Economy: Productivity Measurement

Lord Stevenson of Balmacara Excerpts

Thursday 28th March 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is always a pleasure to see the noble Lord in his place, particularly when he is straying off-piste. He mentioned some of the issues raised in Professor Haskel’s book but he did not touch on the key point raised by my noble friend Lord Haskel, which is that the new technologies do not rely on physical goods but on a different type of trading, which involves platforms, brands and algorithms. What work is being done to try to make sure that that aspect of the new technologies is being caught? The second point made in that excellent book is that people measuring productivity seem to ignore the productivity of which we in this country are very proud of, in making real progress in education and health. Those things are not even counted in GDP.

[Lord Young of Cookham]

The noble Lord is quite right to say that productivity in education and health has gone up. Over the past few years, productivity growth in the public sector, which had been 0.2% for the past 19 years, grew to 1.4% in 2016. We have had six successive years of improving productivity in the public sector, and health and education lead the field. The noble Lord is quite right in his other point about intangible assets. We are putting a lot of work into measuring intangible assets. This has a key impact on productivity, for example, in the information and communications sector and in the science sector. Along with investment in software and R&D, intellectual capital training is also an important intangible. It is one of the most important ones, followed by organisational capital.

Interserve

Lord Stevenson of Balmacara Excerpts

Wednesday 20th March 2019 Lords Chamber

[Lord Young of Cookham]

There is no reason why trade creditors of Interserve should lose any money. The hit was taken by the shareholders and the lenders who wrote off their debt and converted it into equity. The subsidiary companies providing goods and services to the public and private sectors are wholly unaffected by what has happened to the parent company, which has simply changed ownership. The creditors of the subsidiary companies are in exactly the same position as they were before the transaction over the weekend.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I will pick up that issue. This is a pre-pack administration, is it not? In a pre-pack, the people who lose out are the trade creditors and the people who survive are the owners of the original company, who walk away with a new company unencumbered by the debts its previous creditors allowed. How can the Minister defend that? As my noble friend said, this involves thousands of SMEs, which will lose jobs and supply of cash, and be worse off. The Government reviewed this whole process in 2014. They accepted the recommendation of the Graham review to take powers in the Small Business, Enterprise and Employment Act 2015 to make sure that pre-packs were properly regulated. What is the progress on that?

[Lord Young of Cookham]

On the first point, it is important to understand that Interserve was in two halves. The subsidiary companies provided services to the public and private sectors, looking outwards towards the market, whereas the parent company looked backwards at the shareholders and the banks that were lending it money. What happened over the weekend was that the parent company went into administration and immediately, as the noble Lord said, went into a pre-pack and is now owned, in effect, by the lenders. It is the banks of those lenders, not the trade creditors, which are out of pocket as a result of the transaction.

I will write to the noble Lord on the second question, because it affects another department.

Small and Medium-sized Enterprises: Clydesdale Bank

Lord Stevenson of Balmacara Excerpts

Tuesday 19th March 2019 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am grateful to the Minister for repeating the Statement made in another place in response to an Urgent Question. The overall impression one gets from listening to him is a sense of slight panic in the Government’s ranks and an attempt to try to catch up with a situation that seems to have got out of control. It has been understood for some time that the way that our banks deal with SMEs has been a cause of real concern, and there was also an issue about whether there was an appropriate way of getting redress on a fair and appropriate basis. Some of what he said is helpful—I acknowledge that. However, I still wonder why it took the Government quite a number of months—in fact, almost years—to change from limiting the redress from microenterprises to SMEs; after all, we believe that SMEs are the future of much of our economic growth in this country. There is still the question of whether historic cases are being dealt with on a voluntary basis. Is that really the case? On what basis will the Lending Standards Board, which he mentioned, be able to act? Will that also be on a voluntary basis? If the answer is yes, when can we expect to see the regulatory framework?

[Lord Young of Cookham]

I am grateful to the noble Lord for his response. It makes sense to wait for the expansion of the financial ombudsman’s scheme, which I and he referred to, and which comes into effect next month. I also believe that the two voluntary schemes to which he referred are better than the alternative—a statutory independent tribunal, which the Treasury Select Committee considered. We gave that serious consideration, but agreed with Simon Walker’s conclusion that that would not be the right approach. It would involve primary legislation, setting up a tribunal and probably costs for the SMEs that wished to access it. I think a dispute resolution system, as outlined, would be much quicker, much less expensive and not constrained by a narrow interpretation of the law. An ombudsman could see whether a contract was fair and reasonable, for example.

The noble Lord asked whether the standard lending practice was voluntary. Yes, it is a voluntary scheme. It sets the benchmark for good lending practice in the UK, outlining the way registered firms are expected to deal with their customers throughout the entire product life. We believe that this is the right approach to resolving complaints, but we have not ruled out other options if it does not deliver.

[Lord Young of Cookham]

If there was inaction for the past six years, that covers a period when we were both Ministers together in the coalition Government. The noble Baroness asked whether it was fair to ask people to wait. What we propose would bring a swifter solution to those who have already waited a long time—as I agree—than the alternative of a statutory scheme which, as I said, requires primary legislation, regulations controlling SME lending, which is not regulated at the moment, and then possibly expensive access to the tribunal through legal representation for SMEs.

The banks have a good record of observing the recommendations of the financial ombudsman scheme, so we should let them have the opportunity to show that they will also honour the recommendations of the two schemes being announced today, which will be up and running in the autumn—far sooner than a statutory scheme.

[Lord Stevenson of Balmacara]

As there is a gap, I return to ask another question. Am I right in my assumption that the Minister would accept that the issue that has given rise to this Question is not limited to one bank: there is a broader, possibly systemic issue affecting the way in which banks relate to SMEs? Taking up the point made by the noble Baroness, Lady Kramer, does he think it might be worth looking further at some of the measures used by the banks to attract new customers, particularly interest rate exchange mechanisms, which seem very complicated and difficult to understand? They involved swapping of rates, which was not perhaps fully disclosed to those borrowing the money, and the question of tailor-made loans, the details of which were also rather obscure.

One would be tempted to suggest that an element of criminality was sometimes drawn into those issues, for which a voluntary scheme will be hopelessly inappropriate. As the noble Baroness said, perhaps it is necessary to have a properly organised review carried out by, say, the FCA, to ensure that the practices driving those issues are driven out.

[Lord Young of Cookham]

I recognise that there are more cases than the one that has generated the interest. There has been a lot of press interest in some RBS schemes. Looking at the FCA estimates, we estimate that the expansion in eligibility for the FOS scheme will result in no more than an additional 1,300 cases from businesses on top of the existing 6,000 cases from microenterprises. To put that in context, the employment tribunal received over 109,000 cases in the financial year. We think the FCA’s planned expansion of the FOS to include small businesses is the right and proportionate response. We look forward to the next steps and to these vital pieces.

The noble Lord then asked me a number of questions about the incentive loans or interest rates that banks sometimes offer and some of their other practices. I am not sure whether they fall precisely under the remit I have just announced but, if the noble Lord will permit, I will write to him when I have received further clarification.

Interserve: Provision of Public Services

Lord Stevenson of Balmacara Excerpts

Wednesday 12th December 2018 Lords Chamber

[Lord Young of Cookham]

On the first point, I made inquiries to Interserve about the suppliers: 90% are paid within 60 days or less. The Government have now insisted that, where they place new contracts with suppliers, there is a contingency plan to take effect if and when that contract runs into difficulties. Interserve, along with four other companies, is piloting this new arrangement, which was introduced post the problems with Carillion.

[Lord Stevenson of Balmacara (Lab)]

Does the Minister agree that one of the real problems is that more than 20% of government procurement now goes to a small number of strategic suppliers, a figure that has doubled since 2013? The top three suppliers are all having financial problems. After Carillion, a new system was introduced, which I think the Minister was referring to; rather surreally, it is called “living wills”. Has this been completed for Interserve—he mentioned a pilot—and can he reassure the House that no new contracts will be offered to Interserve until such time as the miracle of the new company emerges, and that public services delivered by Interserve will be continued without the cost penalty of £148 million which occurred after Carillion?

[Lord Young of Cookham]

The noble Lord is quite right. On 19 November, the Chancellor of the Duchy of Lancaster made a speech to the BSA outlining new arrangements. The noble Lord referred to some of them; we prefer to call them resolution plans rather than living wills. We have recently announced plans for all suppliers to draw up resolution plans in the unlikely event of a business failure, to ensure continuity of services and, where necessary, to enable another provider or the Government themselves to step in. Interserve has volunteered to lead the way as one of the first suppliers to design one of these resolution plans.

Employee Shareholding and Participation in Corporate Governance

Lord Stevenson of Balmacara Excerpts

Thursday 11th October 2018 Lords Chamber

[Lord Stevenson of Balmacara (Lab)]

My Lords, my noble friend Lord Haskel made a number of very good points in his excellent speech, including arguments for greater diversity on boards and more statutory regulation, particularly by the FRC. I hope that they will be taken forward. His key point was about the growing agreement he detected on the case for having employees on the boards of major companies and making them shareholders as well as stakeholders. He is to be congratulated on this and perhaps should feel a little smug. All those years ago, he put his money where his mouth is, and he has thrived as a result.

There is a wider issue about the structure of the public company. The Bank of England’s Andrew Haldane recently made a speech in which he said,

“despite its durability and success, across countries and across time, this corporate model has not gone unquestioned ... with a rising tide of criticism of companies’ behaviour, from excessive executive remuneration, to unethical practices, to monopoly or oligopoly powers, to short-termism. These concerns appear to be both strongly-felt and widely-held”.

If he is right, our modern company model is coming to the end of its useful life. What should we be doing about it? As has already been said, there are some good ideas to be found in the IPPR Prosperity and Justice report, which I am sure the Minister has read carefully in preparation for this debate. One specific recommendation focused on the central point of this debate and was about controlling executive pay and providing wider pay equality by putting one-third of the membership of remuneration committees out to elected worker representatives. The report goes further. It recommends that large companies with more than 250 employees should have at least two elected workers on their main board.

As has already been picked up, in other ways the report echoes the Prime Minister on the steps of Downing Street when she enthused about workers on boards and puts into sharp contrast the current, very limp, proposal by the Government to give one existing non-executive director the additional role of looking out for workers’ interests, which is a very poor substitute.

If we are to tackle more than just the executive pay scandal, and we should, we need to go further. The underlying theme of Mr Haldane’s speech and the IPPR report is that the idea that a company owes its only true allegiance to its shareholders does not reflect the relative risks shared by the wider group of stakeholders involved in the economy in the modern world. Shareholders, especially as they are now almost universally represented in pooled funds by fund managers, can diversify their risks and have no fear of bankruptcy. Workers, by contrast, have their livelihoods at stake and, usually, a longer relationship with the company. Financial creditors and suppliers take risks which they cannot diversify and suffer badly from poor management and unregulated management practice in, for example, late payment of invoices. A governance model that tries to balance these various interests looks fundamentally fairer. Why should promoting shareholder value above all else be the overriding duty of directors?

