Funding from research councils and Innovate UK is competition-led, and I assure the noble Lord that they do not, nor can they, tell institutions and businesses what they may or may not research or develop, or how they may recruit staff.

This amendment would require UKRI to have regard to the need to protect the institutional autonomy of English higher education providers but, unlike the Office for Students, UKRI’s remit is not limited to these institutions. UKRI will have a strategic vision for research and innovation across the whole UK. It will fund and engage with research institutes and facilities outside the university sector as well as with businesses, both domestically and internationally.

This is why the Government have made the provisions I have already described. Combined with our commitment to the dual support system, the Bill already protects the autonomy of institutions in a way that is tailored to UKRI’s mission. This additional amendment is unnecessary and potentially confusing in relation to the scope and responsibilities of UKRI, which are very different from those of the OfS. Again, in sentiment, I think we are fully agreed on this, but I hope in view of what I have said the noble Lord will feel able not to press the amendment.

The noble Lord, Lord Sharkey, made a powerful case regarding the research councils’ ability to strike up partnerships with other funding bodies directly. I have to confess I got a little lost at some point as he was making his speech, and I will take up his offer to write to him when I can read it tomorrow in Hansard, but I will try to be as clear as possible in my response this evening. As part of UKRI, the research councils will be able to form partnerships with other bodies, such as charities, in the same way as they do now.

The noble Lord has rightly identified the need to still abide by prevailing public sector expenditure rules—for instance, those covered in HM Treasury’s Managing Public Money. Although decisions on more routine partnerships such as joint funding research programmes in a particular discipline will still be taken by the councils themselves within delegated limits set by the department, other more complex arrangements—which might involve setting up an SPV or joint venture, for example—would, as now, require explicit prior approval from government. I am grateful to the noble Lord, Lord Sharkey, for raising this important point, and I hope sincerely that my strong assurances are enough to persuade him not to press his amendment.

Amendment 178A would enshrine in legislation a package of spending flexibilities afforded to some research council institutes by Her Majesty’s Treasury in 2015. These flexibilities recognise the important work these institutes undertake and are designed to provide freedom over how much institutes can pay staff, how much they may pay for marketing and how they may carry out procurement, alongside assurances around approval processes for budget exchange activity and exceptional depreciation. I assure noble Lords that these flexibilities are not affected by the creation of UKRI, and there are no plans to alter them.

However, it is absolutely essential that we do not ossify such flexibilities in primary legislation. Not only is it the prerogative of Her Majesty’s Treasury to determine cross-government rules on public expenditure, but it is important that we are able to evolve these flexibilities over time to respond to changing circumstances. I hope noble Lords will acknowledge the irony of solidifying a “package of flexibilities” in primary legislation, rendering the package unalterable, and hence inflexible. These amendments enshrine the Haldane principle in law and further protect the autonomy of UKRI’s councils.

--- Later in debate ---

[Lord Winston (Lab)]

I have a brief question for either the noble and learned Lord, Lord Mackay, or the noble Lord, Lord Smith. One thing that slightly concerns me is that certain institutions, such as the conservatoires, are generally not funded in their research by UKRI at all. Very often these students, who do PhDs at the Royal College of Music, for example, are either self-funded or funded through other charitable grants. Could the noble Lord, in summing up, address why we would need that kind of governance for the research degree? I should just like a bit of clarity on that.

[Lord Stevenson of Balmacara]

My Lords, I am also signed up to this amendment. I come from a slightly different position, but I arrive at the same point. Throughout this section of the Bill, the Minister has been at pains to stress how it has been improved by the preceding contributions and debate of noble Lords who have experience of operational activity in the field we are covering. He is, I think, aware of my feeling—I explained it to him earlier this evening—that, had we had the same measure of agreement earlier in the passage of the Bill, we would have made a lot more progress and the Bill would be a lot better. We had to force our way into a position of improvement in the earlier parts of the Bill, but we have been able to do it by dialogue and discussion in this part, which is to be welcomed.