I hope that when she responds the Minister will be able to give some thought to this and I hope that in general her response will be a step-change from what we have been hearing on this topic from her colleague, the noble Lord, Lord Henley, who has repeatedly said in this House that he recognises the need for reform but has singularly failed to come up with any significant proposals. I shall mention one example. In Oral Questions on 13 March 2018 he said:

“We have also made it clear that we need to see some degree of reform of corporate governance … we think it is very important that the voice of those working for companies should be heard on the board … It is certainly something that should be looked at”.—[Official Report, 13/3/18; cols. 1507-8.]


Nothing has happened, so perhaps the Minister can go further than that.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Tuesday 24th October 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

14: Clause 2, page 2, line 34, at end insert—
“( ) As part of undertaking its strategic function to improve the financial capability of members of the public, the single financial guidance body must carry out research on a periodic basis, in collaboration with other bodies with an interest in debt issues, to determine—(a) the level of unmanageable debt across England, Wales, Scotland and Northern Ireland,(b) the causes of unmanageable debt, and(c) ways to prevent unmanageable debt.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, I am afraid that I return to the most overworked clause in the Bill, namely Clause 2, subsection (3) of which states:

“The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions”.


Do Ministers genuinely think that that single provision can deal with the breadth of expectation that will be placed on the body, particularly as regards research? It is true that there is a power there, provided that it is “incidental”, whatever that means,

“or conducive to the exercise of its functions”.

Presumably, that can be tested in court if there is any doubt about what it means.

However, let us assume that Clause 2(3) provides the foundation on which a research function will be carried out by this body. The question is then threefold. First, a lot of research is being done in this area, which is all to the good. It is being done by the FCA, which we have talked about a lot, but many others do research which could be brought into scope in this area. Are we confident that the research being done by the commercial sector, banks, the FCA and the SFGB, if it should be able to fund that and start doing it, will fit well within that arrangement? Can Ministers assure us that there will be no blockage if this arrangement is the only way that a body can take that research forward? That is my first general point: do we have competence in this regard and is the constitution sufficient to carry it?

My second and third questions are about scale. Secondly, the problem with this is that we have a lot of information which could perhaps be collated by the body and made available in digestible form. The information that we have been talking about in the FCA report would be slightly indigestible if it was not for the very excellent graphics and graphs it produced which allow us to get into it and make it easier to understand and absorb. However, if we think about the range of issues that could be brought to bear in relation to problem debt and financial capability, we are talking about a very significant volume of activity and work that has to be done.

We should add to that the fact that most of the research is, for good and persuasive reasons, snapshot research—the sort of research which looks at something happening at a particular moment in time. The report from the FCA spans two years but effectively one fiscal year has been chosen, out of which have come the figures. But to understand the causes of unmanageable debt and the way to prevent it we need longitudinal studies. Will the body we are discussing have the resources, the capacity and, most importantly, the constitution to undertake work on that scale? That is very different from being just an incidental part of the function: this is mainstream stuff. It will start now and run for 30 years across a life cycle—perhaps longer—to try to understand what causes unmanageable debt across huge populations, not just in samples. Without that information we will not get the detailed granularity we need to make sure that progress is being made in this area.

Thirdly, we are seeing this through the prism of financial capacity. That, of course, is inevitable given where we are starting from. However, as has been stated in many speeches today, and was certainly raised in Committee, the problem with finance is that it is the end product of a lot of other factors that are going on, all of which I argue also need to be researched. Again, I ask: does the wording,

“The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions”,


really catch the need to look at health data, the Tesco card, the purchase of cigarettes or whatever we will use to build a picture of what is happening in relation to people’s consumption and their use of the funds they have to enable them to do what they want to do in terms of what the Data Protection Bill, which we are about to go on to, describes as human flourishing?

That term has been coined to try to think through the issues relating to individuals and humans in relation to the work of robots. As citizens we will often be unable to determine whether decisions have been reached by robotic means or by persons. Many people who have campaigned on that Bill argue that we have to remain focused on what will help humans to flourish, not just on how automated machines will work. I am sorry about the digression, but I will tackle that Bill next and it is in my mind as I speak.

The issue remains: do we have confidence that the wording will get us to the point where we can make sure that the body will be able to command both the legal personality to do what it is required and also the funding and resources to carry out a really good job of bringing together so much material, over such a large range of activities, to research what is happening in the debt space particularly? I beg to move.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, I thank the noble Lord, Lord Stevenson, for moving Amendment 14—tabled by the noble Lord, Lord McKenzie, in Committee—and for this evening’s debate. The amendment relates to the new body’s strategic function to conduct research on the levels of unmanageable debts across England, Wales, Scotland and Northern Ireland, as well as the causes of unmanageable debt and ways to prevent it.

It is right that this House continues to take a great interest in understanding the causes of debt and how the Government can best help those who are struggling. I thank noble Lords again for their ongoing, important contributions on this matter since the introduction of the Bill and beyond. Problem debt, as the noble Lord has said, is such a serious issue, with wide-ranging consequences for those affected by it. The Bill is testament that the Government take the issue very seriously and recognise that there is more work to do to ensure that fewer households slip into problem debt. I understand the worthy aims behind this amendment: to highlight the importance of research on indebtedness and to ensure the new body gives it all the attention this important issue requires. The strategic function of the new single financial guidance body will play a fundamental role in this area. It will give the new body the responsibility to develop a national strategy to identify the most pressing issues and the most effective interventions in financial capability, personal debt management and financial education, working closely with others in the financial services industry, the devolved authorities and the public and voluntary sectors.

However, the Government’s assessment remains that to specifically reference one area of research over others in legislation is not needed. There are many topics that the new body will need to investigate and I have no doubt that it will conduct research on the very issue that the noble Lord suggests. Significant research is already being undertaken by the Money Advice Service, which is looking at the levels and causes of over-indebtedness across the UK. A great deal of the focus of MAS’s financial capability work, and the work that is envisaged for the new SFGB, will support the aim of preventing and reducing problem debt.

I refer, as I did in Committee, to my visit to MAS recently. I was tremendously impressed by the focus of those working there on research. They are trying to bottom out what it is and find out how we can tackle debt from an early age onwards and really make a difference—not just to be tactical about it, but to ask: what is it that leads to this really difficult issue of problem debt? A lot of this debt starts from an early age—as referred to in the previous debate—but it also has to do with people’s attitude to it and so on. Noble Lords should have every confidence that all these people will be very excited to take this work forward with the new body. However, specifying one issue of research in legislation—as we said earlier this evening, in terms of having lists for things—can always be problematic and could risk hindering the body’s ability to take a wide-ranging, strategic approach across the whole sector.

The legislation has specifically been drafted to enable the body to do anything that is conducive or incidental to the exercise of all its functions, and this includes conducting research. So, yes, in response to the noble Lord, Lord Stevenson, we are confident that doing research is a part of the incidental and conducive function, and I am very happy to give that assurance. This will ensure that the body is future-proof and able to have regard to any unforeseen, emerging issues—ones which we have not even begun to contemplate, I am sad to say, and which may confront us in years to come.

The whole purpose of this new body is to improve the financial capability of the public through its delivery and its strategic functions. To do this effectively, it will need to conduct wide-ranging research to fully understand the issues it is addressing, test what works best and learn new approaches. As I hope I have set out clearly today, the Government believe that the new body should have the ability to choose the specific topics it researches in relation to its function and that these should not be specified in legislation.

The noble Lord, Lord Stevenson, also asked whether the body will have the capacity to do this research on a large scale. Yes, it will have that capacity. I have talked to everybody working across the three existing bodies and they see this very much as a part of their role going forward. Therefore, I hope that, after considering these points, the noble Lord will withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for her ringing endorsement of the role of research in the work of the SFGB. I admire her confidence that it will be able to be done, and I am sure that it will be. We hope that it will be one of the things that will be read in Hansard and used as a way of building up the forward work programme. I am still slightly worried about the breadth of the research and the ability to carry it out on a very long timescale. Longitudinal studies take time and a lot of resources, and they have very few results for a long time, so a real engagement at that level will be required. However, given that that is where we are and it is what we are going to do, I beg leave to withdraw the amendment.

Amendment 14 withdrawn.

--- Later in debate ---

Moved by

[Lord Stevenson of Balmacara]

21: Clause 2, leave out clause 2 and insert the following new clause—
“Objectives and functions
(1) The objectives of the single financial guidance body are— (a) to improve the ability of members of the public to make informed financial decisions,(b) to support the provision of information, guidance and advice in areas where it is lacking,(c) to secure that information, guidance and advice are provided to members of the public in the clearest and most cost-effective way (including having regard to information provided by other organisations),(d) to ensure that information, guidance and advice are available to those most in need of them (and to allocate its resources accordingly), and(e) to work closely with the devolved authorities as regards the provision of information, guidance and advice to members of the public in Scotland, Wales and Northern Ireland.(2) The single financial guidance body must have regard to its objectives when it exercises its functions.(3) The single financial guidance body has the following functions—(a) the pensions guidance function;(b) the debt advice function;(c) the money guidance function;(d) the strategic function.(4) The pensions guidance function is to provide, to members of the public, free and impartial information and guidance on matters relating to occupational and personal pensions.(5) The debt advice function is to provide, to members of the public in England, free and impartial information and advice on debt.(6) The money guidance function is to provide, to members of the public, free and impartial information and guidance designed to enhance people’s understanding and knowledge of financial matters and their ability to manage their own financial affairs.(7) Where the single financial guidance body provides information, guidance or advice to a person in pursuance of one of the functions mentioned in subsection (3)(a) to (c), it must consider whether the person would benefit from receiving information, guidance or advice in pursuance of any other of those functions and the single financial guidance body must ensure that, where information, guidance or advice is provided on its behalf by an SFGB delivery partner, the SFGB delivery partner is under a duty to do the same.(8) The strategic function is to develop and co-ordinate a national strategy to improve—(a) the financial capability of members of the public,(b) the ability of members of the public to manage their debts, and(c) the provision of financial education.(9) In developing the national strategy, the single financial guidance body must work with others, such as those in the financial services industry, the devolved authorities and the public and voluntary sectors.(10) The single financial guidance body also has the function of providing advice and assistance to the Secretary of State on matters relating to the functions listed in subsection (3).(11) The single financial guidance body may do anything that is incidental or conducive to the exercise of its functions.(12) In this section “the devolved authorities” means—(a) the Scottish Ministers,(b) the Welsh Ministers, and(c) the Department for Communities in Northern Ireland.”

[Lord Stevenson of Balmacara]

It seems rather perverse, right at the very end, to talk about a clause that we have been debating for nearly a whole day and then to propose that it should be struck out and replaced with something else. Also, I wonder whether the clerks understand what we are trying to do here. We have already amended Clause 2 as it currently stands and they have not raised a single eyebrow. Actually, two eyebrows are being raised at the moment but they were not raised earlier when we seemed to stray into the territory of constitutional confusion, although I do not wish to raise that again today.

Let us be quite clear about this. The amendment was meant to be an attempt to aid wider public understanding of what the body is about. When we went through Committee, and certainly when we talked about some of the issues relating to the Bill in meetings, it was felt that we had the wording in the Bill as published before this stage—starting as it did with functions and moving on to objectives—the wrong way round. It was felt that there would be better clarity and a better understanding of what we were about if we could rejig it in a way that focused on the long-term vision of this body, how its constitution and powers supported that long-term vision, and what functions it needed to achieve that objective in the medium term. Amendment 21, in my name, is an attempt to do that. It borrows heavily on discussions with the Bill team, for which I am very grateful, and indeed some of the wording may be rather familiar to the team. It is not far from what appears in the Bill as currently printed, except that it is in a different order. I argue that the way it now reads—and I hope that there will be support for this around the Chamber—provides a much more logical approach to what we are going to do.

In a nutshell, the problem is that if you start with the functions of the body as it may be in the future, you tend to think of those in terms of where we are at the moment with the existing constituent bodies—the MAS, Pension Wise and TPAS. If you detach that from your initial thinking and think only about what will happen to the consumer and the journey the consumer takes in trying to get the information, advice or guidance that they seek, in the appropriate way, it clears up a lot of the confusion that we ran into and the terminological difficulties that we had. They were helpful in that they brought out the problems that we faced, but unhelpful in that they brought us back to confusion about what this body was about.

In Amendment 21, the objectives, coming before functions, are listed in proposed new subsection (1). In proposed new subsection (2) they are now objectives, whereas before they were functions, and then the functions follow. The related powers come after that. It has a clarity of overall shape that commends it, but I doubt that the wording is now sufficient to cope not only with where we might want to see changes coming forward but also in light of what has happened.

I have anticipated an amendment already in the Bill, as of this afternoon, by including within the phrasing of my current amendment the “free and impartial” amendment, which we have accepted. I took a bit of a chance on that but I am delighted that we have agreed that that should go forward, as it should do. There may be others that a little bit of time and work by parliamentary draftsmen could polish up by the time we get to Third Reading. I hope that, when the Minister responds, she might feel it worth taking away this amendment and bringing back something that would substitute for the existing Clause 2 in a way that fulfils some of the objectives that I have set out here today. I beg to move.

[Baroness Buscombe]

My Lords, I thank the noble Lord, Lord Stevenson, for this amendment to Clause 2. I also want to thank all noble Lords who have spoken today in connection with the functions and objectives of the single financial guidance body. We have had a wide-ranging debate, covering matters including financial inclusion, financial exclusion, financial education, scams and fraud, and unmanageable debt. We were also going to debate, and accept as important, the resourcing of front-line services.

I also thank the noble Lords, Lord Stevenson and Lord McKenzie, for the discussions that we have had outside the Chamber in relation to this clause and how it might be reframed. As noble Lords have rightly indicated, Clause 2 is the foundation that sets the whole tone and ethos for how the single financial guidance body will operate. It provides, as we have discussed today, the framework and lens through which the body will exercise its functions and make progress, working with others towards achieving its objectives.

I think that we are all agreed that establishing the single financial guidance body with a framework of broad core functions and objectives provides a sensible and pragmatic way forward. The amendment that the noble Lord, Lord Stevenson, has tabled does four key things. It restructures the subsections in Clause 2 to bring to the fore the body’s objectives. It places an obligation on the body to consider all a person’s information, financial guidance and debt advice needs, and whether they would benefit from receiving other services that the body provides. It seeks to clarify that the body will hold the pen and have some responsibility for ensuring that all parties involved in developing a national strategy make progress on taking it forward. It also seeks to extend the strategy’s financial education element beyond children and young people. I see the value in the intentions behind this amendment.

There is a certain merit in setting out up front what the objectives behind the activities of the body should be. I also see merit in making it more apparent that the single financial guidance body will take the lead in developing a national strategy to improve people’s financial capability and ability to manage debt. These changes could clarify, not only to the body but also to all those it will work closely with, that these are the Government’s and Parliament’s expectations.

I recall that the noble Lords, Lord Stevenson and Lord McKenzie, raised a similar point in Committee about ensuring that, if a member of the public comes to the new body seeking information, guidance or debt advice from two or more different functions of the body, they will be able to access those different functions if needed, as opposed to only one function. I think we all agree that this is important. While this was one of the Government’s stated aims for the single body, I still believe that it is already encapsulated in the Bill. However, I can see that it may be useful to strengthen that point and make it more obvious in the legislation.

We discussed earlier amendments tabled by the noble Lords, Lord McKenzie and Lord Stevenson, and the noble Baroness, Lady Kramer, on matters relating to financial education which seek to extend the element of the strategic function beyond the provision of financial education to children and young people. I do not think it is necessary for me to reiterate the points which I and my noble friend Lord Young made when discussing Amendments 9, 10 and 13, but I am supportive of much of the intent behind this amendment. I feel that we agree on the broad thrust of much of what it aims to achieve. On this basis, I trust, and very much hope, that the noble Lord, Lord Stevenson, will withdraw the amendment to provide some further time for us to consider and refine it before bringing it back at Third Reading.

--- Later in debate ---

[Lord Stevenson of Balmacara]

My Lords, how could one possibly resist that invitation? I accept it in every way possible. We were joking beforehand that we were so in debt to Ministers that at one point we would have to run round the table and embrace the noble Baroness to thank her for all that she has done on our behalf. I will hold back on that for now—we need to see what happens at Third Reading before we get to the kissing stage. But I thank the Minister very much for what she said. It was also wrong of me not to mention the additional important point about proposed new subsection (7) and I am glad that she was able to pick it up and talk about it. I am sure that we can work together on this. There is time to get it right before Third Reading. I beg leave to withdraw the amendment.

Amendment 21 withdrawn.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 4th sitting (Hansard): House of Lords
Wednesday 13th September 2017 Lords Chamber

[Viscount Trenchard]

My Lords, I, too, strongly support my noble friend Lord Hunt’s amendments. I was completely horrified to hear the statistics relayed by the noble Earl, Lord Kinnoull. It does not surprise me because I travelled to Spain last summer—not on a package tour but they nevertheless somehow know where you are and I started to receive unsolicited texts and emails from people inviting me to make claims for the bad food or being sick. I just deleted them, of course.

I also agree with my noble friend Lady Altmann that, where possible, the cap on fees should be broadened because I would have used a CMC to pursue a claim against an airline. This was not this summer but the summer before, when our flights were cancelled and I tried to get refunded by an airline. My daughter had booked on the same flights through a different travel agent, but in the end neither of us has made a successful claim, although we are both entitled to. It was too difficult because the airline had contracted the flight to another airline. When you are entitled to a refund for a service that was contracted but not delivered—as in the cancellation of a flight—then, as the Committee is well aware, it is made extremely difficult for you to receive reimbursement. When I received an unsolicited email from a CMC about cancelled flight claims, I was quite tempted to use it. But even though I had virtually given up on the claim against the airlines, I decided not to because a quick examination of the company made me suspicious. I also thought it would absorb in fees most of what it might get back, so I decided not to proceed.

Once such companies are capped in what they can charge, I will feel much happier about using their services because of what they specialise in and because it is made extremely difficult for individuals to pursue refund claims themselves. In many areas there may be a route whereby the individual can do the same thing as a CMC, and do it for free, but it is often made so difficult. It is intended that people will get bored or be too busy to go on waiting, while listening to music and pressing “1” or “2”.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support the amendments in the name of the noble Lord, Lord Hunt. Once again, he has made his case brilliantly and without having to resort to metaphors about drones or anything else. He seemed this time to be firing a set of missiles rather closely to his right. I am sure progress can be made on this important issue and want to make two points.

First, to pick up on the point made by the noble Baroness, Lady Altmann, in the representations that many of us have received there was a slightly larger package than just the question of claims management companies. There was a question about the small claims limit going from £1,000 to £5,000 and I would be grateful if the Minister, when he responds, could give us some better information about how that impacts on this issue. There is also a narrower question about an amendment to the public liability protocol, which I do not fully understand. But I hope the Minister will rise up in his helicopter, or whatever he is currently riding in to get to his scenic views, to give us a view of what this is about. There is an exception for claims arising overseas in these areas, which seems a little unfair because if a claim is genuine then it should be possible to mount it in whichever jurisdiction. If the package travel regulations are UK law and need to be resolved in that way, it seems odd if an exception is made for those who want to claim from an overseas position.

My other point would be that while I think we are all in the same place in wanting to see this issue resolved, I hope it will not be at the expense of genuine illnesses. The Minister might want to make sure that there is an avenue open when he comes to respond. Rather like the noble Viscount who has just spoken, I had a problem with a holiday—not a package holiday but one booked through an agent. It was in Italy, at a villa which was a nice place to be, but it became overrun with rats; I think this was on day three. So numerous were these creatures, and of such an extraordinary puissance, that they climbed up on to the veranda and entertained us while we tried to eat. They then ran round the bedroom while we tried to sleep, knocking over our toothpaste and other things in our bathroom. We eventually had to retreat to the top floor of the villa and barricade ourselves in.

The response from the locals was that they were “ratti”, which I think is the Italian for rats. We were therefore fairly clear what they were. At one point the locals produced some materials to capture these rodents. It consisted of a large plane of wood, about the size of the Dispatch Box, on which was placed some translucent gooey substance. They did not want to kill these things—they were very eco-friendly and against that—but just wanted us to capture them. But the blooming things were so strong that when one ran up and landed on that sticky substance, it could not quite get all four legs off at once but it got one limb up and then just hopped off. It was not very effective.

We sued the company that let us this property. The interesting thing about suing holiday companies—I am sorry, this is a long way into my point—is that holidays exceptionally attract damages because holidays are not repeatable instances. In other words, under English law you can claim for exemplary damages for a holiday lost in a way that you cannot for other damage. That is an issue that need not detain us in the Bill, but given that that particularity exists in the law, I hope that the sense of the amendments would not damage genuine claims. Illness does occur on holiday, and sometimes rats invade, and we would want to make sure that people can sue properly and, given that it was a holiday that was spoiled, get the additional money available without any recall or loss.

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[Lord Stevenson of Balmacara]

I rise briefly to support the noble Earl, Lord Kinnoull, in his quest for a more equitable arrangement with the powers that be in terms of the FCA. I think he would be the first to admit that this is a recurring theme in many of his contributions to debates around financial guidance and similar issues. On the surface, it seems extraordinary that a body so well resourced and organised as the FCA should be so diffident in coming forward with helpful advice to get people to work better and more constructively within the sector it is regulating.

This amendment has had to be framed to get it into a debate around claims management but it touches on a much wider issue about all the aspects of the FCA that we are talking about. Indeed, it is about an attitudinal and possibly a conduct approach, which is also part of it. I hope that there is a way to get this matter resolved one way or another because it is part and parcel of the other issues we have talked about in terms of duty of care and responsibility for consumers and the vulnerable. If the FCA—and indeed, by implication, the SFGB—took a more interactive and supportive stance, we would all be better off.

[The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Buscombe) (Con)]

My Lords, it is my turn to rise to my feet to support my noble friend Lord Young, who has been more than a co-pilot for this part of the Bill. Perhaps I see myself more as flight observer.