I say all that because this issue of research degree-awarding powers is really important for the higher education institutions in this country. In this section, we are dealing primarily with the UK-wide impact on research funding, but the reality is that this issue relates to the power to award research degrees. English higher education providers, as we need to call them, have attached great strength to this—so great that it was the motivation behind the insistence that we try to change the way the Bill is configured by ensuring that an amendment, which was resisted very strongly by the Government, was added to the very first clause to set out what we meant by a university. Intrinsically wired into what we mean by a university is the question of who has responsibility for awarding degrees. That was decided in the context of the opening clause with a discussion of what universities meant. Then we agreed with the Government to insert a very strong sentence referring to institutional autonomy and academic freedom. With that goes the ability for universities—higher education providers in England, particularly—to award degrees in their own right within a framework established by statute. This issue goes right through the Bill. It is interesting and quite informative that we have come back to it at this point. It has been a long and interesting journey.

Goldilocks, who featured earlier in our discussions, would have taken the view that there was a need here for some sort of equitable approach. It is very surprising that the very presence of the former Lord Chancellor, the noble and learned Lord, Lord Mackay, sitting directly behind the Minister and looking sternly at him, although he cannot see it—that got him moving quickly—has not had more success in cutting through on this point than his case warrants. He made it clear early in Committee that this was something he felt very strongly about. He got a lot of support around your Lordships’ House and he is still there today. It is an extraordinary situation, unprecedented in my short experience here, and I cannot wait to see the denouement of this process. We wait to hear what the Minister will say. He has tried a letter, he has tried a phone call and now he is going to do it in person—what a wonderful triage we will have before us on this occasion. I am rambling slightly, but I wanted to make the point—

[Noble Lords]

Hear, hear!

[Lord Stevenson of Balmacara]

Hush. I wanted to make the point that this is important. It matters to the institutions and cannot be taken away or given just by discretion—it really is about what universities are about. Not to approve the requirement that the Office for Students or office for higher education must work jointly with UKRI is to take away a very valuable part of our community. I support the amendment.

[Lord Prior of Brampton]

My Lords, I rather fear that an irresistible force has met an immovable object on this occasion. That is a shame because we have agreed on so much in this part of the Bill and we all agree that the various amendments that have been made have vastly improved the Bill. I would argue that we have done 98% of the work required. Despite the very eloquent speeches made by the noble Lord, Lord Smith, and my noble and learned friend Lord Mackay, I feel we are somewhat dancing on the head of a pin on this issue. What is the difference between the two cases being put? On the one hand, my noble and learned friend and the noble Lord, Lord Smith, say that research degree-awarding powers should be made jointly by the OfS and UKRI, whereas the Bill says they should be made by the OfS with advice from UKRI. There is clearly a distinction between the two and I understand it, but we are not talking about a huge distinction this evening. It is important to bear that context in mind as we wind our way to the end of this debate.

I start by stating that the Government fully recognise the importance of a co-ordinated approach to supporting the pipeline of undergraduate and postgraduate talent and skills development. Let me explain briefly where responsibilities will lie across the two organisations, UKRI and the OfS. The OfS will be responsible for maintaining the quality of higher education in England, including postgraduate provision, and promoting the interests of students in English higher education providers, including students engaged in postgraduate research and study. In Scotland, Wales and Northern Ireland this is the responsibility of the devolved Administrations.

UKRI will support the cost of postgraduate research degree programmes in English universities through Research England’s dedicated PGR funding stream. Support of this type is also a devolved matter for Scotland, Wales and Northern Ireland. Additionally, the Government made an amendment in the other place that clarified UKRI’s ability not only to support postgraduate provision but to encourage it. At his appearance before the Science and Technology Select Committee last October, Sir John Kingman argued that these reforms would improve oversight of the research talent pipeline.

UKRI will be a major and influential advocate for the importance of maintaining a strong, healthy pipeline of research students. Crucially, it will have a strategic centre that can gather and analyse intelligence on the pipeline from across its councils and can work with the OfS and the devolved funding bodies to develop a more holistic and comprehensive picture of the landscape than is possible under current arrangements.

The Government are backing UKRI to succeed. In the Budget—funnily enough, very little publicity was given to this aspect of it, which is surprising given the importance I know noble Lords attach to it—the Government committed to spend £250 million over the next four years to increase the number of highly skilled researchers and develop the talent needed by British industries for a thriving and innovative economy. We also announced £100 million for global research talent over the next four years to attract the brightest minds to the UK and help maintain the UK’s position as a world leader in R&D. That was a very significant announcement. Let me be clear: UKRI will work closely with the OfS and its equivalents in the devolved Administrations to ensure that this vital part of the university system is protected.