The amendment moved by the noble Earl, Lord Kinnoull, aims to ensure that the FCA helps firms to interpret the FCA rules. I absolutely accept and understand his reasons for tabling this amendment in terms of the importance of that interpretation and in order to be helpful. I agree that ensuring that firms understand the FCA’s rules will be vital to the success of this new regulatory framework, and I would like to draw the noble Earl’s attention to the steps the FCA already takes to ensure that firms are well informed of regulatory requirements.

The FCA undertakes a range of communications activities, including monthly e-newsletters summarising all the main changes that have taken place over the previous month and a programme of regional events across the UK for firms to discuss regulatory issues. The FCA holds round tables and other briefings on specific issues with trade associations and firms to help them better understand how new policy may impact their business models. It also maintains a smaller business practitioner panel which represents smaller regulated firms which may not otherwise have a strong voice in policy-making. I have noticed that the noble Earl has, quite rightly, throughout our debates in Committee focused on those smaller businesses that may not have their own strong voice.

On top of this, the FCA is aware of the need to engage with firms about new regulatory provisions. Building on the approach taken in the consumer credit transfer, the FCA will develop a clear communications strategy to engage with firms as a key part of the transition process. The FCA is committed to alerting firms to changes in regulation that affect them and has several well-established channels to support this—for example, in its regulation round-up, which is a monthly e-newsletter sent to more than 50,000 recipients summarising all the main changes that have taken place over the month. That will have links to further information on the FCA website. There is a programme of monthly regional events called “live and local”, across the UK, for firms to discuss the changes, and round tables and other briefings on specific issues. In addition, the FCA sends over 500 speakers each year to talk at industry conferences and events to discuss regulatory issues, and maintains regular relationships with trade associations.

These actions will help to support CMCs through the authorisation process as they work to meet the FCA’s regulatory requirements in the provision of claims management services. The FCA’s strategic objective is to ensure that the relevant markets function well, which will ensure that the market for CMCs’ services functions well. Communication on that basis is vital. The FCA also has a competitive objective, which requires it to have regard to the ease with which new entrants can enter the market. Of course, being able to understand the rules is critical to that.

I hope that the actions that I have set out help to support CMCs through the authorisation process. This short debate with the noble Earl and the noble Lord, Lord Stevenson, will, I hope, give a nudge to the FCA that it is of critical importance that it undertakes this important issue with care to make sure that the process works. For those reasons, I hope the noble Earl will withdraw his amendment.

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[Lord Stevenson of Balmacara]

My Lords, we have Amendment 75 in this group, and I shall speak to it briefly. It is a gentle prod to the Government that in the clause that deals with commencement there is an extensive list of the various sections that come into play. Then at the top of the next page is just a general provision stating:

“The other provisions of this Act come into force on a day appointed by regulations”.


No date is given for that. It would be helpful if the Government could urge themselves to do a bit a more than just leave it open that regulations will come forward at some future date. A lot of what we have been talking about in this area would be helped if there was urgent action, and the urgency should apply to the regulations that need to come forward as well. I hope that will be well received by the Government at this point.

The noble Earl, Lord Kinnoull, has done another good service to us in bringing forward a possible lacuna in the approach being taken by the Government. It fits in with the various sensible amendments that I have been tabling, asking the Government to look again at the way in which the financing arrangements for debt advice in Scotland, Wales and Northern Ireland operate. I sense that there is also an issue around CMCs that needs a response. I look forward to hearing from the Minister.

[Lord Young of Cookham]

My Lords, Amendments 74 and 76, tabled by the noble Earl, Lord Kinnoull, seek to extend Part 2 to Scotland. I am grateful to him for the way he set out the case for this extension. The Government carefully considered the scope of claims management regulation during the development of this policy. The current framework for claims management regulation, set out in the Compensation Act 2006, limits the extent of claims management regulation to England and Wales only and this will remain the case as we transfer regulation to the FCA. The matter is currently reserved, so we cannot simply make regulations to devolve the matter to the Scottish Government.

In reaching this decision, the Government had a dialogue with the Scottish Government to establish their view. Their view, as outlined in correspondence from the Scottish Business Minister, was that there is limited evidence of malpractice by CMCs in Scotland, and they concluded that extending the scope of claims management regulation would be unnecessary and disproportionate. That view is clearly challenged, and is about to be challenged again.

Financial Guidance and Claims Bill [HL]

Lord Stevenson of Balmacara Excerpts

Committee: 2nd sitting (Hansard - continued): House of Lords
Wednesday 6th September 2017 Lords Chamber

Moved by

[Lord Stevenson of Balmacara]

45: Clause 4, page 3, line 46, at end insert—
“( ) When arranging with a primary SGFB delivery partner to carry out on its behalf the debt advice function, the single financial guidance body may contract only with organisations and companies which are established for charitable or not-for-profit purposes.”

[Lord Stevenson of Balmacara (Lab)]

My Lords, it is well past my bedtime and I will therefore be very brief. I think I can be. I was going to say that these are two sides of the same coin but there are three amendments. Let us be imaginative and say they are grouped around a common theme, which is again to get on record the idea that the work that is going on either directly or through the SFGB must ensure that the services delivered are free at the point of use. That is the main point of Amendment 45, which restricts the operations to,

“companies which are established for charitable or not-for-profit purposes”.

It may be argued, and I think I would accept, that many companies operate in a way that has different branches and it may be that the particular branch which deals with, for example, debt advice might be a not-for-profit operation. Provided it is understood that the advice is always free, the actual status of the company is probably of a lesser order and I would understand if the Minister were of a mind to mention that in his very brief response.

Amendment 46 deals with how the objective attaching to the SFGB also applies to the overall system, in the sense that it would be perverse if the arrangements were such that the initial interactions with the partners and organisations working with the SFGB were free at the point of use but these were also referring clients to profit-seeking or charging operations. This is primarily a probing amendment but, again, I am looking to make sure that the advice circle is complete by retaining this free-at-the-point-of-use idea.

Amendment 47 picks up the possibility that with regard to the general governance arrangements that are set in place—which the Secretary of State has responsibility for, as we have learned this evening—the FCA may have an involvement but the single financial guidance body certainly has an arrangement for making sure that governance is properly arranged and the level of accountability is appropriate. One might ask why that was necessary but it would be a rhetorical question and I do not expect a lengthy response. Given that the delivery partners are being supervised by the FCA in most cases, and certainly where clients’ money is concerned, it is a requirement that they be authorised by the FCA. Given that most of these are charities and therefore also subject to the regulatory requirements of the Charity Commission, it is unlikely that the SFGB would be in a situation where governance arrangements were falling short of absolutely perfect. Again, reassurance from the Minister would be most welcome. I beg to move.

[Lord Young of Cookham]

My Lords, I am grateful to the noble Lord, Lord Stevenson, for moving Amendment 45 and then demolishing it, which saves me the task of so doing. I confirm that we are absolutely clear that any help funded by the new body will be free at the point of use. The difficulty we have with his amendment is that it may be appropriate for the body to enter into arrangements with organisations which provide free-to-client advice but also make a profit elsewhere. He made it clear that as long as it is free at the point of use to the client, he was relaxed. That deals with that amendment.

Turning to Amendment 46, we agree it is important that delivery partners refer members of the public to additional help when they are unable to provide the information themselves. The difficulty with the amendment is that it prevents delivery partners referring members of the public to the most relevant source of help in the first instance. For example, if a member of the public needs legal advice, we do not believe that delivery partners should be obliged, as the amendment requires, to refer that individual back to the SFGB. They should be free to refer that person for appropriate legal advice.

Finally, I may need to write to the noble Lord on Amendment 47. Given the SFGB’s relationship with government, it would be inconsistent with the precedent set by other arm’s-length bodies if the sponsoring department sought to interfere with, or have direct involvement in, the contractual arrangements that the body seeks to enter into. But I assure the noble Lord that as an arm’s-length body the SFGB will be required to comply with government policy on public procurement. The sponsoring department will support the SFGB in dealing effectively with any issues that may arise in the area of delivery partner governance and accountability. If the noble Lord wants more information on that, I would be very happy to drop him a line. Against that background and given the hour, I hope he will be able to withdraw the amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for his comments and his brevity. Hansard will have an interesting time trying to unscramble all our mixed-up shorthand for the body that is still yet to have a name. I wish we would get a name quickly and then we would not have to worry about “F”, “S”, “G” and “B”, and my teeth falling out. I will read Hansard very carefully, and I am sure that any additional information that might be provided by letter will be most welcome. I beg leave to withdraw the amendment.

Amendment 45 withdrawn.

Higher Education and Research Bill

Lord Stevenson of Balmacara Excerpts

Report: 3rd sitting (Hansard): House of Lords
Monday 13th March 2017 Lords Chamber

[Lord Carrington of Fulham (Con)]

My Lords, I had not intended to speak in this debate but I have been encouraged to do so. First, I remind your Lordships of my interests as declared in the register: I am chairman of a sharia-compliant bank in London and therefore have some knowledge of the problems, but I have also spent my professional lifetime in sharia banking.

I encourage the Government to move ahead as rapidly as possible in providing these loans. Clearly, there are no real problems in doing so from a sharia point of view. All those problems are well understood and are easily addressed by conventional techniques in sharia banking. There are problems, however, in the way that the Bank of England treats those types of loans and in the way that the Treasury looks at them. I suggest that the Government really need to move ahead to resolve those issues as quickly as possible because the benefit to the Muslim community of providing these types of loans outweighs any difficulties I can see that the Government could face.

[Lord Stevenson of Balmacara (Lab)]

My Lords, with all the voices in accord around the Chamber it seems almost otiose for me to join in and add my support. I had a conversation with the noble Lord, Lord Sharkey, just after he had tabled his amendment; I suggested that it was a rather weak amendment and he ought to sharpen it up because I thought there would be a lot of interest around the House. I have been proved right in that, to the point where a vote would perhaps be sensible. I am sure his intention in speaking today is not to force a Division on the House because the arguments are so all-encompassing and completely unanswerable.

I hope the Minister will be able to make a firm commitment, as previously suggested: first, that he supports the intention of introducing this measure as quickly as possible; and, secondly, that he will not allow the apparent problems with the supply line to hold up the provision of sharia-compliant loans. After all, a touch of competition from those experts in the field who might be able to step in might be a way for the Government to get themselves out of the hole. But it is a very sorry tale. The idea that students who could benefit from these loans cannot because of a conflict between faith and their ability to operate within the system that is currently available seems so utterly shocking that it just needs the Government to say that it will change.

[Lord Young of Cookham (Con)]

My Lords, the noble Lord, Lord Sharkey, is to be commended for his continued work to emphasise the importance of the Government’s plans to put in place a viable system of alternative student finance. I know that he has had a useful discussion with the Minister, my honourable friend Jo Johnson, and my noble friend Lord Younger.

I am grateful to my noble friend Lord Sheikh, who reminded us of the history of this commitment and the objectives of further opening access to higher education to more people who might be unable to access it at the moment. His points on the importance of Islamic finance in this country, particularly on the potential benefits of alternative student finance, are well made. We will consider carefully the correspondence that he has sent on to us. I am also grateful to the noble Baroness, Lady Cohen, for reminding us of the adverse impact of the current regime on women, and to other noble Lords who came in on this debate.

In response to the noble Lord, Lord Hussain, who is worried that this might be more expensive, I have looked quickly at page 53. Clause 82(7) would insert new subsection (11), which says that,

“the person making the regulations concerned, achieves a similar effect to a loan under this section”,

so the idea is that it should be neither more nor less expensive than the equivalent finance under a conventional student loan.

During debate in Committee, my noble friend sought to assure noble Lords that the Government are fully committed to delivering alternative student finance. We are the first Government to legislate to make such alternative finance possible, and have legislated at the first opportunity. As the noble Lord, Lord Stevenson, has just reminded us there is no disagreement at all about the policy and the objective. Introducing alternative student finance is one of our priorities for the student finance system. We are working to expedite its delivery. We want this new alternative system to be available to students as soon as practicable. In response to the questions posed by the noble Lord, Lord Sharkey, and other noble Lords, I can inform the House that subject to parliamentary processes, we are currently working towards it being open to applications from the first students within this Parliament.

I can see that there is interest in more information on our progress but I am afraid that a quarterly report, as required in the amendment, would be an unusual and unwarranted step. It would be onerous and, I suspect, of limited value to the people we are trying to support. The Bill is not the place to set out administrative processes around policy development; it is about the legislative framework needed to bring in alternative student finance. I am very happy to give an update on our progress here today, in the light of the clear interest shown. I have detected a note of impatience in the speeches we have heard this afternoon. Noble Lords will of course have an opportunity to hold the Government to account through the usual processes, whether by tabling questions or scrutinising the regulations that we intend to bring forward using the powers within the Bill.

Officials in the department are co-operating closely with counterparts in delivery partner organisations. Together, they are working through the requirements for the new alternative student finance system. We have started the process to engage dedicated experts in Islamic finance to work for the Government and support the detailed implementation of alternative student finance. We are also commissioning research that will explore the views of Muslim prospective students, and their non-Muslim peers, to help ensure that alternative student finance will meet their needs. I also assure noble Lords that we are actively considering how best to bring alternative student finance to the attention of prospective students in England in the run-up to its launch. We will want to ensure that we reach prospective students studying in a variety of settings, or indeed not currently studying at all.

It is only by working hard to develop and deliver complex and detailed plans that we will be able to meet our policy objective—a shared policy objective—of supporting participation in education. This careful, sensitive and important work has to be done properly first time. It takes time but I reassure all noble Lords who have spoken that it is one of our top priorities.

As a final point of reassurance, I note that in Amendment 208 the noble Lord, Lord Sharkey, has sought to ensure that his proposed new clause in Amendment 144 would be commenced on Royal Assent. I assure noble Lords that although the Government’s clauses enabling alternative student finance are to be commenced by regulations and not directly on Royal Assent, this is consistent with the rest of the Bill and should not in any way be considered as an impediment to the Government’s commitment to making alternative student finance available as soon as practical.

In light of the progress that I have set out here, and of the commitment that we have given about the timing of the introduction of this important new initiative, I hope that noble Lords will feel that a reporting clause in this legislation is not required. I therefore ask respectfully whether the noble Lord might withdraw his amendment.

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[Baroness O'Neill of Bengarve (CB)]

My Lords, the purpose of this amendment is to try to help to ensure that higher education providers, including new ones, have adequate standards of governance, and in particular standards that support the integrity of the student loans scheme. The intention of the Bill is to permit a wider range of higher education providers to offer university education in England.

The novel term “English higher education provider” has a capricious definition: it is simply an organisation that offers higher education in England. It could be a public body, a charitable body, a company limited by guarantee or a for-profit company. It could also be an organisation with a single proprietor. In our debates so far, we have tended to speak of such providers as having governing bodies. This can sound reassuring and familiar, but there is nothing yet in the Bill that requires an English higher education provider to have a governing body that meets specified standards, let alone UK standards. The term “English higher education provider” is therefore somewhat misleading. We would not, I think, speak of a Chinese textile company that sells cotton t-shirts and socks here as an English cotton clothing provider. However, the English higher education providers that the Bill envisages are to count as English merely if this is a market for which they provide something.

We all hope the new entrants that the Bill when enacted may attract will offer high-quality university courses—ideally, courses that are not sufficiently available in the current spectrum of UK university offerings. For example, we might hope that some new providers would offer the quality of undergraduate education that the best American liberal arts colleges or the best technical universities in Germany or Switzerland offer. However, I think that that is very unlikely. The cost base for these institutions is extremely high. The US liberal arts colleges—I have in my time taught on five well-known undergraduate programmes of that type—require a four-year degree and charge extremely high fees. These institutions are typically part-supported by endowment funding and could not function without it. The cost of STEM provision, such as that offered by technical universities in Germany or Switzerland, is evidently also high, as it is for their counterparts here. Such institutions are not likely to see a ready market for their standard offering here, particularly as there would be very high competition from the best existing UK institutions.

At most, such institutions might offer a restricted, downmarket set of courses only in subjects that are cheap to teach but whose graduates are assumed to be well paid—typically law, business, accountancy or subfields of these. That approach to their franchised overseas provision has been taken in other jurisdictions by some prestigious US institutions. However, I am not going to name names, because I think that that would be unfair.

The major risk is that institutions of quite other sorts would seek to enter the market to provide higher education in England, lured by the prospect that their students might have access to publicly funded tuition loans. At present, somewhat surprisingly, there is nothing to ensure that those who seek to provide higher education will have even adequate, let alone high, standards of governance. We have talked rather cosily about the governing bodies of higher education providers, but that need not be the situation. Noble Lords who followed the story of the collapse of Trump University and the compensation settlement that was reached a few months ago will recognise the sort of risk that I am talking about. Noble Lords who have not yet had the enjoyment of following the gory story might start with Wikipedia. It is not an edifying tale.

The amendment seeks to address this problem by requiring incorporation under UK law for any English higher education provider whose students may gain access to publicly funded tuition loans. This requirement would allow the Office for Students to discover something about the governance, and therefore the finances, of any would-be English higher education provider that hopes to franchise its offerings in the UK. The OfS might even be minded to set a fit-and-proper person standard for members of such governing bodies and university leaders. We do this for banks; should we do less for universities? I beg to move.

[Lord Stevenson of Balmacara]

My Lords, this is a golden thread in our debate that has been pursued with considerable vigour by the noble Baroness, who has on every occasion, I think, asked difficult questions. In fact, she has been quite free with her favours, asking questions of me and of other noble Lords around the whole Chamber when we have failed to measure up to her high standards of accuracy and precision when mentioning the words “English”, “higher” and “education” in sequence.

Here we are at the crunch point. The noble Baroness has put down a very specific amendment that would have quite strong repercussions for any body attempting to recruit English higher education students, because along with students comes public money. The main argument as I take it—and we look forward to hearing about it from the Minister—is that we are risking public money on bodies when we have no certain knowledge about where and how they are incorporated and what rights and responsibilities they have to the students. She could have mentioned several other areas and it is important to get them on the record. Under the Consumer Rights Act, students are owed a duty of care by the providers of their course. Specific issues must be supplied by the institutions and remedies for students lie in legal protections, which would be exercised in court. If the bodies are not incorporated in the UK, how are they going to manage that? I think the Minister should respond to that in a positive way.

We are also concerned with insolvency issues. It is quite interesting and instructive that most of the Technical and Further Education Bill—which is accompanying this Bill through Parliament—is taken up with measures that apply if a college of further education goes into insolvency or is wound up. There is a special education administration regime with particular powers for the insolvency practitioner appointed to ensure that students rank above all other creditors and that their courses will continue, if possible, or be transferred to a similar institution if not. Creditors, who in insolvency law—as I am sure your Lordships’ House is well aware—are normally given primacy, are relegated to second place. We have no such system for higher education institutions in the UK. There is therefore no provision for what happens when a private company, in particular, decides it no longer wishes to teach its students. Where will the students seek redress? The cases mentioned by the noble Baroness are relevant in this jurisdiction as well as abroad. It will be very interesting to see how students will recover their loans and their opportunities if there is no incorporation which allows them to do so.

We are discussing this when there has been a change of ownership of a very distinguished private provider, BPP. That situation is not nearly so dire as the one I have been discussing but nevertheless reflects a very major arrangement. The ownership has changed. The senior management have decided to not continue and there is still uncertainty about how the overall firm will be run. This is a real situation involving large numbers of students, lots of money and very difficult legal and jurisprudential positions.

The Government are taking this seriously. I had a letter delivered to my hand as I walked into the Chamber. It deals in four pages with some of the issues that the noble Baroness raised. I am not in any sense wanting to make slight of the letter because it is useful to have it on the record, but the Government seem to be broadly of the view that the existing arrangements under which the Office for Students—surely we will be shortly be calling it the Office for Higher Education, as we prefer—will have responsibilities under the registration and degree-awarding powers will make sure that nothing untoward happens. That is not sufficient. We need greater certainty about what institutions are responsible for our students, how they are responsible, in what way they are incorporated and what the legal position is.

I look forward to hearing the Minister’s response, but I do not think that he will be able to measure up to some of the very strong critiques that have been made so far.

[Baroness Wolf of Dulwich (CB)]

My Lords, as the noble Lord, Lord Stevenson, has pointed out, we are in the strange position where one has far greater protection if one is studying for a higher education qualification in a further education college than if one is in a university, because there are very clear requirements, now going through this House, for what should happen if that institution becomes insolvent.

This issue has been raised on a number of occasions in this Chamber, where it has been argued that, although the Government have committed to a protection regime for students in higher education, it is not very clear or demanding, as far as we can tell. The amendment goes a step further, because it draws attention, as have my noble friend Lady O’Neill and the noble Lord, Lord Stevenson, to a situation in which, over and above issues relating to the institution delivering the education, there is an issue of ownership. It may mean that, in extreme situations, it is unclear where students would seek redress, never mind how.

The Government are aware of the new issues that have come about as a result of creating a sector in which providers can be bought and sold. In 2015, they asked HEFCE to look at this issue and, as a result, there are now some new regulations about the treatment of degree-awarding powers in the event of a change of ownership or legal status. In that situation, HEFCE must discuss the potential implications for degree-awarding powers, including continued eligibility to hold them, and must be assured that the original institution that was awarded the powers is in substance the same institution in spite of the change of ownership. That is what is happening with BPP at the moment and there is no reason to suppose that the institution will not continue to be a distinguished provider of higher education.

I think that everybody in the sector who is providing good-quality education, whether they are private or not for profit, would agree with that. However, what the regulations do not get to the heart of is how, if an institution is owned by a company or body overseas—it may be somebody who has taken the entire institution into private ownership—the OfS will be confident that it can make sure that the institution complies with the conditions of registration. An institution may change hands regularly—I give the example of the University of Law, which in the three years after it moved from being not for profit to being a for-profit company changed hands twice. How in that situation will we operate if we find that students are in effect left without not only the institution in which they enrolled but any clearly identifiable body to which they can have recourse and which the OfS can—bluntly—bring to court and demand that it do what it should do?