I turn now to the amendment in front of us; there are two distinct proposals within this amendment. First, on the matter of research students, it must be said that the OfS is an England-only regulator, while UKRI is a UK-wide funder. It would be entirely inappropriate to give the OfS a decision-making power in relation to a research council’s doctoral funding for a Scottish, Welsh or Northern Irish university, for example. Secondly, each organisation will make countless decisions that relate to research students. Requiring them to make every one of these decisions jointly would result in a duplication of effort and, in many instances, simply not make sense. For example, the OfS will not be well placed to take decisions on where research funding should be allocated to fund doctoral training for the purpose of enhancing the UK’s research capability where this is outside the university sector—for example, in one of the UK’s world-leading research institutes. Conversely, this amendment would risk giving UKRI unnecessary decision-making responsibilities on regulatory issues which affect all higher education students, but where UKRI will have no particular remit or expertise, such as on ensuring institutions have appropriate student protection plans in place.

As we have been clear throughout the passage of this Bill, the OfS and UKRI can share information and will co-operate at all levels to ensure that the respective decisions they make regarding research students are appropriately informed by the expertise of the other organisation. This is a much more proportionate and effective approach. Clause 108 already enables this and, since both organisations have a duty to have regard to the need to operate in an effective and efficient way through Clauses 3 and 100, the Bill actively encourages such co-operation. In addition, this House has already agreed amendments that require the OfS and UKRI to detail in their annual reports how they have co-operated in the past year. We fully expect evidence of co-operation on matters related to research students to be included in these reports and, through provisions in Clause 108, Ministers can act to require this to happen should the evidence suggest otherwise. However, I put to the House that while co-operation and collaboration is appropriate, asking the OfS and UKRI to make joint decisions in every instance is not.

On research degree-awarding powers, we considered carefully the constructive arguments made in Committee by my noble and learned friend Lord Mackay, the noble Lords, Lord Mendelsohn and Lord Stevenson, and the noble Baroness, Lady O’Neill, that this should be a matter where OfS and UKRI should make decisions jointly. Having given this matter much thought, we do not agree that the decision itself should be a joint one between the two bodies, given that UKRI has no direct regulatory function in relation to higher education providers. Nevertheless, while we believe that the OfS as regulator of the sector is best placed to take the final decisions, we fully agree that it is important that the expertise of UKRI should be fully utilised in ensuring that the OfS makes well-informed decisions. Because of this, we put forward an amendment, which this House has already agreed, requiring the OfS to request advice from the designated quality body or committee on degree-awarding powers. This amendment ensures that the advice must be informed by the views of UKRI when it concerns research degree-awarding powers, and this advice cannot be ignored by the OfS. This gives UKRI a clearly enshrined role, securing its influence in decisions on research degree-awarding powers, which is much stronger than anything that has gone before in securing a guaranteed role for such advice to be given for matters concerning research degree-awarding powers. Through our reforms, we see UKRI having a bigger role than any research organisation currently has, or that HEFCE has now.

The new system that we have designed has clear accountabilities, and instituting joint decision-making in this way could give UKRI a role in matters which have nothing to do with an institution’s research capability. Further, the Government will also commit to giving UKRI an important advisory role when the department is preparing guidance on the criteria by which applications for research degree-awarding powers will be assessed. These are meaningful legislative provisions. The Bill does not prevent UKRI having a role in the appeals process when appropriate. We believe that it is a more practical and reasonable alternative to the amendment, taking into account the real-world operations of the two bodies, while crucially ensuring that any decisions are informed by the relevant expertise. The amendment as drafted would make it a legal requirement for the OfS to jointly take decisions about the number of doctoral training places to be supported by the research councils, about the funding of doctoral research training in research council institutes and facilities, and about the support given by UKRI for doctoral training in universities in the devolved Administrations. These things are the primary responsibility of UKRI and are outside the scope of the OfS’s responsibilities, and I believe it would be wrong to put them into legislation today. It is with those things in mind that I ask the noble Lord, Lord Smith, to withdraw his amendment.