This is a major issue. The amendment would make sure that there was a body to which students and the Government could address themselves if a catastrophic event, which I am sure would be extremely rare, occurred. Setting up a subsidiary company in this country is generally not a very complicated or time-consuming affair. It cannot be beyond the power of the Government and it would not distort the underlying objective of the Bill to ensure that any institution offering higher education to students receiving loans subsidised by the taxpayer is clearly identifiable in the case of students being left without an education and creditors being left without obvious recourse.

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[Lord Stevenson of Balmacara]

My Lords, I think that we are all very grateful to my noble friend Lord Dubs for bringing back this amendment in an amended form. We should also credit the Minister for arranging a meeting with his counterpart in the Home Office, the noble Baroness, Lady Williams, which was extremely helpful in identifying two things that allowed us to make progress. One was that the original drafting seemed to imply a much larger number and a much larger problem than could have been resolved within the scope of the clause as originally proposed and amended. After a very good discussion, we were able to get that down to a very narrow point. It seemed to be a point of considerable unfairness in relation to the people whom my noble friend mentioned. I also thank the Home Secretary, to whom reference has been made, for taking the trouble to see my noble friend Lord Dubs today to make sure that he understood the context within which the decision, which we hope to hear shortly, has been made.

[Lord Young of Cookham]

My Lords, I begin by thanking the noble Lord, Lord Dubs, for bringing forward this amendment and, with others, I commend him for his tireless campaign on behalf of a group of vulnerable people. This is an important issue and our short debate today, coupled with our debate in Committee, have demonstrated wide support and compassion for those who seek our protection. The UK has a long and proud history of offering sanctuary to those who genuinely need it. The Government take our responsibility in asylum cases very seriously.

Those who come to this country and obtain international protection are able to access student support and home fee status. Uniquely, those who have been granted refugee status and their family members are allowed access to immediate and full support. This includes access to tuition fee loans, living costs support and home fee status at higher education institutions. This is a privilege not extended to others, including UK nationals who have lived overseas for a few years or EEA nationals, all of whom need to have lawfully resided within the EEA for at least three years prior to commencing study.

The requirement for three years’ lawful residence was put before the Supreme Court only two years ago, in the case of Tigere. The Supreme Court upheld as fully justified the Government’s policy of requiring three years’ ordinary residence in the UK prior to starting a course. The Supreme Court also upheld the Government’s case that it was legitimate to target substantial taxpayer subsidy of student loans on those who are likely to remain in this country indefinitely so that the general public benefits of their tertiary education will benefit the country.

Noble Lords have expressed sympathy and compassion for people who have entered the UK under the Syrian vulnerable persons resettlement scheme and the vulnerable children’s resettlement scheme who are currently granted humanitarian protection. The Government share that sympathy and have taken a number of actions to support those on the scheme. The Government are not persuaded of the need to treat persons given humanitarian protection more favourably than UK nationals for the purpose of student support. The noble Baroness, Lady Lister, raised some wider issues, and I confirm that we are looking at them in the round.

UK nationals arriving from overseas must wait three years before accessing student support, regardless of their personal circumstances, and so must nationals of British Overseas Territories. That is not a lack of compassion but a fair, objective and non-discriminatory rule to demonstrate the lasting connection to the UK upheld by the Supreme Court in the Tigere case.

Turning to the specific group whose cause the noble Lord, Lord Dubs, has championed, I know that the Home Secretary has met him to discuss how we can progress the issue of access to higher education and that she shares my sympathy for the matters presented by the noble Lord. The Government understand the importance of accessing higher education as soon as possible for those on the Syrian vulnerable persons resettlement scheme and the vulnerable children’s resettlement scheme and are looking very carefully at this issue. I hope that the noble Lord will understand that I cannot say more than that today. I know that he will continue to engage with the Home Office on this issue over the coming weeks to resolve some of the complexities in the determination of refugee status to safeguard the UK’s proud history of offering sanctuary to those who genuinely need it.

I was not at the meeting which the noble Lord attended earlier today, but if he came away from that meeting with a spirit of hope and optimism, it is no purpose of mine to do anything to take away from that. In the light of the ongoing discussions that are under way with the Home Office, and against a background of the spirit of hope and optimism mentioned by noble Lords, I hope that the noble Lord might feel that this is not an amendment that should be pressed to a Division at this stage.

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[Lord O'Donnell (CB)]

My Lords, I will be very brief. I declare an interest as a visiting professor at LSE and UCL, and my first job was as a lecturer in economics at the University of Glasgow, where I saw at first hand the joys of teaching a diverse group of students. I take all the points that have been made about education and the economy. However, I want to speak as a former Permanent Secretary to the Treasury. Far too rarely in this House do we pass amendments that have the effect of helping the Chancellor and reducing the deficit. Undoubtedly, this will do that, so could the Minister pass on that message to the Chancellor? It is a very good reason for accepting the amendment of the noble Lord, Lord Hannay, which I support.

[Lord Stevenson of Balmacara]

Follow that. My Lords, this has been a terrific debate. We have rightly taken our time over it, taking perhaps a little longer than we should have done, but it has been worth it. We have explored the issues that the noble Lord, Lord Hannay, wished us to and come to a resounding conclusion on all sides of the House—apart from the noble Lord, Lord Green. He stated in parentheses that he was not in a majority on this occasion. My noble friend Lord Blunkett put the case rather well, and I have to say that the noble Lord, Lord Green, is never in a majority on this issue. However, I am glad that the arguments have been made so that we can knock them down.

At the heart of this debate are relatively straightforward issues to do with counting, reporting and transparency. The point was made rather well by the noble Lord, Lord Broers—by the noble Lord, Lord Krebs, rather. I apologise to the noble Lord, Lord Broers, who also made a very good speech; I am in no sense comparing the two, but it is the point made by the noble Lord, Lord Krebs, that I want to pick up. The Government are in a quandary over this. When introducing his amendment in the previous group, my noble friend Lord Dubs said that he was trusting a single government voice. Perhaps more in hope than experience, he has agreed to go with the Government and trust them on that. This amendment, however, is one on which the Government are speaking with many voices. We are going to get the Government’s view tonight, but I am afraid that it is not going to be the view that many in the Government would like to see. The fact that we got as much support from the Conservative Benches as we did from elsewhere in the House suggests that this is not an argument that the Government can win.

I urge the Government to agree that we have before us a straightforward set of amendments that would solve the problem of students coming here to study being treated as economic migrants when they are not, help with the staffing issues that are going to be so important for our industrial strategy and our future post Brexit, and provide a common sense, no-brainer solution, as so many speakers have said. We have covered the economic, industrial, cultural, educational and local perspectives on why having overseas students here is good for us in every respect. We have been told how much money is involved. However, at the end of the day, as many have said, it is about perception.

The noble Lord, Lord Holmes of Richmond, quoted the Prime Minister of India, who said: you want our trade but you do not want our students. It is about the perceptions that have built up. I am sure that when he comes to respond the Minister will say that there is no cap and that every overseas student who is qualified to do so can come. However, as the noble Lord, Lord Cormack, said, the signal being sent out to the world, and which the world believes, is that we do not want students to come here. We have to take a stand and make our case absolutely clear to the world. The fight back can start now. This is a flag that we should all be waving. We must join together, around the House and across the country, to say that this is something that we want to happen. I leave it to the Minister to say that he agrees.

[Viscount Younger of Leckie]

My Lords, for the second time I am grateful to the noble Lord, Lord Hannay, and to my noble friend Lord Lucas for providing your Lordships with an opportunity to discuss the issue of international students. I also send my best wishes to my noble friend Lord Patten, who cannot be with us today. I say at the outset I am left in no doubt about the passions expressed in this debate by noble Lords around the Chamber. As I have previously indicated—and as the noble Baroness, Lady Royall, indicated—we have indeed said this before. But I will say it again so that the House is in no doubt. The Government very much welcome the contribution that international students and academics make to the United Kingdom’s higher education and research sectors and we have sought to nurture and encourage that.

I will deal first with the amendment from my noble friend Lord Lucas. I entirely share its goal of ensuring maximum transparency. I am pleased to say that there is already a wealth of information in the public domain about the contribution of international students. Provisions in the Bill will add to this. As I have previously indicated, the Bill already includes provisions requiring the Office for Students to monitor and report on the financial health of higher education providers. This can be done only if the OfS understands the types of students and the income they bring to the sector. Clause 9(1)(b) requires all registered providers to give the OfS such information as it needs to perform its functions. This will ensure that the OfS has the power to gather the information it considers it requires on international student numbers.

Furthermore, the Higher Education Statistics Agency already publishes detailed information about international student numbers, along with a breakdown of the countries they are travelling from. We envisage that these arrangements will continue. This amendment would also require information about the proportions of visas granted when set against the total number of applications submitted by each institution. The Home Office already publishes a breakdown of tier 4 visa applications, including the number granted and the number refused.

As I explained in Committee, I do not support providing this information broken down by institution. If there is an institution which, for any reason, has seen its visa refusal rate rise, that does not necessarily make it a failing institution. Provided that it passes the Home Office’s basic compliance assessment, and there are no other compliance issues, no action will be taken against it by the Home Office. But I am sure that the institution concerned would want to make any changes to its system that it deemed appropriate out of the public spotlight. I dare say that any institution that finds itself in that position would support the Government’s position on this.

My noble friend and I both support transparency and the publication of as much information as possible. Much of the information that he seeks is already available and published, and the Bill will strengthen those arrangements. There are small elements of his amendment where, for the reasons of practicality or commercial confidentiality that I have given, I would not favour publication of the data in question. However, those cases are very much the exception, and I can assure my noble friend that the information in which he is interested will be collected and published for all to see.

I turn now to the amendment from the noble Lord, Lord Hannay. These topics, as the House will know, were covered at some length in Committee and I do not propose to repeat all that I said then. However, it is important that I put on record again that there is no limit on the number of genuine international students whom educational institutions in the UK can recruit. I make no apology for repeating that. Equally importantly, the Government have no plans to limit any institution’s ability to recruit international students. Likewise, as recently emphasised by the Prime Minister, the Government are committed to ensuring that the UK continues to be one of the best places in the world for science and innovation.

I previously pointed out that the United Kingdom has a very competitive offer when compared to other major recruiters of international students, whether you look at speed of visa processing, proportion of successful applications, work rights during study or post study opportunities. While, of course, there is no room for complacency, the United Kingdom continues to be the world’s second most popular destination for international students and we have welcomed more than 170,000 international students to the UK for the sixth year running.

The noble Lord, Lord Hannay, spoke eloquently, backed up by statistics, about the importance of overseas students to the UK. We continue to look for ways to promote the UK as an attractive place to come to study and we have a very generous offer for international academics who want to come to work in UK universities. The Chancellor’s recent Budget acknowledged that the continued strength of UK research and innovation depends on access to world-class skills, ideas and talent. It set out how the UK is investing in our industries of the future and that the Government have committed to invest more than £100 million over the next four years to attract the brightest minds to the UK. This will help maintain the UK’s position as a world leader in science and research. It includes £50 million ring-fenced for fellowship programmes to attract global talent and more than £50 million from existing international funds to support fellowships that attract researchers to the UK from emerging research powerhouses such as India, China, Brazil and Mexico.

In the tier 4 visa pilot, four universities are involved in a trial which involves less paperwork surrounding applications and a longer period of post-study leave. The noble Lord, Lord Bradley, mentioned a similar issue. This is an excellent example of taking sensible steps to try to ensure that the UK is as welcoming as possible for international students. It covers exactly the ground in the first limb of the amendment from the noble Lord, Lord Hannay. I do not believe that a general statutory duty, which would be impossible to measure and bound to give rise to litigation, is the way forward here. The noble Lord, Lord Green, stated that these were not matters appropriate for legislation.

I turn now to the second part of the amendment from the noble Lord, Lord Hannay, which seeks to stop students being treated as long-term migrants. Incidentally, I have noticed that the noble Lord has moved from the description of “economic migrant” in his amendment in Committee to “long term migrant” now. However, I fear that, whatever the terminology, the difficulties with what he proposes remain the same.

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[Baroness Garden of Frognal]

My Lords, I added my name to this amendment and spoke to it in previous stages of the Bill. I will be brief; in any event, the noble Baroness, Lady Deech, set out a comprehensive argument as to why this is so important. Who would have thought that it was important in this country to champion freedom of speech? Sadly, obviously that has become necessary. We are living in strange times. We have heard tales of students closing down free speech, and universities have taken remarkably little action over some issues when freedom of speech should have been protected.

It is difficult. There are obviously grey areas between what is lawful and what is not. As the noble Baroness said, we must not in any way encourage hate speech or incitement to violence but university students should be subject to ideas they find uncomfortable and be in a safe place where they can address them without those ideas immediately being shut down. This amendment also includes students unions, so it should help activities and events organised by students to make quite sure that they too encourage freedom of speech. It is a precious and valued part of our national life, and it is currently under threat. This amendment would add powers to ensure that we preserve it.

[Lord Stevenson of Balmacara]

My Lords, this is a very important debate. We are grateful to the noble Baroness, Lady Deech, for raising again with such powerful arguments the point she has been making consistently throughout Second Reading and Committee about the need to focus on this and get it right in the legislation. This issue is at the heart of what we really think about universities and higher education providers more generally. As the noble Baroness, Lady Garden, said, it is almost shocking to think that the understanding we have of what constitutes a university does not read across to what actually happens on the ground. The stories are legion and very unpleasant, and in many cases almost too awful to talk about in these circumstances.

Higher Education and Research Bill

Lord Stevenson of Balmacara Excerpts

Report: 2nd sitting (Hansard - continued): House of Lords
Wednesday 8th March 2017 Lords Chamber

[Baroness Garden of Frognal (LD)]

My Lords, I support Amendments 126 and 127 in the names of the noble Lord, Lord Lucas, and my noble friend Lord Willis. I accept the arguments that the noble Lord set out clearly and I look forward to the Minister’s reply.

I also add my support for Amendment 130, as I did in Committee. As we have already discussed, those on non-permanent contracts may find it more difficult to deliver quality teaching with all the uncertainties hanging over them, and it would be useful to have data to see whether that is in fact the case. The reverse situation with lifetime tenure tended to have the effect of too much certainty of employment, which could lead to a lack of incentive to devote time and trouble to quality teaching, but tenure is not really a problem that we have to address these days. The employment status of staff and the staff to student ratio are both significant factors in teaching. I hope that the Minister will be able to accept this amendment and I look forward to his reply.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support the amendments in the names of the noble Lords, Lord Lucas and Lord Willis, which were explained very well by the noble Lord. They would contribute to a better understanding of all the issues that have arisen during the course of the Bill and would be a source of good data for the future as we see how the system being brought into play works in practice.

My Amendment 130 stems from Clause 61, which would place a duty on the relevant body or the Office for Students to put in a series of measures in relation to data that are to be published. The requirements are not very detailed—there is broad discretion—but the broader areas relate to student entrants, the number of education providers of different types, the number of persons who promote the interests of students and a good range of other things. Curiously, it does not really go down into the detail of some of the mechanics mentioned by the noble Baroness, Lady Garden, when she spoke on behalf of the noble Lord, Lord Willis, and these are the issues picked up in my amendment. It happened to be topical because, when the Committee stage took place, there was an investigation into the use of part-time, non-permanent and permanent staff in higher education on zero-hours contracts—I think that was the term used. This amendment at least points in that direction but I think that it has a wider resonance, and I look forward to hearing the Minister’s response.

[Lord Young of Cookham]

My Lords, I am grateful to those who have spoken in this debate for addressing data issues. I entirely share the view of my noble friend that as much data as possible should be made openly available as soon as possible, and I have no difficulty in endorsing the broad principles that he enunciated.

However, I do not think that the issue here is about the powers to obtain data under the Bill. The current drafting already enables the OfS to make data available in connection with the performance of its functions and it also gives the Secretary of State the power to require application-to-acceptance data for qualifying research purposes. I am sure my noble friend will accept that, however we draft the powers of the OfS, data protection rules will necessarily mean that open data are subject to restrictions on sensitive and personal data.

With regard to the amendment in the name of the noble Lord, Lord Willis, although I sympathise with its intent, the OfS will be a regulator of HE providers, with the power to require such information from them as is required to perform its functions. However, it is not feasible to expand its remit to impose conditions on private companies that it does not regulate and with which it has no regulatory relationship.

Although I do not believe that these amendments are the answer to overcoming barriers to accessing data, I agree that greater collaboration between sector bodies on sharing and making comparable data available to students and researchers is something that we must continue to strive for. We would expect the OfS and the body designated to compile and publish higher education information on behalf of the OfS to play a part in encouraging that collaboration. The requirement to consult on what, when and how data are published will ensure that the interests of the sector, as well as those of students and prospective students, as called for by my noble friend, are taken into account. Moreover, in the spirit of co-regulation we must also recognise that the sector is already taking measures to address the points raised by my noble friend through the recently published HESA open data strategy, along with the recommendations made in the Bell review around the co-ordination of data.

I turn now to Amendment 130, which relates to an issue raised by the noble Lord, Lord Stevenson, in Committee. I understand his concerns about the job security of higher education staff and I can reassure him that the Government value the crucial contribution of HE staff. I remind the noble Lord that we are not seeking to determine on the face of the Bill exactly which data must be collected. Data requirements and needs evolve over time. The relevant data body needs to maintain the ability to adapt to changes and therefore data requirements will be decided through a period of consultation. The OfS will have a duty to consult on data collection and publication in conjunction with the full range of interested parties. In respect of the publication duty, the OfS will also have the discretion to consult persons that it considers appropriate, including any relevant bodies representing the staff interest. It would be inappropriate to specify workforce data when all other data requirements will be agreed through a period of consultation. It also risks pre-judging the consultation process.

However, I can offer the noble Lord some reassurance on workforce data. The current data body, HESA, already collects data on so-called “atypical” academic staff whose working arrangements are not permanent. This is governed by the code of practice for higher education data collections. Discussions were held last year between the trade unions, employers’ representatives and HESA on improving understanding of employment patterns in the HE workforce. This has led to proposed improvements to the HESA staff record. These are currently going through consultation with a view to being implemented in 2017-18. We are confident that this issue will be considered as part of the data consultation and that the OfS will want to build on HESA’s positive action in this area. I would therefore ask my noble friend to withdraw his amendment.

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Moved by

[Lord Stevenson of Balmacara]

133: Clause 70, page 44, line 19, leave out from “protect” to end of line 26 and insert “the institutional autonomy of English higher education providers.”

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Moved by

[Lord Stevenson of Balmacara]

135: Clause 71, page 45, line 41, at end insert—
“ In exercising its regulatory functions under this section, the OfS must have regard to the Regulators’ Code.”

[Lord Stevenson of Balmacara]

My Lords, with the agreement of the noble Baroness, Lady Wolf, and in the absence of the noble Baroness, Lady Brown, I will speak to this group. We understand that their Amendment 135, which we support, has been overtaken by events. It may be subject to an announcement that would remove the requirement for it, which I am sure we would all be grateful for. I have read through the Regulators’ Code and looked in detail at what it does. It can do nothing but good for the sector. It is an effective and useful guide. It will be extremely helpful to all those who will have to deal with the OfS as it moves into its new role. It is to be welcomed that the Government have seen the sense of the amendment we tabled in Committee and have decided to move forward in this way.

Amendment 136 is a slightly different beast. I am grateful to the noble Baroness, Lady Deech, who always seems to get stuck at the end of debates and has to hang here to make her very valuable contribution. That situation will change when we next discuss amendments that have her name to them. This one concerns an issue that has been growing in impact as we have been discussing and thinking about the issues raised in the Bill.

There is not, as might be implied by the drafting of Amendment 136, any sense in which we would resile the authority of the CMA regarding the work that will be done by the OfS and its associated committees and structures. The CMA has statutory rights to engage with anything consumers do in the public and private realms. Therefore, it will from time to time no doubt take an issue and respond to complaints. All these things are set out in statute in the ERR Act and the Consumer Rights Act 2015. However, there clearly are operations under the whole umbrella of the CMA that will have a resonance and possibly an ability to be dealt with by the Office for Students. It would be more appropriate for it to do these as part of its regulatory functions.

This is a question we have asked before and have not had a satisfactory answer to, which is why we are bringing it back tonight: what exactly is the boundary between the Office for Students in its regulatory mode and the CMA? At the moment the CMA has taken quite a serious first step into discussions with higher education providers. It has carried out a survey of the way they treat their consumers: students. It has drawn certain conclusions from that and is currently obtaining undertakings from a range of providers, many of which are well-known household names. This is a dog that barks and bites. We have to be very careful where it might go. We would not in any sense wish to constrain it, but it will introduce a completely new sense of engagement between those who respond to offers from higher education institutions to go to them and study, the results they obtain, and their attitudes to and relationships with such institutions.

However, the detailed work of that will necessarily fall to the Office for Students, so there really are questions. Where does the boundary lie? What are the parallel powers that the Government are setting up in this area? Will the OfS have the same powers that the CMA has, as defined in the two Acts that I have already mentioned? Are there new and additional powers that are not being mentioned? If so, could we have a note about these? Where exactly are we on this? I think there is a danger that this ground will be rather trampled over. I have said this was a dog that not only barked but bit, but I think there are other worries that there may be some sort of competitive urge between the two bodies to be more regulatory than the other, and I hope there will be powers available to make sure that that does not happen. We do not want too many dogs, and we certainly do not want them biting. We want to make sure at the end of the day that the true interests here, which are the interests of the students, are not curtailed or in any sense hampered by the fact that regulators are exercising functions in a lot of different ways. I am speaking to this amendment but there is a previous one in the group, and I will respond to mine once the noble Baroness has responded. I beg to move.

[Baroness Deech (CB)]

My Lords, I will speak about Amendments 135 and 136. It was a bit of a shock to many people to find that the Competition and Markets Authority had entered this rather competitive field of regulation. The CMA’s job is to promote competition and make markets work. I think much of the debate we have had over the past few weeks is precisely about how universities are not really about competition and markets; they are about collaboration, scholarship and research.

The OfS is replacing HEFCE, which was the lead regulator, but the OfS is not taking over the Office of the Independent Adjudicator. I declare my interest as the first holder of that office, a few years ago. The OfS is intended to be a single, student-focused regulator. I think the Government might be seen to be undermining their own scheme if they allow the CMA to meddle in affairs which really are not suitable for it. There is already far too much compliance and legalism for universities to deal with—human rights, health and safety, data protection, freedom of information, judicial review, Prevent guidance and much more, including the common law. There is a crowded enforcement field as well—the CMA, other higher education bodies, consumer protection legislation, the Office of the Independent Adjudicator, Scottish and Northern Irish ombudsmen, government departments, the Advertising Standards Authority and the Quality Assurance Agency. The CMA admits how fragile its own guidance is because everything depends on how the courts would interpret consumer law applied to universities’ functions.

I would argue that the CMA is also an inappropriate regulator because it shows little experience of how universities work. It is insistent on clear information being given about course variation before a student signs up. This is an example of how it is inappropriate. The prospectus for a student goes to print four or five years before the potential student who has read it graduates some years further on. It is impossible, therefore, in a prospectus to lock in lecturers for five years because of sabbaticals, fluctuating demand and finances, and even building works. How can a university predict what its fees will be five years from now, especially with new mechanisms being introduced right now? The CMA has recently opined that it thinks that it is unfair for universities to withhold formal qualifications from a student who is in debt. Does it have any idea how difficult it is to chase a student through debt collection procedures or failure to provide campus accommodation the following year—which it suggests as a sanction—when a student has left with no forwarding address or gone abroad, as frequently happens?

The CMA will also come into conflict and overlap with the Office of the Independent Adjudicator. The latter has been in existence for about 13 years and has decided thousands of cases, many of which have a consumer flavour. It has given a wide range of advice to universities about the same issues that the CMA has involved itself in. The OIA’s task, however, is to decide what is fair and reasonable. This is not the same as the CMA’s perspective, which is about deciding a dispute on the precise terms of the contract.

The Office of the Independent Adjudicator offers alternative dispute resolution, which is far better than resort to litigation. Unlike the CMA, the OIA can be flexible and offer resolution tailored to the needs of the wronged student—not money but a chance, for example, to retake a year or have extra tuition. The OIA should prevail over the CMA because it was based on a statute designed to provide that one specialised service for students; namely, the settlement of complaints according to what is fair.

There is something wrong in theory about letting the CMA drive issues of university information and practices. Its perspective would cement the student as a paying customer expecting to reach an acceptable outcome. But we are dealing in this Bill with a participatory process—education, not training; knowledge, not skills; and teaching, not rote learning—in a situation that involves a relationship of give and take between students and lecturers, parents and universities, and employers and government. We do not want the commercialisation of this relationship, as if it were the purchase of a car. We want value placed on stimulation, career guidance and intellectual growth, not just the path to a paper qualification.

The consumer model that the CMA applies results in a totally one-sided set of contractual details. It seems to think that there are no obligations on students to pull their weight and no enforcement mechanisms against students’ own shortcomings. There is no mention by it, or in the TEF, of students’ efforts and their responsibility to learn. This one-sided market approach is more likely to lead to complaints about poor teaching after an unacceptable result has been handed down. We expect collaboration and not competition.

Higher education is not like a consumer transaction. The education relationship is unique. There is no fixed outcome which can be measured by organisations such as the CMA because the quality of the experience is determined by the aptitude and hard work of the student, as well as the facilities and teaching offered by the university.

Higher education is one of a class of major events in life which do not readily lend themselves to government by contract. Such situations are too emotional and personal, with no clear goal and perhaps an imbalance of power. The issue may be too important for the rest of society to be left to the narrow issue of a contract between the individual parties. Only overall regulation focused on the goals of higher education and the student will do, not intervention from an unrelated and unrepresentative body such as the CMA.

The CMA focuses on choice, price and competition. It assumes that satisfying the consumer-student is all that matters. Its view of contracts is about the provision of education, but it is no help when it comes to what education should achieve. Its interventions will not only overlap and conflict with the Office of the Independent Adjudicator but will lead to more micromanagement, box-ticking, checking and inspection, and not to greater quality or public benefit. It has no place in this new system.

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[Lord Young of Cookham]

I am grateful to noble Lords who have spoken to these two amendments for their contributions to this debate. I shall deal with the easy one first.

My noble friend explained in his letter earlier this week that he had listened to concerns around the regulatory powers of the OfS and the assurance that noble Lords, many of whom have spoken in this debate this evening, are seeking around its adherence to the Regulators’ Code. As already stated in the Bill, under Clause 3(1)(f), we share the aspiration that the OfS should comply with recognised standards of good regulatory practice. We remain wholeheartedly committed to the principles of the Regulators’ Code, and because the OfS is the sector regulator, we agree that it should sign up to the code. I am therefore pleased to confirm the announcement made on Monday that the OfS will voluntarily commit to comply with the code, with a view to its regulatory functions being formally brought into scope when the list is next updated via statutory instrument.

I now turn to the more difficult amendment about the respective roles of the CMA and the OfS and what the interface is between the two. In his letter to noble Lords earlier this week, my noble friend recognised the concern over the respective roles and responsibilities of the CMA and the OfS. I will explain why we believe that this a not a substantiated concern. I think that the noble Baroness, Lady Deech, used the right expression when she said, “We expect collaboration”. That is exactly what we expect.

The CMA is not a sector regulator but an enforcer of both competition and consumer protection law across the UK economy. The CMA has the specific role and specialist expertise to enforce competition law and consumer protection across the whole of the UK economy. It would be unprecedented, as has been suggested at times, for the competition and consumer enforcement functions of the CMA to be transferred entirely to a sector regulator. Even where sector regulators have enforcement functions, the CMA retains powers as an enforcement authority, with appropriate arrangements for co-ordination of concurrent functions.

In the past the CMA has provided general advice to HE institutions on complying with consumer law. In addition, its consumer enforcement powers have been used in relation to the sector. Specifically, it has received undertakings from providers around, for example, academic sanctions for non-fee debts, such as accommodation debts; information for prospective students on additional non-fee costs; terms and conditions on fee variations; and fair complaints procedure.

HEIs are expected to comply with consumer law, enforced by the CMA. The OfS will be expected to take on board the CMA’s guidance and best practice when it develops the details of the regulatory framework. It is perfectly usual for an organisation that is subject to sector regulation to be required to comply with legal requirements that are enforced by bodies other than the sector regulator. For example, even in regulated sectors the Environment Agency carries out regulatory and enforcement activity in relation to the environmental aspects of an organisation’s activities—for instance, as regards waste and contaminated land—and the Health and Safety Executive enforces health and safety requirements.

Although the CMA and OfS share areas of common interest in relation to competition and consumer matters, their roles are distinct and complementary, not contradictory. This is the joint view not just of Ministers but of the CMA. So we expect the CMA and the OfS to work productively together, just as the CMA works well with other regulators—indeed, as it does with HEFCE at the moment—and we see no reason for this to be different once the OfS is established. There will be a further opportunity to explain respective roles and responsibilities, as necessary, as part of the consultation on the regulatory framework this autumn.

Students—in addition to being students—have consumer rights, and universities and other higher education providers that do not meet their obligations to students may be in breach of consumer protection law. Compliance with that law is important not just to protect the students but to maintain student confidence and the reputation of the HE sector, and to support competition.

The noble Baroness asked whether there was confusion about the regulatory roles of the CMA, the OfS and the OIA. I applaud the work that she did at the OIA. As I think I said a moment ago, subject to the passage of the Bill, the OfS will be the regulator for higher education providers in England. The OIA will continue to operate as the body designated by government to operate the student complaints scheme in higher education, so it is not a regulator and it will continue to deal with individual student complaints. The CMA is not a sector regulator but an enforcer of both competition and consumer protection law across the UK economy, and it has the specific role and specialist expertise to enforce competition law and consumer protection across the whole of the UK economy. So there is no overlap of responsibility between the CMA, the OfS and the OIA, although the OfS will be expected to take on board the CMA’s guidance and best practice when developing the regulatory framework.

As I said, there will be an opportunity, as part of the consultation on the regulatory framework this autumn, to explain, discuss and identify the respective roles and responsibilities of these three bodies as necessary. In the meantime, I ask the noble Lord to withdraw his amendment.

[Lord Stevenson of Balmacara]

I thank the Minister for that reply. On the relatively simple question—the good news, as he called it—of Amendment 135, I echo the remarks of the noble Baroness, Lady Wolf. We are very grateful for the listening and reflecting that has taken place. The end-result is exactly as we would want it. This is a body that will be carrying out regulatory functions. It would be better if it were fully subscribed to the Regulators’ Code. I understand that there will be a transitional arrangement. If that is the intention, we wish it well and that will be the right solution for that.

However, I am a bit more puzzled about the question of the overlap and links between the CMA and the Office for Students, particularly in relation to the very powerful case made by the noble Baroness, Lady Deech, whose experience in the OIA leads to real and very important questions about where this is all going to go. As she pointed out, and I do not think was picked up by the Minister in detail—although I will read what he said in Hansard—there are three bodies with very different functions and aims. They have very different cultures, missions and outturns that they will be looking for. I do not quite see how that all fits together.

I understand that there will be a consultation period, but we are starting from a very odd position. With the competitive focus and the competition issues—the possibility that institutions might seek to challenge the work being done by other higher education institutions through the Competition Appeal Tribunal—this is a new world that is going to cause quite a lot of concern, worry and cost. It is certainly a deflection from their main purpose of the higher education institutions engaging in this. That has not been dealt with, and I wonder whether it might be possible for more information to flow our way.

On the detailed precision about where the CMA sits in relation to the Office for Students, I understand that will have to evolve. I am not in any sense being critical of that, and I have already admitted in my opening statement that we understand the role that Parliament has given to the CMA. That cannot be taken away but, surely, there is a case here for a memorandum of understanding at least—some sort of written documentation so that we would at least have a baseline on which to operate. I did not hear that from the Minister. Perhaps he could reflect on that and write to me about it.

It was a good aphorism to say that these are complementary but not contradictory groups working here, but it will be very difficult to see for a few years where this will all settle down. He may be right in what he asserted: it may be that this is in the best interests of students, but it is a bit hard to see that at the moment. While I see no particular case for progressing this amendment, or any others related to it, to improve the Bill, I wonder whether it might be sensible to have a quick meeting about this. Those who are keenly involved in this might just share experiences about where our nervousness comes from to ensure that there is nothing to be picked up, at least by a statement about a way forward to set out the broad understandings under which we will start the system before we get to Third Reading. With that, I beg leave to withdraw the amendment.

Amendment 135 withdrawn.